The PTI government is considering reviewing some of the agreements under CPEC. Some people are taking this well. Other people are not so happy.
The new government’s subtle, yet visible shift in policy has led to debate again over the short- and long-term benefits, and repercussions of the China-Pakistan Economic Corridor.
SAMAA Digital looked at Chinese overseas investments for the past 10 years through the Belt and Road Initiative in Pakistan and all over the world. This data has been sourced from the American Enterprise Institute, a public policy think tank based in the US. We wanted to know the extent of Chinese commitment in Pakistan.
There are two types of Chinese investment:
- Direct investment by a Chinese, or a Chinese state-owned company in Pakistan when it buys part of an enterprise in Pakistan, buys the whole business or starts a new business. An example was the 2007 buyout of PakTel by China Mobile (Zong). Another example is the tech giant Alibaba recently acquiring Daraz.pk
- Contracts awarded to Chinese, or Chinese state-owned companies. These are from loans given to Pakistan by the Chinese state-owned bank under the condition that only Chinese contractors can be hired from the loaned amount. An example would be the China National Nuclear Corporation (CNNC) being awarded a contract of $6.5 billion for the construction of two new reactors at the Karachi Nuclear Power Plant in 2013.
In total, China has invested $7.63 billion through CPEC since 2014 and this investment peaked in 2015. This is the same year that China invested a total of $2.78 billion in the energy sector, a major chunk of which went to coal and alternative energy.
In ten years, we see that Chinese companies have invested heavily in energy, followed by technology (mostly telecom) and transport, which is understandable given Pakistan’s energy crisis. If we look at all of China’s investments through the Belt and Road Initiative, we find that the energy sector in Pakistan is China’s 4th biggest investment.
We’ve often heard that Pakistan is the biggest beneficiary of the Belt and Road Initiative, here is a map that puts that into perspective.
So far, construction projects in Pakistan through CPEC are worth 31.8 billion US Dollars. Bangladesh, which comes second on the list of beneficiaries, has construction projects worth $18.2 billion.
Most of this these construction projects are in energy and transport. Of all the construction projects in the 68 countries under the BRI, the energy sector in Pakistan is China’s single biggest investment at an estimated value of $22.6 billion.
This money coming from China is in the form of loans, not aid. This is money we have to pay back.
According to a report released by the Centre of Global Development, China will finance 80% of the projects under CPEC. This has to happen through loans which will have to be paid back with interest rates as high as 5%. The study evaluated the current and future debt levels of the 68 countries hosting BRI-funded projects. It found that of the 23 countries that are at a high risk of defaulting. In eight of those high-risk countries, future BRI-related financing is said to greatly increase the already high risk of default. Pakistan is one of these eight countries.