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September 11, 2018

Does PTI govt really want to protect and pursue CPEC?

Top Story

September 11, 2018

ISLAMABAD: Two similar, recent headlines in the foreign media, both citing the leading personalities of the Pakistan Tehreek-i-Insaf (PTI), have spotlighted the apprehensions of the ruling party towards the China Pakistan Economic Corridor (CPEC), a project of crucial importance to the country.

On August 19, India's Zee News ran the headline “CPEC in trouble? Imran Khan’s new government preps to raise pressure on China”. And on September 9, the British newspaper Financial Times (FT) published a story headlined “Pakistan rethinks its role in Xi’s Belt and Road plan”. In the first story, the PTI Leader of the appointed PTI leader of the house in the Senate, Syed Shibli Faraz, was quoted as saying CPEC projects would be reevaluated in the national interest, but the report was unnoticed, by and large.

The latter story cited the prime minister's adviser on commerce, Abdul Razzak Dawood, as criticising the terms of the CPEC agreement signed in 2015. It has generated a controversy, resulting in the issuance of an immediate- but unconvincing - rebuttal.

A comparison of the two statements strongly suggests that the PTI-led government is not fully invested in the CPEC, despite the reassurances extended to Chinese state counselor and foreign minister Wang Yi over the weekend, and the parallel talks on the next phase of the showcase $62 billion development programme.

The Indian media's interpretation of Shibli’s statement a few weeks ago is no different from how the FT quoted Dawood on Monday.

Zee News reported: “China's 'all-weather' friend Pakistan seems set to be the latest country to promise to review the agreements of projects under Chinese President Xi Jinping's pet Belt and Road Initiative (BRI), of which the CPEC is a critical part. A senior member of Imran Khan's party, the PTI, has said the new government would judge which of the projects are not in Pakistan's interests.”

"After the formation of the government we will review the projects' agreement and decide about those which are not in the country's interest," PTI senator Syed Shibli Faraz was quoted as saying.

Zee News noted: “Faraz's statements on the matter carry weight since he is a member of the new Pakistani Senate's Standing Committee on Planning, Development and Reforms.”

The Indian channel said that if the PTI followed through on this statement, it would mark a radical departure from the previous Pakistan Muslim League-Nawaz government's portrayal of CPEC as a bed of roses - with the Midas touch. "The PML-N government did not share the details of the CPEC agreements they signed with China, with parliament and concerned stakeholders," Faraz reportedly said.

The Indian cable news channel said Imran Khan, since becoming the Prime Minister of Pakistan, has made positive noises about Islamabad's ties with Beijing and CPEC. “But he seems to be using his party to raise the pressure on Beijing into offering better terms to a Pakistan that is staring in the face of an economic crisis,” the ZeeNews report added.

Shibli had told the Saudi newspaper Arab News, “The PML-N government did not share the details of the CPEC agreements they signed with China, with parliament and concerned stakeholders.”

“After the formation of the government, we will review the projects’ agreements and decide about those which are not in the country’s interest. We will honour the agreement, but would request friendly countries for further improvement to create a win-win situation,” he vowed.

Likewise, the FT report said, “Pakistan plans to review or renegotiate agreements reached under China’s BRI, joining a growing list of countries questioning the terms of their involvement in Beijing’s showpiece infrastructure investment plan.”

“Pakistani ministers and advisers say the country’s new government will review BRI investments and renegotiate a trade agreement signed more than a decade ago that it says unfairly benefits Chinese companies. The projects concerned are part of the $62 billion CPEC plan — by far the largest and most ambitious part of the BRI, which seeks to connect Asia and Europe along the ancient silk road,” it added.

The FT then quoted Dawood as saying, “The previous government did a bad job negotiating with China on CPEC — they didn’t do their homework correctly and didn’t negotiate correctly so they gave away a lot.”

He was also cited as saying: “Chinese companies received tax breaks, many breaks, and have an undue advantage in Pakistan; this is one of the things we’re looking at because it’s not fair that Pakistan companies should be disadvantaged,” he said.

