Pakistan will never back out of its friendship with China, Federal Minister for Planning, Development and Reforms Asad Umar said on Saturday, a day after US diplomat Alice Wells ‘warned’ that CPEC will further add to Pakistan’s debt burden.
“A lot of conspiracies have taken place against CPEC. But, relations between the two countries will never be frayed,” the minister said while addressing a press conference at the Karachi Press Club. “Pakistan will not be caught up in a fight between two other entities,” he added.
Asad Umar said Pakistan is an important beneficiary of CPEC in term of projects pertaining to energy and infrastructure. While denouncing the statement of Alice Well that China alone is the beneficiary of CPEC, the minister said that CPEC is much important to Pakistan’s long-term economic development and that is why the present government has taken ownership of this bilateral project. “We have also taken it forward with special focus on industrialization, agricultural growth and social security,” he said.
Commenting on Alice Well’s statement that Pakistan will be swamped by China in debt, he said besides being a huge investment portfolio, CPEC is bringing in commercial debt in Pakistan, which is only 1/4th of overall public debt but this commercial lending from China will be decreasing within three to four years once our own economy stabilizes. “Our total public debt right now is $74bn of which the Chinese debt amounts to $18bn – even less than one-fourth of the total debt. And if I further break it down, the CPEC debt under this figure of public debt is $4.9bn – not even 10pc of the total debt,” the minister noted.
“As far as the money taken from China is concerned, it was taken at such a time when our trade deficit was dangerously high and our reserves were falling. We were unable to easily procure loans from other sources. This was the hallmark of China’s friendship with Pakistan that in such a time of crisis, it provided us loans from its commercial banks,” Asad Umar said, adding that over the course of the next three years, debt servicing will see about a third being spent on settling the commercial loans from China. “After three years this commercial borrowing will be substituted by long-term, multi-lateral debt and so the portion of Chinese debt servicing will witness a sharp decline.”
He said that Wells’ argument that the commercial loans are expensive and do not have a long enough payback period is incorrect. “The public debt obtained from China has a maturity period of 20 years and the interest is 2.34%, which is cheap. And if I include the grant element, the interest value slides down to about 2%,” the minister explained.
The minister said Pakistan is going to get technology transfer from China under CPEC. “There is even debate within the US that China will be the future giant in global technology,” he said. “There is no doubt about the transfer of technology as a result of US investment, but China is part of a technology war now and is a big source of technology. Moreover, Pakistan will go towards wherever greater chances for technological development lie,” he added.
“Wells said that CPEC is not an aid but an investment and this is correct. There is a small grant element contained within it but fundamentally it is an investment. Pakistan has always recognised that this is not aid and especially this government has always maintained that it wishes to move past the initial scope of the arrangement,” the minister said. “The aid that Pakistan received in the past did not really contribute in real terms towards the country’s progress and she was right to point out that we must stand on our own feet,” he added.
Dismissing her allegations that Pakistan’s development will be limited under CPEC, Umar said in the first phase the infrastructural development focused on roads and energy projects. On this basis, he added, Pakistan will see industrial development. “Beginning in about two months’ time, special economic zones will start opening. She was right to say that not many jobs have been created because in the first phase, when infrastructural development is the goal, that happens. But on the basis of that when industrial development takes off, that will pave the way for jobs.”
“China is our extremely close friend and partner and has stood by Pakistan in our most difficult times. They call us their iron brother. When any of us go to China we realise even more deeply the ties that bind us,” the minister said. “But this does not mean we are against the US. I can assure Alice Wells that American companies were welcome, are welcome and will continue to be welcome to invest in Pakistan,” he added.