 Yeah, we just need to know which hello, okay, welcome everyone to this Seminar with Tyab Saftar on the China Pakistan economic corridor progress opportunities and perils Tyab is a postdoctoral researcher at the Center of Development Studies at the University of Cambridge Where he completed his PhD on the effects of economic globalization on agro industrial value chains in developing countries And his current research explores the economic and political dimensions of increased increasing Chinese investment in host countries that are part of the Belt Road initiative And before joining the Center for Development Center of Development Studies, Tyab was an LSE fellow at the Department for International Development so Tyab will speak for about 45 or so minutes and then we'll have time for questions from the floor as usual So thank you. It's a pleasure being here. So as is, you know, this is my first talk over here I've been here multiple times before But this is the first time that I've had the opportunity to speak at so as and the Belt and Road initiative is a fascinating You know area to study where does one begin where does one end? That's always a question and it's an evolutionary, you know sort of a project as things move as as more and more countries join in The evolution of the Belt and Road initiative continues and CPEC very much is at the heart of end of this evolution CPEC, you know is is called the pilot project of the Belt and Road initiative What does it mean to be the pilot project of the Belt and Road initiative and that's something that I'm going to look at in deeper detail You know as as the talk goes on Just to talk about the methodology, so I've been in Pakistan for the last nine ten ten months doing fieldwork And primarily what I've done is that I've informed this research through more than 70 In-depth interviews with policymakers in Pakistan, especially but also Chinese policymakers as well With businessmen with you know as many people as I could get hold off You know and and then I've also analyzed a lot of government documents as well A lot of these documents are unpublished. They're not available in in the public's affair, but I've been able to get hold of them Interestingly enough while the success of the BRI is not contingent on CPEC being successful But because of this whole discourse about CPEC being the pilot project of the BRI Whatever happens in the BRI is important for BJ. It's important for Pakistan Of course because this is a huge chance, you know, you've got so much money coming into the country However, it's extremely important for Beijing To ensure that the optics work So even if you know things aren't moving as smoothly as they say the optics have to work Because there's a lot of people there are a lot of people who are actually watching it not only in Washington in London Etc, but also in many of the other countries that are a part of The Belt and Road Initiative so the way that I've structured this talk is that I'll talk briefly about what the China Pakistan Economic Corridor is Next I'll look at two sectors in particular. Those are energy and transport These are the two sectors where a lot of the initial money has gone What what sort of progress has been made in these sectors is important, but also You know where the snags are and what what sort of problems have arisen are also important And finally I look at industrial cooperation. That's a that's a nascent, you know, sort of an area However, industrial cooperation trying to understand where they're going with CPEC is extremely important as well At its heart for people who don't know CPEC is a connectivity project, right? So it's basically from Kashgar Which is in Xinjiang province in China all the way through Pakistan You go down to Balochistan and you connect Gawadar with Xinjiang So what that does is that it reduces the the transport time from from Western China all the way to the sea And it solves a number of other problems as well But it is much more than that as when you talk to you know policy makers in Pakistan So Pakistani policy makers actually call it a game-changer and the language that they use is extremely interesting because what they say is that They want to move from taking advantage of Pakistan's geostrategic position to a geoeconomic position So what does the geoeconomic position, you know sort of mean and when you ask them You know, there's not a lot of response about what geoeconomic actually means But there are critiques as well within the Pakistani policy making It's that they they're there is criticism in the way that CPEC is evolved For example, one of the bureaucrats that I talked to said CPEC has become transactional moving from project to project as opposed to programmatic So rather than you know sort of vision of how things should be it's become more about you know project to project sort of an interaction between the Chinese and Pakistanis and it's been developed and Actually been implemented by bureaucrats on both sides and there's emergent literature as well So McCartney in a 2019 paper actually asked can CPEC be a leading sector of the economy So can it pull the economy along with it as well? In the sense that Rostow, you know sort of in the stages of development actually used McCartney is not very hopeful He says that the elite in Pakistan have had these chances before as well And they've not been able to actually have a consensus on on where they want the society to actually move and A recent work wolf 2020 is actually skating in the way that it views the CPEC So for wolf CPEC actually reduces economic freedom is geopolitical as opposed to primarily Economic gives rise to corruption. It's a debt debt trap loss of a political sovereignty Challenge to the rule-based liberal international order and that's something that you hear about In the policy world about, you know, the Belt and Road Initiative that it's a challenge to the liberal International order and China is going to trying to reinvent the way that the international rule-based system works CPEC as I said, you know, it occupies this special position as far as the Belt and Road Initiative is concerned and Chinese foreign minister Had an interesting statement So if the one belt one road is like a symphony Involving and benefiting every country then construction of the China-Pakistan economic corridor is the sweet melody of the symphony Symphony's first movement. So that shows you the importance at the highest level that CPEC was given Of course, this is a little dated. The statement was from 2016 a Politician from the opposition Pakistan people's party that I talked to Said CPEC is the jewel in BRIs crown and Gavadar is the jewel in CPEC's crown So so that sort of gives you an idea of how policymakers and politicians on both sides of the divide actually look at Look at CPEC and it's seen as the country's top priority across the board You know, whichever event you go to in Islam, but the first thing that you hear is that CPEC is above political divide Everyone in Pakistan supports CPEC fully and of course this the reality is more nuanced than that But we can discuss that during questions And As I said, you know, there's the stakes are quite substantial for China So as I said, you know, the optics are extremely important But what does it mean to be the pilot project of the BRN? That's something that really unpack It's the only bilateral corridor. So there are five constituent Corridors in the Belt and Road Initiative CPEC till 2018 was the only bilateral corridor. So that was the only You know, all other corridors actually had more than two countries involved So for example, the Russia China Mongolia corridor has three countries involved What that means in theory at least is that the cost of coordination for you is easier, right? So you have lower cost of coordination, which means that it's easier for you to actually Negotiate with one country alone as compared to with multiple countries The China Myanmar economic corridor president Xi Jinping was in Myanmar recently Is the other bilateral corridor, but that came much later. So that was announced in 2018 even though negotiations were ongoing since 2017 and of course, there's this whole notion of China and Pakistan as all weather strategic friends Iron brothers. So in Pakistan, they say that Pagachin Dosti is higher than the Himalayas and deeper than the Indian Ocean. So that's that's a sort of discourse around China-Pakistan Relations and in most of these other corridors this because there are multiple countries involved this tension between countries You know who are constituent members of these corridors or between or there's historically been Conflict between China and these countries as well. That's is completely missing as far as the China-Pakistan economic corridor is concerned and a lot of people actually don't appreciate that however the Cooperation between the two countries has been institutionalized for example by 2013 when interaction actually started or when Discussions around CPEC started there was an institutional mechanism that was developed For interaction between the two countries So right at the top is the Joint Coordination Committee the Joint Coordination Committee meets once a year And it is jointly chaired by the Minister of Planning Development and Reform of Pakistan and the Vice Chairman of the NDRC The National Development and Reform Commission The agenda is set by a number of joint working groups and these are the areas where you know, there's cooperation Between the two countries or there's institutionalized cooperation between the two countries The red ones show the the new areas of the joint working groups that have just been started So after the change of government There's been a reorientation in the way that the government wants to take this forward or would like to take this forward And these are the three areas where they want where they're new joint working groups that have actually been set up So these working groups actually set the agenda for the Joint Coordination Committee projects are Deliberated on and discussed at the level of the joint working groups and they're then they then go to the joint Coordination Committee For approval and for further deliberation Again, this sort of institutionalized cooperation is missing in many other cases So so it's it's interesting that that right at the start you had this sort of an institution institutionalized cooperation and the speed of project implementation So Pakistan is one of those few countries where you had a lot of projects ready, right? So there were lots of PC ones as they say in Pakistan's planning parlance ready They didn't have resources so in comes China Which had the resources to actually, you know, do a lot of these projects And if you look at the construction projects the amount of money that's gone into these construction projects In the last five years, it's around 50 billion dollars to put that into perspective the