NationalVolume 14 Issue # 19

Gains from the Belt and Road Initiative

Pakistan has immensely gained from the Belt and Road Forum in China. It has not only removed doubts about the second phase of the China-Pakistan Economic Corridor (CPEC) but also opened 90pc of Chinese markets to Pakistani goods.

 

The signing of memoranda of understanding (MoUs) on the first Special Economic Zone (SEZ) by China and Pakistan is being seen as a new phase of the CPEC. A new agreement on free trade between the two countries will allay the dominant fear that the free trade between the two countries will harm Pakistani businesses. The new agreement on free trade allows Pakistani goods to reach to 90pc of the Chinese market. It will open huge opportunities for Pakistani exporters. Last year, the Chinese share of Pakistani markets was $11.458 billion while Pakistani exports to China were a mere $1.744 billion. The new agreement is expected to increase Pakistani exports by $500 million. It may not be a huge gain but an open access to Chinese markets will benefit Pakistani traders in other ways.

Besides the two significant developments, the Chinese state will invest $ 1 billion in 27 projects in Pakistan that the two sides have identified as crucial for socio and economic development of Pakistan. The visit of Prime Minister Imran Khan to China has further cemented bilateral relations as China has promised to assist developing different sectors of the Pakistani economy. The Pakistan Railways will benefit the most. Pakistan will lay a double track from Peshawar to Karachi with China’s help. Trains will run at speed of at least 160km/h on the track. It will also help the department improve its freight service and earn profits after running into losses for decades. As the CPEC will enter its second phase, Pakistan is poised to exploit the opportunities to their maximum.

 

For Pakistan, the stakes surrounding its relationship with China are also central to its future as the country pursues the CPEC with Beijing’s backing. At least $60 billion earmarked for CPEC-related investments across Pakistan marks a historic milestone. Never before has a foreign power committed such a large investment in Pakistan during the nation’s 72-year history, noted the Gulf News. The relationship also has a vital dimension related centrally to global security interests which must be considered in gauging the relationship. Pakistan continues to maintain security related ties with Washington, notably over events in Afghanistan, notwithstanding the friction unleashed after US President Donald Trump ended virtually all defence related assistance to Pakistan. Being in this unique position of maintaining close ties with China versus a security dialogue with the US, albeit a reduced one, Pakistan is able to talk to both countries. This is a powerful and a telling relationship. In about three years, China will begin supplying up to eight new submarines to Pakistan over the subsequent six years with half of them due to be assembled in Pakistan. The submarines are part of what is widely acknowledged as the largest defence contract in dollar terms, ever signed by Pakistan.

 

Meanwhile, by next year, the Pakistan Air Force is expected to get nearer to deciding on a new contract for the purchase of its next batch of advanced fighters. Though the cost of that purchase and its source remain a matter of speculation, many seasoned analysts have noted that a Chinese aircraft supplier will likely win that contract. If true, that would partially be driven by not only the affordability of Chinese military hardware by comparison to western suppliers but also a long history. Unlike a country such as the United States, China has never blocked the supply of military hardware to Pakistan on any pretext. In sharp contrast, the US in 1990 suspended the sale of F16 fighter planes to Pakistan on the grounds that the country was close to producing nuclear weapons.

 

Pakistan’s emerging economic relationship with China under the CPEC and its history of defence ties with it have only helped cement Islamabad’s most important foreign relationship. Though Imran Khan chose the right moment to compliment China for its support to Pakistan, his words also reflect a powerful longer term reality. Any Pakistani leader in Imran Khan’s place would have chosen the moment to similarly praise Beijing’s support to the country, the newspaper noted.

Experts say Pakistan also needs to revamp its own house to sustain the warmth in its relations with China. Fundamentally, the country needs to redefine the role of government in daily lives if it is to improve the role of the state in the economy. Even though the CPEC has been launched as evidence of a new era, parts of the Pakistani state machinery continue to vastly underperform. In particular, the future of debt tied to CPEC-related loans is an oft discussed matter in daily conversations.

Meanwhile, the United States Defense Department has said that China seeks to establish military bases around the world to protect its investments in its ambitious One Belt One Road global infrastructure program, according to an official report. Beijing currently has just one overseas military base, in Djibouti, but is believed to be planning others, including possibly Pakistan, as it seeks to project itself as a global superpower. “China’s advancement of projects such as the ‘One Belt, One Road’ Initiative (OBOR) will probably drive military overseas basing through a perceived need to provide security for OBOR projects,” the Pentagon said in its annual report to Congress on Chinese military and security developments. However, there was no word from China or Pakistan on it.

 

Many critics argue that with Pakistan’s tax collections repeatedly falling behind target, the country’s ability to meet its CPEC-related financial obligations will remain in doubt. Similarly, Imran and his Pakistan Tehreek-e-Insaf (PTI) came to power just last year, promising to lay the ground for a concerted attack on corruption. But Imran Khan cannot afford to oversee a slowdown across Pakistan from his government’s anti-corruption drive, especially at a time when a recessionary type environment is already expected under the weight of conditions expected under a new loan from the International Monetary Fund. In the end, it should be clear to any observer that the full success from Pakistan’s closer economic ties with China, in part must be tied to the policies chosen by the country.

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