A REPORT by the US-based research lab AidData on the nature of Chinese financing for infrastructure schemes under the multibillion-dollar CPEC initiative should once again lead to calls for greater transparency in the projects being executed here since 2015. It should also bring up questions about the impact of CPEC borrowings on our economy and how the projects will be paid for.
The assurance of the SAPM on CPEC affairs that “everything is in the open” and “there’s no hidden debt” does not allay concerns. In fact, the PTI, when in opposition, had demanded complete transparency in CPEC investments. But now in government, it has done nothing to make public the costs or conditions of the CPEC deals with China’s government, companies and banks, keeping the matter strictly under wraps just as its predecessor had done.
The report, which has mostly collated scattered data and information to weigh the hidden costs of CPEC, sufficiently elaborates on the potential impact of Chinese loans for the power and transport infrastructure on Pakistan’s economy. That the bulk of Chinese financing for CPEC schemes comprises expensive commercial loans isn’t the only worrisome aspect. What is more troubling is that as much as 40pc of Chinese loans have been disbursed in a way that blurs the distinction between private and public debt, ‘doing away’ with the need for its disclosure as public debt. Further, Islamabad has given an “explicit or implicit … government liability protection” to Chinese investors in the form of sovereign guarantees or guaranteed returns on equity. This means that the government will repay loans from its own sources if public and private borrowers can’t meet their financial obligations.
Then, about half of all Chinese finance has come in the form of ‘export buyer’s credit’ or the money lent by Chinese institutions to Pakistan to facilitate the purchase of equipment and goods to be bought by Chinese implementation partners. That is why almost all CPEC projects are awarded to Chinese contractors without competitive international bidding, which could have saved Pakistan millions of dollars. Lastly, we are also not aware of the amount of tax waivers and exemptions given to Chinese firms executing public or private projects.
The CPEC initiative has largely helped Pakistan fill its power and transport infrastructure gaps and may be a boon for the nation’s faltering economy going forward, but it is deplorable that people get information on Chinese investments from foreign sources rather than their own government. Indeed, considering that most of the deals analysed were inked during the PML-N’s tenure and that the PTI leadership accuses the previous rulers of having made a lot of money on these schemes, it is a wonder the government is not respecting the people’s right to know on what terms these deals were concluded and who, if any one, benefited from them at their expense.
Published in Dawn, October 1st, 2021