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Belt and Road

Pakistan's Khan uses special ordinance to push China's Belt and Road

Powerful new agency and tax holiday for Gwadar port operator likely to fuel controversy

Pakistan's Prime Minister Imran Khan, left, and Chinese Premier Li Keqiang meet in Beijing on Oct. 8. The Pakistani government's decision to set up an agency to push Belt and Road came on the eve of Khan's visit.   © Reuters

QUETTA, Pakistan -- Pakistan's government, led by Prime Minister Imran Khan, has bypassed the legislature and used presidential ordinances to establish a powerful new authority to accelerate the major Belt and Road project known as the China-Pakistan Economic Corridor. The government has also provided a 23-year tax exemption to the Chinese company operating Gwadar port, one of the key facilities in the project. 

These decisions by the government are likely to make CPEC more controversial because Pakistan's opposition parties have rejected them.

The CPEC Authority would be empowered to make decisions about CPEC projects all over the country, overriding the authority of the provincial governments. In the past Chinese officials have repeatedly complained about bureaucratic red tape in Pakistan stalling progress of CPEC projects. The creation of the CPEC authority will act as a one-window operation to avoid red tape.

The 23-year tax holiday for Chinese Overseas Port Holding Company and other Chinese companies is meant to provide an incentive to continue working in Gwadar. In the agreement, COPHC will get 91% and the government of Pakistan will get 9% of profits from the operations of Gwadar port. The decision to grant a 23-year tax holiday means the federal government of Pakistan has given up tax revenue from operations at Gwadar port. 

Pakistan's leading opposition parties, the Pakistan Muslim League-Nawaz and the Pakistan People's Party, rejected outright the government's decision, calling the moves illegal, and in violation of parliament. 

Ahsan Iqbal, a former federal minister, told the media that the CPEC authority was set up using backdoor legislation and that is why his party would not accept it. He alleged that side-stepping parliament and implementing its authority through an ordinance was an intentional effort to make CPEC controversial.

Iqbal was the man behind CPEC in the last government and the biggest defender of the project. He was called a "Hero of CPEC" by a Chinese ambassador. But now, after the formation of the CPEC authority through a presidential ordinance, he has become a critic of the government's approach to CPEC. This hints that the government's two CPEC related moves have backfired.

Pakistani and Chinese national flags flutter next to an installation featuring a giant flower basket at Tiananmen Square in Beijing on Oct. 7.   © Reuters

Senator Mir Kabeer Ahmed Muhammad Shahi is a member of the Senate special committee on CPEC. He told the Nikkei Asian Review that forming the CPEC authority was discussed in a Senate special committee on CPEC and the members opposed the idea. Later the government formed the authority using an ordinance bypassing the Senate.

Senator Kabir, from Balochistan, alleged that the formation of the CPEC authority is an attempt by Islamabad to snatch power and control over resources from the provinces. "CPEC was already controversial and this move has made it more controversial," he said.

Malik Siraj Akbar, a Balochistan analyst based in Washington, D.C., believes the moves are an attempt by the government to discredit the former ruling party PML-N, which signed the CPEC agreement with China. "The PTI government's move to act unilaterally without taking other stakeholders onboard would exactly [discredit PML-N government]," he told Nikkei.

The sudden decision to issue two presidential ordinances was announced on the eve of Prime Minister Khan's visit to Beijing. The analysts see these moves as desperate attempts by the government of Pakistan to compensate for slowing down CPEC projects during the last year.

Michael Kugelman, Deputy Director of Asia Programs at the Wilson Center, believes that at the moment CPEC has lost some momentum, owing to mounting concerns in Pakistan about the debt risks of the project. "Islamabad has a very strong incentive to signal Beijing that it's still committed to CPEC and what better can be to announce two new measures on CPEC that benefit CPEC in a very big way," he told the Nikkei Asian Review.

Akbar believes the initial idea was that the bulk of challenges to CPEC would come on the security front, but now it seems that a lack of experience, ineffective project management and an inefficient approach within the PTI government is slowing down the work on CPEC.

He believes the creation of the CPEC authority is meant to compensate for the PTI government's ineffective approach toward CPEC so far. "These decisions will serve the purposes of the Chinese as well, because they find the democratic process too slow and frustrating in the way of getting things done in Pakistan," he said.

In the past, CPEC has been subject to criticism largely due to a lack of transparency surrounding the content of its agreements. The complete text of the CPEC agreements has still not been made public despite demands by the media, citizens and politicians.

Kugelman believes that sidelining parliament to create the CPEC authority is unfortunate but not at all surprising. "To this point, much about CPEC has been opaque with little public debate about what's going on, and these latest moves are a continuation of the same policy," he said. He added that the use of ordinances, which bypass public and parliamentary debate, is sure to sharpen the grievances of CPEC critics who believe there is something unequal and unfair about the project.

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