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CPEC: An Environment Friendly Project

Qura tul ain Hafeez

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Poverty and health always go side by side. It’s very obvious that the poor will always try to adapt the cheap means of to fulfill its needs. He will use those resources which are easily available to him and same is the case with Pakistan. China-Pakistan Economic Corridor (CPEC) has perhaps become the most talked about event in Pakistan and has been deemed as an economic anthem of the country far it is a toll for boosting the economy keeping in lines the international consensus on Climate Change. CPEC appears to be an absolute development and Environment friendly package in energy sector and will be a boon for Pakistan’s crippling economy. It envisages various road, railway, energy, infrastructure and industrial projects.

Substantially, in order to meet the energy crises Pakistan has stated various energy projects and coal power plants are one of them. In Sindh the CPEC is starting additional energy projects compared to any other province of Pakistan. Coal power plants in the area of Thar are being constructed. Thar-I coal power plant with 6600 MW and Thar-II coal power plant (consists of two power plants each of 330MW) will be using the indigenously produced coal through local coal mines. According to an estimate these local coal mines will be providing 3.8 million tons of coal on yearly basis. Port Qasim coal power plant is another coal based power plant constructed in Sindh worth of $2billion.Moreover in Sahiwal a coal power project of 1320MW is to be built as well along with the project of a coal mine of $589 million. A 330 MW of coal plant will also be launched in Punjab Salt Range and in Baluchistan at Hub and Gwadar; coal power plants of 660 MW and 300MW will be constructed respectively, to meet the energy demands

However due to such a huge investment for the energy projects, a major concern is the possible impact on environment sustainability and climate change. It is being argued that it will introduce a new set of problems because the coal power plants are considered to be one of the major contributors to greenhouse gases, which cause global warming. This is also being said that these projects ignore the aspect of an Environmental Impact Assessment (EIA).Although Pakistan is responsible for a mere 0.43% of global greenhouse gas emissions, but it is among the world’s 10-most vulnerable countries to climate change. Moreover it can cause significant damage to the eco tourism and glaciers, which are diminishing due to expanded infrastructure. The wild life of the region could also be affected with changing natural landscapes. These are some of the impacts which should not be taken lightly.

Poverty has direct relation with environmental degradation and climate change because people use the cheap resources. However CPEC is not just about the energy generation projects but the concerned authorities have also considered the best means to considerably reduce the environmental damage. It has been formally agreed that one should not completely take for granted the impact of carbon foot print on the echo system. Unfortunately, coal use has attracted a lot of criticism due to its environmental impact. Analysis shows that Pakistan’s energy mix contain a minimum share of coal is and it will remain less despite the investment in new coal fired power plants.  It is pertinent to note that the developed economies like USA, Germany, Poland, etc are still at the forefront in carbon foot print then Pakistan. Furthermore, for Pakistan, it is important to overcome the problem of energy crisis and invest in renewable energy.

Both China and Pakistan are well conscious of the fact that these harmful externalities which this lignite coal possesses should not be ignored and decided to offset the impact by focusing more on renewable energy projects. It is explicitly explained in the Long Term Plan (LTP) that renewable energy sector will be the major area of investment in future. The Federal Minister for Power Division, Sardar Awais Ahmed Khan Leghari has proposed to establish a renewable energy institute in the country which is a good step for controlling the carbon foot prints. It also promises to bridge the energy gap by constructing numerous hydro, solar, wind power and Liquefied Natural Gas (LNG) projects to reduce the green house emission.

Augmenting the share of renewable energy in power projects would also address the gaping disparity between the Pakistan and global leaders in the realm. In order to sustain the energy need and keeping in mind the climate effects the CPEC energy projects not only engage in generating power from coal but focus on other renewable sources of energy such as hydroelectric power for which Pakistan has a huge potential. For this a hydro power plant Suki Kinari with total capacity 870MW worth US $1802 Milionn to be constructed in Mansehra district of KPK. On 10th of January, 2016 construction of another hydropower plant famously known as “Karot Hydropower Plant” was on track. This US $1420 Million power plant will be finished by the year 2020 and will be able to produce 720 MW of power from river Jhelum. Only these hydropower projects altogether will produce 7190 MW of electricity.

