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Friday, May 24, 2024

BRI moot: Pakistan better hurry to gain financial and technological benefits from China

Jan Achakzai |

The Second Belt Road Forum (BRF) brought in more than 180 heads of states, key leaders and high-level representatives from across the world to share their vision and float new ideas on investment, infrastructure, and connectivity with the aim to benefit from China’s 1$ trillion Silk Road project, the Belt and Road Initiative (BRI). The consensus reached in Beijing was on green development highlighting the sustainability of the BRI.

Prime Minister Imran Khan through his historic visit to Beijing showcased investment opportunities in the country, the prospects of China Pakistan Economic Corridor (CPEC) as a game changer and suggested many new ideas focusing on climate, investment, people to people contacts, tourism, labour and ways to end corruption.

Both, PM Khan’s government and its predecessor, (Sharif government) supported CPEC projects and welcomed Chinese investment; the Nawaz government emphasized more on infrastructure development while the Khan government has stressed on social development including seeking investment in the industrial and agriculture sectors.

Imran Khan’s government is right in seeking investment and loans since China is better resourced than perhaps the International Monetary Fund (IMF) and World Bank combined to keep its economy afloat. Indeed Imran Khan is trying to protect the industry, reduce the trade deficit, and get maximum concessions under ASEAN concessions regime. Free Trade Agreement-II (FTA)  is a remarkable achievement of both Chinese and Pakistani leadership.

Read more: Pakistan China relation: friendship turned into business?

We have sought to view Pakistan-China economic relations from a narrow-angle of trade concessions, loans, and seeking market access for our less competitive industry, but we should not lose jungle for counting trees.

Since China is rapidly rising as the new world economic power, Islamabad needs to ponder how best it can expand on engagement with Beijing, enhance Chinese interests and also create new opportunities to raise Beijing’s stakes in Pakistan’s economy. We must remember that soon we will be competing with the entire world which is after Chinese money, resources, technology, diplomatic clout, and its attention. Now Europeans have started joining the BRI, the latest example is of Swiss after Italy and Luxembourg.

Beijing, a rising world power, is also evolving to look at the world from its own lens of world power status rather than Islamabad’s viewport. Let us look at the big picture of Pakistan-China relations and how best Beijing can be more invested in long term, to deepen ties with the rising world power:

China’s Assistance to Pakistan

China has never interfered in Pakistan’s internal political squabbling nor has it stopped dealing with one government or the other unlike the US which has influenced or maneuvered regime changes to promote its strategic, geo-political and political interests. China has eschewed any policy perceived as an instrument of interference in Pakistan’s internal settings. This policy continues even today.

Beijing has thwarted any Indian ambitions against Pakistan; its support at Nuclear Suppliers Group, at UN on Maulana Azhar issue, its pressure in 2016 on India (for being a lower riparian country to China) not to alter flow of water to Pakistan and its much needed   economic assistance for balance of payment support, are a few examples.

Read more: Indian fears: Is Russia joining Pakistan China in CPEC?

Effect of Emphasis on Social Projects

However,  recently, there has been a blip in Chinese investment what the PTI government termed as a pause to take the CPEC to the next level: social development and Special Economic Zones (SEZs). The fact remains that China’s economic engagement with Pakistan has decreased over the last two years as more emphasis has been laid on social projects. Since social projects promise less return to investors, they do not serve as lucrative enough to trigger massive investment.

Special Economic Zones

We urgently need to find new ways in enhancing economic component in our bilateral relations. The present level of actual Chinese investment stands around $22 billion through CPEC projects which is not significant. We must aim at securing up to $50 billion investment. For this purpose, our economic vision like SEZs, their timely feasibility and execution is the need of the hour and all bureaucratic hurdles should be dealt with on war footing.

Just like national security, we need CPEC specific national economic decision-making body involving Prime Minister, his key team and top military leadership sending a message to domestic institutions, bureaucracy, and Chinese counterparts as to how much Pakistan is serious in intent, and resolve in the execution of SEZs.

Indeed, Special Economic Zones are the real price of CPEC but we have no simplified in-house clearing rules due to different layers of governmental authorities complicating implementation processes which are time-consuming and delaying critical projects to the frustration of Chinese investors. It took at least up to 15 months to finalize feasibility of a SEZs; for example, as one government was supposed to provide gas, the other land and still other water. In other words, 18th Amendment is the main hurdle since provinces have to decide land, connections, water, given their inherent weaknesses­ ­– will, capacity and archaic bureaucracy– they are causing more red tape and delays.