Referring to the establishment, by the prime minister, of a nine-member committee to evaluate CPEC projects, Dawood said it is scheduled to meet for the first time this week.

Then he was quoted as saying, “I think we should put everything on hold for a year so we can get our act together... Perhaps we can stretch CPEC out over another five years or so.”

Dawood's reported remarks to the FT generated controversy within Pakistan, prompting him to issue a vague rebuttal, claiming that the FT article was based on statements taken out of context. “Pakistan rejects the article, especially its title,” the rebuttal said.

Nonetheless, the PTI has in the past said that it would make public all major international commercial agreements, whether they relate to CPEC or liquefied natural gas imports from Qatar. The party is skeptical of both these big deals because it suspects its nemesis, the Sharifs, have made billions of rupees in commissions and kickbacks from mega-projects under the CPEC umbrella, particularly the Orange Train project.As in some other cases, the PTI government may have shot from the hip again. A senior official associated with the CPEC feared that the immature approach of cabinet and senior PTI members toward this vital project could seriously dent the national interest.

Earlier, Prime Minister’s adviser on Commerce Abdul Razak Dawood, who was chairman of Descon (Design Engineering Services and Construction), had serious issues with CPEC before his induction in the cabinet.

In an interview with Dawn early this year, Dawood complained, “Pakistani firms have been denied contracts for power and other projects; equipment and raw materials for the(CPEC) projects are being imported (from China); labour (technicians, managers, engineers, etc) too are coming from China. (In other words) there is no restriction on (Chinese) firms to involve Pakistani contractors, and use local equipment and labour as they take the lion’s share of infrastructure projects.”

He added, “Descon, a billion-dollar company with a 40-year experience of maintaining and implementing landmark projects in oil and gas, chemicals, and power sectors at home and abroad, also had made bids for engineering, procurement and construction (EPC) contracts of five CPEC power plants, but failed to win even a single contract as all went the way of Chinese companies. The power projects include two coal power plants in Sahiwal and Port Qasim and three gas-based plants in Bhikki and Haveli Bahadur Shah.”

“We didn’t get even a single job because we were expensive. They (Chinese companies) were cheaper because they got certain tax benefits that were not on offer for us (Pakistani bidders),” Mr Dawood said, adding, “If you know at the start that you are getting certain benefits, you price (your bid) according to the benefits (to undercut your competition). It is not a level playing field... they get a lot more benefits than we do.”

Dawood further told the newspaper, “Now we are moving into the second phase of CPEC initiative: special economic zones (SEZs). (If we want to take advantage of investments in these zones) we should ensure that whatever benefits are given in these industrial zones are available to everybody.”

“(Moreover, these benefits) should be devised in such a way that these don’t put industries outsides these SEZs at a disadvantage. The existing industries at Landhi or SITE area (in Karachi) or in Faisalabad should not suffer (because of the SEZs being created under the CPEC cooperation),” he cautioned.

Answering a question, Mr Dawood underlines the need for Pakistan to devise and implement a trade policy that lays out an export-driven growth strategy and curb imports if “we want to have strong manufacturing and be a large economy”.

“Pakistan will never be a large economy and our exports and manufacturing industry will continue to stagnate unless we bring our focus back on export-driven growth and continue with our extremely liberal import policy. No country can make economic progress if it relies only on the domestic market.”

He also felt that companies should expand into the export market. “You have to go into export market (because) that is the only way a company can grow. Some business houses have expanded overseas. But most of them are focused on the domestic market. Maybe one of the reasons our companies don’t go into export markets is that they are not competitive in the international markets and yet are so profitable in Pakistan. So why expand overseas (if you can make money here)?”

“Our view at Descon is that you must go out. We moved into the Gulf states when we were a small firm. I believe Pakistani companies should work overseas. That’s the only way we can increase our exports, and become efficient and internationally competitive. We gain by interacting with the outside world.”