next country in line is Malaysia and the Resources given or resources promised to Malaysia are 38 billion dollars So that's just the speed of progress as far as the China Pakistan economic corridors concerned and it's equivalent to around 6.5 percent of the total spending on the BRI which again in terms of Money going to a single country is the most money that's gone to one country alone And there are economic the economic relations between both the countries are expanding So on the right hand axis, you've got foreign investment from China and on the left You've got the total foreign direct investment that's coming into the country. So notice that from 2013 onwards China actually accounts for almost 70 75 percent of FDI into the country The green line is actually Hong Kong So I clubbed I added both China as well as Hong Kong because a lot of investment actually flows through Hong Kong As well a lot of FDI from China by Chinese SOEs So that just gives you an idea of how economic relations between the two countries have been You know expanding especially since CPACs Announcement and at the end of the day as I said, there's a lot of strong popular support For the Chinese in Pakistan. So you go on the street. You ask the average Joe about America You'll get you know, this whole tirade against, you know, the US and and how it's enemy number one But you ask the average Joe about China and so, you know China and Pakistan are best friends and it was interesting that One of the statements that I heard Chinese have a very favorable impression in society and they're welcomed by ordinary people the response that they get in Pakistan is probably unmatched anywhere else in the world and that's So that's also, you know corroborated by looking at There's a new publication by the Chinese Academy of Social Sciences Which looks at the risk profile of various countries that Where foreign investment is being made by Chinese enterprises So one of the variables that they look at is Is Chinese relations and over there the country with the most favorable relations as far as Relations with China are concerned is Pakistan the index is based on six sub variables, you know, it's got Investment block and then you know a number of bilateral investment treaties etc On that but that just gives you a notion of how, you know It's despite the fact that there are the other risks are quite substantial in Pakistan The fact that it has best relations with China matters now The implementation of the project was supposed to be in phases, right? So you had an early harvest phase, which was 2015 to 2020 Medium-term phase and then a long-term phase. So in the medium term the idea was that you would have initially cooperation as far as You know dealing with the structural problem supply side problems were concerned in transport and in the energy sector And then you would slowly enhance cooperation into other sectors of the economy such as industry etc And in the long-run phase you were basically connection young To the port so that's the idea behind it as I said the early harvest phase two sectors are most important Which I'm going to talk about energy and transport. So why energy? Pakistan has had serious problems as far as access to energy is concerned electricity is concerned in 2012 for example when the Pakistan People's Party was in government You had a maximum shortfall of 5000 megawatts in the premier countries or in the main cities of Karachi and Lahore you had load shedding of around 12 hours a day GDP reduced by 2 to 2.5 percent These are figures of the Asian Development Bank and you had high transmission and distribution losses as well Because the system just could not cope with the lack of investment that it didn't made and this was despite the fact that you had Generous incentives that were given to producers to actually you know sort of invest in Generation a background of the power sector. So the power sector in Pakistan, you know, you had reforms in 1994 The World Bank supposed sponsored a lot of these reforms whereby you privatized. So you had a vertically integrated Entity called WAPTA. So basically the World Bank broke it into various pieces and There was subsequent reforms in 1994 98 2002 etc The total generation capacity of the country. So most of the money actually for went into generation So a lot of them private money that came into the country both foreign investment as well as local investment went into the generation Oh, so if you look to think of electricity as a value chain It's the generation node where a lot of the investment went and around 2014 40 percent of total Generation capacity was in the private sector and a lot of it was based on oil and later gas and So 64 percent of your total generation came from thermal sources. So that was the situation in 2014 So when Pakistan and China started discussing about the China Pakistan economic corridor Nawaz Sharif's government came in in 2013 and before that as well There were discussions on going about you know sort of dealing with some of the supply side bottlenecks because one of the things that people saw was our Policymakers thought was that the real issue with growth was that you just did not have enough sustainable power Available for the in the grid for people to actually invest in industry, etc And the Pakistani government actually observed Pakistan looks towards Chinese friends to extend their cooperation in developing coal hydropower and transmission lines It was seen as a way to deal with some of the fiscal constraints So Pakistan was was physically constrained 2013 you had the IMF program ongoing in Pakistan as well So the state did not have a lot of capacity to actually invest in generation and across the board within Pakistan's You know sort of institutional architecture There's this belief that the private sector should take the way forward as far as the power sector is concerned So in 2014 both sides agreed that in the initial phase We will invest on the basis of imported fuel So instead of dealing or instead of exploiting local sources of energy What we're going to do is that we're going to use imported sources of fuel to actually Get generation going and then you know slowly we can develop the local sources of energy And in the medium to long term, you know, you had local sources especially To reduce this dependence on imported fuel There was also this idea that the transmission and distribution system is weak So therefore there has to be investment in the transmission and distribution system as well And that's where the bulk of the investment has gone 70% of total financing in this first phase of CPEC has gone towards The power sector and when you look at it in the context of the Belt and Road initiative 38% of the total investment during these years these initial five years. This is still 2018 has gone towards the power sector and There was a lot of criticism about how you know, the Chinese investors are actually given higher returns However, policy makers say look, you know, there's there's no bar on anyone coming into the country investing in the power sector No one wanted to come in local investors actually did not want to come in and invest in the power sector It was only the Chinese who showed interest. So basically, you know, we had no choice and Was decided early on as I said the independent power producer mode of generation was well-intended So you had since 1994 you had Independent power producers in the economy. So so this wasn't something which was a new, you know, sort of addition to the system There were other things as well For example circular debt is a persistent problem circular debt basically means that your cost of generation is high Your cost of generation distribution and transmission is high And you just don't get enough money in terms of the payments that you're receiving from people Which means that the state has to subsidize X amounts of rupees in order to keep the system going and because the state does not have money Basically that debt keeps on going and going up further and Then there were other, you know, sort of ideas as well This is very interesting because they wanted to use Chinese standards in designing these energy projects so one of the things that the Chinese have been trying to do is to emerge as as 10 setters or as setters of of standards because they want to emerge as you know a knowledge economy And that's something that they want you to do and they've explicitly mentioned that during the negotiations negotiations as well So under 2000 these investments have been governed by the 2015 power policy And what that power policy actually says is that basically you've got no risk in theory You've got no risk as an investor Your return on equity is guaranteed by the government of Pakistan Everything is indexed to the US dollar in case that it is you know foreign component Import duties are lower in case that you don't manufacture anything and in case of Pakistan coal is a new technology So basically there was no manufacturing capacity at all so everything had to be imported The the government ensured that you had convertibility from the US dollar from Pakistani rupees to US dollar In case that you weren't paid as I said, you know circular debt was a problem So in case that you weren't paid the government actually said we'll give you Money for delayed payments as well So that that the rate is the Karachi interbank rate plus 2% and in case that you're not able to Meet your fuel supply as well the government bore that risk as well So this is quite a sweet deal that that the Chinese investors got and of course so so once you had these sort of guarantees There's been substantial progress So in the last five years you have added five thousand odd megawatt of capacity Which is a total investment of around nine billion dollars. This is only in generation There are other nodes where there has been some investment as well and while much of this initial investment went towards imported coal There's also been moves to develop, you know, local sources of fuel as well. For example, Hydel and Thirkhole and These investments have played an important role in alleviating some of these problems. So for example now Even in rural areas load shedding Is quite limited in the major cities. You've got no power shortages at all And policy makers point out that this is actually foreign direct investment So what that means is that there is no debt implication for the Pakistani government But the truth is of course more nuance in that and you can discuss that further as well So if you look at the total capacity Some of this capacity in 2018 is apart from CPEC as well But total capacity actually went up at around 13,000 megawatt and if you look at the total generation Which is on the right side my left actually It's gone up quite substantially as well and the total share of CPEC investments in the national transmission system is around 14 14 and a half percent of total generation and