A former Indian national security advisor has raised serious questions and concerns about the CPEC. Pakistan’ Ministry of Finance has asserted that tax exemptions provided to Chinese entities under CPEC will have no adverse impacts on the local industries and investors. China’s deputy chief of mission to Islamabad has revealed that the CPEC was at the take-off stage.
India Openly Opposes CPEC:
At times when China is working diligently for the success of an international summit on its New Silk Road project to be held next month in Beijing,[i] its strategic rival India has resorted to the rhetoric of objection and disapproval. In fact Beijing is so much keen on this summit that it has tried to bring the top leaders of all its close partners and important countries to the conference. For example, Foreign Minister Wang Yi announced that Russian President Vladimir Putin, Pakistani Prime Minster (PM) Nawaz Sharif, Cambodian PM Hun Sen, Myanmar’s Aung San Suu Kyi, Kazakhstan President Sultan Nazarbayev, Malaysian PM Najib Razak and the Indonesian Presient Jokko Widodo were all going to attend the conference. However, there is a major exception to all this diplomatic hustle: India’s opposition to the CPEC. India maintains that CPEC not only passes through territory which belongs to former but also poses a strategic challenge to the country.
While trying to assuage India’s concerns about the CPEC, Mr. Wang said that “[A]s for disputes in Kashmir, China’s position has remained unchanged. The CPEC has no relationship with the dispute in certain regions. I want to reaffirm this to our Indian friends.”[ii] He added that “[C]ertain sections of the CPEC have raised concerns on the Indian side but these disputes are not the result of the economic corridor and the economic activities in this region are not the direct result of the CPEC. China has been providing support Pakistan in these areas for many, many years. This is a contribution China is making for development of our neighbouring countries.” He also encouraged India to participate in this Belt and Road Initiative (BRI).
Unsurprisingly, China’s efforts have fallen short of bearing desirable results. A former National Security Advisor to the Government of India, Shivshanker Menon, said that “the sovereignty aspect of the CPEC, as proposed now, is unacceptable to us.”[iii] He added that “[N]ot all projects under the BRI are economically viable, which suggests that there is geo-strategic motivation.” New Delhi, under the pretext of geographical claims vis-a-vis Pakistan but primarily for strategic reasons, is striving to make China’s regional expansion under the OBOR controversial. China so far has cared less about Indian protestations. Beijing and Islamabad would have an advantage in this respect if countries like United Kingdom (which has already appreciated and shown interest in the project) could join CPEC directly or indirectly.
Ministry of Finance in a written reply to the National Assembly has explained the series of tax immunities offered to Chinese investors under the different project of the CPEC.[iv] With all the massive tax exemptions provided to Chinese investors which amount to around of Rs150 billion lost in revenue, the government has asserted that there will be no adverse impacts on domestic industries and investors. The Finance Minister Ishaq Dar didn’t show the financial cost of such exemptions. He argued that as all these concessions and exemptions were subjected to the condition that imported goods were not manufactured locally (except in few cases), local industries had been provided important buffer against the negative impacts of imports. Due to surge in CPEC-related imports (and stagnant exports), Pakistan’s economy has recently faced troubles and the deficit in current account bill has worryingly widened. However, the incumbent government and all the other major political parties in the country have cared less about these costs and instead focused on getting a bigger share out CPEC pie for their respective constituencies. Still worse, the government is hell-bent upon depicting CPEC in only and very rosy terms.
CPEC at Take-Off Stage:
China’s Deputy Chief of Mission to Pakistan Zhao Lijian revealed that the CPEC was at the take-off stage as several projects would be completed this year under the early harvest program.[v] He said that “[T]he CPEC is under implementation at accelerated pace out of six corridors being built by China in different parts of the world.” He added that “[W]e are here to help Pakistan for creating a win-win situation for both Pakistan and China under CPEC initiative.” He pointed out that Sahiwal power project, Port Qasim power project and four wind power projects would be completed this year. In pursuit of its grand BRI dream, China has pinned high hopes on CPEC. However, to make this project a reality, a lot more endeavours and availability of congenial circumstances will be required rather than mere launching of different projects.
This report is compiled and written by Abdur Rehman Shah, Research Associate at the Centre for Research and Security Studies (CRSS), Islamabad. He tweets @abdur_shah
[i] Reuters. (2017, April 18). China to gather friends for the biggest summit of year on Silk Road. Retrieved on April 23, 2017 from http://www.reuters.com/article/us-china-silkroad-summit-idUSKBN17K0FL
[ii] Patranobis, Sutirtho. (2017, April 18). India to attend Belt and Road forum in Beijing, says China. Retrieved on April 23, 2017, from http://www.hindustantimes.com/world-news/india-to-attend-belt-and-road-forum-in-beijing-says-china/story-snbk416L5P7cbWLTsd4y1I.html
[iii] Sahoo, Priyanka. (2017, April 22). China-Pakistan economic corridor unacceptable to India: Shevshankar Menon. Retrieved on April 24, 2017, from http://indianexpress.com/article/india/china-pakistan-economic-corridor-unacceptable-to-india-shivshankar-menon-4623185/?TPSecNotice&TPNotCheck
[iv] Kiani, Khaleeq. (2017, April 24). Tax breaks for Chinese won’t hit economy: govt. Retrieved on April 24, 2017, from https://www.dawn.com/news/1328853/tax-breaks-for-chinese-wont-hit-economy-govt
[v] Haider, Mahtab. (2017, April 18). CPEC is at take-off stage: Chinese envoy. Retrieved on April 24, 2017, from https://www.thenews.com.pk/print/199291-CPEC-is-at-take-off-stage-Chinese-envoy