From made in Pakistan to made in China

What to watch out for

While the multi-billion-dollar infrastructure project, backed and financed by China, is likely to inject a much needed financial support, the project is going to put the country’s local economy and industrial base under strain

 

Pakistan is not ready to contest or even counterbalance Beijing’s strategic plans to dominate Pakistan’s local economy which is worth more than 300 billion dollars with a potential to grow significantly if the available resources are properly harnessed

A few months ago, the then deputy chairman of the planning commission, Ahsan Iqbal, in a statement said that the China Pakistan Economic Corridor’s (CPEC) long-term strategic plan will be made public before it is approved. Reports have emerged that the core aspects of the plan have been charted out. However, it appears that the government, which is deeply embroiled in a battler with a number of other state institutions, is either ready or prepared to make public the CPEC’s strategic impact beyond tactical glimmers and tactical highlights.

While the multi-billion-dollar infrastructure project, backed and financed by China, is likely to inject a much needed financial support, the project is going to put the country’s local economy and industrial base under strain.

According to the available information so far, China’s investments in Pakistan focus in areas which can restore a general stability in the country by revamping broken and receded infrastructure, energy and connectivity projects. It’s undeniable that Pakistan’s energy sector is one of the underdeveloped and directly threatens the country’s plans for economic development. Moreover, Pakistan doesn’t have sufficient capital to connect landlocked and hinterlands areas of the country with major local or international markets to facilitate domestic and international trade or to bring into play regions that remain away from Pakistan’s urban zones, such as Karachi, Lahore and other major cities. China’s investment is vital in this regard: the road connectivity which is being put in place under the plan is not only going to boost trade links but will also increase revenues that remain buried and untapped due to the non-existing road infrastructure.

The investments in energy and road connectivity remain one of the glamorous and much-cited highlights of the project. What is underreported, however, is the part that how China’s plans to or have pushed for concessions when it comes to gaining access to Pakistan’s domestic market which goes beyond energy and road connectivity. For instance, according to Dawn’s recent report, tilted, ‘CPEC master plan revealed’ China plans to bring major agriculture enterprises to Pakistan that will operate their own “farms, processing facilities for fruits and vegetables and grain. Logistics companies will operate a large storage and transportation system for agrarian produce. Enterprises entering agriculture will be offered extraordinary levels of assistance from the Chinese government. They are encouraged to “[m]ake the most of the free capital and loans” from various ministries of the Chinese government as well as the China Development Bank.”

What this actually shows is that Pakistan is not ready to contest or even counterbalance Beijing’s strategic plans to dominate Pakistan’s local economy which is worth more than 300 billion dollars with a potential to grow significantly if the available resources are properly harnessed. Pakistan’s agriculture and industrial sector are under acute strain and it’s likely that with the advent of Chinese cash, these businesses are going to vanish unless they partner with or give-up huge shares to foreign investors.

Reportedly, Beijing has clearly asked for preferential treatments for its investors and firms that are looking to gain stakes in Pakistan’s market. “The areas where such preferences need to be extended are listed in the plan as “land, tax, logistics and services” as well as land price, “enterprise income tax, tariff reduction and exemption and sales tax rate.” Simply put, this actually means is that such concessions will put Pakistan’s own local firms and investors at a huge disadvantage and given Beijing’s deep pockets, the country’s local industry will be at the mercy of China’s economic dictations. “The government has allowed the CPEC’s imports without any duty and taxes – of all the machinery and equipment – putting the local industry at a disadvantage and consequently works against national interests,” said the spokesperson of the Pakistan Economy Watch (PEW).

Any such outcome will mean that with increased stakes and influence on Pakistan’s local economy, China’s diplomatic and political clout will also grow manifold. It can be rightfully argued that Beijing’s influence in Pakistan’s politics and policy-making will grow to an extent that the latter’s internal sovereignty will come under threat. What the policymakers in Islamabad need to realise is that Beijing’s influence and clout in Pakistan will be nothing like what Pakistan may have experienced in the past. The United States and even Pakistan’s longtime ally, Kingdom of Saudi Arabia never had an influence that could choke Pakistan’s domestic economic base. However, in Beijing’s case, this appears to be where Pakistan is headed.

Pakistan remains a small entity in China’s global connectivity project where the latter is eying to tap into external markets by putting out local businesses. The focus needs to be on reviving the country’s local economy rather than putting it on disadvantage to fulfill shadowy and vague interests which don’t support Pakistan’s own manufacturing and growth.