China appears to be backing away from its initial financial promises to Pakistan under Beijing-financed China-Pakistan Economic Corridor (CPEC), a US$60 billion infrastructure building plan, amid rising corruption and terrorist attacks on Chinese engineers.
According to Asia Times, Pakistan Army is set to take near-total control of the CPEC in a bid to reassure Beijing that their investments will be more secure amid terrorist attacks on Chinese engineers and others facilitating the infrastructure projects.
The new bill comes at a time when reports suggest that China is slowly retreating from its promises.
Overall lending by the state-backed China Development Bank and the Export-Import Bank of China declined from a peak of USD 75 billion in 2016 to just $4 billion last year. Provisional 2020 figures show that amount shrunk to around $3 billion in 2020, according to data of Boston University researchers in the United States.
The belt-tightening is believed to be in line with Beijing's so-called "rethink strategy" for its US$1 trillion BRI, which is under broad fire for "structural weaknesses" including opacity, corruption, overlending to poor countries resulting in "debt traps" and adverse social and environmental impacts, the Boston University researchers said.
Pakistan Prime Minister Imran Khan, whose government is criticised for being under military control, is also facing flak in his country for not prioritising and expediting big-ticket Chinese infrastructure investments, Asia Times reported.
In 2018, Imran Khan had put on hold several CPEC projects suspecting corruption by the previous government. However, two years later, several of his Cabinet members were named in big corruption scandals involving the country's power sector. About one-third of Pakistan's power companies are involved in Chinese projects under the CPEC.
The 278-page inquiry report, compiled by the Securities and Exchange Commission of Pakistan (SECP) and presented to Imran Khan in April, unearthed alleged irregularities worth over USD 1.8 billion in subsidies given to 16 independent power producers (IPPs) including those belonging to Imran Khan's advisors Razak Dawood and Nadeem Baber, Asia Times said.
The SCEP had also investigated the profits earned by the Chinese power companies. The report revealed that Huang Shandong Ruyi Pakistan Ltd (HSR) and Port Qasim Electric Power Co Ltd (PQEPCL) were together overpaid by 483.6 billion rupees (USD 3 billion).
Terrorists in Balochistan province, meanwhile, have intensified their attacks on CPEC projects and Chinese nationals working on them, raising the security costs and political risks of the projects. Islamabad's move to give the military more control over the scheme is a clear attempt to mollify China's rising security concerns.
A high-placed source in Pakistan's Planning Ministry told Asia Times on condition of anonymity that Beijing has principally agreed to allow Pakistan to form a new joint venture mechanism with companies other than Chinese state-owned or private enterprises to stimulate CPEC project progress including on a multi-billion dollar railway upgrade.
"We certainly need foreign investors to pump in funds for the mega CPEC projects including $6.2 billion worth of Rehabilitation & Up-gradation of Karachi-Lahore Peshawar Railway Track (ML-1) and half a dozen special economic zones in the width and breadth of the country," the source said.
The much-touted 1,872-kilometre long ML-1 project is moving at a snail's pace due to China's reluctance to fund the project at a paltry 1% return on investment. China is also reportedly unhappy with the government's decision to trim the project's cost from $8.2 billion to $6.2 billion due to its rising debt load.
The slow execution of top-line CPEC projects, caused largely by China's lack of financing, figured high in a meeting held last month between newly appointed Chinese Ambassador Nong Rong and Pakistan's Foreign Minister Shah Mehmood Qureshi in Islamabad, sources say.
If China stands by its original CPEC commitments, it would build and finance at least eight SEZs in all four Pakistan provinces as well as in the Islamabad Federal Territory, the Port Qasam Federal Area, and Pakistan-administered Kashmir and Gilgit-Baltistan, which Pakistan recently declared as a province. Another SEZ will be built at Gwadar.
The Institute of Policy Reforms (IPR), a Lahore-based think-tank run by Pakistan Tehreek-e-Insaf's (PTI) senior leader Hamayun Akhtar Khan, claimed in a recent report, "Pakistan has slipped into a debt trap due to the government's failure to bring reforms and weak fiscal management."
In the research report titled "Pakistan's debt and debt servicing is the cause of concern," the IPR summed up that "We are in a debt trap that is entirely our own making. It is a risk to our national security. The government was borrowing to repay the maturing debt, which now seems to be a concern for all the political parties, businessmen and experts."
Whether Pakistan's move to give the military near-total control over the CPEC will reassure China that their investments are more secure, what is clear is that Beijing is backing away from Pakistan's $60 billion plank in the BRI, for reasons that until now are not altogether clear, Asia Times reported.