China businesses face hostility in Pakistan

Burnt-out vehicles outside the Chinese consulate in Karachi after an attack last Friday. As Pakistan becomes more indebted to China and an economic crisis worsens, anger is brewing among the locals.
Burnt-out vehicles outside the Chinese consulate in Karachi after an attack last Friday. As Pakistan becomes more indebted to China and an economic crisis worsens, anger is brewing among the locals.PHOTO: AGENCE FRANCE-PRESSE

KARACHI • An attack on a diplomatic mission in Karachi last week shows the risks that Chinese businesses face as they expand across Pakistan in the face of growing resentment over Beijing's influence in the economy.

As Pakistan becomes more indebted to China and an economic crisis worsens, anger is brewing among the locals. Pakistani businesses say they are being sidelined in state projects and complain that Chinese firms get preferential treatment from a government desperate for foreign money. The hostility has now taken a violent turn.

Separatist militants attacked the Chinese consulate in Karachi last Friday, killing seven people, the city's second major strike this year on officials from China.

Prime Minister Imran Khan said the perpetrators are trying to scare off Chinese investors and undermine the government's recent trade deals with Beijing.

Terror attacks in Pakistan have long been a concern for foreign investors. With Chinese workers and businesses becoming a more visible presence in the past five years, Pakistan has a military force of more than 15,000 to protect them.

Beijing has become increasingly vocal over the risks in Pakistan and has asked Mr Khan's government to take more measures to protect Chinese citizens.

Much is at stake for Pakistan, which is seeing a second wave of Chinese investment as businesses follow the path paved by President Xi Jinping's flagship Belt and Road Initiative.

 
 
 

This year alone, Alibaba Group, co-founded by China's richest man, Mr Jack Ma, acquired two Pakistani firms including an online retail company; CLSA, backed by China's biggest brokerage, bought a stake in a local securities house; and the China-based Inner Mongolia Yili Industrial Group is close to the purchase of a dairy company.

China has been the top investor in Pakistan for the past five years, growing its share of total foreign direct investment to 52 per cent in the year through June from less than 10 per cent five years ago.

The United States and United Kingdom have kept investment relatively steady in that time.

With a young and growing population of more than 200 million and natural resources like coal and copper deposits, Pakistan is a lucrative bet for Chinese investors, who have overlooked security issues and a balance-of-payments crisis that is pushing the country towards another bailout from the International Monetary Fund.

Chinese investors are also contending with a foreign-exchange crunch. Mr Wang Xianfeng, deputy general manager at the Chinese-built Port Qasim coal power plant, said Pakistan is five months behind with payments for electricity that the 1,320MW plant started generating last year.

With easy access to a large market and relatively cheap labour, however, more Chinese companies are heading to Pakistan.

Local businesses are growing wary though, resentful of Chinese investors who are often able to sidestep much of Pakistan's stifling bureaucracy and win tax breaks and duty-free access to imports.

The Competition Commission of Pakistan stepped in this year to ask the nation's road authority to give domestic companies the same treatment as Chinese competitors.

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A version of this article appeared in the print edition of The Straits Times on November 27, 2018, with the headline 'China businesses face hostility in Pakistan'. Print Edition | Subscribe