The way the China-Pakistan Economic Corridor (CPEC) is progressing is certainly going to end up hurting Pakistan. This is not something we are saying, but the opinion of Pakistan's Federal Board of Revenue (FBR), Pakistan media reports have said. The FBR believes CPEC could well end up destroying Pakistani industry, and take away any incentive for Chinese companies to manufacture in Pakistan.
This round of rising discord within the Pakistani government over the CPEC's negatives outweighing the positives comes as Islamabad removed import tariffs on about 6000 items from China. These 6000 items are part of list of about 7200 articles that are also manufactured in Pakistan.
The waiver on import duties came as part of the second phase of the Free Trade Agreement between China and Pakistan. Maintaining the opacity that has characterised CPEC so far, even governmental organisations like FBR and Pakistan's Board of Investment (BOI) were not informed of the contents of the FTA that has been put in place, major Pakistani dailies Dawn and The Express Tribune have reported.
Officials from the FBR and BOI anonymously expressed alarm to these newspapers, saying the removal of import tariffs would make it completely unnecessary for China to manufacture these items in Pakistan, and that Chinese companies would rather save on the cost of setting up factories and import them anyway. Chinese investments in special SEZ set up along the CPEC route have so far been advertised as a key component of the project, one that would provide employment for local Pakistanis.
Another major concern that the officials expressed was that the move could flood the market with cheap Chinese goods, driving Pakistani manufacturers who make those 6000 items out of businesses in no time. Even if some of them did survive, they just couldn't work up the cost advantage to export anything of significant value to China, the officials said.
After years of blindly praising CPEC as a mutually beneficial project that would raise Pakistan to great riches, there are now a rising number of voices questioning the whole deal. Concerns have focused on a whole range of issues with CPEC, from the opacity surrounding the terms of agreement between the two countries, to the use of Chinese workers instead of Pakistani ones, to the lopsided revenue-sharing from Gwadar Port, and the terms of control of infrastructure projects, among numerous others.
China has also done its fair bit of arm twisting to keep the Pakistanis from airing negative views in public. CPEC is presently the only fully functional part of Chinese President Xi Jinping's ambitious Belt and Road Initiative (BRI), and any discordant notes over it could lead to more troubles for China in other countries.