ISLAMABAD (Reuters) - After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink signature Chinese “Silk Road” projects due to debt concerns.

A cargo train loaded with coal dust, moves past the port area near City Station in Karachi, Pakistan September 24, 2018. REUTERS/Akhtar Soomro

The rail megaproject linking the coastal metropolis of Karachi to the northwestern city of Peshawar is China’s biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms.

Resistance has stiffened under the new government of populist Prime Minister Imran Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Khusro Bakhtyar, minister in Pakistan’s planning ministry, told reporters recently.

The cooling of enthusiasm for China’s investments mirrors the unease of incoming governments in Sri Lanka, Malaysia and Maldives, where new administrations have come to power wary of Chinese deals struck by their predecessors.

Pakistan’s new government had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favored China.

But to Islamabad’s frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told Reuters.

China’s Foreign Ministry said, in a statement in response to questions faxed by Reuters, that both sides were committed to pressing forward with BRI projects, “to ensure those projects that are already built operate as normal, and those which are being built proceed smoothly”.

Pakistani officials say they remain committed to Chinese investment but want to push harder on price and affordability, while re-orientating the China-Pakistan Economic Corridor (CPEC) - for which Beijing has pledged about $60 billion in infrastructure funds - to focus on projects that deliver social development in line with Khan’s election platform.

China’s Ambassador to Pakistan, Yao Jing, told Reuters that Beijing was open to changes proposed by the new government and “we will definitely follow their agenda” to work out a roadmap for BRI projects based on “mutual consultation”.

“It constitutes a process of discussion with each other about this kind of model, about this kind of roadmap for the future,” Yao said.

Beijing would only proceed with projects that Pakistan wanted, he added. “This is Pakistan’s economy, this is their society,” Yao said.

Islamabad’s efforts to recalibrate CPEC are made trickier by its dependence on Chinese loans to prop up its vulnerable economy.

Growing fissures in relations with Pakistan’s historic ally the United States have also weakened the country’s negotiating hand, as has a current account crisis likely to lead to a bailout by the International Monetary Fund, which may demand spending cuts.

“We have reservations, but no other country is investing in Pakistan. What can we do?” one Pakistani minister told Reuters.

CRUMBLING RAILWAYS

The ML-1 rail line is the spine of country’s dilapidated rail network, which has in recent years been edging towards collapse as passenger numbers plunge, train lines close and the vital freight business nosedives.

Khan’s government has vowed to make the 1,872 km (1,163 mile) line a priority CPEC project, saying it will help the poor travel across the vast South Asian nation.

But Islamabad is exploring funding options for CPEC projects that depart from the traditional BRI lending model - whereby host nations take on Chinese debt to finance construction of infrastructure - and has invited Saudi Arabia and other countries to invest.

One option for ML-1, according to Pakistani officials, is the build-operate-transfer (BOT) model, which would see investors or companies finance and build the project and recoup their investment from cashflows generated mainly by the rail freight business, before returning it to Pakistan in a few decades time.

Yao, the Chinese envoy, said Beijing was open to BOT and would “encourage” its companies to invest.

Rail mega-projects under China’s BRI umbrella have run into problems elsewhere in Asia. A line linking Thailand and Laos has been beset by delays over financing, while Malaysia’s new Prime Minister Mahathir Mohamad outright canceled the Chinese-funded $20 billion East Coast Rail Link (ECRL).

Beijing is happy to offer loans, but reticent to invest in the Pakistan venture as such projects are seldom profitable, according to Andrew Small, author of a book on China-Pakistan relations.

“The problem is that the Chinese don’t think they can make money on this project and are not keen on BOT,” said Small.

OFF-BOOKS DEBT

During President Xi Jinping’s visit to Pakistan in 2015, the ML-1 line was placed among a list of “early harvest” CPEC projects that would be prioritized, along with power plants urgently needed to end crippling electricity shortages.

But while many other projects from that list have now been completed the rail scheme has been stuck.

Pakistani officials say they became wary of how early BRI contracts were awarded to Chinese firms, and are pushing for a public tender for ML-1.

Partly to help with price discovery, Pakistan asked the Asian Development Bank (ADB) to finance a chunk of the rail project through tendering. The ADB began discussions on a $1.5-2 billion loan, but China insisted the project was “too strategic”, and Islamabad kicked out the ADB under pressure from Beijing in early 2017, according to Pakistani and ADB officials.

“If it’s such a strategic project then it should be a viable project for them to finance on very concessional terms or invest in?” said one senior Pakistani official familiar with the project, referring to the BOT model.

China’s foreign ministry said Beijing was engaged in “friendly consultations” with Pakistan on the rail project. Chinese companies participated in BRI projects in an open and transparent way, “pooling benefits and sharing risks”, it said.

