China and Pakistan are reportedly facing some disagreements regarding the Belt and Road Initiative that has resulted in a delay in holding the annual bilateral summit of the China-Pakistan Economic Corridor (CPEC). According to Economic Times, disagreements have emerged between the two countries over the Main Line 1 (ML -1) railway project and special economic zones under the CPEC. The ML-1, worth$ $6.8 billion, is the largest project under the CPEC. Pakistan wants to borrow $6 billion that China is expected to lend in the project at a concessional rate of less than 3%. However, China is reportedly hesitant in agreeing Pakistan’s demand as it feels that the local politics in Pakistan will pose obstacles in getting returns on the investment for China.
China reluctant to accept Pakistan’s demands
The ET quoted the statement of a senior journalist from Lahore, Nasir Jamal, given to Japanese media outlet Nikkei which read, “China is reluctant to lend money for ML-1 because Pakistan has already sought debt relief to meet G-20 lending conditions and it is not in a position to give sovereign guarantees”.
“China is much more comfortable deferring payments or providing new financing than it is offering concessional rates in the first place. This approach provides Beijing with greater leverage and control even if they are willing to be very flexible at the back-end”, Adrew Small, a senior trans-Atlantic fellow with Asia program at the German Marshall Fund told Nikkei .
JCC meeting being delayed due to disagreements between the two countries
The disagreements between the two countries have been pushing the Joint Cooperation Committee (JCC) meeting that had earlier been delayed due to Covid outbreak. The JCC, that governs the CPEC, is jointly chaired by Pakistan’s minister for planning, development and special initiatives and the vice-chairman of China’s National Development and Reform Commission. The first meeting of the JCC was held in August 2013 and the last meeting was held in November 2019. The 10th meeting of the JCC scheduled to take place in December 2020 could not be held due to pandemic.
Earlier this month, Pakistan Railways had reportedly asked the Pakistani government to provide 11 billion rupees for providing security to ML-1. Pakistan is reportedly renegotiating its $6 billion extended fund facility with the International Monetary Fund (IMF) that was suspended in April last year. The program will only be resumed by the IMF if Pakistan does not take any new commercial loan. Therefore, Pakistan is seeking concessions in the ML-1 project.