Taking the Asian option
Pakistan has turned to the International Monetary Fund for a bailout package
Despite the inevitability of Pakistan turning to the International Monetary Fund (IMF) for a bailout package sooner than later, it would be unrealistic to expect the donor to erase its soaring foreign debt pain. As a matter of recourse, our government has two choices to make. Both options can somehow be traced to the Asian continent.
The first path is the one adopted by Malaysia — an Asian tiger in its own right — as recently as around two months ago. Dr Mahathir Mohamad, the ageing architect of that country’s economic transformation three decades ago, made the stunningly intrepid decision to cancel Chinese projects, as Malaysia did in August 2018. This was a bold and calculated damage risk by Malaysia to its long-term relations with Beijing; Kuala Lumpur showed the wherewithal to grit its teeth and buck unpopular sentiment for the sake of serving greater national interest. Then there is the example of Sri Lanka which decided to allow China to transform debt into equity, as Colombo did not too long ago. Realising that Colombo would not be able to repay its debt, Sri Lanka gave China a controlling equity stake and a 99-year lease for Hambantota port, which it handed over in December 2017. The decision was rooted in the realisation that the economic argument for Hambantota — no more than a circular fort in the early 1800s under British colonial rule — was rather unsound as well as stoking fair bit of local and regional concerns that it could one day become a Chinese naval facility.
Therefore it would be wise of recipient countries to link infrastructure projects to neater development strategies that assess projects within larger networks and monitor overall debt levels. This is perhaps music to the ears of the international community — distrusting as it is to any proposed expansion alternatives to Chinese infrastructure financing. Neither the fierceness nor the urgency of the opposition to Chinese infrastructure expansion should be underestimated or overlooked.
We should also understand the reasons why they would want to block support for all such proposed projects. Rivalry and envy play a huge part in Asia’s infrastructure contests. CPEC will remain a dream unless we can keep the external debt in check.
Published in The Express Tribune, October 11th, 2018.
The first path is the one adopted by Malaysia — an Asian tiger in its own right — as recently as around two months ago. Dr Mahathir Mohamad, the ageing architect of that country’s economic transformation three decades ago, made the stunningly intrepid decision to cancel Chinese projects, as Malaysia did in August 2018. This was a bold and calculated damage risk by Malaysia to its long-term relations with Beijing; Kuala Lumpur showed the wherewithal to grit its teeth and buck unpopular sentiment for the sake of serving greater national interest. Then there is the example of Sri Lanka which decided to allow China to transform debt into equity, as Colombo did not too long ago. Realising that Colombo would not be able to repay its debt, Sri Lanka gave China a controlling equity stake and a 99-year lease for Hambantota port, which it handed over in December 2017. The decision was rooted in the realisation that the economic argument for Hambantota — no more than a circular fort in the early 1800s under British colonial rule — was rather unsound as well as stoking fair bit of local and regional concerns that it could one day become a Chinese naval facility.
Therefore it would be wise of recipient countries to link infrastructure projects to neater development strategies that assess projects within larger networks and monitor overall debt levels. This is perhaps music to the ears of the international community — distrusting as it is to any proposed expansion alternatives to Chinese infrastructure financing. Neither the fierceness nor the urgency of the opposition to Chinese infrastructure expansion should be underestimated or overlooked.
We should also understand the reasons why they would want to block support for all such proposed projects. Rivalry and envy play a huge part in Asia’s infrastructure contests. CPEC will remain a dream unless we can keep the external debt in check.
Published in The Express Tribune, October 11th, 2018.