Similarly the CPEC places solar and wind energy projects on the forefront to avoid the green house emission effect as they not only produce cheap electricity but are also better for the environment and are more sustainable in the long run.In the idea is to come up with the best possible options to fulfill the requirement of energy. Quaid-e-Azam Solar Park in Bahawalpur (US $1302 Million) is a 1,000 MW. solar energy generating plant whose first phase was completed by the year 2015 and the second phase will be completed by the end of year 2016.The commercial operation date (COD) of 300 MW was attained in August 2016.

To further overcome the coal emissions wind power plant at Jhimpir is constructed. It is producing 50 MW of electricity by wind power and another plant of 100 MW is likely to produce electricity through wind power with a cost of US $250 million through the CPEC.

Moreover it is pertinent to mention here that Pakistan has planned some LNG energy projects planned to be carried out as part of the CPEC project. Among the LNG projects under CPEC, a 711KM long gas pipe line isto be built which will provide 1 billion cubic feet of LNG per day. The total cost of this project will be $2.5 billion. Along with reducing the carbon emission this project will not only supply gas to Pakistan but China will also get benefit from this project for its trade activities.

This is a known fact that China has adapted strict measures and it has developed a network of 1500 air quality monitoring stations in over 900 cities to control air pollution. Likewise to further make CPEC an environment friendly Pakistan and China can jointly collaborate on green house trading mechanism, this will offset environmental cost of carbon emission in Pakistan. However, it has also been stated in the LTP of CPEC, that China will also help Pakistan excel in the production of renewable energy related technologies. One can hope that, under global scrutiny, and for all that it promises in Paris agreement Pakistan is firmly committed to the purposes and objectives of the Climate Convention thus Making CPEC and environment friendly project.

Qura tul ain Hafeez has done M Phil in international relations from Quaid-I Azam University Islamabad. She is currently working as a Research Associate at Strategic Vision Institute Islamabad. She can be reached at Quraathashmi[at]gmail.com

South Asia

Dilemma of Strengthening Democracy in Pakistan

Fateh Najeeb Bhatti

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No country can achieve political stability without the active coordination of different state institutions working within their own specified parameters. For a nation to keep moving smoothly on the road to prosperity and maintaining national cohesion, consensus among political forces and other stakeholders is mandatory. History of developed and successful democratic nations is evidence of such instances in which political stability came out as a result of collective national wisdom.

Talking about Pakistan’s political dilemma, a few things become very clear that certain impediments had always been there right from the emergence of Pakistan as an independent state. Due to the internal politics in the power corridors, Pakistan was unable to formulate its constitution till 1956. Soon after that, in 1958, as a consequence of a long spell of endless political differences of the politicians in power and related lack of efficiency in handling the government affairs, the very first Martial Law was imposed. As a result the country was ruled by the military General Ayub Khan, although in that period Pakistan was able to achieve high economic growth progress. Since then, Pakistan has faced four martial laws till date.

Apart from these military takeovers and running of the governments by the military leaders for almost thirty years at different times, the elected civilian governments have also ruled the country for about 40 years. It is a popular perception among the majority of masses that the politicians adopt malpractices like nepotism, aristocratic behavior, change of loyalties etc and do not run the government affairs efficiently, which motivates the military leaders to take over the affairs of the country. However, whatever the reason may be, there is no justification to not allow the democracy to strengthen its roots, as according to Pakistan’s founding fathers, Pakistan’s future lies only in the democracy.

Although not likeable, but perceivably different military leaders took over the governments based on certain grounds, propagated mainly due to the inability of the civilian leaders to govern the country efficiently and their attitude of encouraging corruption, thus, undermining Pakistan’s socioeconomic development and its foreign and defence policy objectives. For instance, in 1958, the politicians’ inability to govern the diverse two part country inevitably invited Ayub Khan to take over. Similarly, in 1969 when Ayub’s presidential democracy failed on some accounts he had to hand over the power to General Yahya Khan.

