As an "all-weather friend" of Pakistan, China must ensure that the infrastructure projects it supports in that country are not unviable and that they should contribute to the long-term growth -- and not bankruptcy -- of the country, the News International said Wednesday in an article.
The article by Abid Hasan, a former operations advisor at the World Bank, welcomed China's promise of tens of billions of dollars in aid for infrastructure building in Pakistan, but noted that if this aid was implemented in a "business as usual" manner, China's reputation in Pakistan could face huge risks.
"The people of Pakistan view China as their best friend. This friendship has stood the test of time and emerged stronger through many challenges. However, experience shows that bad decisions at critical moments can end up damaging even the best relationship," Hasan said.
"A white elephant, or (a) corruption-ridden mega project will be an eyesore for decades. China must avoid this... to protect its reputation as an all-weather friend of the people of Pakistan," he wrote.
He warned that as "Pakistan's best friend with long-term strategic interests", China can ill-afford a Sri Lanka-like situation, in which Chinese-financed and -constructed mega-projects came under a great deal of criticism for unusually high costs and lack of transparency.
Hasan conceded that it was primarily the responsibility of the Pakistani government to ensure that each project proposed for Chinese financing was subject to rigorous "due diligence" from the earliest stage.
"However, in today's Pakistan this will not happen, given the weak institutional capacity and politicisation of decision-making. Therefore, China will have to shoulder most of this responsibility, as a friend of the people of Pakistan," Hasan noted.
"...It is essential that any project that China finances has high economic priority, is fully justified on economic and technical grounds, and will contribute to Pakistan's long-term growth," the article said, adding that "China needs to realise that rigorous institutional decision-making, especially when it comes to development projects, is virtually absent in Pakistan".
"Pakistan is ruled by 'friends and family' groups, and mega-projects are their 'instrument of choice' to make big bucks," Hasan observed.
Therefore, according to him, "China must assure itself that each project is selected through a rigorous and sound process, and not because it is the pet idea of the leadership or 'friends and family', which may or may not be in Pakistan's long-term interest".
The article urged China to avoid financing over-sized projects and ensure that loan servicing and operational and maintenance (O&M) costs of such projects were affordable and would not haunt Pakistan for decades to come.
"Many of the 'unneeded and uneconomic' proposed projects (for example, the Orange Line, rail to Muzaffarabad, etc) will be unaffordable to operate and maintain without large public subsidies, and will eventually run into disrepair and obsolescence," it said.
Hasan called on China to apply to each project the same kind of rigorous technical, economic, institutional, environmental and social evaluation as it did to its own development programmes, or as any other donor committing huge sums of money.
He noted that protracted disputes like those in the 1990s between Pakistan and foreign power producers should be avoided as such confrontation damaged Pakistan's reputation among foreign investors.
The article also puts the onus on China to "ensure that Pakistan is undertaking the necessary sector reforms that are critical to long-term sustainability of the proposed projects".
Also, "China must ensure that global best practice transparency standards are followed in procurement and implementation. It should follow President Xi Jinping's crackdown on 'princelings', and 'zero tolerance policies against corrupt practices and kickbacks' to avoid a Sri Lanka-type situation," the article said.
China must insist on avoiding corrupt practices of public institutions implementing infrastructure projects and must not be seen as aiding and abetting the "friends and family" style of governance, the article said.
"China needs to carefully review whether Pakistan (and its public agencies) will be able to service the foreign debt -- even with "soft" loan terms -- when all the revenues are in local currency."
"In this regard, the infrastructure programme to connect Gwadar (Pakistani port city) to China's northwest region of Xinjiang needs to be carefully evaluated in respect of its affordability," Hasan said.
"Some of these projects may be good strategic investments, but can Pakistan afford them at this time," he asked.
"Pakistan has many 'good and sound' infrastructure projects that need to be built and which require external financing... China should support these, but ... it must not provide financial cover for ill-conceived development projects and corrupt practices," the article noted.
"The implications for China's reputation in Pakistan are far too serious for this to be ignored," it added.