Analysts say Pakistan will struggle to attract non-Chinese investors into the project, which may force it to choose between piling on Chinese debt or walking away from the project.

In 2017, Pakistan turned down Chinese funding for a $14 billion mega-dam project in the Himalayas due to cost concerns and worries Beijing could end up owning a vital national asset if Pakistan could not repay loans, as occurred with a Sri Lankan port.

Khan’s government chafes at several Chinese intercity mass transport projects in Punjab, the voter heartland of the previous government, which now need hundreds of millions of dollars in subsidies every year.

Slideshow (7 Images)

They also fume about the risk of accumulating off-books sovereign debt through power contracts, where annual profits of above 20 percent, in dollar terms, were guaranteed by the previous administration.

With the ML-1 line, there are also those who harbor doubts closer to home, including the previous government’s finance minister, Miftah Ismail, who said his ministry had always had concerns about its viability.

“When people say it’s a project of national importance, that usually means it makes no sense financially,” he said.</s>Analysts say Pakistan will struggle to attract non-Chinese investors into the project, which may force it to choose between piling on Chinese debt or abandoning the project</s>Lahore, Pakistan (Reuters) - Islamabad has cut the size of the biggest Chinese “Silk Road” project in Pakistan by $2 billion, Railways Minister Sheikh Rasheed said on Monday, citing government concerns about the country’s debt levels.

The megaproject to revamp the colonial-era line stretching 1,872 km (1,163 miles) from Karachi to the northwestern city of Peshawar was initially priced at $8.2 billion, but wrangling over costs has led to delays.

The changes are part of Islamabad’s efforts to rethink key Belt and Road Initiative (BRI) projects in Pakistan, where Beijing has pledged about $60 billion in financing but the new government of populist Prime Minister Imran Khan appears to be more cautious about the Chinese investment.

“Pakistan is a poor country that cannot afford huge burden of the loans,” Rasheed told a news conference in the city of Lahore.

“Therefore, we have reduced the loan from China under CPEC for rail projects from $8.2 billion to $6.2 billion,” he added, referring to the China-Pakistan Economic Corridor (CPEC).

Rasheed said the government remains committed to the Karachi-Peshawar Main Line-1 (ML-1) project but added that he wishes to further reduce the cost to $4.2 billion from $6.2 billion.

Islamabad has balked at the financing terms and has pushed for deeply concessional loans for ML-1. It also invited third countries to join or for the Chinese to be investors in the project through the build-operate-transfer (BOT) model that would rely less on debt.

The United States has criticized BRI projects, warning that the loans could turn into debt traps for poor countries unable to pay them money back. Beijing denies the claims, saying the loans are a win-win situation for both countries.

“CPEC is like the back bone for Pakistan, but our eyes and ears are open,” Rasheed said.

The ML-1 is the spine of the country’s dilapidated rail network, as well as the biggest source of revenue. Pakistan’s rail system has struggled to break even for decades as passenger numbers plunge, train lines close and the vital freight business nosedives.</s>Pakistan's rail minister says the country's largest Chinese-funded "silk road" rail project will have its budget cut by $2 billion, citing debt concerns.

 

 The project to restore the aging 1,872 kilometer ML-1 rail lines from Karachi to Peshawar was initially priced at $8.2 billion, but concerns over the cost have led to delays.

 

 The new government of populist Prime Minister Imran Khan has been cautious about taking on the rail projects, which receive billions in funding from the Chinese government. It has pushed the Chinese government to restructure the agreement to rely less on debt or to allow other countries to co-finance the operation.

 

 "Pakistan is a poor country that cannot afford huge burden of the loans," Railways Minister Sheikh Rasheed said Monday in the city of Lahore.

 

 Chinese President Xi Jinping has pushed his Belt and Road Initiative as a means of increasing international trade and goodwill through massive infrastructure spending. Morgan Stanley has estimated the project will cost $1.3 trillion by 2027. Xi has called it the "project of the century," comparing it to the ancient Silk Road that made China a hub of international commerce.

 

 Pakistan joins a growing chorus of countries concerned about infrastructure deals struck with China under previous administrations.

 

 Thailand, Laos, Sri Lanka and the Maldives have all voiced complaints about the terms of the loans from China, which many have described as debt traps. Malaysia's new prime minister, Mahathir Mohamad, canceled a $20 billion rail project in August.</s>China Belt and Road Initiative another debt trap…Maldives the last link in China’s takeover of Indian subcontinent

When smaller nations default on loans from China, the country steps in and lays claims to their assets.

 So far, China has laid claim to international airports, ports, bridges and in some cases lands financed through predatory lending.

