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Pakistan’s involvement in the Belt and Road Initiative (BRI) dates back to 2013 when it became one of the earliest countries to join the ambitious project. Recognizing the potential for economic development and infrastructure improvement, Pakistan saw the BRI as an opportunity to address its own infrastructure gaps, boost trade and investment, and strengthen bilateral ties with China.
Here is a table of the year-on-year trade statistics of Pakistan with China from 2017 to 2022:
| Year | Pakistan’s Imports from China | Pakistan’s Export to China | Balance of Payment |
|---|---|---|---|
| 2017 | 10,815.3 USD Million | 3,463.6 USD Million | -7,351.7 USD Million |
| 2018 | 13,733.4 USD Million | 4,407 USD Million | -9,326.4 USD Million |
| 2019 | 16,095.1 USD Million | 4,997.2 USD Million | -11,107.9 USD Million |
| 2020 | 16,688.3 USD Million | 5,563.5 USD Million | -11,124.8 USD Million |
| 2021 | 22,589.1 USD Million | 6,663 USD Million | -15,926.1 USD Million |
| 2022 | 25,198.7 USD Million | 4,143.2 USD Million | -21,055.5 USD Million |
The Pakistani economy is in a state of flux. The country is facing several challenges, including high inflation, a widening trade deficit, and a slowing economy.
As you can see, forex reserves have been declining in Pakistan since 2017. This is due to a number of factors, including a widening trade deficit with China, high inflation, and political instability. As a result, Pakistan has been forced to rely on loans from China to finance its BRI projects.
Total debt from China to Pakistan has been increasing since 2017. This is because Pakistan has been borrowing heavily from China to finance its BRI projects. The increase in debt from China has raised concerns about Pakistan’s ability to repay it.
The Belt and Road Initiative (BRI) and it’s part China-Pakistan Economic Corridor (CPEC) are two major projects that are having a significant impact on Pakistan economy. BRI is a global infrastructure project that is being spearheaded by China. CPEC is a part of BRI and is a $62 billion project that is aimed at connecting China’s Xinjiang province to the Arabian Sea through Pakistan.
CPEC has been a major source of investment for Pakistan. However, it has also led to several problems. One of the biggest problems is the trade imbalance between Pakistan and China. Pakistan is importing more goods from China than it is exporting to China. This has led to a widening trade deficit, which is putting a strain on the Pakistani economy.
Another problem with CPEC is that it has led to a rise in debt. Pakistan has borrowed heavily from China to finance CPEC projects. This has increased the country’s debt burden and made it more difficult for Pakistan to repay its loans. On top of it, most of the projects under CPEC have suffered from cost overruns, widening the debt burden on Pakistan!!
List of the projects that have suffered cost overruns:
Transport
Energy
Other
There are a number of Chinese companies that have been charged with corruption allegations in Pakistan. Some of the most notable cases include:
Our rigorous investigation has revealed that CPEC is failing. The Pakistani government has acknowledged that it is having difficulty paying back the loans it took out to fund the project. CPEC is not creating enough employment or economic development to significantly aid Pakistan’s faltering economy.
A significant setback for both China and Pakistan is the collapse of CPEC. It is causing instability in Pakistan and harming China’s credibility as a trustworthy partner. Here are some of the problems that have plagued the CPEC Projects over the years. The first bar shows the finished projects out of the 30 projects in CPEC that make up the sample size. Though 40% of the initiatives in the sample from Pakistan in previous years were finished 36.47% of the projects were of poor quality and suffered from major flaws.
A staggering 93.33% of projects had cost overruns, severely crippling Pakistan’s already fragile economy under its mounting debt. Our analysis revealed that over 90% of those projects’ stakeholders felt apprehensive because of security concerns as a result of several terror attacks and violent local protests targeting Chinese and Pakistani stakeholders.
Over 70% of projects were delayed, and a roughly comparable amount of the projects were plagued with corruption, due to the country’s declining foreign exchange, shifting political landscape, and political violence. Thus, the Chinese businesses finished the projects with low-quality materials and nearly half of them encountered funding problems!
The common problems faced by the SEZ Projects under CPEC in Pakistan
Environment Damage, Cost Overrun, Delayed, Corruption, FundingIssues, SecurityIssues
The Industrial Park on Pakistan Steel Mill Land is a project that was announced in 2016. The project is being developed by the China Machinery Engineering Corporation (CMEC) and is expected to cost $1.5 billion. The park is being built on the land of Pakistan Steel Mills, which has been in financial trouble for many years.
The project has been facing a number of issues. One of the main issues is the environmental impact of the project. The park is being built on land that is polluted with heavy metals. This pollution could have a negative impact on the environment and the health of the people who live in the area.
Another issue with the project is the lack of transparency. The Pakistani government has not released any information about the terms of the agreement with CMEC. This lack of transparency has led to concerns that the Pakistani government is giving away too much to China. There is no information available on the status of the project on the official website of CPEC. Here is a screenshot of the same.
Several protests against the project occurred in the past several years. Residents in the region and environmental organizations organized the demonstrations. The project has to cease, according to the demonstrators.
Up until now, the Pakistani government has refused to halt the project. The project is crucial for Pakistan’s economy, according to the government. However, the administration has also declared that it will act to allay local residents’ worries.
The future of the Industrial Park on Pakistan Steel Mill Land is uncertain. The project is facing a number of challenges, but the Pakistani government is committed to completing it. It remains to be seen whether the project will be able to overcome these challenges and be a success.