interestingly enough. This is only two power plants at the moment So there are only two power plants in 2018-19 Which were CPEC related power plants. So that's the total capacity of around three three and a half thousand megawatt The Pakistan Muslim League also, you know invested in other Other areas as well So this is the Saiwal coal power plant. This coal power plant is 13 and 20 megawatt. This was built in 22 months And 22 months for a 13 20 megawatt power plant is unheard of so they actually started calling this Punjab speed rather than Chinese speed It's it's completely so even the chandeliers came from China And you just cannot build a 13 20 megawatt power plant in Pakistan in 22 months by having local You know sort of doing local sourcing as well and talk about that further There's also been a recalibration of priorities for example one of the things is that the Chinese want something and they'll build You know sort of push you to to doing it However, there's been an ongoing dialogue process between the two countries as I said, you know institution the dialogue process between the two countries Has been institutionalized. So there's a constant, you know sort of recalibration of priorities in the power sector If you look at the early harvest projects in the power sector some of them were dropped Others were added through mutual discussion Of course, there's a lot of lobbying involved as well and lobbying not only by Chinese state-owned enterprises But also by Pakistani conglomerates who are partnering with Chinese firms and There's been a joint study in the power sector. So in 2018 there's a joint study that was undertaken by both governments And what was decided out of that study was that we've in we have enough capacity in the pipeline to actually Now stop investing in the power sector because if we invest more in the power sectors There's going to be a bubble that's going to emerge and and Pakistan's not going to be able to handle that investment This is another 13 and 20 megawatt power plant. So I had the opportunity to visit all of these power plants This is at Port Kasim in Karachi. It's a joint venture between power China a huge Chinese state-owned enterprise and Al-Marqab capital, which is a Qatari Venture capital fund again 13 and 20 megawatts This is based on imported coal as well This took a little longer than the Sahiwal coal power project. I think it was built in two and a half years Rate of return as I showed you, you know, the rate of return is extremely high And one of the assertions is that, you know, this is exploitative as far as developing countries are concerned Because the government guarantees everything so even if the the money is not on the government's balance sheets At the end of the day the government is actually guaranteeing that you're going to be paid everything This you know criticism I think is a little misplaced Because it was the the geniuses at the World Bank who actually came up with these models initially So interestingly enough the Chinese are basically taking that model that was introduced in the 1990s and taking advantage of the rules of the game As were set in the 1990s and no one's been able to change those rules of the game So basically the rate of return that you get is as follows And it's it's depending on the kind of technology that you use An IRR based return on equity basically means because the life of these projects is over 30 years So when you you know sort of use time value of money and bring it to year zero the return on equity that you get is 17 percent for imported coal 18 percent for third coal and then you know it's it's for other sources as well and The rates of return are among the highest in the world and this is you know They make limited sense as far as a developing country like Pakistan is concerned Especially in the case of third coal where you initially started off with rates of return dollar index Please remember rates of return of around 20 odd percent You did not go through a competitive bidding process which meant that basically you did not find you know Or do you did not discover the true cost of electricity? So basically there's no incentive for a potential investor to actually keep costs down Right because you're basically saying that I'll cover your cost and basically I'll give you something on top of that cost as well So there are all of these problems and at first class it does appear like you know that these these returns are exorbitantly high However, there are problems in the way that NEPRA, you know calculates this tariff as well For example, some of the basic assumptions that are taken are extremely problematic They use the risk-free rate of return from the US utilities It makes absolutely no sense at all in terms of Pakistan's institutional environment There are historic problems as far as the implementation of arbitration cases are concerned the government of Pakistan has a dismal you know history of Implementing a lot of these arbitration cases against them The IPPs have actually invoked their sovereign guarantees four times since 2010 and Pakistan is defaulted in payment on payments in 2012 There's a convertibility risk as well Is there enough foreign exchange actually available in the market for you to to convert your rupees in two dollars? And there's an operational risk as well So even if the government says that I'm going to give you Karachi interbank rate plus two percent You actually need money to buy coal to run the power plant as well So all of these risks are there and Collier in his study on on the African, you know sort of power sectors actually saw That most of the risk in these projects is actually political and this is the case in Pakistan as well with a lot of the risk comes from the political factors Now what's happened over the last five years is that you've been able to change the power mix So unlike your dependence on imported oil You switched to imported coal, so it's not optimal, but still it's cheaper as compared to up to Imported oil and you've also had capacity come online which uses indigenous resources as well The problem over here is that over the last year and a half the Pakistani currency has depreciated by almost 50% So your cost of generation your your actual cost of generation whatever The fuel for generation might be has gone up substantially because everything is indexed to the dollar And what that does I'll talk about what what that does is As I said, you know local capital is a part of the power sector So one of the criticisms again about Chinese investment is that they want to go it alone That's not the case as far as Pakistan is concerned in Pakistan Especially in the development of Tharkol a local capital is very much a partner of the Chinese state-owned enterprises And there are benefits to having local capital as a partner as well because they understand the market They can deal with some of the constraints You know as far as working capital, etc. Is concerned they used to dealing with the uncertainties of the system and You know This was the only way so for example when I talked to the head of one of the largest conglomerates in Pakistan who've invested now in In coal-based technology, they were they were up front They were like, you know, we went to the IFC the IFC said no Everyone does not want to invest in coal because of obvious reasons. I'm not saying you should But if you look at it in the context of Pakistan where you had such huge power shortages Coal was the best or the easiest way forward just as thermal generation was the easiest way forward 2030 years ago and There's move as I said, so I keep talking about Tharkol So basically Thar is this area in Sindh province in Pakistan where they discovered huge reserves of lignite waste coal I won't bore you with the details But lignite is the lowest quality coal of them all which means that the moisture content is very high So therefore the efficiency of these plants is lower However, there's a massive 175 billion tons of coal in this area in Sindh province and the Pakistanis have been trying to develop these resources at least since the 1990s Engro, which is the local conglomerate they became involved in the project in 2008 And as I said, you know the Chinese were the only ones who were interested in funding and The block 2 which is so it's been divided into various blocks block 2 is the one that's actually started working This is it's a rare, you know sort of success story as far as public-private partnerships are concerned and the it's a very interesting model That's been used over here. So basically you've got a company which has three shareholders One is the government of Sindh, which is the majority shareholder The second is local conglomerates and local banks and the third is a Chinese state-owned enterprise What is interesting in this model is that the Chinese state-owned enterprise, which is China machinery engineering Corporation is also the EPC contractor of the firm So it's so they're both doing the upstream work as well as being equity partners and when I asked them why they went for such A model they said that they wanted someone in the with skin in the game So they didn't want someone with who did the EPC contractor and just left They wanted someone who was long-term in the game and who had skin in the game So it started operating in 2018 with 3.8 million tons And it's going to go up to around 10 million tons with with total generation capacity of 13 and 20 megawatt the first power plant started operating in In you know in 2019 as well What is interesting over here is that there's been this assertion that it's only the Chinese the Chinese only go for Capital equipment, which is manufactured by Chinese firms Over here. We see that the boiler was actually Manufactured by GE so G isn't the Chinese firms last time I checked So that's that's something that's different and across Her coal power plants the technology that they're using is actually GE technology It's not Chinese firms that have given the technology and it's actually the case in imported coal as well So in one of the plants The the client actually said, you know, we want GE technology. So therefore they actually got that so it's not Predominantly it is Chinese, you know capital goods equipment. However, that's not the case across the board But the choice of technology has been criticized. So this is this is part of all basically, this is the mine It's an open-pit mine This is just the first phase. They're basically going to go South to expand the mine and that's going to take it up to 7.6 million tons These are other power plants that are actually being built in the Thar Park area as well And as I said that the same government has actually done a wonderful job of developing the infrastructure around her So for those of you who know Pakistan Thar is one of the most deprived areas in Pakistan The same government actually spent a lot of money in developing the provincial road network