Foreign investment spurs development. A resulted-oriented foreign investment must give full control of assets to local businessmen and people as suggested by the World Bank. China made phenomenal changes after it opened up its economy for foreign investment in 1978. After accumulating huge capital, China is in a position to massively invest in other countries. Recently, it offered US$ 42 billion to invest in Pakistan, US$ 40 billion for the Silk Road project, and US$ 20 billion to invest in India.
United States and Canada are top global investment destinations. In Europe, Germany, Poland, and Romania are popular destinations for foreign investment. Besides China, Hong Kong, Singapore, and India attract more foreign investment in Asia. In Latin America, Brazil and Chile are attractive destinations. United Arab Emirates, Saudi Arabia, and Egypt also attract foreign investment in the Middle East. Australia is also a popular destination of foreign investors.
What attracts foreign investors are strategic markets, liberal policies, and a business-friendly atmosphere including the legal system in a country. What governments should do is to ensure full transparency in foreign invested projects without favoring any business group or a country.
The reason that China has been investing heavily in Pakistan now is because of its strategic location, China’s Silk and Economic Belt policy, and closer relations with Pakistan.
How nations ensure transparency in foreign investment, is a relevant question. According to Transparency International, Pakistan ranked at number 127th in a list of 177 countries in 2013. Abuse of power, bribery, kickbacks, favors, bypassing of rules, and secret deals have damaged Pakistan’s economic performance, governance, and reputation over the years; it is no surprise that government posts carry with them the greatest allegations of corruption.
China also suffers from massive corruption. It was ranked the 80th most corrupt country by Transparency International in 2013. The post-1978 market revolution introduced ever more corruption; it is rampant now. Corruption in China includes graft, bribery, theft, embezzlement, backdoor deals, nepotism, patronage, misspending of public funds, statistical falsification, and much more.
Chinese President Xi Jinping has launched a grand anti-corruption crackdown under the rule of law. More than democracy, it was students’ movements against corruption that launched in 1989. Economic reforms could not totally block corruption. In fact, it has systematically grown. As a result, many fled abroad. This year, China sentenced 13,000 officials on corruption charges. In April last year, just to mention a few, Chinese Railways Minister, Liu Zhijun, was arrested on corruption charges for allegedly taking bribes and abusing power worth US$ 2.8 billion during 1986-2011. Many of China’s top political and military leaders and their relatives are linked to offshore companies based in the British Virgin Islands.
At the November APEC Summit in Beijing, China proposed an international network to extradite corrupt people. Most corrupt Chinese take refuge abroad such as America, Canada, and Australia. So far, Australia extended a helping hand to Chinese authorities for an extradition treaty. The setting up of a global network of anti- corruption would be an effective way of controlling corruption as proposed in the APEC summit held in Beijing on 5-11 November.
Pakistan has a very poor record of accountability. Most accountability, started in the 1990s, has been politically motivated to victimize political opponents rather than genuinely cracking down on corrupt people, institutions, and companies etc. The last four consecutive governments have remained unable to control corruption since 1999. According to Admiral (Retd) Fasih Bokhari, a former Chairman of the National Accountability Bureau (NAB), at least Rs 12 billion financial corruption is made daily in Pakistan.
There are huge corruption cases pending in the NAB and in courts for long. The Nawaz Sharif government needs to adopt China’s type of anti-corruption crackdown and it should join the APEC proposed anti-corruption network. Unlike the Chinese government, the Pakistani government is quite slow on anti-corruption crackdown. Much speedy work is needed to be done to ensure transparency in government actions and also to lure foreign investment.
China is not a member of the OECD Anti-Bribery Convention. There are anti-corruption bodies such as the National Bureau of Corruption Prevention and the Central Commission for Discipline of the Communist Party of China. Still, China has to launch an anti-corruption crusade. This is just the beginning.
Five Chinese projects draw public criticism in Pakistan over the past few years. These projects are: Reko Diq, Saindak, Nandipur power project, locomotives deals with Pakistan Railways, and Pakistan Steel Mill project as cases of non-transparent deals between Pakistan and China. The Supreme Court found the Reko Diq’s deal non-transparent. The Saindak project run by Chinese MCC and MRDL has disputes about its share to Balochistan.
DongFang Electric Corporation has a black record for supplying 69 locomotives that were later grounded. The PPRA blacklisted the company on 21 June 2013 on account of failure ‘to fulfill the contractual obligations and solve the chronic technical problems against the contract agreement’. The company was, however, allowed to construct the Nandipur power plant that was awarded in 2009 to it and the project was speedily resumed after the Nawaz Sharif government was formed. Pakistan Steel Mills brokered a non-transparent deal of US$ 2.2 with the Metallurgical Corporation of China (MCC) for expansion program in 2009.
Anti-corruption measures should immediately be adopted before implementing China-invested projects in Pakistan. All projects must be abided by PPRA’s rule of 2002. The PPRA rules were put in place to ensure transparent and cost-effective procurement of quality goods and services in public departments. Tenders should be advertised through PPRA. A number of laws and acts should be followed. The PPRA’s website placed 30 such laws. No public projects could be exempted from PPRA’s rules.
Non-transparent deals should not be signed with any country or company. It should also be conveyed to Chinese authorities that Pakistan would strictly abide by anti-corruption measures. Black-listed Chinese companies should not be allowed to operate any of these projects or conduct any business in Pakistan and vice versa.
Moreover, Pakistan and China should sign an extradition treaty against corrupt officials and personnell and should sign an anti-corruption treaty similar to the China-Australian anti-corruption agreement signed in July. The treaty will be mutually beneficial to both Pakistan and China. After ensuring transparency, investment deals should be implemented to spur development.
Views expressed are of the author and do not necessarily reflect the views of ISS or of the Government of Pakistan.
