Pakistan is to pay China in millions – in billions when converted to its Rupee — as compensation to the 36 Chinese nationals killed and 26 injured in a terrorist attack on July 14 last year, hoping to remove “a major irritant in bilateral relations.”
Pakistan has decided to make the payment despite there being no legal or contractual obligation on the government, The Express Tribune said (January 19. 2022).
To analysts this appears to be a case of a Chinese firm, whether of the state sector or private, exercising arm-twisting, with the Chinese authorities leaning on Islamabad.
The cabinet is to choose from one of the four different packages worked out by the government. They range from $4.6 million (Rs 810 million) to $20.3 million (Rs3.6 billion), unnamed sources told the newspaper.
This is being done despite the hydro-power project at Dasu in Kohistan district of Khyber Pakhtunkhwa province not falling under the China Pakistan Economic Corridor (CPEC). The 4,320MW Dasu Hydropower Project is being constructed by China Gezhouba with funding from the World Bank.
Now, the Chinese power firm is demanding from Pakistan six times the compensation it would have paid to its employees had the incident taken place within China.
Pakistan is compelled to follow its own 2004 precedence on compensation payment, before it entered into CPEC pact. It must keep in mind that according to Gomal Zam Dam amount of 2004 indexed upwards using nominal GDP increase, the compensation will be $20.3 million.
The terms for the current and future projects, where they exist, are weighed heavily in the Chinese’ favour.
It is a bitter pill for Pakistan that is getting increasingly sucked into the Chinese vortex, with or without the CPEC that is expected to be the biggest economic boost since Pakistan’s inception.
The decision would have to be taken politically since it must also resolve the issue of compensating the four Pakistani workers who, governed by domestic compensation rules, may be paid much lower than their Chinese counterparts, potentially opening another contentious issues.
The July 2021 incident that impacted bilateral ties was a suicide attack on a bus that was carrying workers to the work site of the Dasu Hydropower Project. Pakistan initially sought to play it down as an accident. But the Chinese government intervened, issued a terse statement demanding that the terror aspect be also probed, and secured a joint probe that established it as a terror attack.
China had immediately retaliated and cancelled a scheduled meeting of the Joint Cooperation Committee of the CPEC. The Chinese contractor had also stopped the work on the project and demanded a compensation of $37 million.
In a critique of the progress in CPEC projects under the Imran Khan Government, the newspaper says: “Work on CPEC has slowed down considerably over the past three and half years and there is no new project approved by both the sides under the project’s framework. “The $6.8 billion mainline-I project of Pakistan Railways also remains buried in the files.”
The entire exercise is being handled by the Economic Coordination Committee (ECC) headed by Finance Minister Shaukat Tareen. It had been tasked by the prime minister and the cabinet to work out the compensation package for the affected Chinese nationals keeping in view the past precedents, the current demand of the Chinese company, the prevalent insurance rates and the package offered by the Chinese government for their nationals in similar cases.
The body had in turn set up a sub-committee, comprising officers of the ministries concerned to work out the necessary details. The sub-committee had determined that there was no contractual remedy to make financial compensation related to casualties of the contractor’s staff, owing to any terrorist activity.
“However, because of China’s sensitivity, Pakistan has decided to make the payment, government sources told the newspaper.