CPEC is not Debt Trap: A Fact-check Analysis.

0
96

By Shakeel Ahmad Ramay

Before delving into CPEC, it is pertinent to mention here that the history of bilateral cooperation between China and Pakistan is as old as the history of both countries. Right after building diplomatic relations, both countries started trade besides looking for ways to enhance bilateral economic cooperation. The first recorded trade transaction happened in 1952.It was worth of US$ 86 million (US83 million export, US$ 2million import by Pakistan). The total investment of China in Pakistan was US$ 15 billion in 2010 before the launch of CPEC. Many big companies like China Mobile, Huawei, etc. are now working in Pakistan.

Thus, the case study of China-Pakistan Economic Corridor (CPEC) is a very interesting example because it is the continuity of decades-old cooperation, which was built on the principles of win-win cooperation. It will help explore the dynamics of slogan of debt trap diplomacy and hidden agenda of opponents. For the same reasons, its opponent tryto malign and create confusion about the motives of Chinese investments under CPEC. On the basis these facts, it has been inferred that CPEC has been targeted to achieve multiple objectives:

1. It is a symbol of China-Pakistan friendship, any misunderstanding between China and Pakistan will help the Western countries and they will be able to secure support for Pakistan.
2. It started at a time when no country was interested to invest in Pakistan,
3. It is a flagship project of BRI, the assumed failure of CPEC will help the West to use it as an example to undermine the BRI.
4. The West wants Pakistan to be their ally in the implementation of their policy of China containment.
5. As it is going with good pace and making progress, so it gives hope to new BRI member countries.

It is surprising that nobody tries to understand the CPEC investment and context under which CPEC was launched. Pakistan was going through the worst period of its economic history. Terrorism had shaken the whole social and economic fabric of the country causing sufferings on all fronts. In the war on terror, Pakistan lost more than 70,000 citizens and hundreds of thousands became disabled. The economic loss was more than US$-120billion. Economic activities have come to a halt. Pakistan was looking for investment and no one was ready to invest in Pakistan, leavingthe country alone. The worst part was that even the friends and so-called allies of war on terror betrayed Pakistan.

It caused multifaceted problems on socio-economic front, in addition to debt repayment crisis. The infrastructure started to deteriorate. Load-shedding became the order of the day. Industry started to relocate, and Pakistan was unable to produce jobs to cater for the needs of its youths. It resulted in energy crisis (loss to economy, US$ 4-5 billion dollars, annually), poverty (MPI, 40 percent, 2014), food insecurity (58.8 percent) and many others. Pakistan had to launch Benazir Income Support Program (BISP) to combat the terrible situation. In these dire circumstances of need, China came forward to help Pakistan and launched the joint initiative of CPEC.

CPEC is a comprehensive programme, which includes sectors of economy, energy, connectivity, infrastructure, agriculture, and tourism. It has been designed by keeping in mind the circumstances and needs of Pakistan. First phase was designed to overcome the infrastructure and energy gaps, which were costing dearly. Second phase is all about industrialization, agriculture and science & technology cooperation and development. Second phase has been designed to put economy and high growth and development, create jobs for the youth bulge and make Pakistan able to enter into the fourth industrial revolution with dignity. Financial allocations under CPEC have been kept under two categories, i.e. i) investment, and ii) productive loans.
It shows that both categories do not fall under the definition of debt trap. It is pertinent to mention here that investment is overwhelmingly higher than productive loans.

The other element, which negates the notion of debt trap is that the CPEC related debt constitute only 5.6 percent of Pakistan’s total debt, which has further shrunk (less than 5 percent, as recently Pakistan took new loans from other sources). The major lenders of Pakistan are Paris Club (US$ 10.924 billion), IMF (US$ 7.68), bilateral donors (US$ 24.352 billion), Multilateral donors (US$ 39.392 billion), International Bonds (US$ 5.3 billion), etc. Further analysis shows that majority of these debts were remain in non-productive or consumptive use, which entangled Pakistan in debt trap. So, the debt problem of Pakistan originates from the IMF, Paris Club and other lenders not from China. Unfortunately, the opponents do not mention this aspect and keep continuingthe propaganda.

Lastly, CPEC projects have attracted enormous benefits for Pakistan and is helping to generate the financial resources. First phase of CPEC has produced 83,000 jobs, which means livelihood of 83, 000 are secure. The majority of jobs were for the poor families, which helped them combat the challenge of poverty. More than 100 SMEs also got benefit from the CPEC investment. It helped to create indirect jobs. Owning to CPEC investment, Pakistan was able to manage the challenges of road infrastructure and energy. Road infrastructure is a great help in improving connectivity between raw material production areas and industrial areas. For example, motorway and road constructions between Faisalabad and southern Punjab has helped improve the cotton transportation, asthe area is specialized in cotton production and Faisalabad has textile industry. CPEC also helped overcome the annual loss of US$ 4-5 billion due to load= shedding. It also helped to put a check on industrial relocation, which is helping in jobs creation for locals.

Now, Pakistan is implementing the second phase of CPEC. The major components of second phase are industrialization, agriculture and cooperation in science and technology. These areas will help Pakistan revive economy. It will also lead to mass creation of jobs and export surplus. The job creation will assist Pakistan to tackle the problem of the youth bulge and poverty at wider scale. The overall impact will be multifaceted as predicted by the World Bank.

First of all, due to infrastructure investment, Pakistan’s GDP will increase by 6.43 percent till 2030. Reforms in governance like tariffs, ease of doing business, and trade facilitation can push the increase to the level of 14.03 percent. Welfare effect would be 5.18 percent and reforms will give further impetus and total increase would be 10.51 percent. It will help pull out 1.1 million people out of extreme poverty trap. It has the potential to boost the employment opportunities as well. It was pointed out that Pakistan can get four million jobs. Trade will also witness an increase of 9.8 percentif Pakistan implements the CPEC and support it by required reforms.

Thus, CPEC is helping and will help Pakistan on the following fronts:

1. Job creation
2. Production base expansion
3. Development of agriculture, especially climate smart agriculture
4. Building capacity and infrastructure for fourth industrial revolution through science and technology cooperation
5. Generation of financial resources to pay back the loans.