CPEC brings political leadership on one page | Business

LAHORE: Prime Minister Nawaz Sharif, accompanied by all the four provincial chief ministers, is attending the Chinese Summit, One Belt One Road initiative, which clearly indicated that the political leadership of Pakistan is at least on one page regarding China-Pakistan Economic Corridor (CPEC).

However many distractive voices are being heard at seminars and social media. The same distraction was witnessed in Sri Lanka where China-funded infrastructure projects were initiated much before CPEC. The propaganda poisoned the public sentiments and on promises from India and the United States to finance the ongoing Chinese-funded projects.

No assistance was offered once Chinese were asked to back off. This forced political leadership to restore relations with China. The Sri Lankan prime minister is among those head of the states that are attending the summit.

The OBOR, in fact, ensures physical connectivity and CPEC is part of that initiative. The Chinese have mastered the art of building infrastructure in a cost-effective way.

It is a well-known fact that efficient infrastructure enhances productivity, encourages investment, lowers the cost of trade. This in turn accelerates growth, increases economic opportunity and reduces inequality. With the right infrastructure an economy can exploit its comparative advantages. These approaches can jumpstart development in low and middle income countries.

These countries lack the massive funding needed for this connectivity. They also lack regulatory harmonisation.

Pakistanis as a nation must realise that physical connectivity work needs not only huge amounts of funding, but also requires policy coordination and regulatory harmonisation. There is clear risk that the initial infrastructure investment would be impeded by political, sovereign, and financial risks.

We have seen our politicians differing on which CPEC route should be completed first, but they should realise that the route that gives quickest economic benefits should be completed on priority.

The route is of importance to China, which is funding it and the other routes, as well. If routes where financial gains require further infrastructure needs like industrialisation, etc, there would be a risk of being unable to service the loans taken for the initiative.

Of course, doling out too much concession to foreign investors would impact our sovereignty, as well.

The CPEC projects are based on a certain financial model that ensures enough income to service the loans taken for their completion.

The loans are serviceable on a certain toll on roads and power tariff on power projects. If for political reasons any ruling party decided to lower these tariffs below viable levels for winning votes; these projects would become a nightmare.

Another downside of CPEC is that we have almost no fiscal space. We have to provide our share of funding either by increasing government levies and taxes or by diverting funds from other important sectors.

Increasing taxes is politically not possible; but slowing down social sector activities like in education, health and environment does not hurt much politically. That is what we are doing currently, as the country has also to bear huge cost on maintaining law and order situation and fighting terrorists.

Chinese leadership is aware of all these risks and drawbacks. This is the reason that it is liberally funding the infrastructure projects such as building roads, rails, grids, power plant and Gwadar port. It has also ensured the security of these projects and the Chinese workforce working in Pakistan the civilian government and the armed forces.

China has often been accused of attempting to wrest greater control over the sovereignty of Pakistan through CPEC.

India and Western powers are fuelling this idea. After setbacks in Sri Lanka, Africa and some Latin American countries, the Chinese are extremely careful in their attitude to nullify this misgiving.

There is no defence for rejecting an economically sensible global initiative just because China is the one leading it.

Pakistan is not alone in welcoming Chinese. More than 60 countries have welcomed its “One Belt, One Road” initiative; that is a combination of aid with trade and investment that will benefit both Pakistan and China alike.

It is based on new structural economics, which is a process of continuous structural change in technologies, industries, and hard and soft infrastructure.

It is a recipe to enhance productivity and per capita income.