Pakistan

CPEC funding in Trouble. China plays hardball

Pakistan’s CPEC is not going as per the script. Pakistan denied China, First it was the Diamer-Bhasha dam then the 8 billion dollar loans to Pakistan railways under CPEC terms. Now its turn of China to close the taps on three projects – namely Dera Ismail Khan-Zhob Road, Khuzdar-Basima Road and the remaining portion of Karakorum Highway (KKH) from Raikot to Thakot.

While the dawn reported that ‘the Pakistani side was left “stunned” when told of this development since it was the first time they were hearing it’ what was more disturbing that there is no official comment on why this funding was stooped. While dawn sided with the version that Chinese were unhappy with the level of corruption in the three projects, we believe this was a natural reaction to the Pakistanis rejecting the railways loan for not being certain (interest rate) level and not (under) favourable conditions.

CPEC is not an partnership project for China rather a loan based investments.  We had argued before that Chinese banks are forwarding this loan to Chinese companies for doing work in Pakistan for which Pakistan is liable pay back and that one will be only naive to think that in any segment of Pakistani industry can even hope to compete with the Chinese Industry, not with the OBOR and CPEC making access to markets from Peshawar to Karachi ever so easier for factories all over China.

In our view the project suspension is a pressure tactics, that China will play, more often than not. Given the precarious financial situation, Isalmabad has little weight on the negotiating tables. The nations is in urgent need for some foreign money, recent Dollar bond sales not withstanding, to pay its bills. With a not so friendly Washington, IMF will be hard to convince and Beijing remains the only possibility for a bail out.  Pakistani Army, for all its talk of safeguarding the Islamic Republic may have already sold her sovereignty to Beijing.

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