connecting Thar with the province as well and some wonderful, you know, sort of road to travel on and The question now becomes is all of this sustainable? So is the amount of money that China is pouring into this the power sector? Sustainable It is a lot of money So it's dealt with the short term problems Which means that you don't have power shortages You don't have power riots anymore that the Pakistan people's party government had to have to deal with in 2012 But there are structural issues that remain in the sector for example circular debt that I talked about earlier That's how it stands at around 10.6 billion dollars. So that's the amount of money that's caught up in the system Which the state does not have the capacity to actually pay back and that has a ripple effect across the value chain So basically you don't get paid as a distributor As a generator, which means that you can't pay your supply which then you know sort of has other issues as well The devaluation of the Pakistani currency has further raised as I said, you know, everything is indexed to the US dollar So when the Pakistani currency is devalued Basically your cost of generation or whatever Generation you're doing is going to go up And Managing cash flows remains a problem For example, the two power plants that I showed you earlier with that came online within your two or three years When I interviewed those those guys, they had not been paid for five months And the Pakistani government actually said, you know, we're going to set up a revolving fund for you guys And we're going to pay you off as soon as possible However, they've not been able to pay them off They weren't able to pay them off for five months and it's interesting Interesting what a senior executive of one of these power plants actually said We would not have invested in Pakistan if it were not for the BRI and the focus of the Chinese government on the country so that shows you the sentiment of a lot of these Chinese firms that are facing these problems and As I said the Chinese twice raised this issue at the JCC, which is supposed to be the highest Forum of negotiation that, you know, we need to make sure that our firms are actually paid on time However, the government just does not have the resources to actually pay them on time It's just as simple as that and the problem is likely to become more acute as you have more Capacity that comes online. So during 2020 there are a number of other power plants that are going to come online 2021 there are hydro projects that are going to come online. Similar is the case in 2020 22 However, I don't think that the Chinese are going to call in the sovereign guarantees because they know the Pakistanis don't have the capacity to pay and The code from from this executive at the Chinese firm is actually interesting. So for example This the Chinese investment in the sector is patient capital, right? So as state owned enterprises They've got a dual motive. It's not only to make money But it's all to also to further whatever interests there are of the central government And there's a lot of literature on how a state owned enterprises actually have a profit motive as well But the profit they do not deny the fact that there is a profit motive. However There's a broader national imperative involved as well. So it's unlikely that Chinese firms are going to You know sort of call in the sovereign guarantees. The other problem is that there's a lack of local participation So 22 months as I said to you earlier, there's no Pakistani firm That works in the civil engineering, you know, sort of broad area that can meet those sort of deliverable So what that that has meant is that initially in the early harvest phase in the first two projects You've got extremely limited Money that's gone into the local economy Most of the money is actually gone back to China because all the EPC contracts were from there as I said, you know, even the chandelier the The floor etc. They'd all been imported there, but there's there's a So in the civil case, you know, they actually subcontracted the work to a large local firm The large local firm just wasn't able to you know Meet the quality requirements of these SOEs or meet the time requirements of these SOEs as well So it's not like the Chinese don't want to spend any money. Locally It's just that the capacity for many of these firms isn't there and At the end of the day in a lot of these cases what we've seen in other cases of successful technology diffusion is that the state Has to take an active role, right? So the state has to force the foreign investor to actually invest in building Certain technique technological capabilities in the local economy. There's a lot of literature on that There is no, you know, sort of there is no No way that the Pakistani state is going to do that It just does not have the capability or the capacity to actually talk to investors and force them to actually invest in this in technology Transfer and there have been political challenges as well as I said So a lot of this investment came in during Pakistan Muslim League's rule, which was from 2013 to 2018 Political changes have actually sought the mood as far as CPEC investments in In the energy sector are concerned and one of the problem is that a lot of the things that were handled In house during negotiations. They are now being done You know on the media and that's something that the Chinese just do not Like for example, this one power project, which was in brain we have fun on imported coal Was cancelled So that's fine. As I said, you know, that's something that's been ongoing as far as CPEC is concerned It's a moving target. So, you know, you have some projects that are added to the list and then others that are cancelled however In this particular case, it actually came on the media and there was a lot of You know, sort of hue and cry as far as Pakistan as far as the Pakistani media was concerned and there the literature actually suggests that in previous instances that the The dispute resolution mechanisms have been more of a government-to-government discussion as opposed to taking it out on the media And this is something which which did not, you know, sort of sit well with the Chinese the second area that I talked about is transport infrastructure and And that's you know in order to build the corridor, you need roads, you need pipelines, you need You need railway lines to actually connect Kashgar all the way to To Pakistan and and and basically the World Bank actually says that transport infrastructure or improvements in Pakistan in first transport infrastructure can actually have a major impact as far as Real incomes are concerned However, over here a lot of the domestic policy makers and their priorities actually come to the fore So there's a local political economy aspect that comes into the investment in the transport sector and a lot of the investments that were made needed to ensure that they were in sync with the requirements of the local political economy They also were needed to be so the Chinese actually did a monographic study on the transport infrastructure sector from 2014 all the way to 2030 and basically the idea of that monographic study was to develop the transport infrastructure in a more scientific manner So basically what this is that you need multimodal connections between Kashgar, Islamabad, Sakhar, Karachi, Gawadar And this is the initial, you know sort of version of that transport report It was it was later changed Amended by the Pakistanis, but interestingly enough it completely bypasses Balochistan, so Gawadar port is in Balochistan. I'm sorry. I don't have maps I should have had maps overhead, but it completely bypasses the rest of Balochistan and goes straight to Gawadar And Gawadar is the pivot around which, you know CPEC revolves As I said, you know, you needed to connect to Western the Western region And the basic idea behind building roads is that if you want to get rich You basically need to build a road first So when you solve that supply side bottleneck as far as transport infrastructure is concerned economic activity is going to follow That's the rationale and basically the idea behind these The road transport network was that you had one you know You had one corridor and multiple alignments and the multiple alignments are Western central and Eastern alignments However, unlike Energy where a lot of money has actually come in in terms of infrastructure the amount of money that's come in in developing the road network Which one would have thought would have been quite substantial is quite limited There are only two road projects that have actually been almost complete one is complete the other is almost going to be completed with with a total outlay of around four odd four four and a half odd billion dollars and One of them is the Karachi Lahore motorway and one section of that motorway is Multan to Sakhar. There's another You know sort of there's another Motorway that's going to be built from Sakhar to Hyderabad in order to link Karachi to Lahore. However, that motorway has not been built So the initial idea was that while the time during the time that you had the Lahore Sakhar Multan Sakhar Motorway being built you would also start work on the Sakhar Hyderabad Part of the motorway to ensure that you know you had connectivity between Lahore and Karachi that's not actually happened and we can again of course talk about why that's not happened during the question and answer section This is pictures from the motorway being actually built The second area was railways now This is actually one of the case studies that I've been looking at in greater detail Because this is a project that in 2017 was was was titled as a strategic project of the of CPEC This main line connects Karachi all the way to Lahore and and goes to Peshawar It has a total length of around 1700 odd kilometers And it makes a lot of economic sense because 80% of the revenue of the Pakistan railways is actually generated on this line There's been no progress as far as the main line one is concerned and there is there is of course an inherent bias as far as You know railways is concerned within the Pakistani state And there's a lack of policy support at the highest level So if you look at the profile of passengers traveling on the railways 90% actually use economy class, which is the lowest class as far as the railways is concerned So that just gives you an idea of the profile economic profile of passengers And the rail is not like you have the state of the art railway. That's the picture on the top right That's that's basically you Mapping where your trains are it's all manually done This is the state of the railways infrastructure as far as manufacturing is concerned You've got machines which are actually from the turn of the last century 1911 that are still working in many of these Many of these workshops What then and I know that it's five minutes, so I'll try to hurry