Pakistan has come up with Foreign Investment (Promotion and Protection) Bill, 2022 which is now mired in controversies. The stated objective of the Bill is to provide for the promotion and protection of certain “qualified foreign investments” which are expedient and in the national interest to bring in large-scale foreign investments of USD 500 million or more. Pakistan’s PM Shehbaz Sharif told the Assembly that with the passage of the Bill, Baluchistan would reap the maximum benefit in the RekoDiq project by receiving around 35 to 40 billion dollars in thirty years.
The immediate trigger for the passage of the Bill came due to the RekoDiq dispute. The RekoDiq open-pit mine is located in the Chagai district of Baluchistan and is one of the largest copper and gold reserves in the world with estimated reserves of over 5.9 billion tonnes of ore. The mining agreement was signed in 2006 between Canada’s Barrick Gold, Chile’s Antofagasta (both part of the consortium Tethyan Copper company) and the Balochistan government in a revenue-sharing model. However, the project came to a halt after the provincial government refused to renew Tethyan Copper’s lease in 2011. The case was taken up by the World Bank’s arbitration tribunal ICSID which imposed a penalty on Pakistan for unlawful denial of mining.
Prima facie, it appears that to give effect to this award and to attract foreign investments, Pakistan has come up with this Bill. However, there’s more to this Bill than what meets the eye. The Bill empowers the Federal government to notify any foreign investment project as “Qualified Foreign Investment” and provide whatever incentives it deems fit even if the investment is less than USD 500 million, by recording the reasons as per Clause 3(3) of the notification. Further, the Bill in Clause 3(7) makes even the Federal government incompetent to remove any “Qualified Investment” that has been placed in the First Schedule, thus limiting the sovereign powers of the government itself.
In this context, it is important to understand how this legislation is going to enable China to effectively colonise Pakistan through its debt-trap diplomacy. The International Monetary Fund in its report in 2022 has raised a red flag with regard to China-Pakistan Economic Corridor (CPEC). It stated that in 2022, contingent liabilities pose a significant risk to Pakistan’s debt sustainability. With over 30 per cent of Pakistan’s total foreign debt being owed to China, this new legislation is going to work well for China’s ploy of Salami Slicing Pakistani territory.
Pakistan’s latest Economic Survey 2021-22 gives a glimpse of how much indebted Pakistan is to China. China is Pakistan’s largest bilateral creditor with loans of over USD 14.5 billion. However, this does not cover the true extent of Chinese lending to Pakistan. For instance, lending has been made under various other categories such as China’s State Administration and Foreign Exchange (SAFE) which has lent over USD 7 billion to Pakistan. Moreover, a significant part of Chinese lending is for CPEC which underlines the strategic intent behind lending. Such a project is central to China’s vision of building a Sino-centric world by creating infrastructural projects and pulling these countries into its political orbit.
Chinese firms have not only completed some of CPEC projects, but are also undertaking several other investments. For example, Beijing has bought a 40% stake in the Pakistan Stock Exchange (PSX) company. It is also planning to buy a power utility in Karachi which is one of the largest energy companies in Pakistan. Further, even sanitation contracts are being doled out to Chinese companies which are making investments in the country across various sectors.
As per Khurram Ali, Secretary General of Awami Workers Party in Karachi, various oil exploration blocks in the Sindh region are also being given to Chinese companies. In Baluchistan, apart from Gwadar port, an airport and several other major projects are being built by Chinese firms. In this region, Chinese are engaged even in fishing business wherein they carry out unsustainable fishing using deep-sea trawlers, depriving the locals of their livelihood and ruining the marine eco-system.
One may easily note that Chinese investments are capturing Pakistani economy. With this new legislation, China will get a free run to make loot in this country with the connivance of the Pakistani political and military elites, depriving the ordinary Pakistani citizens of growth, livelihood and prosperity. Several legislators and Pakistani leaders are not only skeptical of this new legislation, but also realise the nefarious design of the Bill. For instance, BNP-M’s President Sardar Akhtar Mengal raised the concern in National Assembly of Bill being passed overnight with vested interests. Mengal stated that Baluchistan’s resources have been taken as “maal-e-ghanimat” (spoils of war) to be looted by the foreigners and Pakistani elites at the expense of locals. He even stated that Balochistan was deprived of the CPEC project works that benefitted other parts of the country. He accused the federal government of appeasing foreign powers. With Baloch rebels resisting the occupation of their lands and resources by Chinese, the message was clear. Even the Minister of Housing and Works, Maulana Abdul Wasay, opposed the bill as it would take away the resources of the province without local government having any say in it.
With Chinese geopolitical agenda becoming more expansionist and aggressive to create a Sino-centric world order that will end up pushing small and developing countries to margins, this new legislation fits very well with the Chinese playbook of salami slicing and gobbling up the territories to advance its own geostrategic ambitions. The result of such a reckless Chinese investment was seen in Sri Lanka which pushed it to bankruptcy and political turmoil. With measures such as Foreign Investment (Promotion and Protection) Bill, 2022 that will pave the way for China, a looming crisis waiting at the door step of Pakistan.