 China has already seized control of territories in Sri Lanka, Zambia, and Tajikistan.

Global experts believe the move forms part of China’s strategy to secure its economic and military influence in the world.

 It is no wonder that many are now expressing concerns about China’s operations in the Republic of Maldives, a chain of small islands located in the Indian Ocean.

 In fact, the Maldives forms the last link in the string of countries, which have been swept under China’s debt trap in India’s subcontinent.

 Pakistan, Myanmar (Burma), Sri Lanka and Bangladesh have all been infiltrated.

 Sri Lanka is a key example. Last year, Sri Lanka was forced to hand over a Deep Water Port to China’s government after falling into more than $1 billion in debt.

 As such, China’s move to purchase lands in the Maldives is fast becoming a global issue of concern.

 Earlier this year, Mohamed Nasheed, a former President of the Maldives made a resounding accusation of land grabbing against the Chinese government.

 LAND GRABBING

 According to the Macau Daily Times, a local newspaper, Nasheed accused China of buying up lands and key infrastructure in the Maldives.

 He described China’s growing influence in the Maldives as a land grab in the guise of investments in the island’s development.

 The Maldives has embarked on a number of infrastructural projects funded by China.

 For instance, a US$210 million Friendship Bridge linking the capital island of Male and an airport island currently under construction — is being financed by China under the contentious Belt and Road Initiative.

 There is also the 1,000-apartment housing project on Hulhumale suburb, which is being built under the Belt and Road Initiative.

 The initiative is widely regarded as a “debt trap”.

 Therefore, critics have warned the Maldives that massive debts could eventually force the country to cede land to China.

 The Indian Ocean country, known mostly as a tourist destination, takes in less than $100 million a month in government revenue.

 As of January, China accounted for nearly 80 percent of the Maldives foreign debt.

 Much of China’s investment in the Maldives went into infrastructure, including roads, bridges and airports.

 Foreign News Magazine, Vanuatu Independent, quoted the former Maldivian leader as saying these are ‘vanity projects’, roads going to nowhere, airports that [will sit] empty.”

 Nasheed has alleged that China has already taken over lands in 16 islands under the Maldives’ government.

 “This land grab exercise hollows out our sovereignty,” he argued.

Once ports have been built on the islands, ‘these commercial infrastructures can very easily become military assets, Nasheed asserted.

 Such conversions are ‘very simple’, he said, pointing to a naval base China established in the East African nation of Djibouti last August. For now, the debts to China are accruing interest at high rates.

 And the Maldives’ is expected to start payments on this debt by 2019 or 2020.

 The former leader has warned that the country would not be able to repay its debts to China, and will eventually be forced to cede land to Beijing.

 “If the Maldives falls behind, China will ‘ask for equity’ from the owners of various islands and infrastructure operators, and Beijing will then ‘get freehold of that land,” he said.

 QUESTIONABLE DEALS

 Meanwhile, Maldivian President Abdulla Yameen has been accused of opening the doors to Chinese investment without any regard for procedure or transparency.

 The matter came to the forefront last December after China signed a Free Trade Agreement (FTA) with the Maldives.

 The FTA was, however, not the only pact that the two nations signed.

 In addition to the FTA, a Memorandum of Understanding, (MOU) was signed for the rolling out of infrastructural projects under China‘s Belt and Road Initiative project.

 China has extended hundreds of billions of dollars in loans to developing countries under the initiative— most of them have been unable to repay the debts.

 When the two countries signed the agreement last December, it came under intense scrutiny from the Maldivian main opposition party.

 The opposition had criticized the government over the speed at which the deal was concluded.

 According to Reuters, the Maldives parliament signed off on the deal, which included a document of more than 1,000 pages after less than an hour of discussion.

 The main opposition Maldivian Democratic Party (MDP) objected to the signing of the document.

 The party noted the FTA contained technical details that should have been thoroughly reviewed.

 The Opposition called for its implementation to be suspended until an independent feasibility study is conducted.

 DISMISSIVE

But despite the growing fears, Maldives’ Ambassador to China, Mohamed Faisal recently told the South China Morning Post that the country would push ahead with Chinese projects and seek more investment from the country, regardless of concerns raised by regional power India.

 Faisal dismissed the claims of land grabbing in the Maldives.

 “There has been tension and pressure on the Maldives … the talk of debt traps, land grabs in the nation is because we have been working with China.

 “(But) it is part of a global trend now – a lot of people are seeing what China is doing because, in terms of both economically and global power, China is rising.

 If we were working with India or the US, people would not be talking.”

 Guyana’s Foreign Affairs Minister, Carl Greenidge has been equally dismissive of concerns over the Belt and Road Initiative.