up what I've still have a lot to go basically what The the transport sector or investment in the transport sector has actually done is that it's stoked a lot of sub-national grievances The road network that's being built is through the heartland of the Punjab and through sinned as well It by as I said it bypasses Balochistan completely and that has stoked a lot of Resentment as far as the smaller provinces are concerned. So as far as CPIC is concerned, there is this sub-national grievance as well The second area, which is interesting to see is as I said earlier, there's a lot of local political economy as far as the transport network is concerned and Basically, if you look at if you use the political settlements literature if you look at it from a political settlements, you know sort of a lens Powerful organizations have their own incentives to actually support or not support projects and it's basically about rent extraction and differences in rent extraction between various organizational interests be there Chinese or Pakistani lead to delay as far as the implementation of projects is concerned industrial cooperation Don't have a lot of time, but just to talk about industrial cooperation Basically under CPIC, there are nine special economic zones that are to be built and the idea is that Chinese Chinese firms are going to invest in these special economic zones. I went to Pakistan at the end of 2018 the discourse on or the discussion about these special economic zones started Around mid 2018 and the idea was that they're going to be operational by the mid of 2019 The first special economic zones have yet to start work The Prime Minister broke ground on one of the special economic zones in 2020 So there's no progress as far as the special economic zones is concerned And then there's this question of whether Pakistan can actually use FDI strategically Pakistan has had one of the most liberal Foreign direct investment regimes in the world since the mid 1990s you could actually own As a foreign investor 100% of a firm you could repatriate profit 100% of the profit as well And yet foreign direct investment in Pakistan has not really flowed towards Efficiency as it's called in the foreign direct investment literature efficiency seeking You know FDI in the manufacturing sector most of the focus has been on The service sector or on power generation and mobile communication So then the question and if you listen to the discourse in Islam about the discourses that we're going to have joint ventures between local companies and Chinese firms The question then becomes what is the incentive for a Chinese firm to actually have a joint venture because what you're doing as Far as the special economic zones is concerned is that you are providing all of the services to Chinese firms in this area Which is well protected where you've given them X number of incentives as well So what is the incentive for a Chinese? you know firm to actually enter into a joint venture with a local firm because Initially all of the money that came in is state-owned enterprises But in the second phase you're going to have private capital coming as well and there's a lack of pro-policy clarity as well Especially with the change of government, you know, there's been a change Or there's been a slowdown or there's a perception that CPAC has actually slowed down and a senior Chinese, you know policymaker that I talked to said If the present government does not agree with the policy framework It has every right to change it however, it cannot remain a bivalent and expect investors to come in In a stage of policy limbo this will have a negative impact on FDI in the country at present There is a complete lack of any policy across multiple sectors of the economy including industry ICT and agriculture And then there's a problem Go to questions and there's a problem as far as CPAC is concerned So basically the way that governments have been trying to use CPAC is that they've been trying to use it as a replacement for the public sector development program The Pakistani state is supposed to use this public sector development program to actually fund development schemes a Lot of the projects that have been that have been pitched to the Chinese lack any commercial You know logic at all So a lot of these projects are have to do with water supply, you know sanitation, etc So what the Chinese have actually finally done is that they have airmarked a billion dollars for socioeconomic projects I'll leave it there Won't finish the conclusion then we can go to question and answers. Yeah, extremely interesting Yes, questions contributions Yes over here at the front and then So we talked about sustainability in terms of in CPAC Does the Pakistani state recognize the Yeah, great the implications on the environment that the coal development has because Developing a such a vast industry in coal and then also being a part of Advocating like also having a lot of environmental crises. Like how does that play into each other, right? And then up there Hello, thank you for the presentation I work on similar issues in Cambodia Myanmar, which are countries that are you know Sort of defined as China's client states or where China especially in the context of the Belt and Road decides everything Or at least that's the current narrative and here I think you spoke of a bit of a mixed picture from lobbying from local business people from engagement with the government but also for example the lack of regulations on JVs or the lack of Other potential or the use of Chinese standards in these projects for example So what's your view specifically on this matter on the sort of agency in the relation with China? Thank you for the presentation. It was really detailed and really nice My question is about methodology. I think you touched it in like one line and you said that we can talk about it later And then at the end you talked about lack of clarity on policy Don't you think it's all one of the reasons it could be because there is not much public Documents or information available on CPAC And also, do you think because of BRI and how it's gonna be linked up? Do you think there's gonna be more public information available on CPAC and last question How did you get those documents like as a researcher? Thank you Here thank you very much for the presentation You said they just spent nine to ten months on the CPAC projects That would be really kind of you if you could just highlight any labor issues that Chinese labor is actually facing in Pakistan and any kind of Cooperation they are getting from the Chinese laws So sustainability is is a major issue it had not featured initially in the discourse And there are a couple of reasons for it Number one was the crippling power shortage So the idea was that you know, this was the cheapest and the easiest way to actually get capacity going For example, one of the power plants that I showed you is in the in the agricultural heartland of Punjab And there's a lot of you and cry about what the implications are for the environment in the long run However, if you talk to a lot of the Chinese firms what they say is that they followed World Bank Protocols as far as you know ensuring that they meet all of the safety standards For coal generation are concerned and if you look talk to Pakistani Policy makers, they're very candid about it They say, you know, we cannot afford at the moment the kind of problems that we had in 2013 We cannot or we could not afford to wait for five years for hydro capacity to actually come online So this was the easiest solution But you're right that these problems are emergent in tar on the other hand because there's a marginalized community as far as tar is concerned So the voice of that community hasn't really been heard in the same way in tar Because it's a desert So and coal is water intensive. So in order for that mine that I showed you there are 24 There are six or seven large pumps that are extracting water 24-7 just to make sure that the mine does not collapse. So what does that do to do the aquifier? So these are all questions that are going to probably come to the fore as You know, this sort of progresses but as far as the company is concerned They say that they've done all of the due diligence as far as companies are concerned and the depth at which they're extracting water Doesn't really affect the water table as far as people use it on the Cambodia man mar and agency but that's that's the interesting bit actually so for me The railway project was the most interesting thing that I studied because on the one hand most of the literature actually shows You know, the Chinese come in they put the money the railroad everyone And you know, they basically get things done. But here was a project which was strategically important That's something that they they say openly, you know, it's it's public news and yet it's been three years They're still under negotiation. They're not the project hasn't been built. So what's what's the story over there? and by you know, sort of my contention is that there's a Two there are two aspects to the story one is local agency because these actors who negotiate on the behalf of the recipient governments They're not powerless. So these state-enabled actors as I call them. They're not powerless. They actually have The capacity to actually negotiate with with the larger power and the Chinese are receptive to to some of the things They're of course not receptive to everything you say as as a host government But they're receptive to some of the points for example After these initial power plants that the host government said, you know, we want local Sourcing to be a part of the project. They're like, okay, you know If if those firms meet our requirements, we can go up to like 30% of the total contract EPC contract The second, you know sort of manifestation of agency is through the local political economy because a lot of the discourse around the Belt and Road Initiative and on CPEC in particular discounts the local political economy Which is not the case because there are some extremely strong organizational interests that are linked as far as the transportation sector are concerned You know both in the private sector as well as in the public sector. So Making sure that you can get these projects off the ground without antagonizing these Interests and coming to a rent sharing agreement, you know in the rent not in the sort of corruption rent But rent sharing agreement in terms of the EPC contract for example Is something that Chinese firms will probably have to do It's probably going to be the same case in Myanmar and Cambodia as well But that's that's the two-faced, you know, sort of manifestation of local agency that one finds in a lot of these projects Methodology so methodologically I went for a lot of it as I said elite interviews So in-depth interviews with people who were actually involved in the negotiation process with firms