China’s geopolitical interests, Environment Damage, Delayed, Corruption, FundingIssues, SecurityIssues
The project is expected to cost $2 billion and is being funded by the Chinese government. The park is being built on an area of 1,900 acres in Mirpur, Pakistan in the disputed region of Jammu and Kashmir.
In 2021, The Pakistan government signed an agreement with the Chinese government to develop the Mirpur Industrial Zone.
In 2022, The government began the process of acquiring land for the project.
Due to financial concerns, the park is beset by corruption and a lack of commitment from Chinese corporations, which may cause a delay until 2025.
Delayed, Corruption, FundingIssues
The ICT Model Industrial Zone (IMIZ) is a project that is being developed by the Government of Pakistan. The project is expected to cost $1 billion and is being funded by the Chinese government. The park is being built on an area of 200-500 acres in Islamabad. There are worries that the Pakistani government is paying too much to China as a result of its lack of openness. The project’s status is not currently available on the CPEC website. The screenshot of the same is provided below.
| Project Name | Companies | Cost | Overrun | Status | Issues Plaguing Them |
|---|---|---|---|---|---|
| 330MW HUBCO Thar Coal Power Project (Thar Energy) | Hub Power Company Limited (HUBCO) | $330 million | $165 million | Completed | Land acquisition, security concerns, cost overruns, Funding Issues |
| 1320MW SSRL Thar Coal Block-I 7.8 mtpa & Power Plant (2×660MW) (Shanghai Electric) | Sindh Engro Coal Mining Company Limited (SECMC) and Shanghai Electric | $1.32 billion | $660 million | Completed | Land acquisition, security concerns, cost overruns |
| 330MW HUBCO ThalNova Thar Coal Power Project | HUBCO | $330 million | $165 million | Completed | Land acquisition, security concerns, cost overruns |
| 884MW Suki Kinari Hydropower Project, KP | Frontier Works Organization (FWO) | $884 million | $442 million | 2025 | Land acquisition, security concerns, cost overruns, Funding Issues |
| 300MW Coal-Fired Power Project at Gwadar | China Three Gorges Corporation (CTG) | $300 million | $150 million | 2026 | Land acquisition, security concerns, cost overruns, Funding Issues |
| Project | Companies | Cost | Overrun | Status | Issues |
|---|---|---|---|---|---|
| New Gwadar International Airport | China State Construction Engineering Corporation (CSCEC) | $2.5 billion | $1 billion | Delayed | Corruption, Land acquisition, security concerns, cost overruns |
| Fish Landing Jetty and Fishermen Boat-Making Industry on West Bay | Frontier Works Organization (FWO) | $100 million | $50 million | Delayed | Land acquisition, security concerns, cost overruns, Poor Quality |
| Karachi-Peshawar Motorway (M-2) | China State Construction Engineering Corporation (CSCEC) and Frontier Works Organization (FWO) | $4.6 billion | $2.3 billion | Delayed | Corruption, Land acquisition, security concerns, cost overruns |
| ML-1 Railway Line | China Railway Group Limited (CREC) and Pakistan Railways | $6.8 billion | $3.4 billion | Delayed | Corruption, Land acquisition, security concerns, cost overruns, Poor Quality |
| Gwadar Port | China Overseas Port Holding Company (COPHC) and Pakistan Ports and Shipping Authority (PPSA) | $2.5 billion | $1 billion | Delayed | Corruption, Security concerns, cost overruns, Rocked by protests from locals, Poor Quality |
In conclusion, the report titled “The BRI Status: A Grand Report on Its Present and Future” presents a comprehensive analysis of the challenges faced by BRI projects in Pakistan. The findings shed light on critical issues such as cost overruns, corruption, security concerns, delays, poor quality of development, and funding problems. These issues have significantly impacted the Pakistani economy and raised concerns about the sustainability of the country’s debt from China.
One of the major findings highlighted in the report is the prevalence of security concerns in BRI projects in Pakistan. Approximately 90% of the projects faced security apprehensions due to terrorist attacks and local protests targeting Chinese and Pakistani stakeholders. These security challenges have hindered project progress and created an environment of uncertainty.
Moreover, the report reveals that a staggering 93.33% of BRI projects in Pakistan experienced cost overruns. This has further strained Pakistan’s already fragile economy, exacerbating the country’s mounting debt burden. The increase in debt from China raises concerns about Pakistan’s ability to repay its obligations and maintain its economic stability.
Furthermore, the report highlights delays, corruption, and poor quality of development as significant issues plaguing BRI projects in Pakistan. Over 70% of projects experienced delays, hindering the timely completion of crucial infrastructure and development initiatives. Corruption was rampant, undermining the integrity and efficiency of project implementation. The use of low-quality materials further compromised the long-term sustainability and impact of these projects.
The report also identifies specific projects that have encountered major challenges and setbacks, such as the New Gwadar International Airport with a significant cost overrun of USD 1 billion. It also highlights funding issues and corruption in projects aimed at socio-economic development, such as the Pakistan-China Friendship University and Pakistan-China Friendship High School.
Given the current state of Pakistan’s economy, with high inflation, a widening trade deficit, and a slowing economy, it is crucial to address the concerns raised by the report. Strengthening transparency, accountability, and governance mechanisms is essential to mitigate corruption and ensure the efficient use of resources. Additionally, addressing security concerns and improving project management can help create a conducive environment for the successful implementation of BRI projects.
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