A recent speech by a U.S. diplomat criticizing China's flagship Belt and Road projects in Pakistan spurred an angry response from Beijing and amplified pressure on Pakistan, which sided with China in the row, to provide more transparency.
Alice Wells, the U.S. Assistant Secretary of State for South Asia, said the $62 billion projects, known as China-Pakistan Economic Corridor, lack transparency, had incurred unjustifiable cost escalations, and had "debt-trap" implications for Pakistan. She was speaking at the event "A conversation with Ambassador Alice Wells on CPEC" at the Wilson Centre in Washington on Nov. 21.
Wells' speech marked the first time a high-ranking U.S. government official had launched a direct and comprehensive attack on CPEC.
Wells said that contracts for the related projects had been awarded to Chinese companies in a shady manner. She also said Chinese companies import labor and raw materials for the CPEC project into Pakistan from their own country, and so do not contribute to the development of the host nation's economy.
"The lack of transparency can increase CPEC costs and foster corruption, resulting in an even heavier debt burden for Pakistan," she said.
She also pointed out the increase in the cost of the Main Line-1 Railway project from $6.2 billion to $9 billion, and encouraged Pakistani citizens to ask tough questions of Beijing about the opaque nature of the projects.
The ambassador's criticism prompted a swift response from Beijing. Yao Jing, China's Ambassador in Islamabad, rejected the criticism and questioned where the U.S. had been when Pakistan needed help.
"I would like to remind my American colleague that if you are really making this kind of allegation, please be careful, show your evidence, give me evidence; we will take action," Yao was quoted as saying in a report.
The Chinese ambassador described Wells' remarks as an attempt to disrupt CPEC development and sow discord in China-Pakistan relations.
Pakistan joined China in rejecting the criticism. In a statement issued by Pakistan's Planning Ministry, Pakistan dismissed Wells' comments as "assertions based on wrong analysis and incorrect assessment of the facts."
Experts say Pakistan and China are now feeling an increased pressure to make the projects more transparent.
"The statement by Ambassador Wells is a part of the overall U.S. response toward Belt and Road. And Pakistan, being a key member, is facing increasing pressure from the U.S.," said Hasaan Khawar a public Policy analyst based in Islamabad. He further added that Pakistan is in a tough spot because it cannot afford to alienate either the U.S. or China.
Asad Umar, Pakistan's Planning Minister, made it clear that Pakistan is in no way against the U.S. on other issues, and even invited American companies to invest in Pakistan.
Michael Kugelman, deputy director of the Asia program at the Wilson Center, said he thought Washington's hope is that Islamabad will take the speech as a signal and reform the CPEC enterprise to make it more affordable and transparent.
"Islamabad's reaction has actually been quite restrained, at least relative to Beijing's. And that's because it knows the speech was mainly targeting China," Kugelman told the Nikkei Asian Review.
The experts also view Wells' verbal attack in the context of U.S. criticism of the debt-driven development model of all Belt and Road initiatives, and chose CPEC because it is the initiative's flagship project.
Kugelman said he believes that Wells' speech can be regarded as an expression of the Trump administration's Indo-Pacific strategy, which calls for economic development on terms that are fairer for the region's people than anything offered by China.
Malik Siraj Akbar, a Washington-based analyst, suggested that U.S. criticism came amid fears that Pakistan could fall further under Chinese influence once it fails to repay the loans related to the projects. "Pakistan does not have the effective institutions to transform [itself] overnight into a solid economy that's capable of paying back its loans [to China]," he told the Nikkei.
He added that Well's speech was a reminder of China's exploitation of the projects that many people in Pakistan, including the national media, despite being aware of, are unable to publicly speak up against.
There have been many demands in the past to make agreements on CPEC projects public but Pakistan's government evaded them. But Wells' remarks could restart the debate on transparency.
Akbar said whether the issue comes to light or not "entirely depends on how the civil society, the media and independent observers [in Pakistan] take this as an opportunity to initiate a new dialogue and ask questions [about CPEC] that have not been asked."