Again in 1977, when the opposition parties failed to admit the election results and Bhutto was unable to bring the opposing politicians to negotiation tables,  Zia-UL-Haq was motivated to take over, as some politicians, including late Air Marshall (R) Asghar Khan had advised General Zia to take over reins of the government. In 1999, when the then PM Nawaz Sharif sacked General Pervez while he was on the flight from Sri Lanka, back from his visit, in reaction, General Pervez Musharraf ordered a military takeover by alleging PM Nawaz Sharif that he had tried to hijack the PIA plane carrying General Pervez Mushrraf and many other passengers, by ordering that plane to land somewhere else instead of Karachi airport.

Although, elected civilian were governing the country since 2008, in view of various apprehensions the political atmosphere remained ripe with the news stories of the civil-military divide and possibilities of the military take over being there. This situation was there because on most of the national issues and defence and foreign matters both civilian and the military leadership did not seem to be on the same page. However, apprehensions about military’s alleged role in the politics are still there, despite the current Chief of the Army Staff’s negation stating that the military supports democracy in the country.

Broadly seeing through the efficiency of the civilian political leadership in strengthening democracy by cooperative politics and working on national issues with consensus, the civilian leaders are still not working as per the people’s aspirations. Many of our politicians are involved in corrupt practices. Those who declare themselves Mr. clean have not much reliable past. So far, they have not been able to prove through their efficiency that politicians can provide Pakistan with the best form of the government that can make Pakistan a welfare state providing equal opportunities to everybody. Although, it is not an excuse for military powers to intervene in politics. Hence the problem is that how this desired sustainable and durable system will come into Pakistan, because inefficiency and corrupt practices of the politicians still offer chances to the military leaders to take over the government in Pakistan.

It is also a historical fact that Pakistan, because of its ideological mythology and geographical proximity has always been a security state. It has yet to achieve the objective of a welfare state, which is a way to address the present internal and external issues of Pakistan.  Furthermore, the public perception of military institution is as a disciplined, honest and purely nationalistic institution, which majority of our politicians’ lack. The supremacy of civil institutions is alright, but to achieve it the political pundits in Pakistan has to prove themselves loyal, honest and men of words and actions. Also, both sides have to recognize each other’s constitutional role in true letter and spirit.

Neither military nor political leadership can handle the prevailing issues of Pakistan single handedly. The need of the hour is to cooperate with each other on domestic, defence and foreign policy issues. Since, the foreign policy of any country is the outcome of its internal strength, domestic peace, prosperity and national cohesion leads to a strong and effective foreign policy. This fact needs to be understood by all stakeholders. Hence every institution should remain in its own domain to strengthen government hands to serve the county in all areas, particularly in carrying out socioeconomic development of the country and running of strong foreign and defence policies. In this context, democracy will be only sustained and strengthened if all national institutions work in their own domains and mutually cooperate to maintain a good atmosphere for development of the country.

To avoid future military takeovers, sustain democracy and develop economically, we can also learn from our friendly country, Turkey. Turkey has also suffered such political upheavals in their history, but now they have managed to restrict the influence of each institution to its own sphere. Though, Pakistan’s scenario is somewhat different, but things are not as bad as  perceived by some people in Pakistan. As a student of international politics, my personal opinion about the future of Pakistan seems very bright if our politicians follow the guidelines of our founding fathers and military establishment concentrates on its own responsibilities and always gives a helping hand to the civilian governments.

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The FATF meeting: Unjustified decision for Pakistan

Uzge A. Saleem

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The threat that loomed over Pakistan since February has finally made an impact and unfortunately it is a negative one. In simpler words, Pakistan has been placed on the FATF Grey list. Optimists say that it is a rude awakening and there is still time to get a hold of matters and prevent the state from falling into the blacklist whereas the pessimists are of the opinion that the decision to sideline Pakistan like this is biased and unjustified. So far the pessimists seem to be on the logical end of the debate.

The FATF is an organization that works to keep a check on Money Laundering activities and Terrorist Financing. Pakistan is not a direct member of the organization, but is associated through the Asia/Pacific group which deals with money laundering. This is why direct impositions cannot be made on Pakistan, but APG and other financial institutions like the World Bank can be pressured not to give loans to Pakistan.

