In parallel with engaging the International Monetary Fund (IMF) for a more extensive, comprehensive 25th programme, Prime Minister Shahbaz Sharif’s government is poised to prioritise the China Pakistan Economic Corridor (CPEC).

“As Pakistan enters the second decade of the flagship programme aligned with China’s ‘Belt and Road’ vision, the CPEC holds the promise of diversifying and broadening the manufacturing base, enhancing agricultural productivity and fostering technological advancements through human resource development. These endeavours aim to overcome developmental bottlenecks and pave the way for sustainable growth, ultimately delivering prosperity to the multitude,” a former federal minister and a prominent member of the PML-N economic team contends.

He emphasised that the groundwork to expedite CPEC had already been initiated during the 16-month rule of the PDM government, which assumed power after the ousting of the PTI government in April 2022. In his view, there was a noticeable slowdown in CPEC projects during the tenure of former prime minister Imran Khan’s government.

“The PDM government revitalised CPEC during 2022-23. Notably, Chinese-funded energy projects totalling 3,800MW were completed, including the Shanghai Thar Coal 1,320 MW and the K-3 1,100MW nuclear plant. Pending payments to Chinese power plants and ongoing hydropower plants were cleared during the coalition government’s tenure. However, challenges persisted in dollar conversion and overseas fund transfers,” he shared.

‘What was perceived as deceleration is, in fact, the transition into the second phase’

He attributed the unilateral stoppage of payments in energy projects and the disclosure of the details of confidential Chinese agreements with the IMF in April 2019 as reasons for the trust deficit between Pakistan and China during the former PTI government.

Expressing regret over the apparent reluctance of the Chinese government, post-2018, to underwrite investment risk in Pakistan, which has deterred several private companies interested in various sectors, he remarked, “It won’t be easy, but we are hopeful of changing this situation over time. Our team has extensive experience in dealing with Chinese counterparts, and we intend to work diligently on repairing ties and regaining their trust and support.”

He further voiced reservations about the role of the Special Investment Facilitation Council (SIFC) in the context of CPEC. “My sense is that the premium body of SIFC seems to prioritise investments from sources other than China, perhaps as a mean to strike a strategic balance.”

Miftah Ismail, former finance minister turned thought leader, holds a different view on the investment facilitation body that also includes representatives of the powerful security establishment of Pakistan. “I think SIFC will definitely have a role in CPEC.”

Echoing his logic, a private sector executive in the know of CPEC-related affairs asserted, “Since SIFC is primarily tasked with facilitating investments, providing a conducive environment for business, and resolving issues related to investment projects, it has a role to play in improving the regulatory mechanism of Pakistan.

Security challenges along the route, in regions such as Balochistan, need to be addressed effectively

“Currently, obtaining more than 30 no-objection certificates/approvals from various federal and provincial agencies is required before setting up a business unit. It creates a great deal of impediment for foreign as well as local investors. SIFC can help streamline these processes, helping investors navigate bureaucratic procedures efficiently.”

A self-proclaimed non-partisan insider commended the continued progress of CPEC projects despite facing challenges spanning political, security and financial issues over the tumultuous past two years in the country, compounded by the pandemic prior to that.

Dismissing the perception of a slowdown as rooted in misconceptions, he argued: “What was perceived as deceleration was, in fact, the transition into the second phase of CPEC. This phase shifted focus from energy and infrastructure to the development of special economic zones (SEZs), agricultural enhancement, and science and technological cooperation.

“Achieving this required significant policy interventions to improve the ease of doing business, reforming regulatory frameworks and eliminating bureaucratic red tape in the country.”

Commenting on prospects of future Chinese investment, a senior officer associated with CPEC was optimistic. “If you examine the long-term plan of the China Pakistan Economic Corridor, it delineates various projects to be completed in different phases: Early Harvest and Short Term (by 2020) to tackle major bottlenecks to economic and social development and stimulate economic growth; Medium Term (by 2025) to focus on developing processing and manufacturing industries and improving people’s livelihood; Long Term (by 2030) to play a crucial role in achieving sustainable economic growth.

“With these broad outlines in mind, we can confidently assert that the majority of the planned projects have been completed. However, a few early harvest projects, such as Main Line-1, are still in the planning stage. The current phase of CPEC is of utmost importance and demands special attention to realise its true potential.

“This entails developing SEZs, ensuring a plug-and-play environment to attract foreign investment, particularly from China, and expanding our manufacturing base. The successful development of SEZs will bolster our exports and curtail imports, providing us with the breathing space needed to address the balance of payment issues and fuel economic growth.”

Sharing his perspective, drawn from his involvement with CPEC in various capacities since its inception, on what the new government needs to do to capitalise on this unique opportunity, he stated: “Enhancing governance structures and institutional frameworks can improve project management, streamline decision-making processes, and facilitate the implementation of CPEC projects.

“Creating a conducive environment for foreign and domestic investment is critical for attracting additional funding for CPEC projects. This entails providing policy stability, ensuring the protection of investors’ rights, and offering incentives to encourage private sector participation.

“A one-window facility for CPEC projects can help ensure timely execution. Security challenges along the route of the CPEC, particularly in regions such as Balochistan, need to be addressed effectively.”

Published in Dawn, The Business and Finance Weekly, March 4th, 2024

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