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Senior US official warns Pakistan of economic dangers of China’s infrastructure plan

Ambassador Kenneth Juster Hosts tea for Alice Wells, deputy assistant secretary of the U.S. State Department’s Bureau of South and Central Asian Affairs - January 18, 2018. (U.S. Embassy New Delhi/Released)

This article was originally published by Radio Free Europe/Radio Liberty and is reprinted with permission.

The United States has warned Pakistan of the long-term risks to its economy if it embraces China’s massive infrastructure project and suggested that it should instead look to the U.S. business model.

Alice Wells, the acting assistant secretary of state for South Asia, told a conference on November 21 that the $60 billion China-Pakistan Economic Corridor (CPEC) will only profit Beijing.

The United States and many EU countries have criticized China’s project and its lending for regional infrastructure efforts, warning that it has saddled some developing countries with debts that they cannot afford to repay.

The CPEC project consists of rail, road, and energy infrastructure and is part of the wider $1 trillion Chinese project known as the “Belt and Road” initiative.

“It’s clear, or it needs to be clear, that CPEC is not about aid,” Wells said at the Woodrow Wilson International Center for Scholars in Washington.

She warned that the initiative was driven by nonconcessionary loans, with Chinese companies sending their own labor and material.

“CPEC relies primarily on Chinese workers and supplies, even amid rising unemployment in Pakistan,” she added.

The corridor “is going to take a growing toll on the Pakistan economy, especially when the bulk of payments start to come due in the next four to six years,” she said.

“Even if loan payments are deferred, they are going to continue to hang over Pakistan’s economic development potential, hamstringing Prime Minister [Imran] Khan’s reform agenda,” she said.

China’s planned efforts in Pakistan include the development of Gwadar on the Arabian Sea into a world-class port. Saudi Arabia earlier this year said it plans to set up a $10 billion oil refinery in Gwadar, located in the southwestern province of Balochistan.

Wells acknowledged that the United States could not come to Pakistan with offers from state-run companies, as can China, but she said private American investment, along with U.S. grants, would help Pakistan’s economic fundamentals.

“There is a different model. Worldwide we see that U.S. companies bring more than just capital; they bring values, processes, and expertise that build the capacities of local economies.”