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CPEC CRITICS AND REASONS

If you examine successful ports like Dubai and Singapore, they owned by their own states
and developed with long term strategies. But if you check CPEC deals they are negotiated
with careless manners and Pakistani leadership has shown immense immaturity, short-
sightedness, and lack of good judgement in signing off on CPEC. As time will tell, the CPEC
will soon become Atlas’s burden, a symbol for the world to see but for Pakistan to carry.
China will get lot of benefits from it as they will have one sided deal as Pakistan don’t have
any choice as a broken economy. Here are some points.

Note : if you need references for these fact please refer my following answer and the
sources mentioned in these link are only from Pakistan.
Shyam Bhagat's answer to Is Pakistan becoming a Chinese colony?

1. Huge Loan - The CPEC is based on a $46 Billion loan (now it $55 Billion) that
Pakistan has taken from China under Sovereign Guarantee. From the original
allocation the $11-billion amount for infrastructure purposes is a Chinese loan
whereas the $35-billion investment for the power sector. Infrastructure
investments offered by China for CPEC is to be paid back as equity (ROE)
which is guaranteed at either 17% or 20%.

Check this example which shows actual malpractice in CPEC Projects. With a
substantial portion of the Chinese investments focused on power projects, the
viability of the projects has been closely examined, based on interest rates charged
by the China Development Bank and the China EXIM Bank. Official documents
have revealed that with an estimated debt-equity ratio of 80%-20%, and these
investments guaranteed a 17% to 20% rate of return in dollar terms on their equity
(only the equity portion, and not the entire project cost). China will recover its
investment in less than 26 months, and bleed Pakistan for the 25 year contract
period. Not only that, such hugely expensive electricity will cripple their economy,
making them a wheelchair case.

If you check some historical facts, Sri Lanka is one of the Prime Example. Unable
to repay its debts to China, Sri Lanka is handing over the power
plant, Hambantota port and possibly the airport to Chinese control in a
debt/equity swap. China would then achieve a major objective in its ‘One Belt One
Road’ project, of having a strategic presence on Sri Lankan soil by professing to
offer ‘economic aid’ with no strings attached. Thanks largely to such Chinese
‘aid’, Sri Lanka now spends 90 per cent of all government revenues to
service debts.

In fact, the example of Venezuela, a politically and financially high-risk country
in which China has invested over $52 billion from 2008 up till 2014, the another
biggest Chinese investment in any single country so far, may hold some of the
answers. It created a win-win scenario for the Chinese government by marrying off
low-wage Chinese labour to long-term infrastructure projects in exchange for
secure and continuous supply of oil and commodities. All the Chinese loans to
Venezuela were commodities-backed, under which Venezuela was obliged to
keep supplying to China millions of barrels of oil to feed the Chinese

Under CPEC. no bid contracts against Chinese companies. it was announced with much fanfare that the IMF and World bank had declared Mr Ishaq Dar as the best finance minister in the world.M. goods & materials are all Chinese. So the money China is investing comes back to China and with interest. by mortgaging Motor Ways. 4. in December 2015. Pakistan will never've in a position to pay back even the interest. Again. Presently. To pay interest Pakistan is taking other loans to cover it and will reach alarming levels of Bankruptcy. Pakistan plans to train 15.F. how much is equity and how much is in kind. 3. China is constructing quarters for their own work force in Pakistan. No assurances could be given that Pakistani labour would be recruited to work.000 Pakistani security officials are deployed for the protection of over 8. of Pakistan has to bear from its own pocket. Air Ports. Pakistan had claimed GDP growth of 4. had said: I don’t know out of the $46 billion. Major details about this deal kept very secretive as Governor of State Bank of Pakistan Ashraf Mahmood Wathra. The expenses Govt. after IMF corrections it was found to be closer to 3.1%.The contracts for investments in CPEC are all one sided. As well as Pakistan has nearly (in 2017) $72 Billion debt all together which is nearly 70% of their GDP which are not part of CPEC and Current Account Deficit is now raised to 120%. forget the principal amount. it would and mean China will have to be paid back approximately 7 to 8 billion dollars as EMI for next 43 years from 2018 onwards.a.China is now having huge under-utilised capacity of industrial production and workforce. Even currently Pakistan has raised loans at 8. Radio & TV stations. and substandard construction of Chinese Companies never sure the quality. Preference for Chinese Workforce . payable in 25 to 40 years. 2. how much is debt. 8. That was promptly rubbished by the two institutions. No Toll for Chinese .7%. As Pakistan has very less to export to China.100 Chinese workers in Pakistan. There are also report that some of the projects are awarded to black listed companies in China. economic boom. There will be no Global Tenders and contracts are confined to Chinese companies with Pakistani sub contractors are the only ones who are getting the after meal leftovers that the Chinese would leave on their plates. With CPEC if you assume that the interest will be in the range of 7 % p. Pakistan has to take care of maintenance and security of the road. In CPEC majority of workers. . Khanpur and Nandipur hydroelectricity Power Plants are prime examples.75% interest rate from I.Chinese trucks are exempted from paying toll tax. One sided bids for Chinese Companies .000 security personnel to protect Chinese workers on the corridor. So Govt of Pakistan has to do without a single penny worth benefit getting out of it. Recently. Pakistan also has a history of fudging information and false propaganda. Pakistan will get very less profit from this arrangement.