 Guyana signed an MOU with China that paves the way for the Belt and Road Initiative to eventually come here. Greenidge, however, criticized Kaieteur News exposure of the ‘China Belt and Road Initiative’.

 He contended that MOU that was signed with China is not a loan agreement; it only provides the framework for an agreement between bilateral partners.

 Greenidge said that the project should be viewed as “foreign aid.”

 It has nothing to do with China, it applies to all aid, whether it is from the United Kingdom, or the United States,” Greenidge stated.

 This is the first time China‘s ‘aid’ to Guyana has raised eyebrows.

 In 2013, the People’s Progressive Party (PPP) government took hundreds of millions of dollars in loans to modernize the Cheddi Jagan International Airport (CJIA), and the Skeldon Sugar Factory Plant.

 Those loans are now on the backs of Guyanese. Five years later, the Skeldon plant is yet to process a single grain of sugar.

 And while China and the PPP said that CJIA would have been used as a hub for Africa and Asia, that dream is yet to be realized.</s>After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan's ability to rethink signature Chinese "Silk Road" projects due to debt concerns. The rail megaproject linking the coastal metropolis of Karachi to the northwestern city of Peshawar is China's biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms. Resistance has stiffened under the new government of populist Prime Minister Imran Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

"We are seeing how to develop a model so the government of Pakistan wouldn't have all the risk," Khusro Bakhtyar, minister in Pakistan's planning ministry, told reporters recently.

Pakistan's new government had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favoured China. But to Islamabad's frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told Reuters.

Pakistani officials say they remain committed to Chinese investment but want to push harder on price and affordability, while re-orientating the China-Pakistan Economic Corridor (CPEC) - for which Beijing has pledged about $60 billion in infrastructure funds - to focus on projects that deliver social development in line with Khan's election platform. China's Ambassador to Pakistan, Yao Jing, told Reuters that Beijing was open to changes proposed by the new government and "we will definitely follow their agenda" to work out a roadmap for BRI projects based on "mutual consultation".

Beijing would only proceed with projects that Pakistan wanted, he added. "This is Pakistan's economy, this is their society," Yao said. Islamabad's efforts to recalibrate CPEC are made trickier by its dependence on Chinese loans to prop up its vulnerable economy.

Growing fissures in relations with Pakistan's historic ally the United States have also weakened the country's negotiating hand, as has a current account crisis likely to lead to a bailout by the International Monetary Fund, which may demand spending cuts.

"We have reservations, but no other country is investing in Pakistan. What can we do?" one Pakistani minister told Reuters.

The ML-1 rail line is the spine of country's dilapidated rail network, which has in recent years been edging towards collapse as passenger numbers plunge, train lines close and the vital freight business nosedives. Khan's government has vowed to make the 1,872 km (1,163 mile) line a priority CPEC project, saying it will help the poor travel across the vast South Asian nation. But Islamabad is exploring funding options for CPEC projects that depart from the traditional BRI lending model - whereby host nations take on Chinese debt to finance construction of infrastructure - and has invited Saudi Arabia and other countries to invest.

Rail mega-projects under China's BRI umbrella have run into problems elsewhere in Asia. A line linking Thailand and Laos has been beset by delays over financing, while Malaysia's new Prime Minister Mahathir Mohamad outright cancelled the Chinese-funded $20 billion East Coast Rail Link (ECRL).</s>Pakistan has become the latest addition in the countries which are re-considering China-funded projects in its country. The $8.2 billion project with the objective of connecting the Arabian Sea to the foothills of the Hindu Kush has been witnessing lengthy delays which have forced the new government to relook the viability of the project.

The ambitious rail project linking the coastal metropolis of Karachi to the north-western city of Peshawar is China's biggest Belt and Road Initiative (BRI) project in Pakistan, the administration has raised serious apprehensions over the cost and financing. The voice of dissent against the Chinese projects has become stronger under the new government of populist Prime Minister Imran Khan, who himself has questioned the rising debt levels in the country.

It is to be noted that the incoming government in several countries including Sri Lanka, Malaysia and Maldives are reconsidering the deal struck by their predecessors with China. IN addition to that list new government is muting the idea to review all the BRI contracts. Officials are of the opinion that the deals were badly negotiated, too expensive or overly favored China.

Reuters quoting Chinese foreign ministry reported that both countries have committed to continue working together to complete the BRI projects and "to ensure those projects that are already built operate as normal, and those which are being built proceed smoothly."

On the other hand, the Pakistani counterparts have argued that they remain committed to Chinese investment but at the same time, they want to re-negotiate the deals in terms of price and affordability. China has promised around $60 billion in infrastructure funds for the project all across Pakistan.

