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    Pakistan’s CPEC sees a Lahore vs Karachi fight

    Synopsis

    Between 2013 and 2018, the Nawaz Sharif-led government had awarded contracts under CPEC to some Lahore-based business groups.

    ET Bureau
    A tug of war has ensued between business groups based in Lahore and Karachi over contracts for the China-Pakistan-Economic-Corridor (CPEC)—a project that has drawn opposition from India as it passes over Pakistan-occupied Kashmir.

    Between 2013 and 2018, the Nawaz Sharif-led government had awarded contracts under CPEC to some Lahore-based business groups. According to people aware of the matter, some Karachi-based business houses, allegedly close to Prime Minister Imran Khan and the army, are now pushing to get their share of the pie.
    The persons cited earlier alleged that the government’s calls for transparency in the $62-billion CPEC project is a reflection of pushback from Karachi-based Abdul Razak Dawood, a scion of Pakistan’s biggest business house and Khan's special adviser on economy, investment, trade and textiles.

    In a recent interview with the Financial Times, just after the US and Chinese foreign ministers’ trips to Islamabad, Dawood had alleged that the CPEC was a badly negotiated deal by the Sharif government. According to sources, Dawood's pushback is also a reflection of the concern raised by the US over the project as the business tycoon has close ties in Washington. The Pakistan government wants to prove to Washington that it is transparent over CPEC, they said.

    “The previous government did a bad job negotiating with China on CPEC – they didn’t do their homework correctly and didn’t negotiate correctly, so they gave away a lot. Chinese companies received tax breaks, many breaks and have an undue advantage in Pakistan; this is one of the things we’re looking at, because it’s not fair that Pakistan companies should be disadvantaged,” Dawood had said in the FT interview. Incidentally, Pakistan’s Finance Minister Asad Umar is the previous chief executive of Engro Corp, owned by Dawood’s family.

    While the Pakistan government later played down the interview, the Chinese envoy to Islamabad called on the army chief over the matter. ET has learnt that the Chinese Ambassador raised some tough questions in that meeting.

    Dawood’s family is among the 22 richest families of Pakistan and is said to be an influential one. A commerce minister under former president Pervez Musharaff, Dawood’s support and the support of the Karachi business lobby have been important factors in Imran Khan’s coming to power.

    It is alleged that during Sharif’s last term in office, it was Punjab and its business lobby, and not Karachi, which benefited the most from the $18-billion energy and infrastructure projects under the CPEC. Chinese state firms were granted tax exemptions and healthy guaranteed rates of return on the projects, it is alleged. Dawood’s Descon had bid for the engineering, procurement and construction contracts of five CPEC power projects, but the Chinese firms won the contracts. Besides, Mian Muhammad Mansha and other Sharif-allied tycoons based in Lahore and Faisalabad formed joint ventures with the Chinese in the automotive, cement, power generation and textile sectors.

    Beijing’s priority for the next phase of CPEC, which runs until 2030, is the development of special economic zones and the Karachi-based business lobby may seek its spoils from it, the persons cited earlier said.



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