Pakistan’s exports have fallen by 15. Therefore Xinjiang has very less manufacturing goods to ship to anywhere make CPEC very under utilized. 8. The Chinese PLA is fighting running battle in the province and has been doing that for many years. bordering the South China Sea.In practical. 7. In recent years Foreign Remittences are fell sharply as decline of manpower because of weakened Oil Economy and ideological tussle with OPEC countries. As there is no major industrial growth. It is crazy enough to imagine Chinese would like to ship goods through an at heavy risk CPEC. Lack of resources to payback loans .8 billion imports causing $24 billion trade deficit which is very huge as 215% more than its exports.8 billion in 2015-16 which is compared to $44. .Pakistani goods and services that they can offer to the world are not growing. The population of that province is at this moment attacking the native Han Chinese population and and want to secede from China. on the flip side Pakistani markets are flooded by Cheap Chinese goods which may actually kill their traditional businesses. CPEC is Plan B . This is well evident by their trade deficient where exports are much lower compared to their imports. these loans are becoming major downsides for Pakistani people.5. I think it is unlikely situation. In my view point that it is the alternate route like Plan B and it only works if Plan A fails. The only province that can send freight down CPEC is the Xinjiang Province. the ports being next door and the sea lanes much better secured.Pakistan is facing lot of internal security problems because of internal instability and terrorism. Also Pakistan has much less to offer China for trade. Security Conditions for FDI . Because of high taxation and high Electricity rates Industries in Pakistan cannot compete with products of other countries. China’s major manufacturing is located in her east. The floodgates to Pakistan have been opened to the Chinese and it is just a matter of time before Cheap Chinese goods do the Walmart- effect on Pakistani industry and destroy what is left of it.58 billion in 2012-13 to 20. Impact on Pakistan Industry . thats why Foreign Direct Investment besides China is very low. India and Bangladesh which are providing concessions to decrease their production cost.China has an established track record of arriving much like a horde of locusts and completely wiping out the local indigenous industry.4% in the last three years from $ 24. So it strategically good for China but from view point of Pakistan i can’t see any win win situation. For example Cotton Industries in Pakistan which has major share in its exports are shutting down because they cannot compete with competing industries in China. when they can ship the same goods by sea for a fraction of the cost. Another big reason is China to whom Pakistan is providing favourable terms like Free Trade and Low Tariff on products imported from China makes them cheaper is the other major reason behind falling Industries in Pakistan. 6. These incomes are vital for Pakistan Economy but they are now on downside.

8 billion of the commercial banks as well. the government has borrowed $3. So after paying interests on loans and defence budget. are dropped and adopt different low-grade jobs like electrician. Total foreign exchange reserves are $22 billion that include $4. motor mechanic etc. Environmental Destruction . corrupt and rather helpless against the student community. In one side China is trying to close their own coal based power plants and they are transferring same on the Pakistani sides. Falling Education System . and the Government collects just 9% countries wealth in taxes. Currently in Pakistan there are more than 25 million of children between the ages of 5 to 16 who are not in schools and around 70% of children out-of-school have never been to a school. do major disregard for the environment and utter destruction of ecological systems. In Pakistan only 1% of the population is registered in the Tax System. This is the major cause why Pakistan Government is highly depended on debt. There are no proper checks on the functioning of the educational institutions and accountability is missing at all levels. there is very less amount left for development work. Though the Hydroelectricity is cheaper but it need lot of time to build. and KPK. the routes of quality education are shattered. the elected government are not intervening on this amount. called as “forward buying from the market” to be returned to them.Through CPEC China is installing Coal Based Power Plants in Pakistan which has adverse effects on human health. The education administration is slack. The centuries old syllabus and foreign adopted material is another reason for degradation of whole system.3 billion from the commercial banks. And out of these $4. Enrolment at primary level is very low in Pakistan and most of the students.Pakistan is only spending 2% of its GDP on Education and has a literacy rate of 58pc and these figures are very low for any developing nation. which is lowest in the world. Pakistani text books and syllabus still contain the old boring lessons that were adopted by text book boards a few decade back. As competing for military supremacy with with India. Pakistan also fudging information about increase in Foreign Exchange Reserve which is actually happened because of borrowing from loansfrom foreign commercial banks. Pakistan is spending 7 to 8 billion dollars on its defence budget which also hurts the economy. Not acquirement of knowledge but easy questions papers and fake degrees are the aim of education for most Pakistani people.Pakistan has facing lot oppositions with its provinces like Baluchistan. 10. after passing primary classes. Pakistan don’t have any choice to accept Coal based plants which later becomes major problems for Pakistani Environment. Without proper skilled workforce you don’t have the capacity to run and execute similar kind of project. Because of Islamic and Political Radicalisation in education during Jia Ul Haq military rule. Baluchistan has history of number of uprisings for . 11. Internal Instability .8 billion. Sindh. Nandipur Hydro Power Plant is one of the prime example where after lot of operational failures Pakistan handed over the operations to Chinese Company. Due to the constant pressure of Pakistan Military institutions. 9. To solve Power Generation problem as fast as possible. plumber.