The Chinese Ambassador to Pakistan said that Beijing was open to changes put forward by Pakistan government and "we will definitely follow their agenda" to work out a roadmap for BRI projects based on "mutual consultation." Yao further added that "It constitutes a process of discussion with each other about this kind of model, about this kind of roadmap for the future."

Pakistan will have to make a balance between securing funds for its infrastructure projects and getting trapped under heavy Chinese debts.</s>ISLAMABAD: China was open to the changes proposed by the new, Prime minister Imran Khan-led Pakistani government and "will definitely follow their agenda” to work out a roadmap for BRI projects based on “mutual consultation”, Ambassador Yao Jing told Reuters on Sunday.



“It constitutes a process of discussion with each other about this kind of model, about this kind of roadmap for the future,” the Chinese Ambassador to Pakistan said, adding that Beijing would only proceed with projects that Islamabad desired.

“This is Pakistan’s economy, this is their society,” Yao said.

Both friendly countries were committed to pressing forward with BRI projects, China’s Foreign Ministry said in response to questions faxed by Reuters, in order “to ensure those projects that are already built operate as normal, and those which are being built proceed smoothly”.

According to Pakistani officials, one option is the build-operate-transfer (BOT) model, which would see investors or companies finance and build the project and recoup their investment from cash flows generated mainly by the rail freight business, before returning it to Pakistan in a few decades' time.



Beijing was open to BOT and would “encourage” its companies to invest, the Chinese envoy said.



Earlier, Islamabad baulked at the cost and financing terms, with resistance to the Belt and Road Initiative (alternatively known as The One Belt One Road (OBOR)) — and especially the China-Pakistan Economic Corridor (CPEC) — stiffening under the government of Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

Model that doesn't 'have all the risk'

Pakistan’s new government had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favoured China.



“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Khusro Bakhtyar, a minister in Pakistan’s planning ministry, told reporters recently.

In fact, back on September 10, renowned economist Abdul Razak Dawood, who is also the advisor to prime minister Imran Khan on commerce, textiles, industries production and investment, had told an international economic magazine that all CPEC-related projects must be halted for at least a year.



Deals that are giving illegal benefits to the Chinese companies need to be revisited and made anew, he added, since Pakistani companies are at a disadvantage.



Citing Islamabad's unease with what it claims is unjust benefit being enjoyed by Beijing-origin companies, Dawood told Financial Times he thought “we should put everything on hold for a year so we can get our act together.

"Perhaps we can stretch CPEC out over another five years or so."

Pakistani officials also say they remain committed to Chinese investment but want to push harder on price and affordability, while re-orientating the CPEC — for which Beijing has pledged about $60 billion in infrastructure funds — to focus on projects that deliver social development in line with Khan’s election platform.

The reconsideration of the OBOR's CPEC — an $8.2-billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush — has become a test of the country's ability to rethink the signature Chinese projects due to debt concerns, especially after lengthy delays.

The rail megaproject that links the coastal metropolis of Karachi to the northwestern city of Peshawar is China’s biggest OBOR project in Pakistan.

While the Chinese foreign ministry confirmed that Beijing was engaged in “friendly consultations” with Pakistan on the rail project and that its companies participated in BRI projects in an open and transparent way, “pooling benefits and sharing risks”, three senior government officials told Reuters that it was is only willing to review projects that have not yet begun, much to Islamabad’s chagrin.

Further, Pakistan's efforts to recalibrate the CPEC are made trickier by its dependence on Chinese loans to prop up its vulnerable economy. Analysts believe it will struggle to attract non-Chinese investors into the project, which may force it to choose between piling on Chinese debt or walking away from the project.

Nevertheless, Islamabad is exploring funding options that depart from the traditional BRI lending model — whereby host nations take on Chinese debt to finance construction of infrastructure — and has, therefore, invited Saudi Arabia and other countries to invest.



Mid-last month, Pakistani Information Minister Fawad Chaudhry had said a high-level committee has been formed upon the recommendation of Saudi King Salman bin Abdulaziz, and that a delegation from Riyadh, during its visit to Islamabad, would comprise their finance and energy ministers.



The pacts with Saudi Arabia will be transparent and clear, Chaudhry had said at the time, adding that huge investment would pour in from the other side.



His statements were confirmed two days later by Nawaf Saeed Ahmed Al-Malkiy, the Saudi Ambassador to Pakistan, who explained that his country would soon join the CPEC and make investments at the Gwadar Port to play a role in the progress and prosperity.

Earlier this week, Pakistan and Saudi Arabia consequently signed “three grant agreements” to bring major investment in the country.



