Political & Economic Analysis of CPEC (China Pakistan Economic Corridor)

China-Pakistan Economic Corridor

A need for Critical Political and Economic Analysis of CPEC

By: Vijay Sardana (wrote on 16.05.2017)

Let me start by some fundamental issues, which I will discuss in detail, in coming days. If CPEC is an Economic project, as claimed by Chinese media, then why it is without transparency and why excessive cost padding in every project and why insurance charges are among the highest in the world. What is the justification?

Why open bidding is prevented by China, if China is clear that they are the least cost technology provider, they should be happy with the tendering process. Why they avoid open tendering process? It means either technology offered by them is outdated or too expensive or both.

According to reports, the cost of power from CPEC projects will be 3 to 5 time higher than India, and Road toll is estimated to be Rs. 3 per kilometer, which is also much higher than India. This will put Pakistan into very disadvantageous situation in world trade with respect to India. This will adversely affect balance of payment of Pakistan.

In fact Indian companies can offer better and cheaper options to Pakistan than what China is dumping on Pakistan. Let there be a comparison by Pakistani economists to have fair assessment.

China has also ask assured return of 27% from Pakistan on every project. CPEC will make Pakistan economy to bleed and collapse in competitive situation.
With existing terms and conditions only Chinese companies are allowed to dump goods in Pakistan at no custom duties. Will Pakistan be able to export anything due high cost of power and infrastructure created under CPEC? There is no assessment what will be the export potential from Pakistan back to China?

China demanded and Pakistan agreed tax free import and export of goods by Chinese companies for 40 years from Gwadar port. This will kill all local industries of Pakistan. Cement, textile, sugar, petrochemicals, white goods, and Steel industry of Pakistan will collapse and imports will flood the markets.

Unemployment will go up. This will feed to militancy and social unrest. This is penny wise pound foolish decisions of Pakistan government.

Let Chinese Experts and Media explain how CEPA will Pakistan will benefit and at what cost?
How much Pakistan will be able to export back to China due to these CPEC infrastructure development and whether China is giving duty free access to Pakistan, the way it is demanding from Pakistan?

How much revenue generation will happen for Pakistan by CEPC and what will be the interest servicing and insurance cost for CEPC. Is Pakistan heading for debt trap?
The backward and remote areas of Baluchsitan are not getting any meaningful investment under CPEC, this is clear message China is looking at market of Pakistan, not development of Pakistan and Pakistan will not get any tax revenue from all this, in fact it will pay assured return thru nose as per CPEC agreement.
Let there be fair financial analysis of CEPC by all including World Bank?

Due to lack of any logic and adverse cost and benefit analysis from Pakistan, it seems Pakistan military is bribed by China to force political leadership of Pakistan to accept CEPC's adverse term and conditions and to keep agreements under lock and key. This will lead to social and civil unrest in Pakistan. It is just matter of time.
At the best China will buy raw material from Pakistan like agriculture commodities and minerals, WITHOUT VALUE ADDITION, this will again suit Chinese interest because they will reduce their dependence on other countries. Farmers and Labour of Pakistan will follow what China will say and all industrialists will become traders of Chinese value added goods. This was the same case under East India Company and British occupation.

Let us wait and see how this will impact social, political and cultural dimensions in Pakistan under its own weight and ego fight of military and political leadership with India.

In future, in Pakistan we may see Chowmin Kabbab in place of Chicken Kabab, Muglai restaurants will be overshadowed by Chinese restaurant and Pakistan Handcraft gifts duirng Id will be wiped out by Chinese low cost rejects. Skull Caps for namaz will be 'Made in China' (a communist nation).

This will be case study for all Geo-political and Geo-economic analysts.

I hope, economists in Pakistan, India, China and International organisations like World Bank, IMF, New Development Bank and WTO will share their views in coming days.
In my assessment, by any standards of common sense (may not be by so-called experts with vested interests, they have tendency to make simple thing complex to justify illogical decisions), CPEC in the current format is not in favour of Pakistan. This must be reviewed and renegotiated with any political consideration in the interets of people of Pakistan.

I will share more inputs on the same in coming days. Pl. share your views.