At a time when economic challenges are multiplying on account of external woes and the case for another bailout package is becoming stronger and stronger, there is a need to float an idea that could help Pakistan avoid this disaster that will only add to its chronic indebtedness.
For making Belt and Road Initiative (BRI), unveiled by Chinese President XI Jinping, as an ultimate success, China must be convinced for creating a window for availing funding by all those BRI countries that are facing balance of payment of crisis.
China has emerged as the second largest economy of the world by working the miracle of expanding its size from $150 billion in 1978 to $8.227 billion till 2012 and then up to $12.3 trillion by 2017. Its foreign currency reserves are hovering around $4 trillion, out of which around $1 trillion were invested into US treasury.
Chinese seemed reluctant to challenge the global financial system, arguing they have played an important role in creating Asian Infrastructure Investment Bank (AIIB) with the mandate to supplement other multilateral institutions like World Bank and Asian Development Bank (ADB) and it should not be considered as competitor of these international financial institutions.
With the experience of Sri Lanka and some other African countries, facing balance of payment crisis after Asian giant’s investment, Chinese were not ready to talk about the proposal of creating Asian Monetary Fund (AMF). However, the situation calls for making renewed efforts to convince Beijing to create a window whereby they could provide balance of payment support only to BRI countries on the pretext that this facility was limited to only that comity of nations.
Pakistan’s economic vulnerabilities are increasing at an alarming rate and nobody is coming up with a sustainable solution. Dr Ashfaque Hassan Khan, a renowned economist, compares the country’s economy to a patient, in an intensive care unit, being examined by different doctors, who are readily giving out their diagnosis but are unable to prescribe a medicine to cure it. Khan said the current account deficit was all set to touch $18 billion for the last fiscal ended on June 30, 2018 but no remedial measures were being taken even by the caretaker setup.
In these circumstances, China can make a real difference for which Pakistan will have to launch diplomatic and political efforts.
Chinese have flexed their economic muscles at global levels and now they are heading towards green growth and growing up to $17 trillion in years to come. All this was achieved with the vision of Chinese leadership as they opted for undertaking reforms with Chinese characteristics by sticking to the policy of opening up their economy from the clutches of state controls, resulting into higher growth in the range of 9 to 10 percent for over two decades.
After transforming from communism to socialism China is now undertaking reforms as interpreted by Chinese professors teaching at Shanghai International Studies Center (SISU) University and University of International Business and Economics (UIBE) at Beijing. According to those scholars China undertook reforms to overhaul the economy with “Chinese characteristics” by devising policies in a synchronised manner in which higher growth with inclusiveness was made the central point of their policy formulation and implementation process.
The Chinese government is facing a trade war, imposed by the US President Donald Trump, at a time when Beijing was making all out efforts to spur growth that fell sharply from 9.9 percent to 6.9 percent last year.
Chinese seem in an aggressive mode to expand the footprint of their economy by connecting Asia with Central Asia, Russia, and up to Europe through road, rail, and sea for reviving old silk route and creating a win-win situation for countries and regions.
Keeping this slowdown in view, China’s leadership launched the BRI, whereby Beijing committed to spend $10 trillion in order to spur the growth momentum not only for China but for all regions and nations inhabiting in this part of the world.
Professor John Dong, a senior faculty member at UIBE Beijing, stated that China transformed its economy to become the largest processing hub of the world and now it was moving towards highest quality doers and artificial intelligence to go into next phase of development. Alone in auto sector, there are over 100 brands, which clearly indicates it is a booming economy and everyone wants to become part and parcel of this qualitative growth.
Keeping this background in mind, Pakistan is presented with yet another golden opportunity to reap benefits from the BRI as much as possible.
Although, we have missed many opportunities in the past owing reasons like lack of political stability, increasing disharmony among different institutions, non-consensus on economic reforms, and discontinuity of policies in last 70 years, a lot can be still be done to stage a turnaround.
Fortunately, China had committed around $62 billion for China-Pakistan Economic Corridor (CPEC) and kick-started and even completed projects of around $30 billion in last three years. Chinese consider the CPEC as BRI’s flagship program, which they want to replicate in other countries of the world.
Pakistan is the middle of a political transition, so things will start moving towards the next phase of the CPEC projects after the general elections, scheduled for July 25.
Now it will be a challenge for Pakistan to streamline the CPEC projects soon after the elections as modernisation of Mainline (ML-1) with estimated cost of over $8.2 billion in two phases was yet to be finalised on financing terms and conditions.
Thousands of industries have closedown in China owing to different issues and Pakistan can manage to have at least 20 to 25 percent of them relocated to special economic zones (SEZs). Unfortunately, so far we have not yet finalised a single SEZ out of proposed nine and it needs to be done on war footings.
Secondly China is all set to open up its imports and a special expo is being arranged for this purpose in next November in Shanghai. Pakistan can make serious efforts to maximise its share of exports to China by setting up a convincing pavilion to promote its made-ups at that expo.
If this golden opportunity in shape of CPEC is knocking on our doors then we must make the most of it for making lives of voiceless Pakistanis prosperous in months and years ahead.
However, the foremost prerequisite to nail this chance is smooth political transition and subsequent stability.
By: Mehtab Haider