that were a part of This early stage of CPEC with policymakers, especially Politicians who were involved in a lot of these negotiations So that's the way that I you know sort of do did it and it was open-ended interviews Basically, you know just trying to get as much information about this particular project Depending on who the person is for example when I went to Thur I'll talk to a lot of the company executives about where the project was where it's moving You know how it's it's gone off the ground how the EPC contractor was was selected, you know those sort of things as far as The lack of information is concerned. Yes There is a lack of information and I think the Chinese Embassy is now trying to you know There was a report today as well that the Chinese Embassy is now trying to you know sort of deal with a lot of these issues What they've done most interestingly is that You know back in Early 2000s no one knew the name of the Chinese ambassador in Pakistan right everyone knew the name of the US ambassador Things have flipped so quickly Everyone knows the name of the Chinese ambassador in Pakistan. No one knows I don't know the name of the American ambassador So that just shows you the importance Of the Chinese and what they've been very good at doing is this whole projection of soft power the media outreach of The Chinese or the last couple of years has been substantial, you know, they've developed their own You know sort of areas of patronage within the media as well. There's a whole discourse around it on Twitter There's this one Fascinating character his name was Li Jianchao. I don't know if you guys know him or not Li Jianchao was the deputy head of mission in the Chinese Embassy prolific on Twitter and He would take American, you know sort of policy people on Twitter head on and he's now gone back to China now and he's head of PR or something of that sort in the Ministry of Foreign Affairs now every ambassador Chinese ambassador in various parts of the world is on Twitter, you know Sort of getting the message across, you know, their own narrative across so that's that's the kind of change that I've seen As far as, you know, creating a public discourse is concerned Getting the information That was tough. I mean the nine ten months going again and again and again So one has to be extremely persistent as far as you know, these things are concerned Labor issues as far as Chinese labor you particularly asked about Chinese labor So in the case of Sahiwal because it had to be built in 22 months Chinese laborers Basically had no place to stay You know, they had basically lived in containers the kind of food they had was local The the areas that they lived in were extremely rudimentary But I haven't really come across any indication if that's what you're asking that there were prisoners or anything of that sort It wasn't I at least have not come across any evidence at all That the Chinese labor in a lot of these camps were prisoners. They were Employees of the Chinese state owned enterprises or the EPC contractors that actually built these projects There was a lot of talk about these LNG plants as well that you know, this there's There's prisoner labor that's been used. I have no indication of that sort Okay So one at the back And Hi, I did my PhD on the third coal project and just I So these these are perhaps more comments then But I obviously Didn't interact with the Chinese I spent quite a lot of time within the communities and and I One of the so the charcoal wasn't see peck then it became see peck when I was there and I left But one of the things I found was when it became see peck it became very securitized the Pakistan army came the Chinese engineers when they would go or they would be military convoys and What the Chinese were I mean it'd be interesting to find out from you is of course you have the this continual Hindu Muslim tension in Pakistan the communal tension which Mr. Modi is now trying to exploit, but I mean the tension is there. Well, whatever Modi is doing in India is Comes from that doesn't come from a vacuum there. There's Hindu Muslim tension in particular in Southern sin I mean are the Chinese aware of this? I mean as they plan because they are obviously As I was leaving the Chinese influence you started to see Chinese In in these very securitized fortified places Are they aware of the the sort of terrain that they're coming to in terms of for example the Hindu Muslim tensions in Pakistan the communal politics The marginal status of Tabarkar You know and generally with extractive industry locals don't really Benefit from it, you know, they just don't have the technical skills to be honest to be So that so I was just more more of the question was what what are the Chinese and that that would probably apply for Balochistan as well Right. Thank you Hello My questions on if so you mentioned the power station that was built in 22 months, which is not just for Pakistan That's incredibly quick So my and presumably it was cheap because the Chinese have funded it So if it's obviously in their interest to make it cheap So my question is has there been any kind of safety assessment either independently or Nationally by the Pakistani government because there could be an accident where it explodes And also taking to account what you said about the labor the quality of the labor that was there building these works Yeah, and also it's key infrastructure. I mean, so there's the economic aspects and the pure safety aspect Just at the front Do you sense that at the bottom line? It's there's been a failure in the part of Pakistan to be on top of the game and the second It's you is it's disappointing that there hasn't been any technology fallout given that it's a It's a problem that China well understands and has always been pretty much on top Okay, and then okay Thank you in the next round There has been a discourse that All these agreements were hastily made Lack of due diligence Lack of taking provincial interest into harmony One wonders what could have been done differently To address these objections because if a major rather substantial Portion of investment is going into go other It is not an economic project. So it is bringing a major share to Balochistan so Do you think that they were alternates available at that time or now? Which could have Addressed such objections or there are just part of political contestation Okay, yeah, sorry, we'll take you in the new so on on the sudden sin and and the Hindu Muslim question I would humbly beg to disagree a little bit because third is one of those parts of Pakistan where you actually had better Communal harmony as compared to many other places So if you look at the social fabric of third, there wasn't the same sort of problems, you know as far as communal tensions concern That's probably going to change and the reason for that is that there's going to be lots and lots of people who're going to come in From outside we're going to change the fabric of the way that her is actually Structured so it's going to change the way that that it's already changed the value of land The value of land was completely different because you know, you had best totalist communities which would sort of moved around Now with with such massive amounts of money coming in the value of land is completely changed The way of life of a lot of these people has actually changed So when I was in her engross developed this this new society with paved roads For people who were affected by the the mind that I showed you earlier and that was very different from the kind of Living that that I mean it was brick houses I'm not don't get me wrong But it was very different from the kind of houses where local people actually live So there is going to be a change in the way that people's lives actually are structured I don't think the Chinese care about that Why would they care about that? It's a local government that actually has to care about that No one from outside that they're to make money. It's a transactional, you know, sort of a relationship Parking those three is on one side, but it's a transactional relationship So it's the local government that actually has to ensure that it meets whatever requirements there are off of the local people and The way that it was structured. I mean because you were there initially At least blocked to when I'm only talking about blocked to at the moment Was that they wanted to make sure that local people were a part of the way that it it evolved, right? Shamsuddin Sheikh at least initially, you know came to the media and you know So I said, you know locals have to be a part of that and they've done all of these corporate social responsibility 2% of the revenue has to go towards Local people, you know, we're training local people to actually become drivers, etc. etc. So they're trying to do that But at the end of the truth is that it's a marginalized part of the country It's a marginalized part of the population both Muslim and Hindu I don't think if you put the communal side to angle to one side as well There is going to be a massive change as far as their life is concerned on the security with that That's a very interesting point that you that you raise because one of the problems that Chinese face is That they're not able to move around freely in the country, right? So the people that I talked to basically moved around with What's that called the special security force that they've developed with those guys with them And that's a major problem. So basically the way what they say is that, you know, it's almost like we're in prison It's not our idea of fun. It's not a holiday for us. It's not our ideal posting, right? So that's one of the concerns and and going forward if you want to get in You know private investment into the country. That's that's Going to be a problem. How do you ensure that these people actually have a standard of living on the safety assessment? So maybe it came out wrongly But a lot of the labor that these Chinese companies brought in the skilled labor So that's the problem that they had so initially because they wanted to build these power plants quickly They brought a lot of skilled labor over from China So the cost of skilled labor for the cost of Chinese labor across the board is going to be higher as compared to Pakistani labor So that's one of the reasons that they had to bring in a lot of people The living the living conditions initially when they initially when they were when they were doing because they did a survey of The project as well So they they they did have all of these issues as far as living conditions are concerned But the Pakistani government at the end of the day whenever a plant comes online There is an assessment that goes through how rigorous that assessment is I can't answer that question But this is an assessment that actually goes in They also have third-party inspectors come in and look at those facilities as well And of course the Chinese