The Pakistani Generals and their politician underlings who will squirrel away every dollar they could steal and invest it wisely in Dubai. Defence spendings in India is $50 Billions in comparison to Pakistan’s $8 Billion Military budget. As India is becomes Economic Powerhouse. China cares only about itself no matter who it hurts. From Military Establishments to small bodies in Government everywhere corruption is massively involved in every development activities. It also has difference with Afghanistan as it supports extremest elements who are destabilising Afghanistan. 14. its Freedom Movement as it is lacking major share in development and infrastructure. Pakistan signed CPEC with good intentions but failed to get a fair deal. The same thing is happening with CPEC. where every state is fighting for getting maximum benefit. China also made similar offer CPEC like loan offer to India. And in the military might. It's the same with CPEC. USA and Panama. Without participation of neighbouring countries CPEC will never be successful as expected.Pakistan is spending more than 3% of GDP on it’s military. To balance it Pakistan always take help from other powerful nations. So if Chinese people think they push Pakistan in loss making business like Sri Lanka to gain full control. China has already put up its naval ship and military in Pakistan to safeguard its investment. Success of CPEC is also lies in hands of Chinese people because Pakistan sold your prospects to them. Pakistan’s military ambitions are mainly India centric and to match the defence capabilities it has spend more on its Military than its development works. Iran is also keeping distance from Pakistan on key relations.Pakistan is having following the Security State Policy and believe India as their number one existential threat. there is nothing Pakistan can do to stop them. No other choice to protect from India. . They have no choice other than to involve China though it will not benefit them in long term. Sindh is the major economic powerhouse in Pakistan but it is getting less amount of resources from Federal Government which is dominated by Punjab Province. Military Tussle with it’s neighbours . They should not surprise anyone it is a kind of selloff like politicians did in Venezuela and Sri Lanka. 13. 12. Only China has maintained good friendship but Power is always come with prosperous relations with neighbours. KPK and Gilgit Baltistan are also facing lack of infrastructure problems. . India is also increasing military capabilities. The dominated nature of Punjab province kept all its provinces its envy and they never actually united as a nation which would make them powerful. there is no comparison between India and Pakistan. Failure of Kalabag Dam is a prime example of lack of unity in Pakistan’s Provinces. Their military's sovereignty is at risk. UK. Corruption . And as a Sunni background and close relations with Saudi Arabia.This is the number one reason of Pakistan’s Economic Backwardness. With smarter decision India got similar investment on 1% interest from Japan which shows their diplomatic correctness. Like they took help from United States till 2008 till they started tilting towards India. but India’s Politicians turned down their offer by taking wise decision instead of trusting Chinese speculative intensions. China will take back its loan amount one way or another. It is very much possible that Pakistan will end up giving control of the Gwadar Port to China.

that means Pakistan is already submitted to China. pakistan has increased its corporation with china resulting in CEPEC. As well as China has to keep in mind that Pakistan is in the habit of dumping the benefactors and working against their interests. healthcare etc Pakistan is spending most of it's resources on the army and non state actors in kashmir and Afghanistan.(can't remember where i read it). The tail is capable of wagging the body. Now since usa is slowly backing away from Pakistan. These are not my words but of pakistani army general named Habibullah. Since it's existence Pakistan has been dependent on other powers (usa. Their duplicity are experienced and suffered by US. differ Well to a certain degree yes.(which i guarantee won't make a difference in pakistan in the terms of betterment of the country. It is in favour of India as Chinese Regime is neutralising Pakistan.china).) .saudi arabia. China need to be cautious. You see pakistan is like a beautiful women that must sell itself to the highest bidder. Actions like arrest of Masood Azar and Chinese Navel presence in Gwadar are indications that Pakistan is obeying Chinese Orders. Instead of developing the country and spending it's earnings on education.Pakistan cannot do anything as Chinese state owned army is in Pakistan. One major reason for this is the obession of Pakistan over kashmir.