Pakistan has failed to realise even one-fifth of the China-Pakistan Economic Corridor (CPEC) potential and the country’s biggest failure is its inability to increase exports, which is required to finance debt and investment-related obligations, said Privatisation Minister Fawad Hasan Fawad on Thursday.
Fawad, who was Pakistan’s focal person on CPEC affairs during the peak of the multibillion-dollar initiative, gave a candid but soul-searching speech at the KTrade event. The event was arranged to look back at first 10 years of CPEC.
“We failed to realise even one-fifth of the potential offered by the Belt and Road Initiative (BRI) and CPEC from 2013-18 and there was nothing after 2018,” admitted Fawad. He went on to say that what was in the pipeline in the shape of incomplete projects had been there since 2013.
Under the BRI banner, over 3,000 projects worth $1.2 trillion have been signed by China with various countries. Out of this amount, $800 billion worth of projects have been put into action and Pakistan got only $25 billion in investment, lamented Fawad.
So far, $25 billion has been invested under CPEC in over 20 projects and 68% of the investment was in the power sector, according to the KTrade brief. China had committed $62 billion in investment that could not materialise because of Pakistan’s own follies.
“Whatever is happening on Pakistan’s economic front is happening because of us, not because of CPEC,” said Fawad.
He added that in 2013-14, “we knew that the current account deficit would hit Pakistan in 2019, if no additional measures were taken for enhancing exports to support CPEC investment and their repayments”.
Pakistan’s current account deficit reached $19 billion in 2018, which led to a severe external sector crisis and ended up in a three-year IMF deal.
China gave Pakistan a solution that the country needed to increase its exports by an additional $20 billion to $25 billion from 2015 to 2020 to survive “but we failed”, revealed Fawad.
“Our biggest failure was that we could not increase exports by putting together Special Economic Zones” under CPEC, said the minister. Pakistan and China had agreed to set up five SEZs but none is still functional.
The Chinese were very active and eager to see SEZ operations but “so far we have not been able to come up with a single SEZ,” said Nasir Ali Shah Bokhari.
Fawad said that Pakistan did not have the capacity to implement $62 billion of CPEC projects and “yet we kept talking about these numbers for political benefits”. “Putting a number to CPEC in public was a political move, which no country does in the world, except us,” said Fawad.
“We were advised by China that there was no need to talk about these billions of dollars investment figures but we kept talking about these numbers.”
Fawad further said that had we not scandalised CPEC for political point scoring, Chinese investors would have invested two to three times more in Pakistan.
“We are not able to segregate strategic development interests from our political interests,” he lamented. “We keep talking about visions but visions do not come without first learning.”
During his visit to Pakistan, Chinese President Xi Jinping asked Pakistan not to do four things “but we did every one of four that he advised us not to do for making progress and development”, said the minister.
Pakistan can benefit from Gwadar being the connecting port, as it is estimated that CPEC would generate $70 billion in transit revenue per annum, said Nadia Ishtiaq, Managing Director of Corporate Finance at KTrade.
A comparative study carried out by KTrade, an investment advisory firm, showed that in 2014, Chinese investment in Indonesia was less than $2 billion, which in 2020 increased to over $7 billion per annum. Compared to this, the Chinese investment in Pakistan was over $600 million in 2014 that in 2022 dropped to below $500 million per annum despite CPEC, according to KTrade.
Chinese investment in Indonesia also went to diverse sectors while in Pakistan it largely remained concentrated in the energy sector.
Since 2013, there were four different prime ministers and the regime change every time led to the change in government’s policies, leading to the loss of investors’ confidence.
The labour quality also immensely dropped in Pakistan and over 800,000 skilled Pakistanis have already left the country in search for better opportunities.
The development of Gwadar was very crucial for China and even the Chinese president mentioned it during his address at the second BRI Forum, said Hassan Butt, former project director CPEC at the Planning Commission.
Before starting phase-II, Pakistan must realise that the conventional approach may not work this time, said Butt. He also suggested that if the government wants to set up new bodies for doing some work, it should abolish the old ones – in a veiled reference to the Special Investment Facilitation Council.
Published in The Express Tribune, October 13th, 2023.
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