Pakistan plans to make a partial payment of $1.4 billion in the next few days to reassure Chinese firms which have invested in the mega-billion China-Pakistan Economic Corridor (CPEC).
The Chinese firms include independent power producers (IPPs) who are protesting at the "highest government level", says Pakistani newspaper Dawn. The government owes Rs 230 billion in Pakistani currency to the Chinese power companies.
Pakistan finds itself on a sticky wicket as China is now arm twisting it through the CPEC.
Besides problems over payments, work on the Dasu hydropower project remains stalled despite Pakistan's best efforts to inspire confidence over security issues. Chinese contractors had stopped work more than two months back after a deadly attack that killed nine of their engineers.
Despite assurances from Islamabad and increased security by the Pakistani Army at the Dasu site, China has not restarted work. Dawn says that Chinese contractors working on the Dasu project are instead asking for compensation.
Pakistan faces Chinese fury over the Dasu attack as it had tried to hide the attack as an accident. A suspicious China uncovered the lies and initiated an independent investigation into the attack.
Islamabad has been trying to mask the attack as a bus accident. Pakistan’s foreign office has maintained that “leakage of gas” caused by a “mechanical failure” caused a blast in the bus, leading to the bus plunging into the ravine.
Chinese engineers across Pakistan have come under repeated attacks highlighting the poor security situation in the country. An angry Beijing has asked all-weather friend Islamabad to increase security for its personnel.
Chinese companies working in the power sector in Pakistan under the CPEC face a twin problem–not getting timely payments from Pakistan as well as a poor return on investment (ROI). They have taken up the matter with the Pakistani government asking it to increase the cost of power for the retail consumer, which Pakistan is loath to do as it will invite displeasure of the people.
Dawn said that officials in Khalid Mansoor's office–Special Assistant to the Prime Minister (SAPM) on CPEC, who recently replaced General Asim Bajwa as the CPEC chief–are "working very hard for some payments within this month or early next month".
Even as Pakistan masks problems with the CPEC, a showpiece project between the two nations, former finance minister Saleem Mandviwala said that the Chinese have been complaining that the CPEC had been ruined over the past three years and many companies were unhappy.
With the wily Chinese snaring a troubled Pakistan in its debt trap, CPEC becomes a quagmire with mounting debt and stalled projects