CPEC impact: Growing Chinese influence may be driving Western investors away from Pakistan, say reports

High-ranking Pakistani official acknowledges that there is fear among Western investors that China could be given preferential treatment.

China continues to push for greater control over the factors surrounding its investments, and the Pakistani establishment is beginning to push back. (Picture: Hilal)

The China Pakistan Economic Corridor (CPEC) and China's ever-increasing presence seem to be putting some Western off from making investments in Pakistan, news agency Reuters has reported. A top government official has scrambled to assure Western investors that Pakistan would not give any sort of preferential treatment or concessions.

Naeem Zamindar, the chairman of Pakistan's Board of Investment (BOI), said his government expects Foreign Direct Investment (FDI) to jump about 60 percent. But persistent failure to deal with home-grown extremism, the souring of ties with the US and the rising hand of China could dampen the FDI projection.

Zamindar told Reuters in an interview that some Western investors appeared non-committal about making investments in Pakistan. He said they could be reluctant over concerns that they would not be given a level playing field. This would stem from the expectation that Pakistan would continue expanding the concessions it gives to the Chinese. 

"A perception was created that the Chinese are taking over. The fact of the matter is that this is not true." Zamindar said. "Pakistan's government is very clear about it: we want investors of all hues to come in and participate in building this economy - whether American, English or Japanese," he added.

He assured that Chinese companies would not be given preferential treatment in the second part of CPEC, which entails the setting up of a number of SEZs along the CPEC route. "That is completely non-discriminatory," he said, adding that Pakistani law does not allow for any country or company will get preferential treatment within SEZs.

However, as major Pakistani news outlets had reported on Wednesday, the Chinese may not even bother to set up factories in these SEZs. Pakistan lifted import tariffs on about 6000 items, which would make it cheaper for Chinese companies to manufacture at home and import into Pakistan.

Repeated invitations from China and Pakistan to other countries in the neighbourhood to join CPEC have so far not received an enthusiastic response. China had even gone so far as to reach out to India to ensure smooth sailing for the project. India is opposed to CPEC as it passes through Pakistan-occupied Kashmir (PoK), which New Delhi seen as illegally occupied by Islamabad.

CPEC is a critical part of Chinese President Xi Jinping's ambitious Belt and Road Initiative (BRI), considering it is at present the only operational part of the showcase project. However there are an increasing number of strains on CPEC. These range from protests over Chinese workers being used instead of locals, to rising voices from politicians about the high non-financial costs of CPEC, to questions over whether Chinese companies are operating illegally in Pakistan, to unhappiness over unfavourable terms on some of the infrastructure projects, and repeated attacks on Chinese workers.

(With inputs from Reuters)