Friend For All Seasons

Pakistan became the first Muslim state and third non-Communist country to recognise the People’s Republic of China by sending a high level delegation there on January 4, 1950. The two countries established formal diplomatic relations on May 21, 1951. And now, on the 70th anniversary of these extraordinary relations, it is time for the people of both countries to celebrate and further consolidate ties and cooperation in all areas, especially in view of the emergence of new geo-political and geo-economic challenges and threats to the security of the entire region.

The time-tested friendship spanning over almost three-quarters of a century between the two countries is unprecedented in our region, which has been the epicentre of the Great Game and its extension, the New Great Game. For nearly a century (1830 to 1930), the two most powerful nations on earth — Victorian Britain and Tsarist Russia — fought a secret war in the lonely passes and deserts of Central Asia. Those engaged in this shadowy struggle called it ‘The Great Game,’ a phrase immortalised by Kipling. In an op-Ed in 2016, the term ‘New Great Game’ was elaborated on by Pakistan’s permanent ambassador to the United Nations, Munir Akram, and much before that, in 2008, by Dr. Sachithanandam Sathananthan in a paper, ‘The Great Game Continues.’ In the prevailing circumstances, both China and Pakistan need to prepare for the rapidly changing realities in the world in general, and in our region in particular.

Since independence in 1947, Pakistan has been struggling to become a self-reliant economy that can end its dependence on foreign lenders and donors and come out of the debt trap. Pakistan faces numerous challenges on the economic front, the most challenging of these being the massive, unsustainable fiscal deficit of over 8 percent of the GDP, coupled with a monstrous debt of 88 percent of the GDP. The recent revival of the up to recently suspended International Monetary Fund (IMF) programme — now with the most stringent conditions attached — is bound to retard the already dismal growth in Pakistan due to the heavy taxation (the federal tax target agreed upon by the PTI Government is Rs. 4.9 trillion for the fiscal year 2021-22), and a third and more deadly wave of COVID-19. With a growth rate of only 1.5 percent this year, it is estimated that even in the next fiscal year, the growth rate will not be more than 3 percent — dismal figures given that the target of the Federal Board of Revenue is Rs. 4717 billion.

The blame for this alarming state of affairs lies completely with the coalition governments of the Pakistan Tehreek-i-Insaf (PTI) at the centre and in the three provinces, who have failed to undertake fundamental and institutional reforms to improve governance in all areas or to deliver what it had promised to voters in the elections and after assuming power in August 2018.

The perpetuation of an elitist economy resulting in an ever-growing gulf between the rich and poor, income and wealth inequalities, a fiscal deficit, an oppressive tax system, sluggish economic growth, lack of investment to generate growth, a dearth of skilled labour, stagnant exports, rising imports and poor infrastructure — to mention just the major ones — will remain the stumbling blocks in respect  of reaping the fruits of the China-Pakistan Economic Corridor (CPEC), which since its inception on April 20, 2015 has been claimed by successive governments and military quarters to be a ‘game changer’ that will turn Pakistan into one of the world’s largest economies in the coming years. This dream is unfulfilled to date, and the country remains caught in a deadly debt trap.

On the other hand, China, with its pro-people economic system and excellent management of all areas of governance is now the second largest economy in the world.

After his first visit to China in October 2019, Prime Minister Imran Khan had announced he would follow our neighbour and best friend’s successful policies to uproot corruption and alleviate poverty. For the ruling party and its allies, the point to ponder is why Pakistan has failed to learn from its neighbour, which gained its independence in 1949, two years after us.

No one can deny that much-needed foreign investment and development of infrastructure is coming from China. Unfortunately, we lack the capacity to make the best use of it. The execution of all projects related to the CPEC and those yet to be conceived, after the requisite infrastructure is complete, can bring prosperity to Pakistan — and fulfil the promise of  making it one of the globe’s largest economies.

The challenge of removing inefficiencies from our legislative, judicial and administrative structures that seem change-resistant is formidable, but not impossible. There is a growing realisation that we should move towards modern and efficient delivery systems if the CPEC really is to become a game changer for us.

CPEC, a multi-faceted project, can pull the public and private sector onto a fast-track development mode and prove a blessing for Pakistanis, who are otherwise suffering on account of lethargy and indifferent attitudes and are not ready for a modern knowledge-based economy and technological advances as practically demonstrated by China.

The following areas need to be focused on while making the CPEC a real flagstaff project of China’s vision of the Belt and Road Initiative (BRI).

1. Agriculture and Food Security.
2. Energy Security (including electricity, gas, oil, nuclear energy, etc.).
3. Industrial & Trade Security.
4. Strategic Economic Security.

The key to success for the CPEC and BRI would be evolving regional developments around Pakistan and China. China has already done this by taking over Iran’s Chabahar project, kicking out India and making a huge investment in Afghanistan. China has also been improving relations with Russia. And according to Tony Kevin, Emiritus Fellow at the Australian National University, both have recently sent a clear message to President Joe Biden of the United States: “Don’t judge us or try to change us. Those days are over.”  Yes, those days are decidedly over as noted by the Centre for a New American Security in a paper titled ‘The New Great Game’: “China’s President Xi has bade farewell to his predecessors’ rhetoric that China is merely a developing country, and has embraced its rise as a major power. Russian President Putin, at the same time, has embarked on a series of assertive moves to directly challenge US and Western aims in both Eurasia and the Middle East.”