Read more: China urges India, Pakistan against ‘expansion’ of tensions

Chinese Influx to Raise Stakes

We also need to attract not only substantive Chinese public and private investment, but also should seek to prepare public opinion paving the way to absorb at least 100,000 Chinese nationals, for example, so as to further raise Chinese stakes. The presence of Chinese nationals will bind both countries further. Ironically, Islamabad has allowed Afghan refugees who instead of contributing to the economy, are a burden on our basic resources and facilities from health to education, etc. We have nationals of Burmese, Bengalis, and Iranian origins then why not Chinese who will contribute to our economy, expand Chinese equities in Pakistan. All xenophobic hue and cry is uncalled for.

Pakistan needs to attract big companies like Huawei to re-exporting zones because they are being discouraged by the Western world.  So we need to sept re-exporting zones for big Chinese companies. For this, the federal and provincial capacities to quickly establish such zones are almost nonexistent.

Think-tanks for better Analysis and Propositions

Islamabad needs to utilize intuitional memory; It shall engage more Pakistani experts who have specialized knowledge and expertise of China’s foreign policy and other trends since 2011 and who have worked with the foreign office or other departments including defence institutions. To pull that talent, a merit-based strategic think tank needs to be established. This way we will be able to discern subtle trends and nuances in China’s posture and its future trajectories. For example, China now uses phrases like “Pakistan being an important country in the neighborhood” instead of two very closed neighbors” or “all-weather friend”.  Chinese are no longer using the word “flagship” project for CPEC and describe it as important BRI project, as Beijing is also working on equally two important Corridors, ( Mongolian and Myanmar Corridors).

Read more: China acknowledges Pakistan’s role in countering terrorism

China’s Increasing Ties with India

Interestingly, China’s engagement with India has increased manifold since being a rising world power it feels inclined not to isolate Delhi and ultimately pull it in the BRI. Equally, India’s rising economic trajectory and its not-too-distant potential convergence with China on seeking reforms to present US-led economic order will likely have an impact on Pakistan’s strategic posture given Islamabad’s widening economic differential with Delhi and solution to Kashmir issue becoming more elusive.

China is getting smarter with more willingness and capacity to manage divergence with other neighbors and the US allies in Asia-Pacific. New nuances in Chinese policy would have wider implications for Pakistan’s vital interests. So “the imperative of big power assertiveness would lend to a new subtle strategy whereby Beijing would want to work with India”, said a China watcher. Pakistan especially needs to study the last 10 years of Chinese foreign policy since President Xi took over power who is the main architect of the BRI and China’s remarkable economic rise.

Smart Strategies to Attract Investors  

As pointed out, SEZs should lead to the next level of Chinese investment. Pakistani institutions like Board of Investment have no capacity to handle Chinese investment and SEZs. New action plan under PM’s direct leadership with input coming from the Army, on the pattern of National Action Plan, has to be launched, to timely execute SEZs and make them successful.

Like investment policies of Malaysia and China itself, during the 1980s, Islamabad should offer huge tariff reliefs at least for two decades to Chinese private investors whose money is being chased by lucrative markets from India, Europe to Africa. It is brave of them to invest in Pakistan when they have equally very attractive propositions on their table from other investment-friendly countries and have a much better environment in terms of ease of doing business. Therefore, we must make it worthwhile for them to invest in Pakistan.

We should not lose interest and focus on reducing the trade imbalance between Pakistan and China. The Current Account (CA) deficit dilemma should be resolved not by decreasing Chinese imports but by increasing our exports and their investment inflows. It is unfortunate that our industry has not moved on with time and is behind even Bangladesh and Vietnam.

China has hugely invested in technology particularly in artificial intelligence. Pakistan needs to take benefit both from the lower and higher end of the technological and industrial value chain.

Read more: Sweeten the China-Pakistan free trade agreement

Curbing Corruption

This is the time we check corruption in our country as commission and kickbacks demanded by elites will inhibit the CPEC’s full execution. Here we need to follow the Chinese model: Beijing’s capital punishment for corrupt officials has made China the preferred destination of investment around the world.

The bottom line is yes strategic and political relations with China is great; yes, China has also strategic interest to equally benefit from CPEC as one of the major Corridors of the BRI, but for Pakistan,  substantive economic engagement with China is a must.  For this to happen, simplified in-house changes are the only way forward. Is Pakistan ready to take the leaf forward instead of frogging in leveraging Chinese miracle? A question better left for policymakers to think through.

Jan Achakzai is a geopolitical analyst, a politician from Baluchistan, and ex-advisor to the Baluchistan Government on media and strategic communication. He remained associated with BBC World Service. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.