While the proportions of this debilitating process is not yet clear, the Covid-19 pandemic is causing a massive melt-down of global economy. The growth rates of some important western economies will go into the negative, for this quarter the US economy has shrunk by 4.8%, the biggest downtown since the 2008 recession. Such a global contraction of economy cannot stay without consequences.
The global economic and political power relations will change, the way most economies and even how the countries will be run won’t be the same. Among the lessons being learned from Covid-19 has taught are that new priorities that are emerging will be made the basis of future planning.
The country least damaged by the pandemic will probably be China. In the beginning they also made mistakes and could have reacted earlier but China had a head start of fighting coronavirus. Run by a strong and centralized state the measures that were taken were strict if not draconian but extremely effective. By early April the epidemic was under control and economic activities cautiously revived at a time when the peak of the pandemic in many places had not even reached.
Of course, Chinese economy has taken a hit as well, it is expected to suffer a contraction in the first quarter 2020 for the first time since the end of the Cultural Revolution in 1976, heaping pressure on the government to steady the economy and ensure the country’s growing unemployment problem does not get worse. However the second quarter will already show a first bounce-back given the head start and because of the “countercyclical policies”, or pro-growth measures, already taken by Beijing.
While global consumption and consequently the demand for Chinese products is falling worldwide, China is a huge country and can fall back on developing domestic consumption instead especially if the unemployment can be contained. By the third quarter global economies will reopen and Chinese export will recover even when they will be targeting different markets than before.
For the foreseeable future, China will be buying extremely cheap oil and filling its storage to capacity. In addition, it is expediting its own infrastructure investments mainly focussed at IT, 5G, AI and the likes trying to develop its independence from imports in those fields. China will come out of this crisis stronger rather than weaker.
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China Pakistan Economic Corridor is hope of better region of the future with peace, development and growth of economy.#CPECMakingProgress pic.twitter.com/XMIiZPBhX8
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In the past China has been trying – with some success- to get its foot into European and American markets by buying companies and investing money. That has been met with a considerable reluctance by those countries citing national security concerns, this resulted in many hurdles for Chinese capital to expand.
Chinese strategy might be very different in future; while concentrating on core businesses of high value in the future, instead of struggling with investments in developed countries and economies they could turn towards developing countries – a strategy that has been pursued before in Africa and in the countries along the BRI. That is the time when Pakistan should come into renewed focus for China.
While Pakistan is in a very comfortable situation both with regard to the pandemic containment and the economic fall-out of it, the Coronavirus has not hit as hard as in Europe or the US. However the constraints of a weak and overburdened healthcare system with limited capacities for testing and isolating the infected people the epidemic will take longer to vanish than in China.
The economic fall-out of this health crisis may become larger and less manageable and threaten many more lives than the virus itself if we don’t use the opportunities it presents. Due to the lock-down Pakistani important industries are suffering and owners are forcing workers to sign their own letters of notice before they are paid their last salary.
The number of industrial jobs that will be lost is considerable and poverty will rise. Pakistani money has been transferred by leading industrial and feudal families like the Sharifs, Zardaris, etc who have always preferred to invest outside Pakistan transferring badly needed foreign exchange illegally to Europe and America. With all their money-laundering laws the western countries and UAE look away from these predators.
In contrast Chinese capital should create new jobs in our country to help fight poverty that will certainly grow after this pandemic. Projects that are already planned under CPEC and any new ones that would come after the end of lock-down have to be welcomed. Construction industry and infrastructure development not only of road and rail roads but of 5G, a stronger internet that reaches remote corners of the country would be the targets.
The most outstanding example is of Kalabagh dam, badly needed but badly politized. The Diamer Bhasha Dam, the foundation of which was laid as early as 1998, more than 20 years ago, has not been finished until today
A second major complex is Pakistan’s agriculture. In the past, Pakistan has been a country that was able to feed and cloth its population without imports and even has exported some of the produce. But during the last decades, agricultural production has stalled or gone down which is – apart from a rising population- mainly due to soil erosion, lack of rains and irrigation water, outlived agricultural cultivation methods.
The fact that much of the land is owned by people who live in the cities, have their main income from jobs and consider income from their lands only additional is another reason. Such people are no agriculturalists, they don’t know and don’t care about new methods, modernization and new seeds. On the other hand, many farmers have holdings that are too small to be profitably tilled.
Agricultural yields in almost all sectors in Pakistan are below international average and need to be raised. Another problem is the fact that farmers are uneducated, they till the land the way their fathers and grandfathers have done and their capacity to (critically) absorb new techniques is limited.
While the Sartaj Aziz National Commission on Agriculture of 1988 still holds largely valid, there is a need for fundamental reforms in agriculture that is the backbone of the wellbeing of the majority of those Pakistanis who cannot buy imported stuff. Land reforms, uniting small landholdings into cooperatives and education of farmers and their children is the need of the hour.
The water problem needs to be tackled first, Chinese investment in the construction of dams should be given priority in exclusion of everything else. The growing water and irrigation problem of Pakistan and electricity produced by dams is the cheapest available. For decades Pakistan has neglected the construction of dams due to big egos of politicians and inter-provincial rivalry.
The most outstanding example is of Kalabagh dam, badly needed but badly politized. The Diamer Bhasha Dam, the foundation of which was laid as early as 1998, more than 20 years ago, has not been finished until today. Upon completion, Diamer-Bhasha Dam would produce 4800 megawatts of electricity through hydro-power generation and store an extra 10.5 cubic kilometers (8,500,000 acres? ft) of water for Pakistan that would be used for irrigation and drinking.
Post-epidemic Pakistan will need to rebuild its economy fast, otherwise poverty, hunger and riots might be the consequence. It is now that Pakistani leadership has to make up its mind and set the markings for the time to come
Water storage in dams big and small, alongwith dozens of other smaller such storage facilities, is badly needed. But financing the project never worked out. In 2017 Pakistan dropped its bid to have the dam financed under the China-Pakistan Economic Corridor framework, under the new circumstances this must be revived. The construction of multiple smaller dams would be helpful as well. Mohmand Dam is one example that has been under discussion since 2000 but construction has not started yet.
For the first 20 years of our existence as a nation, the US was generous with both military aid economic aid. While economic and continued after 1965, military and was dependent upon the US adventure in Afghanistan and it was intermittent. In times of crisis the US has always been generous, with the pandemic hitting their economy hard, US aid is not likely in any great volume, if any.
After 1965 China took up the slack of military association but only when China came into its own economically, and lately in furtherance of their own global ambitions due to their ambitions BRI project, Pakistan has been a great beneficiary. CPEC has strategic connotations, after this pandemic it will become all important.
We should also be careful about Indian ambitions, it may choose this pandemic situation and the future US economic meltdown to change sides as it did in the 1990s when it left the support of the crumbling Soviet Bloc after the Cold war and became the best friend of the US overnight after it had opposed them tooth and nail for nearly 50 years. As day turns to night and night turns today, it will now use this opportunity to try and make China its “best friend” economically, if not militarily.
Inviting Chinese capital to invest in Pakistan will certainly come for a price like the botched negotiations about Bhasha Dam have shown. But what is the alternative? Post-epidemic Pakistan will need to rebuild its economy fast, otherwise poverty, hunger and riots might be the consequence. It is now that Pakistani leadership has to make up its mind and set the markings for the time to come.
Ikram Sehgal, author of “Escape from Oblivion”, is a Pakistani defense analyst and security expert. He is a regular contributor of articles in newspapers that include: The News and the Urdu daily Jang. The article first published in Daily Times and has been republished with the author’s permission. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.