The BRI in Pakistan’s power sector: From initial success to structural challenges

Abstract

As part of the Belt & Road Initiative (BRI), Chinese actors have invested substantial resources in infrastructure projects in developing countries. Many of these projects are now operational. However, there is limited discussion of the factors contributing to the implementation of projects or the subsequent difficulties faced by Chinese actors during operations. This paper addresses this gap using a case study of Chinese investment in Pakistan’s power sector under the China-Pakistan Economic Corridor (CPEC). It uses the strategic action field (SAF) framework to analyse the interplay of Chinese and local actors in Pakistan’s power sector. Using in-depth qualitative interviews, it shows that Chinese and Pakistani cooperation in the power sector is marked by convergence and contestation. The early stages of the SAF were characterised by the convergence between Chinese and Pakistani elite interests, resulting in significant investment. Chinese investors enjoyed greater bargaining power at this stage and received multiple institutionalised concessions from the host country at the rule-setting stage. As projects became operational, increasing contestation culminated in an inversion of the field’s power dynamics. Various factors precipitated this inversion, including high-level political changes in Pakistan, which elevated opposition political leaders who were excluded from the SAF at the negotiation stage and questioned the field’s rules. Pakistan’s economic challenges further exacerbated problems as the host country sought to renegotiate the long-term agreements to reduce the returns for Chinese-financed power plants and alter financing terms. Though the host government has been unable to change the agreements, it has reneged on implementing the critical rules safeguarding the interests of Chinese investors. Chinese investors face diminishing leverage when dealing with host country governments that do not enforce rules underpinning investment due to the sticky nature of infrastructure investments and the Chinese state’s geopolitical interests.