Working on reviving confidence

Published September 20, 2021
Many don’t see a revival of Chinese investments in CPEC or outside it any time soon.
Many don’t see a revival of Chinese investments in CPEC or outside it any time soon.

Last week, federal planning, development and special initiatives minister Asad Umar sought to quash worries that the work on the multibillion-dollar strategic China-Pakistan Economic Corridor (CPEC) was facing delay.

His comments came a day after a Senate panel had expressed concerns over the slow pace of development on the CPEC and the disappointment expressed by the Chinese companies over negligible progress on the project under the Pakistan Tehreek-i-Insaf (PTI) government during the last three years.

The minister advised the opposition to avoid politicising CPEC, claiming that it was incorrect to say that work on the project had been halted (under the PTI government). He also took credit for initiating work on the western route of the CPEC, which had been ignored during the PML-N tenure. He claimed that the work on the second phase of CPEC — industrial cooperation between the two countries — had also begun during the last two years.

Asad Umar said the CPEC projects worth $16 billion had so far been completed under the initiative and $10bn schemes are underway. He said the government had not only completed various power and transport projects related to CPEC started in the tenure of the PML-N but had also launched several new ones. Yet many schemes are falling behind schedules.

The experience of the last three years demonstrates that progress on CPEC will remain tentative and stop-start with diminished chances of Chinese investments in mega projects like upgradation of the main railway line between Karachi and Peshawar

A day before, Senate Standing Committee on Planning and Development chairman Saleem Mandviwala had stated the Chinese were not satisfied with the pace of work on CPEC and no progress on the portfolio was seen during the last three years. “They (Chinese) are crying... the Chinese ambassador has complained to me that you (PTI government) have destroyed CPEC and no work was done in the past three years,” he said.

Special Assistant to the Prime Minister (SAPM) on CPEC Affairs Khalid Mansoor was reported to have endorsed Mr Mandviwala, saying the Chinese companies were not happy with the government’s institutions or their pace of work. He said he himself was not satisfied with the progress of work… (but) “things are now in recovery mode.”

He also briefed the committee on the issues faced by the investors in terms of compliance with investment agreements of CPEC projects, including payment to the Chinese independent power producers and the increase in withholding tax on the sponsors’ dividends post-investment to 25 per cent from 7.5pc. He said an investment facilitation centre to offer One Window Operations to all the Chinese investors was being set up to revive the confidence of those working on CPEC projects.

The minister said after completion of the first phase of CPEC “we are entering the second but very important phase under which Chinese investments would come to a range of sectors — industry, agriculture, technology, and social sector”. He said the government had also taken three industrial zones to the operational stage.

He said the long-delayed meeting of the Joint Cooperation Committee (JCC) of CPEC would be held “very soon” but did not give a specific date. Earlier, Khalid Mansoor had said the Chinese embassy had conveyed September 23 and 24 as the dates for holding the JCC meeting, which was last postponed in July on security concerns.

The 9th JCC had taken place in November 2019 and Covid-19 is blamed for the repeated delays in the 10th JCC meeting. The JCC meeting is considered crucial to revive CPEC, make its Long-Term Plan 2030 effective and address the issues being faced by Chinese firms working on CPEC projects. However, the minister didn’t share progress made on the finalisation of the Industrial Framework Agreement and incentives for attracting Chinese investors to special economic zones (SEZ) being developed in Punjab, Khyber Pakhtunkhwa and Sindh.

At his maiden press conference earlier, the SAPM on CPEC had admitted that security remained a major concern for the Chinese, adding “international forces” were opposed to the CPEC initiative but they will fail in their designs. According to him, a number of Chinese companies have brought investment of $845 million to the SEZ being developed in Faisalabad.

Will the minister be able to put to rest widespread concerns over slowing progress on CPEC, which have only heightened since the Dasu incident? Many don’t see a revival of Chinese investments in CPEC or outside it any time soon. The experience of the last three years demonstrates that progress on CPEC will remain tentative and stop-start with diminished chances of Chinese investments in mega projects like the upgradation of the main railway line between Karachi and Peshawar.

The kind of willingness to move forward on the speed and scale seen among the Chinese investors and banks in the early years of CPEC seems to have been replaced by deeper concerns over political and economic risks, according to a researcher who has worked and written extensively on China and CPEC. The Covid-19 pandemic did not help matters. Besides, many issues like slow progress on SEZs, unavailability of electricity, gas and water in the ‘developed’ industrial zones, and bureaucratic red-tape are also holding back progress on the industrial cooperation that is billed to help relocation of Chinese companies to Pakistan.

According to a Chinese company operating in Pakistan, the Chinese textile industry is trying to relocate out of the country because of a shortage of labour and rising wages. “But they don’t find a place to set up factories in Pakistan since they prefer to shift their businesses to places where they can set up their operations in a few months. Even in Africa, they have industrial parks ready. You just go there and enjoy the ‘plug-and-play’ facility. No firm wants to waste two years in acquiring land and another couple of years in securing utilities to start operations. By the time you get utilities the opportunity is gone and you are already out of business. This is the biggest problem in Pakistan,” the company’s chief executive says.

Published in Dawn, The Business and Finance Weekly, September 20th, 2021

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