Review of BRI contracts

October 4, 2018

After gaining knowledge of the disastrous economic consequences of Chinese development projects in a number of South Asian Countries, the PTI government is desirous of making another study of all Belt and Road Initiative (BRI) contracts. There are increasing concerns that the PML-N government poorly handled the deals as they are too costly and exceedingly favor China. But to Islamabad dissatisfaction, Beijing is only prepared to evaluate projects that have not yet begun. This simply means the terms of contracts of current extremely high capital expenditure (Capex) and per unit tariff thermal and hydro energy projects cannot be discussed again. The suspicions about Chinese model of investment are not restricted to Pakistan only. The fall in keenness for Chinese investment reflects the apprehensions of governments in Srilanka, Malaysia and Maldives, where new administrations are suspicious of Chinese deals made by their forerunners. Lack of enthusiasm to go along with has grown under the new Prime Minister Imran Khan, who has expressed apprehension about rising debt levels and is anxious to rid the country of the shackles of foreign loans which have piled up to the untenable limit of $ 95 billion. Railway project linking Karachi to Peshawar is the China’s biggest BRI project in Pakistan, but its estimated cost of $ 8.2 billion is extremely puffed up. That is why the Railway Ministry was reluctant to shoulder the responsibility of loans to be acquired for the project despite the insistence of Planning Ministry under the stewardship of ex-minister Ahsan Iqbal. This was one of the reasons that PC-1 of the project could not be prepared. Pakistan is still committed to Chinese investment but desires to press on harder on price and affordability, while changing the direction of China-Pakistan economic Corridor (CPEC) for which Beijing has assured about $ 60 billion in infrastructure funds for focusing on projects that deliver social development in consonance with the Prime Minister’s election pledges. China’s Ambassador to Pakistan Yao Jing has said that Beijing stays open to alterations suggested by Pakistani government and it will definitely go after its program to get ready a plan for BRI projects based on mutual consultations about the type of model and the arrangement for the future and that Beijing will only carry on the projects that Pakistan wishes, as this is their economy and their society. Prime Minister Imran Khan is going to visit China next month. Let’s hope the government succeeds in renegotiating Capex and tariff issues of Chinese power projects as power sector circular debt has already gone up to Rs. 1.2 trillion. Before the bailout package becomes unavoidable, Islamabad must mend fences with Washington as it controls 70 percent voting rights in IMF.

Pakistan is still committed to Chinese investment but desires to press on harder on price and affordability