A high-level Saudi delegation reached Pakistan Sunday morning to hold talks, with sources saying Saudi Finance Minister Mohammed Al-Jadaan will arrive on either Tuesday or Wednesday.



From Islamabad, Asad Umar and Ghulam Sarwar Khan, the ministers for finance and petroleum, respectively, will be part of the team that would hold talks with the delegation from Riyadh.



The two nations are expected to sign five important Memorandums of Understanding (MoUs) and hold discussions, and the Saudi team would be briefed about the Pakistani economy.</s>ISLAMABAD: After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink the signature Chinese ‘Silk Road’ projects due to debt concerns.

The rail project linking Karachi to Peshawar is China’s biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms.

Take a look: CPEC projects — status, cost and benefits

Resistance has stiffened under the new government of Prime Minister Imran Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Minister for Planning, Development and Reforms Khusro Bakhtyar said at a recent press briefing.

The cooling of enthusiasm for China’s investments mirrors the unease of incoming governments in Sri Lanka, Malaysia and the Maldives, where new administrations have come to power wary of Chinese deals struck by their predecessors.

The new government in Pakistan had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favoured China.

But to Islamabad’s frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told Reuters.

China’s foreign ministry said, in a statement in response to questions faxed by Reuters, that both sides were committed to pressing forward with BRI projects, “to ensure those projects that are already built operate as normal, and those which are being built proceed smoothly”.

CPEC 2018 Summit: Is Pakistan ready to make the right choices?

Pakistani officials say they remain committed to Chinese investment but want to push harder on price and affordability, while re-orientating the China-Pakistan Economic Corridor (CPEC) — for which Beijing has pledged about $60 billion in infrastructure funds — to focus on projects that deliver social development in line with PM Khan’s election promises.

China’s Ambassador to Pakistan Yao Jing told Reuters that Beijing was open to changes proposed by the new government and “we will definitely follow their agenda to work out a roadmap for BRI projects based on ‘mutual consultation’”.

“It constitutes a process of discussion with each other about this kind of model, about this kind of roadmap for the future,” Mr Yao said.

Beijing would only proceed with projects that Pakistan wanted, he added. “This is Pakistan’s economy, this is their society,” he said.

Islamabad’s efforts to recalibrate CPEC are made trickier by its dependence on Chinese loans to prop up its vulnerable economy.

Growing fissures in relations with Pakistan’s historic ally the United States have also weakened the country’s negotiating hand, as has a current account crisis likely to lead to a bailout by the International Monetary Fund, which may demand spending cuts.

“We have reservations, but no other country is investing in Pakistan. What can we do?” one Pakistani minister told Reuters.

The ML-1 rail line is the spine of the country’s dilapidated rail network, which has in recent years been struggling to survive as passenger numbers plunge and the vital freight business nosedives.

The Khan-led government has vowed to make the 1,872km line a priority CPEC project, saying it will help the poor travel across the country. But Islamabad is exploring funding options for CPEC projects that depart from the traditional BRI lending model — whereby host nations take on Chinese debt to finance construction of infrastructure — and has invited Saudi Arabia and other countries to invest.

One option for ML-1, according to Pakistani officials, is the build-operate-transfer (BOT) model, which would see investors or companies finance and build the project and recoup their investment from cash-flows generated mainly by the rail freight business, before returning it to Pakistan in a few decades time.

Ambassador Yao said Beijing was open to BOT and would “encourage” its companies to invest.

Rail mega-projects under the BRI umbrella have run into problems elsewhere in Asia. A line linking Thailand and Laos has been beset by delays over financing, while Malaysia’s new Prime Minister Mahathir Mohamad outright cancelled the Chinese-funded $20bn East Coast Rail Link (ECRL).

Beijing is happy to offer loans, but reticent to invest in the Pakistan venture as such projects are seldom profitable, according to Andrew Small, author of a book on China-Pakistan relations.

“The problem is that the Chinese don’t think they can make money on this project and are not keen on BOT,” said the author.</s>While Chinese minds created the vision that continues to grow into the Belt and Road initiative, the opportunities and benefits derived from participation in the history changing project will in reality transform other countries far more than it will transform China, a nation already well on the road to building a moderately prosperous society. Yet for a multitude of nations throughout the wider Afro-Eurasian space at various stages in their economic development, Belt and Road represents an opportunity to harness the kinetic economic power of an incredibly diverse set of nations and in so doing, it shall help to pool the strengths of each nation involved while allowing trans-national cooperation to supplement areas where more intensified development is required.

Because of this, it should not automatically fall to China alone to explain the benefits, purpose, challenges and opportunities inherent in an inter-continental project like Belt and Road. As a large neighbour of China and a country often described as an all-weather partner of Beijing, Pakistan is well placed to expound on the benefits of Belt and Road before international audiences and in so doing help to make a project that mutually benefits Pakistan and China into one that garners increased enthusiasm throughout the world.

