Pakistan struggles with China, CPEC

Since 2018, Pakistan has been well aware that the China-Pakistan Economic Corridor (CPEC) is going to wreck its finances and societal structures. And now, even after two years, the Imran Khan led government is saying all is well. Two years back, a 15-year master plan of CPEC revealed that Pakistan will be fully subjugated by China under the current terms and conditions of the project.
The plan spells out in detail what Chinese intentions and priorities are in Pakistan for the next 15 years. It may be recalled that China has decided to invest $62 billion for the CPEC project.  Under the plan, thousands of acres of agricultural land will be leased out to Chinese enterprises in Pakistan to set up “demonstration projects” in areas ranging from seed varieties to irrigation technology. A system of monitoring and surveillance will be built in cities from Peshawar to Karachi with 24-hour video recording on roads and busy marketplaces for law and order. Besides, as the per master plan, a national fibre-optic backbone will be built for Pakistan not only for internet traffic, but also terrestrial distribution of broadcast TV, which will cooperate with Chinese media in the “dissemination of Chinese culture”.
Pakistan will also become a market for agricultural produce from Western China and this will adversely impact local producers, alleged Pakistani civil society activists. From provision of seeds and other inputs, such as fertilizer, credit and pesticides, Chinese enterprises will also operate their own farms, processing facilities for fruits and vegetables and grain. Logistics companies will operate a large storage and transportation system for agrarian produce, as per the CPEC master plan. Chinese enterprises will take the lead in each field.
It seems now that China is not in Pakistan to help its people, but rather as a predatory economic actor. Sensing foul play, in 2019, Prime Minister Imran Khan set up a committee to examine the causes for the high cost of electricity to Pakistani consumers. The committee, after thorough studies warned that Chinese companies are making a big dent in Pakistan’s treasury and increasing the cost of the project with false information, causing their country to pay more. The committee’s report revealed that the Huaneng Shandong Ruyi (Pakistan) Energy (HSR) or the Sahiwal and the Port Qasim Electric Power Company Limited (PQEPCL) coal plants under CPEC was collecting over $3 billion in interest from Pakistan, inflating their set-up costs.
According to the 278-page report by the Committee for Power Sector Audit, Circular Debt Reservation, and Future RoadMap, “excess set-up costs of Rs. 32.46 billion (approximately $204 million) was allowed to the two coal-based [Chinese] plants due to misrepresentation by sponsors regarding [deductions for] the ‘Interest During Construction’ (IDC) as well as non-consideration of earlier completion of plants.”
CPEC plans originally called for a seaport, roads, railways, pipelines, dozens of factories and the largest airport in Pakistan. But, even after seven years, there’s little evidence of that vision being realized. According to government statements, less than one-third of announced CPEC projects have been completed, totaling about $19 billion. Pakistan bears much of the blame. It has repeatedly missed construction targets as it ran out of money; it got a $6 billion bailout from the International Monetary Fund last year, the country’s 13th since the late 1980s. Two successive prime ministers have been jailed on corruption charges. And the Baloch Liberation Army’s desire for a separate homeland in Balochistan province, where Gwadar is located, has made life there uneasy.
Pakistan’s economy has been teetering on the verge of bankruptcy for some time and the COVID-19 pandemic has made the situation even worse. While almost all nations have been substantially affected by the global health emergency, Pakistan’s economy does not have the capacity to absorb the massive disruption caused by the pandemic. Under such circumstances, it is not known what the future will look like and how much it will improve. Pakistan wants to do something to stop this level of exploitation. To this end, bargains have begun to ensure that power charges are low to benefit another form of higher payments. There is also another proposal. According to a report in the Financial Express, Pakistan has made another offer to keep interest rates at minimum for at least 10 years even if electricity tariffs are not reduced.
Electricity transmission and distribution losses have been high in Pakistan. Until Pakistan’s power distribution networks are upgraded the energy crisis is unlikely to ease. Under CPEC energy projects, scant attention has been given toward the upgradation of the electric supply networks. No projects have been agreed upon toward the instalment of smart grids and smart meters. The new power projects being developed under the CPEC will utilize the same distribution and transmission networks plagued with issues of pilferage and losses. Pakistan’s power sector circular debt has swelled to almost PRs 1.9 trillion as the payables stand at PRs 990 billion. Unless Pakistan re-profiles a large portion being CPEC debt, it is in danger of getting into the debt trap and further ruining its international credit.