Little evidence China forcing countries, including Pakistan, into debt — report

A view of the strategic Gwadar port in southwestern Pakistan on October 4, 2017. The port is part of a $62 billion corridor of energy and infrastructure projects China is building in Pakistan.(REUTERS)
Updated 16 May 2019
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Little evidence China forcing countries, including Pakistan, into debt — report

  • Belt and Road Initiative to rebuild Silk Road met with widespread criticism it will saddle countries in unsustainable debt traps
  • China sees critics as harboring anti-Chinese prejudice, wishing to contain the country’s rise

ISLAMABAD: There is little evidence that China’s Belt and Road Initiative is ensnaring nations, including Pakistan, in foreign aid “debt traps,” a Pakistani think tank said in a report this week, in defense of a key policy platform of President Xi Jinping. 
Xi has made the Belt and Road Initiative (BRI), as it is formally called, one of the cornerstones of his administration. But it has run into opposition in some countries over fears that opaque financing arrangements lead to unsustainable debt and that it is more about promoting Chinese influence than bringing development.
China has at times reacted angrily to such doubts, tending to characterize critics as harboring anti-Chinese prejudice and wishing to contain the country’s rise, while overlooking what Beijing says are genuine good intentions.
The Belt and Road scheme seeks to build a modern version of the Silk Road to link China with Asia, Europe and beyond through large-scale infrastructure projects.
A new report by Pakistani think tank Tabadlab titled ‘Belt & Road Initiative (BRI): Belted on a road to debt?’ identified eight countries at high risk of the potential impact of BRI pipeline projects and associated debt levels. These are Pakistan, Djibouti, The Maldives, Lao PDR, Montenegro, Mongolia, Tajikistan and Kyrgyz Republic. The report said these nations would face rising debt-to-GDP ratios in excess of 50 percent, which merits concern.
“While the sustainability of infrastructure financing is critical for regional economic stability, there is little evidence that China is forcing countries into such [debt] crises,” the Tabadlad report said. 
“The financing agreements have largely been structured as bilateral transactions without the involvement of multilateral institutions and their corresponding economic assessment and monitoring frameworks,” the report said. “In short, a lot of the BRI project financing does not come with the conditionalities that World Bank, Asian Development Bank, African Development Bank, Inter-American Development Bank, and other multilateral financing sources come with.”
In the case of Pakistan the report said: “In addition to sovereign loans, financial instruments used for development of economic corridors [by China] also include concessional loans, commercial loans and equity investments. As an example, the China Pakistan Economic Corridor (CPEC), a flagship BRI investment, has USD 19 billion in investments to date of which over 60% is commercial lending and equity investments with no sovereign anchors.”
Last month, at the vast Belt and Road Forum in Beijing, China was keen to show that the initiative was even winning acceptance in Western nations, especially after Italy became the first G7 country to sign on last month. Britain’s finance minister, France’s foreign minister and Germany’s economy minister all made the trek to Beijing for the event, but reminded China of the need for high standards and transparency.
“The IMF has repeatedly and explicitly questioned opaque lending and demanded more transparency from countries and Beijing to bridge information asymmetry around Chinese debt,” the report said. “In the most recent case of Pakistan, details of debt arrangements with China were a major negotiation bottleneck. Making details of BRI projects more public would certainly help counter the debt-trap narrative.”
Citing China’s takeover of the Sri Lankan port of Hambantota as part of a debt servicing swap, the primary example of fears of asset seizure and control that can be potentially exercised by China over strategic infrastructure across continents, the report called it a rare and often misunderstood example. 
“Despite being a creditor enjoying quite a strong position, negotiations have largely benefited borrowing countries with various treatments afforded to countries for restructuring or settling debt,” the report said. “Negotiations have often resulted in the extension of loans, the restructuring of terms and even wholesale re-financing. Interestingly, write-offs, both partial and full, have been the most common solution to debt problems in these negotiations.”
Using the Rhodium Group’s data and analysis, the Tabadlab report said 36% of debt servicing negotiations with China had resulted in write-offs worth approximately $6.5 billion and 7% of the debt arrangements having a value of $23.5 billion were refinanced, constituting 52% of total debt in 40 sample cases.


British Airways to resume Pakistan flights next week after a decade

Updated 23 May 2019
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British Airways to resume Pakistan flights next week after a decade

  • BA halted service to Pakistan in the wake of the 2008 Marriott Hotel bombing in Islamabad
  • BA will begin the London Heathrow-Islamabad service with the Boeing 787 Dreamliner

ISLAMABAD: British Airways will resume flights to Pakistan next week a decade after it suspended operations following a major hotel bombing, becoming the first Western airline to restart flights to the South Asian country.

BA halted service to Pakistan in the wake of the 2008 Marriott Hotel bombing in the capital Islamabad that took place during a period of devastating Islamist militant violence in Pakistan.

Security has since improved, with militant attacks sharply down in the mainly Muslim country of 208 million people, reviving Pakistan as a destination for tourist and investors.

“The final touches are coming together for the airline’s return ahead of the first flight on Sunday June 2,” British Airways said in a statement. It will launch a three-per-week service to London Heathrow, it said.

“We’re on board,” Pakistani Civil Aviation spokeswoman Farah Hussain said about the flights resumption.

BA, which is owned by Spanish-registered IAG, will begin the London Heathrow-Islamabad service with the airline’s newest long-haul aircraft, the Boeing 787 Dreamliner.

At present, only loss-making national carrier Pakistan International Airlines (PIA) flies directly from Pakistan to Britain, but its ageing fleet of planes is a frequent source of complaints by passengers.

Middle Eastern carriers Qatar Airways, Etihad Airways and Emirates have a strong presence in Pakistan and have been eating into PIA’s dwindling market share. Turkish Airlines also lays on a regular service to Pakistan.

Islamabad has been running international advertising campaigns to rejuvenate its tourism sector, which was wiped out by Islamist violence that destabilised the country following the Sept. 11, 2001 attacks in the United States and the U.S.-led war in Afghanistan.

“We hope customers in both the UK and Pakistan will enjoy the classically British service we offer, with thoughtful bespoke touches,” Andrew Brem, Chief Commercial Officer at British Airways, said in BA’s statement.

BA said there will be a halal meal option in every cabin and the airline would also ensure sauces in every meal do not contain alcohol or pork.