have experience of building infrastructure quite quickly But you're right to say that 22 months is insane building something in 22 months or 13 20 megawatt power plant is no joke Balochistan and And the Chinese The Chinese dimension they understand it And there's been some sort of moves to to make sure that the Baloch feel that they're a part of the process as well For example, the Chinese Embassy Tooks Baloch notables all the way to Beijing. They went to a number of cities as well So there's that sort of you know, sort of Reprochement that's going on between the Chinese and and and the Baloch And Through the JCC and those sort of things. There's there's an ongoing, you know, sort of dialogue at least on the face of it between The local Baloch politicians and the Chinese company. So before this Gavada used to be with the port Singapore, you know, the the Singaporean Port Authority And basically it was more a bunch. So the Chinese say, you know, we we poured all of this money and We are trying to, you know, sort of develop the local economy We're trying to make sure that local Baloch youth have employment. So all of the so, you know, the optics as I said, you know The optics around it is extremely important. So they're trying to deal with that and do understand the security problems, of course I mean, they're not a worst to it. The Pakistani state So what they did was that in order to protect a lot of these projects at least in the Punjab and in KPK What they did was there is a division of the Pakistan army. So it's called the specials Protection group SPD or something of that sort and it's headed by a major general So now what they're doing is that because there's going to be more activity probably towards the south of the country There's going to be another division that's going to be raised. So that's the way that they're trying to deal with this security So it's around 10,000 odd people With 5,000, 6,000 soldiers, 4,000 police Personnel, so that's the way that they're trying to deal with the security problem Failure to get on the top of things Yes and no so again if one thinks about the kind of politics in Pakistan from 2014 all the way through to 2018 and the kind of pressures that the elected government was going through It's amazing that they actually got this done I Do think that had the pressures been lesser from other sources Probably it would have been At least in the Punjab, so I'm there's a caveat attached at least in the Punjab. They would have done more Because they wanted to you know, so the Punjab is the only place for example Where Chinese firms private firms have actually invested around 40 odd billion dollars or 40 odd billion rupees? Sorry in setting up industries in Faisalabad. So at least till Punjab they would have been able to do much more The problem is structural so the things that I was talking about about FDI about you know transfer of technology those sort of things this structural the Pakistani state be it The political class the military whoever is in power It's not it's not a part of their decision calculus because it doesn't matter politically for them Transfer of technology is important when you think about it in terms of you know sort of a state a developmental state for example South Korea or even Cambodia to that extent to to to some extent But in in the Pakistani state, it's only the discourse because the underlying institutional structure, which is Giving 100% equities take to a foreign investor. It hasn't changed. It was the same under the PPP's government. It was the same under PMLN's government. It was the same under Musharraf's government and Lo and behold, it's the same under PTI. So it's just that you know, there's there's no there's no returns to to actually having this sort of a policy So due diligence and whether this these things have been hasty On the power side of it The PMLN came in government on the promise of actually dealing with the power shortage. They're dead with it You know as far as CPEC is concerned about corruption and those sort of things Chinese investments. See at the end of the day these these They're a part of so for example Alice Wells. I went to Washington to that That conference where she actually said that you know CPEC is a debt trap etc etc etc See at the end of the day the Pakistani state had no choice They there is there is very there are no people aren't really queuing up to invest in Pakistan So this is the the the best of I mean if you want to put it that way This is the best of a lot of bad bad choices that you had And then as I said the Pakistani state You know is is very powerful in certain things But many other things it doesn't really have the sort of state capacity that it that is required for Effecting, you know structural change in the economy or those sort of things So, you know, it's this is the only choice that they actually had So we've got you and then oh, you've got the mic. Okay Okay, thanks I've been listening correctly. I think you've been portraying as a bit of a contrast between the very rapid investment in energy Which was a domestic? Political priority if I've understood you and a much slower move on the road and rail infrastructure Is that primarily because You you had the ability to leverage attract the state-owned enterprise investment into Energy and there's not an equivalent mechanism in roads or is it there's extra security challenges around roads? I just wondered if you could shed a bit more light on that sort of contrast Thanks for your great presentations. I just to have very simple questions for you that I'm just wondering that what's the attitude for just like because as I as well, I know that Just like people are just like China Chinese government also put great Importance and like by lectures relationship with it will have very good relationship Just like friendship everything, but I would just wonder it. What's the change? before after the SIPAC I mean the ordinary people ordinary Pakistanis and because I I think I guess that maybe the ordinary people or Government officials or LA's or just like Damia's have different Attitudes towards the SIPAC So I want I just want to know what's the difference between the after Before or after the SIPAC carried out in Pakistan Because as a father I know and you just did your fieldwork more than ten months in Pakistan Yeah, this is my question and another one there that so I know that there are a lot of maybe Just like challenges ahead of us But do you have any kind of predictions for the for the SIPAC? And all you also just mentioned that Yes, the lack of the local participation That's I guess. That's also really a problem So to have any proposals for that's how to deal with that's problem of lacking of the local participation For the SIPAC. Thank you Related to the first question I Assume that the Chinese government must have a huge interest in the roads and the railway is starting to work because that's how How the economic benefit is going to be created? So is there a shift in the pressure that the Chinese government is exercising on? Pakistani officials to actually get the the railroad railroads and roads created Thanks, thanks very much and you mentioned the socio-economic Fund I think and that's coming to being I think partly in response to Some critique so I was wondering if you could say a little bit more about what that's For and how it's being spent also. I understood that the sort of the broader belt and Roads initiative has a cultural strand to it. So You say So I wondered is the one to this element and if so, what is it and yeah, what are its pros and cons? And then lastly you mentioned that there's very little interest in from the Chinese perspective. I think you said to deal with the Implicit the this huge change that's going to happen to life as a result of the the power and road Developments and that's seen as the responsibility of local government And if that's the case and what are they doing to prepare and support that change to be a positive change Seeing as they seem presumed if they want to change and that's why it's happening. Thank you Thanks So we take a last sort of two or three two or three questions my question is Do you see the possibility of? Pakistani people or except the you mentioned a SP era and Do you think it's possible for Pakistani to accept the model of SP development in China or can China transport the model SP development in Pakistan and The second question is you mentioned the lack of local Participation right and do you think language please or role in this problem? You mentioned Alice Wells just taking the discussion sort of Slightly above the what's actually the action on the ground I mean sort of the the US or the the wider sort of perceptions or view Geostrategic aspects of CPEC. I mean what what would be the I suppose the mechanism because at the moment It's very much. Okay. Look. This is a debt trap, you know sort of caveat emptor be warned but I Mean behind the scenes whatever what would be the mechanism if for instance, there were serious serious geopolitical kind of considerations that Like the US Could employ to affect change in the way CPEC is currently structured or organized But just if you could comment on that Anyone else those are all excellent questions Including remarks you want to make The the the other one is I guess with what's happened since the 5th of August and there's a there's a bit of a Shift in the sort of narrative on the Indian side that look we're talking about pack occupied Kashmir and Kind of a lot of infrastructure being developed here So what do you see as having changed as a result of that change on this side? That does that make sense? So I'll start off with the last one first So behind the scenes, you know, there's a lot going on of course with Afghanistan So this is not my area of expertise or whatever I'm going to say is going to be a layman's laypersons View but there's a lot that's going on behind the scene, you know, the US Pakistan reproach ma and Especially over Afghanistan and all and then Alice Wells which is what is what is most interesting about Alice Wells Is that she said it in Washington and then she said it in Islam as well and in the the statement that she made in Washington the response from the Pakistanis was quite swift What she said in Islam but the response actually came from the Chinese embassy first and that was followed by the the Pakistani So that that that's actually interesting for me when I look at it for as a student of Pakistan-China relations I Frankly speaking, I don't think that the US is going to have a major problem as far as these These things are concerned because at the end of the day the idea would be that there's some sort of stability as far as the economy is Concerned especially if the second phase, you know sort of goes through or a half cook Goes through one of the things that I didn't talk about was the China Pakistan free trade agreement part two. It's just you