Beijing calling
Government of Pakistan should not sacrifice its own interests to those of Beijing out of a false sense of gratitude.
The Nawaz Administration’s China-focused diplomacy appears to be paying off: Beijing appears to be ramping up its economic assistance to Pakistan and, by all accounts, it is in the sort of capital intensive infrastructure projects that are likely to have a sustained positive economic impact on the country’s future. Chinese President Xi Jinping is expected to arrive in Islamabad later this month with the intention of signing up to $10 billion worth of project assistance in Pakistan, which would be a welcome change from the meaningless platitudes and memoranda that were signed during the previous administration.
However, with the political temperature in Islamabad reaching record levels, and the Sri Lankan president cancelling his Pakistan visit owing to the turmoil, this high-level Chinese visit may also be called off, which will not augur well for an economy which can benefit much from China. In total, the Chinese government is expected to provide financing for 14 infrastructure projects, all of which are absolutely vital and long overdue. The Lahore-Karachi motorway is expected to cut travel time through the length of the eastern half of the country by half, enabling far greater commerce. The Pak-China Economic Corridor is likely to produce little by way of transit trade from Western China to the Middle East, but it will most likely upgrade the transportation infrastructure of the western half the country to be more comparable to the eastern half.
This, in particular, is an important project: Punjab and Sindh are relatively more prosperous than Balochistan and Khyber-Pakhtunkhwa in large part because of the infrastructure built by the British to transport goods and people from Punjab down to the port in Karachi. If a similar infrastructure is built leading from Chitral to Gwadar, that half of the country is likely to see substantial economic gains, and perhaps an alleviation of the sense of deprivation that too often manifests itself violently in insurgencies in those provinces.
In addition, the energy projects that the Chinese state-owned enterprises are likely to invest in can help reduce or even eliminate the severe energy deficit in Pakistan. If these projects involve the use of more local sources of fuel, such as coal and natural gas, or even hydroelectricity, then the energy thus supplied is likely to remain sustainably affordable.
However, while the Chinese assistance is welcome, Pakistanis would do well to remember that the assistance is hardly charity. The financing will come in the form of loans, albeit some of them are expected to carry relatively low interest rates. And the projects are likely to be subject to the condition that the Government of Pakistan hire Chinese state-owned contractors to build them. In essence, the money will leave one Chinese government bank account and end up in another, accruing some Pakistani taxpayer funded interest along the way. All of this, of course, does not mean that the assistance should not be welcomed. It just means that the government of Pakistan should not sacrifice its own interests to those of Beijing out of a false sense of gratitude.
For instance, while the Chinese initiative to set up a development bank outside of the US-sponsored Bretton Woods framework is interesting, Pakistan should not participate in it at the expense of its participation in the existing set of Western-led global economic institutions that have largely served us well. There is no harm in being a member nation of the Asia Infrastructure Development Bank, but Islamabad should remember that the World Bank and IMF still hold access to a far larger capital market.
Aggravating the latter in the hopes of assistance from the former is likely to be a temptation that the finance ministry will no doubt soon find itself facing, but it is one that they must resist at all costs. Just because Beijing has finally started to help Pakistan in substantive ways does not mean that we forgo a constructive relationship with Washington.
Published in The Express Tribune, September 4th, 2014.
However, with the political temperature in Islamabad reaching record levels, and the Sri Lankan president cancelling his Pakistan visit owing to the turmoil, this high-level Chinese visit may also be called off, which will not augur well for an economy which can benefit much from China. In total, the Chinese government is expected to provide financing for 14 infrastructure projects, all of which are absolutely vital and long overdue. The Lahore-Karachi motorway is expected to cut travel time through the length of the eastern half of the country by half, enabling far greater commerce. The Pak-China Economic Corridor is likely to produce little by way of transit trade from Western China to the Middle East, but it will most likely upgrade the transportation infrastructure of the western half the country to be more comparable to the eastern half.
This, in particular, is an important project: Punjab and Sindh are relatively more prosperous than Balochistan and Khyber-Pakhtunkhwa in large part because of the infrastructure built by the British to transport goods and people from Punjab down to the port in Karachi. If a similar infrastructure is built leading from Chitral to Gwadar, that half of the country is likely to see substantial economic gains, and perhaps an alleviation of the sense of deprivation that too often manifests itself violently in insurgencies in those provinces.
In addition, the energy projects that the Chinese state-owned enterprises are likely to invest in can help reduce or even eliminate the severe energy deficit in Pakistan. If these projects involve the use of more local sources of fuel, such as coal and natural gas, or even hydroelectricity, then the energy thus supplied is likely to remain sustainably affordable.
However, while the Chinese assistance is welcome, Pakistanis would do well to remember that the assistance is hardly charity. The financing will come in the form of loans, albeit some of them are expected to carry relatively low interest rates. And the projects are likely to be subject to the condition that the Government of Pakistan hire Chinese state-owned contractors to build them. In essence, the money will leave one Chinese government bank account and end up in another, accruing some Pakistani taxpayer funded interest along the way. All of this, of course, does not mean that the assistance should not be welcomed. It just means that the government of Pakistan should not sacrifice its own interests to those of Beijing out of a false sense of gratitude.
For instance, while the Chinese initiative to set up a development bank outside of the US-sponsored Bretton Woods framework is interesting, Pakistan should not participate in it at the expense of its participation in the existing set of Western-led global economic institutions that have largely served us well. There is no harm in being a member nation of the Asia Infrastructure Development Bank, but Islamabad should remember that the World Bank and IMF still hold access to a far larger capital market.
Aggravating the latter in the hopes of assistance from the former is likely to be a temptation that the finance ministry will no doubt soon find itself facing, but it is one that they must resist at all costs. Just because Beijing has finally started to help Pakistan in substantive ways does not mean that we forgo a constructive relationship with Washington.
Published in The Express Tribune, September 4th, 2014.