China’s growing interest in Pakistan is boon or bane is a question that has to be answered by the political and financial experts sooner or later. In its final review of the recently concluded three-year extended facility programme, a report of the International Monetary Fund has warned Islamabad of the repayment obligations which are entailed with the Chinese investment and could have serious repercussions in days to come. The report says that there could be surge in the inflow of foreign funding into the country, including the foreign direct investment after the completion of the China Pakistan Economic Corridor project. The imports related to the project could reach $5.7 billion by 2020. The country will be in need of $17.5 billion gross external financing from a projected $11billion for the current fiscal year. According to the report, Pakistan will look for heavy financing for the projects under CPEC in the next few years, but the repayment obligations of the Chinese banks loans are also expected to rise. The repayments and profit repatriation could reach nearly 0.4 percent of the gross domestic product per year in the long run and the gross external financing needs of the country will jump to almost 60 percent in 2020.
Meanwhile, a Chinese delegations has expressed its desire to invest $3 billion in infrastructure development, energy and communication sectors. They potential Chinese investors are also willing to explore new business opportunities in Pakistan and are seeking the government permission to launch a new airline while a consortium of Chinese companies is already pursuing investment in aviation and tourism sectors. On the ease of doing business index, Pakistan has improved its ranking due to investment-friendly policies and conducive business environment to attract foreign direct investment. The government has designed a framework to provide comprehensive facilities to potential investors. But the basic point is that all the hopes should not be pinned on the Chinese investment. China is a trusted friend, but there are limits in the international diplomacy and breaking the red line from any side will bring troubles. The foreign investors want protection of their money and properties and attractive tax concessions. Despite improvement in the ranking of ease of doing business, Pakistan still lags behind India by many points. The European investors prefer India over Pakistan due to the reasons that it has a vast market with better tax concessions.
The economic corridor can change the lot of this nation if investment friendly policies are adopted and protection is given to the local and foreign investors. The prime minister and his team will also have to adopt proactive policies to affectively deal with the emerging situation.
