Pakistan and the Road and Belt initiative
China will look to the development of domestic demand to find opportunities for the productive sectors of its economy
The writer is a former caretaker finance minister and served as vice-president at the World Bank
Now once again China is reaching out to the world but this time in a different way. Compared to its opening to the West after the visit by President Richard Nixon in 1972, China’s ‘new opening’ has a different geographic orientation. Then Pakistan played an important role. It is once again involved as Beijing is opening itself to the West in a different way. It has put its faith in land-based commerce to provide a different set of stimuli to its economy. What the World Bank in a 1993 study called the ‘East Asian miracle’ model has run its course. China is no longer a cheap-wage economy and there are no longer rapidly growing markets in Europe and the United States for its cheap manufactures. Wages in China have increased several-fold since it began to develop its economy. There are also other compulsions that the leaders in Beijing must take into consideration to move forward their economy.
It can no longer continue to develop the narrow strip of land that stretches from the northern port of Dalian to Guangzhou in the south. It must diversify its economy and spread development to the provinces in the country’s mid-west and the west. And for that it needs Pakistan’s help — an economic corridor that connects it to the sea. This is where the China-Pakistan Economic Corridor (CPEC) enters the picture. The corridor through Pakistan is a part of what the leaders in China call the Road and Belt Initiative. The RBI is a cluster of projects involving the building of roads, railways, ports, oil and gas pipelines, fibre-optic cables that will link the Chinese economy with the countries to its west.
The new development paradigm China is adopting differs from the ‘miracle economy’ approach in several key aspects. China will look to the development of domestic demand to find opportunities for the productive sectors of its economy. Rapid economic growth in the past three decades has brought in new consumers into its own markets. Their demand is not much different from what the Western buyers of Chinese manufactured goods wanted. But these needs will not be satisfied by China’s own industry. The Chinese will need to tap labour supplies in its neighbourhood. Pakistan, with a large and growing population, could be an important source of supply. CPEC is being designed not only to bring in industrial inputs such as minerals the country’s large economy needs. It will also import cheap manufactures from Pakistan. This is the reason why several industrial estates are being located along with the road network covered by CPEC.
China is also mindful of the mineral and energy riches available in the vast landmass that makes up the five countries of Central Asia, Afghanistan and western Pakistan. It has plans to exploit and develop these resources for use by its industry. A Pentagon study released a few years ago estimated Afghanistan’s mineral wealth at one trillion dollars. The Chinese have already begun to exploit some of this untapped resource. Large investments have already been made to reach the iron ore available at a place located not too far from Kabul. Once the metal is extracted it will need to be transported and the least costly way of doing this is by road. Soon Pakistanis will see huge trucks carrying iron ore on the new road system that will connect the country with China.
The work associated with the RBI is progressing steadily in Pakistan. Results will become visible in the next few years as China’s initiative knits together the countries of Central and West Asia. While the Donald Trump approach to South Asia would result in diminishing his country’s presence in the subcontinent, that of China would increase significantly. It is also unlikely that the United States would succeed in building up India as a counterforce to the growing strength of China. Rex Tillerson, the United States Secretary of State, described what his government was trying to achieve in Asia as Donald Trump set out for the Asian trip earlier in November. He proposed a “free and open Indo-Pacific” area in which Australia, India, Japan and even Vietnam will help counter China’s maritime expansion. But the idea is bankrupt if America is opposed to free and open trade. As The Economist wrote in a report on Trump’s Asia visit, “an administration more clear-eyed about what is at stake for America would have taken more seriously China’s belt-and-road initiative, linking Asia by land and sea to the Middle East and beyond.”