If the case is to be evaluated right from the beginning, then it can be seen that it was interest driven from the very beginning. The decision was not made in the first meeting rather a second round was called in where some members were offered incentives to vote in favor of the decision and the others were conveniently not present. This is proof of the fact that the superpower has made a decision to sideline Pakistan until and unless the state bows down to all their demands and they have gained the support of many states by one way or another. The end result of this was that in June 2018 Pakistan was finally placed on the dreaded Greylist. The injustice is evident from the fact that according to the Money Laundering index formulated by the Basel Institute there are 45 states above Pakistan in terms of money laundering of which none has been mentioned or even discussed to be placed on the FATF greylist. It is clear that the move has an agenda behind it which might be to pressurize Pakistan into following the US orders otherwise there were 45 other states to consider before bringing Pakistan into discussions regarding strategic deficiencies.

As far as Counter Terrorist Financing is concerned, it is nothing more than a mere allegation which is being propagated by the hostile next door neighbour to discredit the state’s Nuclear Program. Pakistan is not sponsoring terrorism rather it is battling terrorism on its own soil. This is being done so not to satisfy the USA but for the state’s own national security. Something which is a personal concern and a threat to the nation cannot be sponsored by the state thus all these allegations are false.

As wrong and unjust as the decision might be the bottom line is that it has been made and it will have consequences for Pakistan until and unless the state manages to get off the list. The first and most damaging consequence would be the decrease in foreign direct investment. Generally, when a state is put under suspicion of money laundering and sponsoring terrorism, foreign investors become reluctant to invest in the state because of its unstable internal conditions. It is common in the business world to opt for investment in areas with minimum chances of risk. Pakistan, with the label of the FATF grey list automatically becomes less appealing to investors. This is likely to put a strain on the country’s financial situation. Furthermore, if Pakistan fails to satisfy the organization in the future, then the FATF is at full liberty to persuade the World Bank and IMF to stop providing loans to Pakistan as well. Considering the mega projects underway in Pakistan like CPEC, foreign investment is an important aspect and any decrease in that would have a negative impact on the state.

Though it should not have been done, but since it is done, Pakistan needs to increase its efforts to change its international image and also build a comprehensive and effective plan to eradicate all issues that put the state in a position to be blamed for such matters.

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CPEC: Cause or remedy to Pakistan’s debt dilemma?

M Waqas Jan

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New times, Similar woes

Pakistan’s most recent debt and balance of payment crises have come to highlight yet again the continuing fragility of its economic and financial situation. Even despite a considerably improved security situation and a significant rise in its GDP growth rate, Pakistan’s current account deficit over the last fiscal year has neared the $16bn mark reducing its Forex reserves by nearly 40pc. This will likely further exacerbate public debt, which currently stands at a staggering 70% of GDP. Add to that the political upheaval of the current  election season; the past few year’s narrative of Pakistan emerging  as a key developing market stands in all out jeopardy, as investors both at home and abroad watch with increasing trepidation.

This bodes ominously for the widely publicized China Pakistan Economic Corridor (CPEC), which has over the last few years dominated economic discourse within the country. Having become increasingly intertwined within Pakistan’ politico-economic framework, CPEC’s detractors and supporters both at home and abroad have hotly debated whether CPEC itself is the cause, or remedy to much of the country’s economic and financial troubles.

Warnings of an impending Debt trap

For instance, the widening current account deficit over the last few years has been continually attributed to the huge import costs of machinery and related building materials for CPEC projects currently underway. This was highlighted by the government as necessary given their stance that importing such capital goods was essential to the long-term restructuring and development of the country. This was also the reason used to justify the rampant borrowing undertaken by the government. By issuing sovereign bonds and taking on expensive commercial loans, the government in effect borrowed more in its attempt to curtail dwindling Forex reserves; reserves that were, and are still crucially needed to meet the ever widening current account deficit.

In a similar vein, critics both in and outside of Pakistan have pointed out the potential of CPEC turning into a ‘debt trap’ for a structurally and financially weak Pakistan. Parallels are often drawn against the Sri Lankan experience of having China fund and build the Hambantota sea port only to have it included as part of a debt-for-equity swap, when low revenues and high liabilities left it unfeasible for the Sri Lankan government to own and operate it. The massive liabilities being incurred on behalf of CPEC projects are often compared to this example.

