Launching Health Silk Road under CPEC

As China has expressed intention of influencing global health systems, it should launch a pilot project of ‘Health Silk Road’ in Pakistan and directly impact people’s lives by achieving enhanced productivity and regional prosperity

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It is difficult to calculate the real impact of the COVID-19 pandemic on the global economy. According to World Bank’s Global Economic Prospects report, the global economy shrank by 4.3% in 2020. China’s economy grew at 2.3% last year – the slowest pace in four decades.

China’s strict lockdown measures targeted support to businesses and rapid vaccination drive has put the economy back on a growth path with 6.5% growth in the last three months of the current financial year.

While China’s economy seems to be normalizing, there have been significant shifts in its approach towards Belt and Road Initiative (BRI) projects and strategic priorities linked to country partnerships.

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Wang Yi, China’s Foreign Minister, has been stressing that China’s commitment to BRI projects remains unchanged. Jib Zhi, Director of China’s National Development and Reform Commission (NDRC), claimed that trade with BRI partner countries grew during the pandemic.

However, project implementation has slowed down due to travel restrictions, and concerns have been raised about the ability of countries to make timely payments of contracts and loans. The Chinese companies are looking for joint venture partners instead of the existing approach of contracting, financing, and management of projects on a turn-key basis.

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Impact of Covid

Launched in 2013, BRI strategically focused on leveraging the physical proximity advantage by reaching out to 138 countries in five regions. By early January 2020, China had planned to invest more than $3 trillion in 2,971 projects.

While this ambitious plan had to slow down due to geopolitics and low capacity in partner countries, the ongoing pandemic has significantly impacted the overall progress due to the closing of borders and air travel restrictions.

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Covid-19 restrictions on Chinese workers and construction suppliers have been major factors in slowing down many projects in Pakistan, Cambodia, Indonesia, and Myanmar. In the case of the China-Pakistan Economic Corridor (CPEC), the Pakistan government’s focus has rightly shifted to the Covid-19 response, which has resulted in a slowdown of both infrastructure development and industrial ventures.

Both countries need to agree on priority investments in a post-pandemic world. Pakistan is concerned about its debt obligations to multilateral and bilateral partners, shrinking fiscal space for development projects, and revival of growth under the IMF program.

Read More: Increase in infant health inequality: What is Pakistan doing about it?

Pakistan’s rising debt

China has started looking for strategic adjustments in its project implementation approaches, terms of financing, and aligning future investments with Social Development Goals, including reducing carbon emissions.

China is also signaling its desire to play a more prominent role in influencing global health systems. In this context, one of the win-win propositions will be to invest in human development infrastructure by launching Pakistan as a pilot country for China’s proposed “Health Silk Road.”

Pakistan needs to do serious thinking about managing the potential threat of its rising debt to an unsustainable level with low GDP growth projections between 2-3 percent in 2021-22. The overall debt of Pakistan has reached 94% of GDP, and with the expected fall in tax revenue due to the pandemic, further fiscal pressures are inevitable.

Read More: Are Pakistan’s health systems prepared for a COVID-19 vaccine?

The continuation of high fiscal deficits and higher borrowing costs has led Pakistan into a situation where nearly half of its revenues go to interest repayments. Pakistan’s Prime Minister has been consistently appealing to the wealthy countries to consider a debt write-off for developing nations that the pandemic has severely hit.

The response, though, has not been as encouraging as expected, especially on the part of multilateral banks. There has been some debt rescheduling by the G-20, but it has not led to serious thinking globally.

China’s loans under CPEC come with diversified terms and conditions but the ones extended by commercial banks are more expensive than lent by multilateral platforms with collaterals in various shapes.

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The bulk of the commercial loans under CPEC are for the power sector, which is now reporting a surplus capacity with the inclusion of thermal, coal, and some renewable energy plants. In addition to sovereign loans, financial instruments used to develop economic corridors also include concessional loans, commercial loans, and equity investments.

China-Pakistan Economic Corridor (CPEC), a flagship BRI investment, has USD 19 billion in investments to date, of which over 60% is commercial lending and equity investments. While Chinese financing has helped Pakistan diversify energy sources, it has also resulted in a surplus of electricity, which is problematic for the government because it is the sole buyer and pays producers capacity charges even when they do not generate.

To help tackle the issue power sector circular debt burden, the government has started negotiations with private power plants to lower rates.