While Pakistan’s new PTI government led by Prime Minister Imran Khan continues to acquaint itself with Pakistan’s long term and new international partners, all eyes were on Foreign Minister Shah Mehmood Qureshi whose address before the United Nations General Assembly was the first major geopolitical speech from a key figure in the new government since the historic election in July of this year.

In a wide ranging speech, the Pakistani Foreign Minister covered a wide variety of topics ranging from peace keeping initiatives abroad to the matter of finding a just solution to the occupation of Jammu and Kashmir. But while Pakistan has long lamented the UN’s inertia in respect of bringing justice to the Kashmiris, Shah Mehmood Qureshi’s speech was by no means exclusively negative.

One of the main themes of Imran Khan’s campaign was fighting extremism not only through the tough security measures that Pakistan has implemented with great success but through draining the swamps of neglect, corruption and neo-feudalism in which extremism has been allowed to foment for decades throughout south Asia. Here, Qureshi invoked the phenomenon of peace through prosperity as a means of not only ending extremism in the short term but as a method of security long term sustainable development. The Foreign Minister stated,

By affirming Pakistan’s commitment to Belt and Road in the form of the China-Pakistan Economic Corridor (CPEC), Pakistan’s Foreign Minister also helped to explain that far from merely being a beneficiary of CPEC, the project will help to link Pakistan with historically fraternal civilians to the north and west as well as China to the north-east. Here, the clear subtext is that Pakistan looks to use CPEC as a means of enhancing partnerships throughout western Eurasia including with Iran and long time friend Turkey while also making inroads into the central Asian republics and Russia to the north as part of a multi-pronged set of economic partnerships that stretch from the border with China to the port of Gwadar on the Arabian Sea.

At a time when those seeking to undermine Belt and Road are busily engaged in outrageous attempts to undermine the Sino-Pakistan relationship, it is all the more important for Pakistan to anticipate these provocations and clarify its own position as a leader rather than a mere participant in Belt and Road.

Below is Eurasia Future’s full report on the goals for Pakistan Prime Minister Imran Khan’s forthcoming visit to China:

Ever since Chinese President Xi Jinping announced the Belt and Road initiative in 2013, western policy makers and their de-facto propagandists across corporate media outlets have been looking for a Sinophobic narrative through which to persuade the nations of Asia and Africa to shun Beijing’s flagship project for modern global inter-connectivity in a new era of peace through prosperity. As the prestige of Belt and Road continued to grow throughout the wider Afro-Eurasian space since 2013, many of the obtuse neo-liberal economic arguments against Belt and Road as well as the all out racist campaigns against the initiative (many of which continue to derive from America’s new Asian ally India) tended to fall flat. This was the case both because of the totally unconvincing nature of the arguments themselves and due to the fact that while Belt and Road is a long term initiative whose benefits will be most profoundly felt in the decades to come, the west has neither a more immediate nor a more sustainable concrete alternative to Belt and Road.

As a result, Indo-western arguments pointing to the fact that it is somehow a bad thing that China’s model empowers partner nations to take a share of responsibility in joint projects in exchange for a shared portion of the profits, have also done little overall to tarnish global enthusiasm for Belt and Road as examples such as that of Sri Lanka’s Hambantota port continue to be misunderstood exceptions which prove the rule of win-win outcomes among Belt and Road partners.

Due to the fact that the economic and racist arguments did not succeed in making Afro-Eurasian leaders reconsider their future in Belt and Road, western black propagandists instead devised a supremely cynical narrative designed to sow a rift between China and the Ummah – the global community of Islamic majority nations and Muslim men and women. Forgetting the fact that the United States has invaded more Islamic majority nations in the 21st century than all other global powers combined, the attempt to now hide behind the Nobel Quran in an calculated effort to wage a global infowar against China appears to be the most challenging western salvo against Belt and Road to date.

The China vs. Ummah false dichotomy being sown in the US and its partner nations is at present, primarily focused on widely misunderstood issues regarding the events in Myanmar’s Rakhine state as well as those in China’s Xinjiang province. In respect of Xinjiang, the western narrative has reached peak absurdity. Where in reality, Beijing has proud millions of dollars into both infrastructural, human and cultural development in Xinjiang in order to counter-extremism and generally elevate the condition of the people, various vocational training programmes, the likes of which exist throughout much of inland China have been described as “concentration camps for Muslims”. Simultaneous to this, Britain’s ultra-liberal Independent newspaper even ran a fake news story stating that the Muslims of Xinjiang are forced to eat pork and drink alcohol by the authorities. These are of course the same liberal media outlets decrying China’s social reform programmes throughout the country which actually crack down on those who purchase copious amounts of alcohol.