know sort of been negotiated and come in on in force and The Chinese are actually giving tariff free access to a lot of Pakistani products which before this had Substantial tariffs so that can you know sort of start kickstart this process of exports and you know industrial development of that sort No, it's it's manufacturing as well. So so if there's a new study, that's just come out So some of the products that Pakistan exports, I mean, it's not like Pakistan is very much of a vast export basket But some of the manufacturers especially textiles where before you couldn't compete with places like Bangladesh now The tariff levels have been brought down that you can actually compete with with Bangladesh And I do think that you know, there are Chinese firms that are going to relocate to Pakistan Probably not to the extent that the Pakistani would like it to happen But there is going to be some sort of relocation just because of the fact that the Pakistani Market is substantial and the cost of manufacturing for export Industries is lower as well So I think that the posturing is going to go for through in the larger, you know sort of schema of the Belt and Road Initiative And on CPAC and there's going to be these statements from Washington But I don't think that the Washington is going to be very bothered about You know the way things are moving They might be bothered if things move too much towards that side But see at the end of the day the Pakistani elite still speak English They still go to British or US universities The Pakistani armed forces frankly speaking would still want to go to Sandhurst or to the US for training as opposed to you know going to PLA Facilities in China. They would still want to buy US weaponry. So, you know when one looks at it in that sort of a Scenario then I don't think that it's going to be there's going to be posturing in the broader You know sort of Belt and Road Initiative. I don't think it's going to be massive On the Pakistan occupied Kashmir and that's very interesting. So one of the books that's just come out is Siegfried Wolfi's based in Berlin And he says that a lot of the infrastructure that is being built on in Gilgit Baltistan is actually illegal Because this is not Pakistan. This is actually land which is disputed Again, I mean if better sense prevails I don't think that there's going to be a massive you know sort of change as far as India is going to continue to oppose the building of this Of the infrastructure if some things go south in a major way then there might be you know sort of the Dispector of conflict, but I don't really think that they're going to go south majorly If there's a protracted slowdown in India, you know with the kind of things that are going on maybe But I don't really see that beyond you know skirmishes on in terms of words. I don't think it's going to go further than that Social economic culture actually I'll come to culture first because that's actually interesting What's interesting is that China has 20,000 they've given scholarships 20,000 Pakistani students to now study in Chinese universities So these students so it's almost like an evening or a full bright program that the Chinese are now sponsoring These 20,000 people now know Chinese of course because you can't live in China without really speaking Chinese They have a better understanding of the culture of the cultural nuances of China And despite these you know sort of things about Pakistan China being very close Culturally they've not really understood each other very well Similarly in terms of education there's going to be further expansion There's going to be expansion in terms of technical and vocational education There's going to be expansion in terms of China investing or giving grants to NGOs to develop education hospitals Those sort of things in agriculture as well so it's quite wide-ranging this one billion dollar socio-economic funding that they want to do Whether it makes sense in the long run for a country like Pakistan which has had massive injections of this sort of Funding before is another story altogether because I don't think that having these sort of handouts does anything positive for the productive side of the economy Because it creates a lot of perverse incentives on the other side as well Life-changing as far as these power projects are concerned So there are two sides of this so this this in third at least this company which is which is developing one of the blocks that I showed you the one that I visited So they have all of these health projects. They have vocational training institutes as well They have education and they're trying to improve water supply for a lot of these people as well They've built houses as I said for these people trying to ensure that they're in sync with their cultural nuances But their life is going to change because these are semi-nomadic pastoralist sort of communities Who moved from one place to the other depending on length Free movement is going to be a problem because now you have these massive power plants coming You can't really sort of have your camels out of your course and take them to the power plants Environmentally water-wise how things evolve that remains to be seen but at least in terms of some sort of an action Which is probably better than what's happened in many other places there is some sort of action over there Okay in terms of the huge interest in the road and rail network yes there is There is substantial interest the Chinese want it done there's a macroeconomic picture as well because Pakistan has substantial balance of payment So we've gone back Pakistan's gone back to the IMF for the 13th time in the last I don't know 20 odd years So there's that aspect as well. It's not only the local political economy. It's about if you take on these loans The IMF has reservations of whether you can take on these loans on your balance sheet and the Chinese have been very clear If you look at some of the documents the Chinese have been very clear that they do not want to fund these projects Because for them the returns don't make sense So that's one aspect of it. The second it was easier in power because you made money out of it right So if you did even if it's delayed you're going to make some money out of it And I do think there's this discourse about how there's no due diligence the Chinese aren't going to make money out of it These Chinese state-owned enterprises as well as the Pakistani partners are going to make it's going to be delayed And it's going to be problematic as we've seen in the case of Pakistan's power industry But they are going to make returns Once Pakistan exits from the IMF program or near exit as the political compulsions for the government increase We will probably see a spurt in terms of infrastructure funding But at the moment you know the macroeconomic picture doesn't really allow it as well On the bilateral relationship and how ordinary Pakistanis actually perceive China As I said closer it's only now that there's a lot of or there are lots of Chinese people who are now coming to Pakistan So it's the first sort of major cultural sort of interaction that's taking place between people in the two countries And there are problems right for example in a lot of these power plants the engineers are all Pakistanis The Chinese way of working is very very different from the way that Pakistanis are trained or Pakistani engineers are trained So getting in sync with the way that their work is proving to be problematic But because they've now spent two three years working for these firms So now you know they're more comfortable in working with a lot of these state-owned enterprises On the ground there is still positive sentiment but there are as two communities have or two people interact There are of course going to be problems so in 2019 there was this whole scandal of Pakistani brides for sale in China And that's created this negative sort of a perception But overwhelmingly you know if you talk to people there is still the notion is that China is the only friend that Pakistan has had You know they've stood with us through thick and thin that's the notion that people have The elite is a different story The elite as I said earlier as well is more western oriented and if you talk to a lot of people You know the perception of the elite about Chinese or Chinese investment is probably more negative as compared to the perception on the ground So the elite is a different story as far as Pakistanis are concerned Predictions as far as local participation I think it's going to increase especially if as I said industries relocate It makes business sense to have local labor right You know what sort of long-term positive dividends that has for the Pakistani economy remains to be seen Because in terms of developing linkages with the local economy You know there are questions about whether that can happen without an activist state and as I said earlier Pakistan does not have an activist state So ensuring that you do not have islands of efficiency in industry is going to be important And I've already answered the real infrastructure just the final point on Gawadar actually Gawadar is interesting Because Gawadar when I went to Gawadar in April 2019 It was basically the port was operational there was nothing apart from the port there was nothing in Gawadar Over the last seven to eight months what's happened is that you have the infrastructure the road infrastructure is now being built The power plant which will supply Gawadar city is now being built The master plan which is which has been designed by China communications company corporation company something CCCC has been almost approved The work on the new Gawadar international airport is is ongoing is probably going to be completed in the next couple of years So you have all the trappings of an international city which which can emerge as an enclave economy and that's the danger So if you have this enclave economy and by the way new Gawadar international airport is going to be the largest airport in Pakistan So you have all the trappings of an enclave economy and how you take advantage of these opportunities remains to be seen because it is an opportunity But you have all the trappings of an enclave economy being developed being developed right in front of us So if the Chinese are intelligent Chinese are extremely intelligent they would actively try and ensure that that sort of a perception does not become reality Or that doesn't even or that perception is actively countered because that's extremely problematic as far as Balochistan political economy is concerned But the wider political economy in Pakistan is concerned as well Join me in thanking time Next week's seminar is techno humanitarianism rethinking the securitization and victimization of refugees with Martina Tatsioli from Goldsmiths So join us next week and also everyone's warmly welcome to a reception upstairs in the senior common room Thank you