Asad Umar debunks myth of CPEC ‘debt trap’

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Asam Umar
Asam Umar

Pakistan jumped into the fray one day after a rare public slugfest over the multibillion-dollar China-Pakistan Economic Corridor (CPEC) between top Chinese and American diplomats. A key minister in the cabinet brushed aside US concerns as “wrong analysis” and called CPEC Pakistan a “blessing.”

“The CPEC projects are not a burden on Pakistan’s economy. Instead, they have provided a strong basis for industrial growth in the times to come,” Planning Minister Asad Umar told a news conference in Karachi on Saturday.

“There is no controversy on the CPEC projects. All provinces are on board and foresee a positive impact of these projects on the economy in the long-run,” he added.

Umar’s press came a day after the Chinese Ambassador to Islamabad, Yao Jing, prompted criticism of CPEC by the US Secretary-General for South Asia, Alice Wells, who said that Pakistan risked long-term economic loss with little return if China continues to press on with its massive infrastructure project.

Speaking at Woodrow Wilson International Center for Scholars, Wells said private US investment, coupled with US grants, would improve the fundamentals of Pakistan’s troubled economy. “There’s another version,” she said. “We see that US corporations bring more than just capital worldwide; they bring values, processes and skills that create local economies’ capacities.”

Umar said that Pakistan wanted to work with all nations. “The unity between Pakistan and China is against no nation[ including the US],” he said. “We welcome the U.S. investment offer in Pakistan,” Umar said. “U.S. investors have been, are, and would be welcome to invest in Pakistan. They’ve already been investing in Pakistan and making good profits.

However, he made it clear that Pakistan’s friendly relations with China remained “higher than the Himalayas and deeper than the Arabian Sea” which would “continue to grow”.

In his scathing rejoinder to Wells, Ambassador Yao said that China has always come forward to support Pakistan in need without any differences in politics or policy. At the same time, he asked whether only because of political priorities the US had suspended its promised assistance to Pakistan.

Asad endorsed Ambassador Yao’s statement that China has always stood by Pakistan in times of need. “China has helped us at times when no one else was with us,” he said. “The friendly relationship would be strengthened further. The [relationship with China] would never be rolled back.”

The Chinese envoy also sought the assistance of Pakistani media in nullifying the effects of propaganda against CPEC.  Umar agreed that the anti-Pakistan elements had waged a broad but distorted campaign against the CPEC projects. “I don’t know,” he said, asking if the United States was part of the campaign.

The United States has gone on the offensive against China’s Belt and Road Initiative, a signature project of President Xi Jinping which aims to build ports, highways and railways around the world. The multibillion-dollar CPEC is a part of President Xi’s BRI vision.

“The IMF [International Monetary Fund] has agreed CPEC … is not against Pakistan. Nothing is left hidden on the CPEC projects,” the planning minister said.

CPEC projects, he says, would have a positive impact on the region. “We are waiting in India for a government that will allow peace to prevail in the region. US President Donald Trump acknowledged the facilitation of Pakistan in freeing Western hostages from Taliban captivity a couple of days ago, “he said.

He said Prime Minster Imran Khan was running a successful foreign policy of friendly relationship with all the nations even though some of countries do not like each other. “We want peace in Afghanistan and a healthy relationship with Saudi Arabia, Iran, Qatar, the UAE, Turkey, and everyone,” he added.

Similarly, the premier welcomed investment from across the world, including China, the US, Europe, the Middle East, Far East and other parts of the world, he said.

Umar said Alice Wells has made a “wrong analysis”, that the loans extended under CPEC were of short-term maturity and that they were expensive loans. “CPEC projects have added only $4.9 billion in foreign loans to Pakistan’s total debt pie of $74 billion. “This [CPEC debt] is less than 7% of the total debt,” he said.

He added that the loans were extended for a long-term period of up to 20 years at a nominal interest rate of 2.34%. “The interest rate falls to less than 2% in case we include the interest rate on Chinese grants,” he clarified.

He, however, agreed that the size of the total foreign public debt at $74 billion was not little, considering sluggish exports at around $22-23 billion. The total Chinese loans stand at $18 billion, including $4.9 billion under CPEC and those borrowed from commercial banks to manage Pakistan’s foreign currency reserves at the minimum level and to make international payments in the past.

The Chinese loans would drop at a fast pace over the next three years. “Out of every $3 to be paid in foreign debt repayment and servicing over the next three years, $1 would be paid to China. Later on, the ratio would drop to $1 to China out of each $5 to be paid back to the lenders,” he said.

Umar said the first phase of CPEC projects of infrastructure development – roads and power houses – has been completed. This would provide strong support for phase-II projects which are about industrialisation.

Pakistan is all set to begin work on the first special economic zone in Khyber Pakhtunkhwa over the next one to two months. Out of the total of nine special economic zones to be established across the country under CPEC, three would be on the fast track to bring about industrialization in Pakistan. In addition, the CPEC phase-II projects would also be implemented in the agriculture, education and health sectors, he said.

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