The RBI is a large programme. It has been defined in very broad terms. Details will get filled in as the work on it progresses. Not unlike other ambitious initiatives, it too has its detractors. Both the United States and India oppose the programme but for different reasons. Once the RBI network of roads, railways and ports becomes functional, it will knit Central Asia, Afghanistan and Pakistan closer with China. This will have the consequence of reducing the influence of the United States in the area. The fact that this time Pakistan seems less concerned about what I, in the article in this space last week, called ‘America’s fourth exit’ from the country has a great deal to do with the RBI and within it, CPEC. India also has reasons for opposing the Chinese initiative. As an Indian participant at an international seminar I recently attended put it: “The RBI is an effort to isolate my country by locking it in a system it cannot reach.”
Published in The Express Tribune, November 20th, 2017.
It can no longer continue to develop the narrow strip of land that stretches from the northern port of Dalian to Guangzhou in the south. It must diversify its economy and spread development to the provinces in the country’s mid-west and the west. And for that it needs Pakistan’s help — an economic corridor that connects it to the sea. This is where the China-Pakistan Economic Corridor (CPEC) enters the picture. The corridor through Pakistan is a part of what the leaders in China call the Road and Belt Initiative. The RBI is a cluster of projects involving the building of roads, railways, ports, oil and gas pipelines, fibre-optic cables that will link the Chinese economy with the countries to its west.
The new development paradigm China is adopting differs from the ‘miracle economy’ approach in several key aspects. China will look to the development of domestic demand to find opportunities for the productive sectors of its economy. Rapid economic growth in the past three decades has brought in new consumers into its own markets. Their demand is not much different from what the Western buyers of Chinese manufactured goods wanted. But these needs will not be satisfied by China’s own industry. The Chinese will need to tap labour supplies in its neighbourhood. Pakistan, with a large and growing population, could be an important source of supply. CPEC is being designed not only to bring in industrial inputs such as minerals the country’s large economy needs. It will also import cheap manufactures from Pakistan. This is the reason why several industrial estates are being located along with the road network covered by CPEC.
China is also mindful of the mineral and energy riches available in the vast landmass that makes up the five countries of Central Asia, Afghanistan and western Pakistan. It has plans to exploit and develop these resources for use by its industry. A Pentagon study released a few years ago estimated Afghanistan’s mineral wealth at one trillion dollars. The Chinese have already begun to exploit some of this untapped resource. Large investments have already been made to reach the iron ore available at a place located not too far from Kabul. Once the metal is extracted it will need to be transported and the least costly way of doing this is by road. Soon Pakistanis will see huge trucks carrying iron ore on the new road system that will connect the country with China.
The work associated with the RBI is progressing steadily in Pakistan. Results will become visible in the next few years as China’s initiative knits together the countries of Central and West Asia. While the Donald Trump approach to South Asia would result in diminishing his country’s presence in the subcontinent, that of China would increase significantly. It is also unlikely that the United States would succeed in building up India as a counterforce to the growing strength of China. Rex Tillerson, the United States Secretary of State, described what his government was trying to achieve in Asia as Donald Trump set out for the Asian trip earlier in November. He proposed a “free and open Indo-Pacific” area in which Australia, India, Japan and even Vietnam will help counter China’s maritime expansion. But the idea is bankrupt if America is opposed to free and open trade. As The Economist wrote in a report on Trump’s Asia visit, “an administration more clear-eyed about what is at stake for America would have taken more seriously China’s belt-and-road initiative, linking Asia by land and sea to the Middle East and beyond.”
The RBI is a large programme. It has been defined in very broad terms. Details will get filled in as the work on it progresses. Not unlike other ambitious initiatives, it too has its detractors. Both the United States and India oppose the programme but for different reasons. Once the RBI network of roads, railways and ports becomes functional, it will knit Central Asia, Afghanistan and Pakistan closer with China. This will have the consequence of reducing the influence of the United States in the area. The fact that this time Pakistan seems less concerned about what I, in the article in this space last week, called ‘America’s fourth exit’ from the country has a great deal to do with the RBI and within it, CPEC. India also has reasons for opposing the Chinese initiative. As an Indian participant at an international seminar I recently attended put it: “The RBI is an effort to isolate my country by locking it in a system it cannot reach.”
Published in The Express Tribune, November 20th, 2017.