Open for discussion: Is CPEC a win-win for businesses on both sides?


While CPEC has largely been hailed in the official circles of Pakistan, some concern have been voiced over placing too much optimism in the mega-project. It is being asked if Pakistan has done its job better in negotiating the terms of projects under CPEC properly. Is that so?

CPEC Watch sought expert commentary on what has been the impact, so far, of CPEC-centered investment in Pakistani business sector? Has it been conducive to the advantage of both countries? 

You can also weigh in your opinion at the Facebook page of CPEC Watch. Below is the opinion of expert(s):

Zubair Motiwala
Former Chairman, Karachi Chamber of Commerce and Industry

It is being said that CPEC is a boon for Pakistan. As a nation, that could be true in the short-term. After all, in the present circumstances, when no one seems to be investing in Pakistan, CPEC is different.

But as a Pakistani business representative, there are questions I am concerned about for Pakistan in the long-term, one because the details are shrouded in mystery and two, because we are a small economy engaging with world’s second-largest economy.

One of my worries is whether we will be able to pay back the debt we owed to CPEC projects. Bear in mind, most of the packages under CPEC are loan-based. Ultimately, we have to pay them back with interest, which will accumulate with time. It will essentially create circulate debt.

Now if there is a fear of falling into debt trap, we have to ask ourselves this: are we investing in the right direction to be able to ward off that fear? That is, will the long-term dividend of the CPEC investment be conducive for us to pay back the debt? Or to be more precise, will the power plants created set up under CPEC be vibrant enough to earn us profit?

We can get some answer to some of the questions if we know about financial arrangements on the projects. For instance, what will be the mode of toll collection on the roads to be set up for CPEC? What about land rate or port handling charges, for instance?

At the same time, it is being asked by the Pakistani business persons if the Pakistani businesses be getting the same treatment as the Chinese are getting? Will there be relaxation for Pakistanis too? I assume both (Pakistanis and Chinese) will be meted the same treatment; again, is that so?

These are all questions or concerns; the key concern out of all is that details should be clearly spelled out.

Even then, we have to make our industry competitive at regional level and then sign Free Trade Agreement (FTA). Otherwise, we will lose.

It is not even about China. It has been observed that Pakistan ended up losing from the free trade agreement it signed with many other countries. The reason is simple: Pakistan’s industry is not competitive with others in the region.

When the same rule is applied while dealing with China, which is a huge economy with bulk production, the odds are definitely set against us. The cost of business is obviously greater here than in China.

The government of Pakistan has to understand the fundamental issue of protecting the industry already in operation. The government has to evaluate whether our industry can stand up to Chinese competition. Their sheer size creates economy of scale: greater production resulting in lower costs. Big economies can sell under smaller cost to beat or rather kick out competitors. What kind of protection can the government provide to our local industry, remains a million-dollar question.

(Disclaimer: Views expressed by experts are their own; CPEC Watch may or may not agree with them.)

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