But forgetting the absurdity of the claims regarding Xinjiang, the rumours have already spread like wildfire in many parts of the wider Ummah. This was of course the intent of the black propaganda. I previously wrote that Pakistanis owe a special duty to themselves as Muslims and to fraternal partners of neighbouring China in respect of combating this infowar. Furthermore, a readily available piece by the Pakistani author and scholar S M Hali should be widely distributed among Muslim populations throughout Asia and Africa which describes his own highly positive first hand experiences in Xinjiang. By contrast, virtually all of the anti-Beijing articles authored about Xinjiang are written by those who have never visited Xinjiang let alone spoken to ordinary people in the province.

The second area where western black propagandists have been attempting to sow discord between China and the Ummah is in Myanmar. As part of the decades long civil conflict in the country formerly known as Burma, atrocities in Rakhine state have seen a humanitarian crisis transpire where Rohingya Muslims have had to flee across the border (in some cases back across the border) to Bangladesh after local Buddhists influenced violence against their communities. While the US and some Muslim leaders have blamed the government of Myanmar for the atrocities, such statements have yet to be substantiated by any verifiable facts from the ground. In reality, the atrocities appear to be an amalgamation of a long running regional conflict which the government of Myanmar perhaps could and should have done more to prevent violence (at this particular stage especially). That being said, to unilaterally direct specific blame for the atrocities at the feet of the government is a gross simplification of a wider set of conflicts that have raged since 1948.

China has already helped to calm the situation in Rakhine by proposing a three step peace process whose implementation is already underway. Chinese State Councilor and Foreign Minister Wang Yi spoke of the peace process during a speech made yesterday before the UN General Assembly in the following way:

Yet in spite of China’s well-reasoned, multilateral and constructive approach to the crisis in Rakhine, the west has largely succeeded in whipping up fear among Muslims with the aim to re-direct anger currently levelled at the government of Myanmar onto China, owing to China’s role as a neutral arbitrator of peace that has refused to irresponsibly issue emotional statements regarding a matter that can only be solved through a logical and realistic approach.

This is why Imran Khan’s visit to China is crucial not only for the future of Sino-Pakistan relations but for the wider relationship between Beijing the the Ummah. Pakistan’s relationship with China is well known as an all-weather friendship while under Imran Khan, Naya Pakistan (New Pakistan) looks to resurrect its long neglected goal of being a leading voice among the Ummah as the country’s founder Muhammad Ali Jinnah originally intended it to be.

As such, Imran Khan’s voice is one that can and should be used to demonstrate the reality that China is already a far better friend to Islamic majority nations seeking an independent path to sustained economic and human development than Beijing’s rivals and that furthermore, while the US and its allies have exuded a neo-colonial influence on much of the Islamic world, China’s relationship towards Muslims abroad and those in Xinjiang is one based on respect and enlightenment.

Already, western media outlets have begun attempting to drive a wedge between China and public opinion in Pakistan as a means of derailing Imran Khan’s new era in neighbourly relations. While it is true that like Malaysia, Pakistan’s new anti-corruption government looks to reverse some of the vanity projects of the previous corruption prone government, including some such projects involving Chinese businesses, prominent western media outlets have already misconstrued such statements from Islamabad as indicating a tendency among the new government to somehow halt progress on the game changing China-Pakistan Economic Corridor (CPEC). The reality is nothing of the sort. Any revision in CPEC related projects in Pakistan has everything to do with the government of Imran Khan’s relationship to that of his corrupt predecessor just as similar revisions to Sino-Malaysian projects has everything to do Prime Minister Mahathir Mohamad’s relationship to his scandal pron predecessor. In neither case do such revisions reflect a change in Pakistan nor Malaysia’s positive relations with China.

While Pakistani officials will therefore need to chose their words carefully when speaking about CPEC so as to not give Pakistan’s enemies rhetorical ammunition in the course of making statements which can be misrepresented in the hostile western press, Pakistan’s leaders must also make a concerted effort to tell the entire world that Belt and Road is an asset to all Afro-Eurasian nations seeking long term sustainable development and that for the Islamic world in particular, there is no schism between Islamic values and Chinese values. In reality both sets of values can help compliment each other on the win-win model that the western colonisers of Asia and Africa seek to once again exploit for their own unilateral gain.
The government of Pakistan is "rethinking" its dependence on China for the loans it needs to complete its Peshawar to Karachi rail project. This is part of a broader pushback on the ambitions of China's Belt and Road Initiative throughout the region.