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Regional Turmoil Requires More Pakistan-China Economic Cooperation

22-06-14 星公报



Pakistan’s economy has been suffering from years of mismanagement and political expediency. And that is why every now and then, the successive governments after coming into power, religiously end up seeking controversial IMF bailout packages and bilateral borrowings from friendly countries like China and Arab States to pay back previously taken accumulated external debt. This unending vicious cycle is now fast putting Pakistan at the risk of defaulting on its external borrowings within months given limited foreign reserves barely enough to meet eight weeks import bill. And there appears to be no remedy in sight to turnaround the economy given renewed political instability precipitated by the ouster of Prime Minister Imran Khan from power in April this year in an un-ceremonial manner.

China’s Critical Interests & Concerns in Pakistan


The political turmoil coupled with ailing economy have been the critical concern of Islamabad’s key strategic ally Beijing. During last couple of months many a time China urged all political parties and other power players in Pakistan to undertake measures to forge stability, a must to put the deteriorating economy back on track in order to create conducive conditions for both neighbors to secure their strategic and economic interests across the region.

The unending political crises is deeply embedded in power politics emitting the scenes of pitch battles between police and protesters, something which is sending negative signals to foreign investors and more particularly to China which has undertaken massive investment in communication, energy and road infrastructure projects connecting northwestern China with the Islamic country’s southwestern Gawadar port in Arabian sea. Beijing’s long term investment is under premier bilateral deal known as China Pakistan Economic Corridors (CPEC), a key off-shoot of Beijing’s 08 trillion global Belt & Road Initiative (BRI) connecting China with rest of Asia, Africa and Europe.

CPEC’s Untapped Potential to Create Jobs


The flagship CPEC was kicked off in 2015 to connect Chinese built Pakistani deep sea port in Gawadar located at mouth of Persian Gulf, with the rest of the world. Since then China has invested an estimated $24 billion out of $62 billion total layout of its investment in various projects under CPEC.

The flagship economic corridor carries the potential to create as many as 700,000 jobs by 2030 when its all proposed and approved projects are supposed to be completed to deliver full dividends associated with Gawadar port’s strategic location which would then fully spell over its economic benefits to neighboring Afghanistan and Central Asian States together with China in years to come.

More Potential of Gwadar Port Awaits to be Unleashed


Gawadar port was technically ready in late 2016 and was fully operationalized in May last year. Every month an estimated 5,000 tons of liquefied petroleum gas from Qatar and Oman is offloaded at Gawadar port and from there it is transported to rest of Pakistan. Similarly as many as 30 to 50 shipping containers are transported every month to Afghanistan from the newly built deep port. Earlier ports in mega city of Karachi were destinations of off-loading of gas and Afghan transit trade. “This mean, there is no new clientage at Gawadar port. Among the leading reasons is lack of allied infrastructure such as uninterrupted supply of electricity, clean water, problem free cellular services which are must to proliferate trade activities. Chinese companies need to do more to market Gawadar port to attract customers” suggested Atif Khan, a Pakistani businessmen and CEO of New Vision engaged in real Estate business in Gawadar

Pakistan’s Economic Crunch Trickles Down on Chinese Companies


At least 40 percent projects linked with road infrastructure, communication and energy deals out of $62 billion CPEC budget have almost been completed and they are meaningfully visible across Pakistan’s major urban centers. Nonetheless challenges to complete CPEC linked projects within deadline are far from over. 

Pakistan’s chronic energy crises which was largely resolved by Chinese funded and operated power plants in the recent years, have now ironically hit the snag given the financial crunch Pakistan has been passing through. Country’s fiscal crises is coming down hard especially on over two dozens Chinese companies whose operation may come to a grinding halt in not so distant future over new government’s so far failure to clear their $1.57 billion (Rs 340 billion) outstanding payments. The fear looms large that some of Chinese companies may be left with no option other than to shutdown their power plants if the government continues to delay releasing the longstanding dues. Many Chinese power producers in their meeting with Pakistani officials have warned Islamabad that they may not able to support maximize power generation critically required in summer in the absence of clearance of their dues. Under intense pressure from Chinese companies, the new government has ordered to release just Rs 50 billion which is tip of the iceberg of the lingering pending dues.

Managing Viability of CPEC


In view of adverse economic conditions, China must undertake an in-depth internal study to determine the financial capacity of Pakistan to return its loans in years to come. In the event of foreseeable default on return of loans, China should not takeover Pakistani assets the way it did in Sri Lank. Over 220 million populated Pakistan is a very different country being deeply religiously conservative where conspiracy theories are favourit gossip among people. The fact that China has track record of not intervening into internal affairs of sovereign nations, people in Pakistan overwhelmingly perceive China as their friend. Nonetheless in case of China taking over key strategic assets after possibly Islamabad defaults on its payments in not so distant future, public opinion may turn against China which certainly the US would exploit through its strong lobbies in Pakistan to ignite public anger against Beijing. Before Islamabad succumbs to US pressure over perceived economic non-viability of CPEC, Beijing should seriously consider Pakistan’s demand to renegotiate CPEC related projects. If it doesn’t happen, Pakistan can fall into US trap which means the flagship economic corridor would further slow down for fear of its lack of economic viability.


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