An inclusive economic model

China-Pakistan relations foster an inclusive economic bond

Isn’t it ironic that the countries and multilateral institutions responsible for promoting gross inequality globally, as well as within even the most developed countries by following a highly faulty economic model since at least early 1970s, are now trying to find fault in an economic model that has lifted millions out of poverty in a matter of a decade?

A study of the Silk Road Economic Belt by the Friedrich-Ebert-Stiftung (FES) and the Stockholm International Peace Research Institute (Sipri) has identified potential issues that may negate any benefits the initiative brings.

The study speculates that the Chinese will likely accept or reject projects based on whether they serve the needs of Chinese industry, rather than what they bring to the recipients.

It also suspects that political tensions between different countries may impede the smooth rollout of projects.

Local elites, the study further suspects, may corner the “spoils” from new projects, thereby exacerbating social tensions. It has also expressed fears that labour rights and environmental protection may not be given the attention they deserve.

Therefore, the study recommends that:

The EU put forward a joint consultative mechanism with China to ensure projects are implemented smoothly, by ensuring all stakeholders have a hand in planning and supervision. Official development assistance programmes in BRI recipient countries should, include assistance in project evaluation. Organisations such as the UNDP and the UN Economic and Social Commission (ESC) for Asia should advise recipient countries on the impact and viability of planned projects. BRI loans should not be allowed to breach the debt burden thresholds determined under the World Bank-IMF debt sustainability framework. And finally, the Belt and Road Initiative needs to attract private capital as there are around $8.5 trillion “sitting in cash, waiting for better investment opportunities”. Bringing in private capital would increase the scale of BRI, open it to non-Chinese companies and allow projects to be implemented more efficiently.

It was perhaps in this frame of mind that some of the delegates at the May Belt and Road Forum had called for a rules-based approach, sensitive to the developmental needs of recipient countries. The stakeholders such as the US, the EU, Russia, India and Japan, according to the study, need to coordinate among themselves and engage with China to promote more transparent partnerships.

Meanwhile, the China-Pakistan Economic Corridor (CPEC) continues to bug India. Out of fear of being overwhelmed socio-economically by China’s Road and Belt Initiative (RBI) India seems to have decided to create problems for the initiative. To start with it has decided not to attend any events connected with the BRI Forum.

What India is most worried about, however, is a collection of infrastructure projects under the label of CPEC, currently under construction throughout Pakistan. It traverses territory which India considers to be disputed. China officially claims not to take sides in the Kashmir dispute, but India believes it has done so by finalising CPEC with Pakistan and ignoring India’s position. As well as compromising India’s territorial integrity, CPEC, in India’s view, is raising other concerns about BRI projects.

India’s version on Gwadar port: the seaport has been leased to China until 2059. Chinese companies are operating the port, developing a 1,000-hectare Special Economic Zone nearby, and building an international airport with a Chinese grant of $230 million. These actions are certainly not driven by altruism. They reflect the strategic value to China of access to the Arabian Sea and proximity to energy-rich West Asia. It should be no surprise that Chinese naval submarines have been spotted in Gwadar.

Clearly, the so-called stakeholders that include the US, the EU, Russia, India and Japan seem either not to have understood the $4 trillion venture across 69 countries meant presumably to project China’s strategic vision for global peace, won through mutually beneficial economic cooperation or they are so fearful of being swamped by its success that they want to stop it before it takes off.

Published in The Express Tribune, June 24^th, 2017.

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