China and Pakistan’s economic recovery

Realisation of opportunities shall be a challenge

Pakistan and China assign a high priority to their bilateral relations. Though these relations are mutually advantageous and China has won over Pakistan as a reliable friend in the region, Pakistan has benefited more from this relationship. No other single country has made such a significant contribution to strengthening Pakistan’s industrialisation, defence production, infrastructure development, power generation, and peaceful uses of nuclear technology.

Two top level visits in May and July this year have reinforced and expanded this relationship: Chinese Prime Minister Li Keqiang to Islamabad (May 22-23) and Prime Minister Nawaz Sharif to Beijing and Shanghai (July 3-7). These were their first visits after becoming prime ministers of their respective countries.

The latest visit of Prime Minister Nawaz Sharif has produced agreements and memorandums of understanding with a long term perspective to turn around Pakistan’s economy. Some of the highlights of the commitments by the Chinese government and its corporate sector include: 2000 kilometers long highway linking Kashgar with Gwadar; a fiber optic cable from the Chinese border to Rawalpindi/Islamabad in order to boost international communication; upgrading of the Karakoram Highway linking Kashgar with Abbottabad; new Lahore-Karachi motorway; construction of the bullet train project between Karachi and Peshawar; completion of the ongoing work on rehabilitation of the Attabad lake and its adjoining areas by 2017; and an early completion of work that is already going on nine small power projects.

Pakistan will get Chinese cooperation for the Diamer-Bhasha Dam project and the Chinese agreed to return to the Nandipur power project for its completion. The two countries will work towards doubling the bilateral trade from the current level of $12 billion per year over the next couple of years. Agreements and memorandum of understanding were signed for increased economic and technical cooperation, greater interaction for economic development planning, China offering courses and training in textile, flood relief and disaster management and provision of equipment for eradication of polio. There will be greater interaction between the PML-N and China’s Communist Party. Another memorandum of understanding for cooperation was signed between Institute of Strategic Studies, Islamabad and China’s Institute of Contemporary Studies.

This is a very ambitious agenda for the next five to ten years. It is a dream for an economically stable Pakistan that is linked with the neighbouring states through roads, gas and oil pipelines and a well-developed port of Gwadar serving as a sea link for trade from and to China, Afghanistan and Central Asia.

Pakistan can cash on its geographical location, linking three regions: South Asia, Central Asia and the West Asia (Middle East) by seeking a future of active trade among these regions through Pakistan. Similarly, a network of gas and oil pipelines offers better economic prospects to Pakistan and the region. Pakistan will also attract much investment. Many western multinational corporations will set up industry in Pakistan and transport its goods to Central Asia.

However, such a dream cannot materialise without Pakistan making a sustained and earnest effort to overcome the current domestic problems and work towards cultivating normal economic interaction with the neighbouring state.

Pakistan does not have technical know-how and finances to pursue such a major economic transformation. China is willing to help in a big way but its cooperation cannot turn around Pakistan’s economy unless the policy makers and politically active circles in Pakistan adopt a down-to-earth disposition towards Pakistan’s internal problems.

If the dream visualised during Nawaz Sharif’s visit to China is to realise, Pakistan has to address four sets of issues on a priority basis. First, a number of issues pertain to Pakistan’s relations with China. It is extremely important that Pakistan’s prime minister continues to take a strong interest in implementation of the agreements and MoUs signed during the visit. If the matters are left to the bureaucracy, most of these arrangements will not materialise. The past experience shows that only a small number of agreements and MoUs between Pakistan and China are actually implemented.

China wants to help Pakistan but it will not entangle in Pakistan’s troubles with India or the United States. China pursues its relations with Pakistan, India and the U.S. as separate and distinct foreign policy strategies. While Nawaz Sharif was in Beijing, India’s Defence Minister, A.K. Antony was making an official visit to the same city. India and China have agreed to extend cooperation between the militaries of two countries. China’s policy is to maintain peace on its border and it politely advises the same to Pakistan.

Pakistan has to deal with China’s corporate sector that functions autonomous of the Chinese government and these Chinese companies are as professional as their western counterparts. Therefore, leaving aside the diplomatic rhetoric of good friendship, business matters have to be dealt with in a professional manner. These companies will not risk their investment and the lives of their officials in Pakistan. Therefore, Pakistan will have to improve security and investment environment for foreign investors.

Second, Pakistan needs to improve governance and control corruption in government so that the business and industrial groups from China and other countries do not get bogged down in cumbersome bureaucratic procedures or some bureaucrats, politicians or other influential people seek their ‘cut’ to facilitate their work.

Third, if Pakistan cannot control terrorism and violence, forget about highways, motorways and pipelines through Pakistan. The military and civilian leaders have to come to a firm decision that terrorism and violence cannot be tolerated no matter who does it and why it is being done. Pakistan will become a non-functioning state and the economy will never be salvaged if terrorism is not controlled. It builds strains in China-Pakistan relations from time to time. Over a dozen Chinese have been killed in Pakistan in the last ten years.

Fourth, Pakistan needs to redefine its regional profile by improving relations with India and opting for more trade. It should adopt a nonpartisan approach towards Afghanistan’s internal affairs. Pakistan should focus on controlling its tribal areas and securing its border with Afghanistan against the movement of militant groups in both directions. Beyond this border Pakistan’s interest should be in helping Afghanistan’s reconstruction no matter who rules Kabul.

Nawaz Sharif’s visit to China has created an opportunity for Pakistan to cope with the current socio-economic predicament. The realisation of this opportunity is a challenge. This requires a major shift in worldview and strategies of Pakistan’s power elite. Can they do it?

The writer is an independent political and defence analyst.