This is especially true considering Pakistan’s increasing reliance on both public and private Chinese banks for financing CPEC related projects. This over-reliance on Chinese funding has in fact extended beyond CPEC projects with the Chinese government repeatedly offering small bailouts to the Pakistani government. The most recent one being the $1 billion emergency loan released at the end of June to help cover Pakistan’s unsustainable import bill for the next few months.  Thus as CPEC’s detractors have pointed out, there is certainly a growing dependency on Chinese funds that can in turn be used as leverage against Pakistan on the geo-political front.

Age-old cycles of debt induced poverty

On the other hand, despite criticisms identifying CPEC as a potential threat to Pakistan’s politico-economic autonomy, it is extremely difficult to argue that the Pakistani economy would be any better off without CPEC. Owing to deep seeded politics and decades old economic structural failings, Pakistan has been unable to mount the sort of economic turnaround seen in the other post-colonial yet newly industrialized Nations of Asia.  This is in spite of the comparisons tinged with nostalgic ‘what ifs’, which are often drawn against the economies of the East Asian tigers and even China for that matter.

Yet, there has been little if any effort to emulate the export led growth strategies of the above countries backed by a strong industrial and manufacturing sector. In fact, both exports and manufacturing have instead declined over the last few years, serving as the most glaring examples of the Pakistani economy’s structural failings. Moving beyond short term measures of financing the deficit through loans and bailout programs, expanding the country’s exports is in fact the only viable and sustainable solution to the country’s widening Current Account deficit.

This is in contrast to prevailing policy measures that have continued to relinquish the country’s politico-economic autonomy to its creditors. The only difference being that policy makers, in light of deteriorating relations with the US over the last few years, have preferred to slowly substitute China for the Bretton Woods institutions as its major source of credit. As has been for decades, the economy’s reliance on external funding remains the same even in light of dramatic shifts in the global political economy.

Still, even amidst mounting public debt and new credit lines from Chinese sources, Chinese officials stationed in Islamabad have gone to great lengths to point out that, out of the $19 billion used to finance CPEC projects so far, only 31.6% has comprised of loans to the government in the form of preferential buyer credit. The rest of the financing has been doled out in the form of aid, interest free loans and loans secured by private investors from commercial banks, all of which are mostly outside of Pakistan’s debt servicing obligations. Taking into account both ongoing and completed early harvest projects, the same officials have placed the overall burden of CPEC projects at around 10% of the country’s overall debt servicing obligations. They too point out that the primary factor behind Pakistan’s worsening fiscal and external accounts is more due to its economy’s inherent structural limitations and challenges; the same challenges that have plagued Pakistan and the surrounding region for decades.  They argue that it is overcoming these very limitations and challenges that CPEC as a part of the overall vision of the Belt & Road initiative aims to address over the long run in a holistic, sustainable manner.

Of Grand visions and dreams

Coming back to Pakistan’ gaping debt crisis in relation to CPEC, it is unlikely that debt under CPEC has played a major role in bringing the economy to its present position. Despite being a slave to geo-political tensions, Pakistan’s economy has suffered more from years of mismanagement and structural failings that have moved beyond the security dynamics of the South Asian region.

What CPEC instead does, is offer in concrete terms, a viable chance for the country to prioritize its economy as the basis for its power and influence within the region, in the same way China has done at a global level.  It offers perhaps the only realistic chance for Pakistan to move beyond its Agrarian focus and develop a robust manufacturing sector to help add greater value to its exports. By successfully leveraging the massive investments in energy, transport and communications infrastructure as well as the financial opportunities under corresponding SEZs, Pakistan can use CPEC as an opportunity to break free of its present structural limitations that have so far reinforced the ensuing cycles of debt and poverty.

This however, is only possible if the underlying, decades-old problems of the present debt crisis are correctly identified and remedied in accordance with a sustainable long-term approach. While all of this is unlikely to materialize overnight, policymakers and administrators overseeing CPEC need to re-prioritize the development of long-term sources of revenue, as opposed to the short-term sources of credit that have come to characterize CPEC in day to day politico-economic discourse. If not, then the entire CPEC initiative is reduced to being just another excuse to borrow more funds to keep the economy afloat. This serves neither Pakistani nor Chinese interests in the long run.

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