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Vaccine diplomacy & social development

China’s vaccine diplomacy in BRI countries has gained geopolitical significance after President Xi Jinping pledged that a Covid-19 vaccine from China would be made a “global public good.”

Following this, the Chinese government announced that the vaccines would be made available in an equitable manner and at a fair and reasonable price. Unlike the United States, China has joined the COVAX partnership to ensure timely and affordable availability of the Covid-19 vaccine to developing countries.

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China’s National Biotech Group, a subsidy of Sinopharm, is conducting third phase trials in several partner countries, including Argentina, Bahrain, Egypt, Jordan, Morocco, Pakistan, and UAE. Many of these partner countries have entered into agreements with China for procurement and local production of Covid-19 vaccines.

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Pakistan has received over one million vaccine dosages from China so far, and more shipments are being procured. It will be a significant development if China and Pakistan announce joint production of vaccines under CPEC.

China has already donated Personal Protection Equipment (PPE) and hospital supplies to Pakistan. Perhaps the time has come to scale up investments in the healthcare sector through the proposed “Health Silk Road” with CPEC being its pilot corridor.

Like in the rest of the world, the current crisis has exposed serious shortcomings in Pakistan’s public healthcare capacities. In a country where 59% of the population is under the age of 30, it will be imperative to increase and sustain public financing in health, education, and skills development for this young labor force.

Read More: Covid ‘vaccine nationalism’ highlights failure of Multi-lateral system

There is every possibility that when both countries talk about infrastructure during their next Joint Coordination Committee (JCC) meeting, they will discuss hospitals and laboratories along with other ports and highways.

With China’s plans to develop its western regions, Pakistan’s skilled labor force could be a major advantage for both countries. For China, this will be an opportunity to step into a huge healthcare market that could expand to the rest of South and West Asia.

Beijing has raised its voice about increasing China’s role in multilateral health governance through health sector cooperation. This could be an excellent opportunity to demonstrate a visible impact on people’s lives by adding cross-cutting healthcare partnerships in economic corridors.

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A sustainable healthcare sector

The health sector offers tremendous sustainable opportunities with both social and commercial returns in most places. According to the World Health Organization, Pakistan is ranked 66th amongst high-burden-of-disease countries.

Despite its heavy burden of communicable and non-communicable diseases, Pakistan’s expenditure on public health is only 0.91 percent of its Gross Domestic Product. The country has one doctor for 957 people and one hospital bed for 1,580.

Health Silk Road under CPEC

The government-run hospitals can only cater to 30 percent of the population, and the private healthcare facilities cover the rest of Pakistan. Prime Minister Imran Khan’s government is already working on reforming the healthcare system, focusing on access to health services to society’s poor and marginalized segments.

Read More: WHO’s initiative to provide Covid-19 vaccine to poor nations, to be joined by the US

China’s investments in doubling the capacity of large hospitals, pharmaceutical production, research, and distribution pharmacy chains will complement these efforts and strengthen the health value chain for potential future shocks.

More importantly, it will lead to the much-needed ownership of CPEC among the ordinary people of Pakistan. There has been a discussion about trickling down the benefits of CPEC investments on the livelihoods and wellbeing of people.

Health sector initiatives will strengthen and widen the ownership of CPEC as a transformational initiative among the general public in Pakistan. Strategically, it will absorb the access capacity in China and be a brilliant signal to the western world, which has constantly been raising questions about debt trap, environmental impact, and lack of transparency in CPEC.

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Pakistan’s National Command Operation Centre (NCOC) leads on the country’s Covid-19 response and is chaired by the Planning Minister, who is also leading on CPEC. While NCOC is busy dealing with the potential spread of the disease, the Ministry of Planning should start working on a major health sector up-gradation plan with the help of private-sector experts.

This plan should underpin the next meeting of JCC to determine post-pandemic priorities for CPEC. Declining social sector spending is a major concern and a binding constraint for Pakistan’s sustainable economic development. A substantial improvement in health indicators of a young population will have a far-reaching impact on productivity enhancement and shared regional prosperity.

Haroon Sharif is currently a visiting fellow at the Institute of Development Studies (IDS) at the University of Sussex, UK. He is also a Senior Advisor to the UN on Finance for Development. He remained Pakistan’s Minister of State for Investment in 2018-19 and led the Industrial Cooperation partnership under CPEC.

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