Pakistan is rolling out a tax red carpet for Chinese investors in the $56 billion economic corridor. According to a report in Pakistani daily Dawn, Islamabad is giving all sorts of tax breaks — from customs, sales to federal and excise – to investors from Beijing in its push to outpace India with the Chinese-funded CPEC.
India has criticised the CPEC, which links China’s Muslim-dominated Xinjiang province to the Gwadar deep-sea port in Pakistan, because it passes through Gilgit-Baltistan in PoK, which New Delhi considers its own territory.
Islamabad, according to the report, has handed out tax discounts close to $ 1.43 billion so far despite concerns of an adverse impact to its local industries and domestic investors.
The Chinese imprint in Pakistan is clear with Beijing overtaking the US as the largest direct foreign investor to Pakistan, funnelling in billions of dollars and revamping Islambad’s decrepit infrastructure via the “One Belt, One Road” trade plan.
With relations frayed between the US and Pakistan, China has been strengthening its ties to the nation of about 200 million people after it pledged two years ago to loan and finance about $55 billion in the corridor. US direct investment in Pakistan stood at $505 million from July 2013 through January this year, compared with $1.82 billion that came from neighboring China, according to central bank data.
Chinese companies are in talks to snap up more businesses and land in Pakistan. A dozen executives from some of Pakistan’s biggest firms say that Chinese companies were looking mainly at the cement, steel, energy and textile sectors, the backbone of Pakistan’s $270 billion economy.
Analysts say the interest shows Chinese firms are using the “One Belt, One Road” project to help expand abroad at a time when growth has slowed at home.
“The Chinese have got deep pockets and they are looking for major investment in Pakistan,” Muhammad Ali Tabba, chief executive of chemical firm that recently got some Beijing backing, told Reuters.
CPEC will connect China’s Western region with Pakistan’s Arabian Sea port of Gwadar through a network of rail, road and pipeline projects. That will be funded by loans from China, and much of the business will go to Chinese enterprises.
The scale of Chinese corporate interest beyond that is difficult to gauge, but in Karachi, Pakistan’s financial centre, sharply-dressed Chinese appear to outnumber Westerners in hotels, restaurants and the city’s airport.
Rising skyscrapers testify to a construction boom in the city, businesses are printing Chinese-language brochures and salaries demanded by Pakistanis who speak Chinese have shot up.
The Chinese interest comes as Islamabad and Beijing discuss the next phase of CPEC: how to build Pakistan’s industry with the help of Chinese state-owned industrial giants.
Bilateral investment has grown rapidly also because the two countries have built up trust over the years. Pakistan, according to experts, is seen as an “all-weather strategic partner’ by the Chinese government, signaling a sense of unwavering support under all conditions.
China’s government plans to hold a summit, called the Belt and Road Forum for International Cooperation, in Beijing in May involving about 20 heads of state. India has already expressed reservations on this summit.
China’s interest also fans concerns that US President Donald Trump may cut economic and military funding to Pakistan, which is the sixth largest recipient of American aid. Trump’s fiscal 2018 budget proposal — entitled “America First” — called for “deep cuts” to foreign assistance with a 28.5 percent funding reduction for international programs, including the State Department and the US Agency for International Development.
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