Pakistan plans to review or renegotiate agreements reached under China’s Belt and Road Initiative, joining a growing list of countries questioning the terms of their involvement in Beijing’s showpiece infrastructure investment plan.
Pakistani ministers and advisers say the country’s new government will review BRI investments and renegotiate a trade agreement signed more than a decade ago that it says unfairly benefits Chinese companies.
The projects concerned are part of the $62bn China-Pakistan Economic Corridor plan — by far the largest and most ambitious part of the BRI, which seeks to connect Asia and Europe along the ancient silk road.
They include a huge expansion of the Gwadar port on Pakistan’s south coast, as well as road and rail links and $30bn worth of power plants.
“The previous government did a bad job negotiating with China on CPEC — they didn’t do their homework correctly and didn’t negotiate correctly so they gave away a lot,” Abdul Razak Dawood, the Pakistani member of cabinet responsible for commerce, textiles, industry and investment, told the Financial Times.
“Chinese companies received tax breaks, many breaks and have an undue advantage in Pakistan; this is one of the things we’re looking at because it’s not fair that Pakistan companies should be disadvantaged,” he said.
Wang Yi, Chinese foreign minister, who visited Islamabad at the weekend, indicated that Beijing could be open to renegotiating its 2006 trade deal with Pakistan. “CPEC has not inflicted a debt burden on Pakistan,” he told reporters. “When these projects get completed and enter into operation, they will unleash huge economic benefits.”
But Islamabad's second thoughts follow other recent setbacks for BRI, which is seen by many as a bid by China’s President Xi Jinping to extend Beijing’s influence throughout the world. Governments in Malaysia, Sri Lanka, Myanmar and elsewhere have already expressed reservations over the onerous terms of Chinese BRI lending and investment.
Imran Khan, the former cricket star who was elected Pakistan’s prime minister last month, has established a nine-member committee to evaluate CPEC projects. It is scheduled to meet for the first time this week and will “think through CPEC — all of the benefits and the liabilities”, said Mr Dawood, who sits on the new committee.
“I think we should put everything on hold for a year so we can get our act together,” he added. “Perhaps we can stretch CPEC out over another five years or so.”
Several other officials and advisers to the Khan government concurred that extending the terms of CPEC loans and spreading projects out over a longer timeframe was the preferred option, rather than outright cancellation.
Pakistan is in the middle of a financial crisis and must decide in the coming weeks whether to turn to the IMF for its 13th bailout in three decades, as pressure on the Pakistani rupee makes the burden of servicing foreign currency debt more onerous.
Asad Umar, Pakistan’s new finance minister, told the FT he was evaluating a plan that would allow Islamabad to avoid an IMF programme, which several people close to the government say would involve new loans from China and perhaps also from Saudi Arabia.
Mr Umar and Mr Dawood both said Pakistan would be careful not to offend Beijing even as it takes a closer look at CPEC agreements signed over the past five years. Mr Khan was elected on a platform of anti-corruption and transparency and has pledged to publish details of existing CPEC contracts.
“We don’t intend to handle this process like Mahathir,” Mr Umar said, referring to the newly elected nonagenarian Malaysian prime minister who has warned about the risk of Chinese “neo-colonialism”. Malaysia has cancelled three China-backed pipeline projects and put a showpiece BRI rail link under review.
The rethink in Islamabad comes as Mr Xi has doubled down on the increasingly controversial BRI. Last week he hosted a ceremony celebrating five years since he first unveiled his plan for the “silk road economic belt” across Eurasia and “21st century maritime silk road” covering ports and sea lanes between China and Europe.
“The broad support for the BRI shows aspiration from countries involved, developing countries in particular, for peace and development”, and affirms China’s vision of a “community of shared destiny for humanity”, Mr Xi said at the ceremony.