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Resetting CPEC priorities

The new government has promised a clear look at CPEC projects to determine whether or not wrong doings have been committed, when these projects were being negotiated. There were media reports emanating from the meetings of parliamentary committees and revelations in investigative news stories and columns that created doubts about the transparency of projects being implemented under the umbrella of CPEC. Not presenting the Nitti Gritty of CPE$C in parliament and keeping it under tight secrecy by the last PML-N government all the more raised concerns about it, which were never addressed.

As in case of Malaysia, former leader, facing corruption charges, which add fuel to the peoples’ mind that all deals negotiated under him, be reexamined. The same rule must apply in Pakistan as well to the leaders who were at the helm of affairs in PML-N government including the former Chief Minister of Punjab. The PTI government has announced to conduct forensic audit of Lahore Orange Train and other projects of mass transit.

One key difference, perhaps, is that that in the case of Pakistan, the new leadership has promised greater transparency and continuity in CPEC projects, provided no real evidence of their shady nature is provided. The fact remains that cost of CPEC was initially $ 46 billion but it went up to $ 60 billion just in two year, which is an unprecedented escalation. Originally, it was a connectivity project but it was largely converted into health hazardous thermal energy project envisaging the expensive electricity generation. To meet certain clauses of Paris Agreement of Climate Change, China is offloading its high density carbon monoxide and other poisonous gases emitting coal based power plants on the soil of Pakistan. One such plant has been set up in Sahiwal and 13 other are in the pipeline. In China, the coal fired power plants cause half a million deaths every year.

The principle of competitive bidding has been excluded in CPEC projects and only Chinese Companies are allowed to compete for getting lucrative contracts, which is a gross violation of rule of transparency in such projects. That is why the Ambassador of the United States had to complain in his address to Islamabad Chambers of Commerce and Industry about not inviting American and European companies to take part in bidding process for the projects under CPEC. Moreover, the rate of interest on Chinese loans goes up to 13 percent after adding insurance charges. On the other hand loans that the World Bank and Asian Development Bank extend loans to Pakistan that carry the interest rate of two percent or less.

The Chinese foreign minster Wang Yi in his visit of Islamabad has claimed that China is not saddling Pakistan with debt. He argued that CPEC that CPEC will usher in an era of unprecedented prosperity, without burdening Pakistan’s economy with expensive debt. A glaring example of Sri Lanka is there to show that Chinese loans are usually expensive. That hapless country of South Asia had to surrender thousands of acres of fertile land and other national assets when it failed to pay back the loans acquired from China. Does the same model will be replicated in Pakistan, which currently cash strapped country and is facing enormous difficulty to meet its external liabilities on account of bulging trade deficit and massive foreign debt?

Ignoring the cogent critique over the agreements of CPEC projects made with PML-N government, immersed up to neck in the deluge of corruption scandals, the Chinese foreign minister insisted that worries about the lack of transparency were false as all projects had been initiated after securing necessary approval. However the cost of projects of thermal and hydropower when compared with the World Bank and Asian Development Bank financed project like Dasu the discrepancies come to light.

Capital expenditure (Capex) for coal power projects is 40 percent higher than the international cost and coal power tariff is 8.4 cent per unit as compared to a tariff in many jurisdictions of five cent and below. In the meantime more evidence has emerged against irrational coal tariff that Chinese power producing companies will charge and for the payment of which the previous government agreed to create a revolving fund in the banking system, without seeking the approval of the parliament. Likewise the hydropower projects being completed by Chinese under the umbrella of CPEC will alarmingly raise the power tariff. A comparative data of different hydropower projects shows that per unit cost varies widely. Karrot has 2.03 percent more the reference cost of Dasu; Kohal is 3.31 times; Azad Pattan is 3.97 times; Sulki Kinari 2.38 times, and Mahal 2.50 times. It remains to be seen as to whether the new government fulfills its promise of resetting CPEC priorities or succumb to China’s pressure.

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