As China celebrates the fifth-year anniversary of its ambitious Belt and Road Initiative (BRI), Pakistan’s new government must confront possible challenges when it comes to the flagship CPEC project. Not least in terms of the fallout of the so-called ‘Debt Trap Diplomacy’. The latter has been routinely touted by the US as legitimate grounds for concern regarding Beijing ’s demonstration of soft but cemented power. This will be brought up with the Chinese Foreign minister when he visits this week.
To be sure, the multi-billion-dollar ‘cash’ injections do not come cheap; with a double return on most CPEC loans. Yet not much else is known about the intricate terms and conditions of the massive infrastructure project. It is expected that this will change under the new Imran Khan government and its commitment to both transparency and accountability. Washington’s biggest gripe hinges on the fact that repayments to Beijing are to be made in hard currency. This has led to accusations of China hoarding foreign exchange reserves; thereby prompting President Trump to publicly caution the IMF against offering Islamabad a bailout package. Inevitably, this will only push Pakistan closer to the Middle Kingdom’s warm embrace.
Certain American pundits feel that Beijing has misled the world about the true objectives of the BRI; given that the latter has long denied the geo-strategic component of infrastructure projects and maritime trade routes. Yet this likely has more to do with avoiding inciting hostility towards either it or its allies. Indeed, such apprehensions, if true, are not entirely unfounded. Pakistan, after all, is somewhat familiar with certain US behaviour that, at times, borders on the capricious. Observers at home point to the timing of the recent cancellation of $300 million in Coalition Support Fund (CSF) reimbursements, which the Americans insist on calling aid. Conventional wisdom holds that it was no coincidence that this came hot on the heels of the Iranian Foreign minister’s visit.
Of course, China entertains a geo-strategic dividend. And there ought to be nothing surprising about this. Pakistan seeks the same by its very participation in CPEC. So, too, does Russia as evidenced from its recent forays into this region as well as the Middle East. All of which suggests that the US is simply irked that its traditional hold on power is being challenged. That being said, there are not unreasonable fears that the BRI’s terms and conditions, to which some 65 developing nations have signed up, are unfair. Malaysia, for example, has pulled the plug on three projects. While Sri Lanka has reportedly granted a 99-year lease of a strategic port to Beijing to cover its inability to repay loans on a $1.4 billion project.
Be that as it may, the question must be asked as to why these two nations, along with Pakistan, welcomed Chinese investment over IMF loans. In Islamabad’s case, recent mulling over the prospect of approaching the Fund for an economic lifeline has less to do with CPEC and more to do with lack of investment by successive regimes in the country’s manufacturing sector. The short answer is that the crippling interest that IMF packages bring with them, for the most part, cancel out any long-term concrete gains. Which is why the Centre still remains undecided about whether or not to approach the Fund; particularly in light of recent US hostility.
In short, energy would be better directed towards critiquing the global capitalist system itself as opposed to pitting competing frameworks against each other; as appears to be Washington’s wont. Until then, the US might well concede that one of the primary reasons that the nations of the Global South are turning towards China is that the latter is not known for either its use of economic sanctions or the oft-realised threat of military intervention. All of which place Beijing in the lead. For now. *
Published in Daily Times, September 4th 2018.