Pakistan can now adjust to the evolving opportunities in the short-term and mid-term for its strategic economic security in the aftermath of the two-day visit to Pakistan (April 6-7, 2021) by the Russian Foreign Minister, Sergey Lavrov. “I came with a message from my President that tells Pakistan we are open for any cooperation, whatever Pakistan needs, Russia is ready for it,” Lavrov was quoted as saying by a senior Pakistani official, who attended the closed-door meeting between the Russian Foreign Minister and Pakistani authorities. “In other words, the Russian President offered us a blank cheque,” said the official, who requested anonymity because of the sensitivity of the issue.

It is worth mentioning that Pakistan and Russia have already started work on the $2 billion North-South gas pipeline project — signed in 2015 — to lay a pipeline from Karachi to Lahore. Russia has also shown keenness to revive the Pakistan Steel Mills that it originally built. Additionally, Moscow has shown an interest in hydroelectric projects and indicated it is ready to make an $8 billion investment in different areas in Pakistan.

The most critical issue for Pakistan, Iran, China and Russia is the withdrawal of US troops from Afghanistan without securing a peace deal because this could jeopardise regional security. It cannot be disputed that there now exists a New Great Game aimed at sabotaging the BRI and keeping South Asia and the Middle East in turmoil. The ultimate aim of the USA is the containment of China and the blocking of the BRI with the help of India. The Modi-driven Hindutva ideology, the rise of extremism and militancy in the entire area, and the genocide of Muslims in Indian-held Kashmir — are all part of the New Great Game. The forces behind this New Great Game want to make a nuclear Muslim State — Pakistan — economically subservient to the IMF and World Bank.

If the hopes related to the project by Pakistan and China were to be realised, the fruits of CPEC connectivity would be enormous for the entire region. Without it, the huge potential of trade within South Asia cannot be achieved. Imagine hundreds of service stations along the roads providing employment to our youth, the acceleration of trade between different parts of Pakistan, the boost to tourism, to peace and prosperity as Afghanistan, India and Iran conducted transit trade through the CPEC. There is no doubt that this would bring prosperity to the millions in South and Central Asia.  It is thus imperative for the government of Pakistan and all stakeholders to highlight the advantages of the CPEC and create an atmosphere of cooperation and fraternity among all the beneficiaries.

If things were to go according to plan, the dawn of economic well-being for Pakistanis would not be very far. To make that happen, we need to ensure that all citizens get adequate opportunities to prosper and benefit equally from economic growth. We must move fast to end the economic apartheid that is presently inbuilt in our elitist economic structure. Without removing these distortions, the real benefits of mega projects like the CPEC could be wasted. Equitable growth would be entirely possible through this great initiative, if we implemented the Chinese model: “A harmonious society should feature democracy, the rule of law, equity, justice, sincerity, amity and vitality” said Chinese President Hu Jintao.     

The real challenge for Pakistan, while remaining within the IMF programme, is to secure economic security through regional and international connectivity, partnerships and strategic economic investments. This will develop infrastructure and industry to stimulate economic development and growth resulting in economic stability and security.

The new paradigm shifts of innovations in technology, manufacturing and supply-chain management, which have improved products and services in growing consumer markets, are geared towards improving human capital management. Pakistan has an abundance of Human Resources but less human capital as compared to other economies in the region and the world. The notion of “economic security for self-reliance” requires the serious participation of all segments of the population by making them active and productive. The multi-sectoral cooperation mechanism for macro-stability ensures better human resource management policies in different industries, as demonstrated by China.

The present PTI government has so far failed to undertake much-needed and long-delayed fundamental structural reforms in the administration, where the Pakistan Administrative Service (PAS, still better known as DMG) controls most of the key posts, both in the federal and the provincial governments. The highest judicial forum has, time and again in the last many years, pointed out the failure of successive governments in governance, including a poor justice delivery system. The PTI government took the reins by making tall claims of establishing an egalitarian society and providing “justice” to all. In fact, the very name of the party means a “movement for justice.” However, it has failed to provide the resources and a roadmap for the reformation of obsolete and outmoded institutions, especially administrative and judicial systems. No country has progressed economically without fixing its justice delivery system, and improving all areas of governance — especially countering corruption. The example of China is before us, which has been taking the following steps in recent years: In March 2018, two new “super agencies” were established to regulate both the public and the private sector.

For the public sector, the National Supervisory Commission (NSC) replaced all previous agencies. The scope of the NSC was enhanced and it was to act as a watchdog for all state-owned enterprises, public healthcare, research and educational institutes. Since then the NSC has been securing executable evidence and recommending cases for prosecution. And for the private sector there was the State Administration for Market Regulation (SAMR). China’s Anti-Unfair Competition Law (AUCL) meanwhile, deals with commercial bribery by individuals and companies in China.

Pakistan has many organisations, like the National Accountability Bureau (NAB), the Federal Investigation Agency (FIA) and many provincial anti-corruption and law enforcement bodies, even inspection teams of the Prime Minister and Chief Ministers in all the provinces. However, the quality of investigation, the prosecution rate and justice delivery in Pakistan are extremely unsatisfactory. The lesson is clear: the establishment of institutions and passing laws are not the answer. In their evaluation reports, investors and international watchdog agencies like the Financial Action Task Force (FATF) and its affiliate, the Asia Pacific Group (AGP) judge us by our performance, not our political rhetoric — lots of chest thumping and tall claims being common to all our political parties, the Pakistan people’s Party (PPP), the Pakistan Muslim League (Nawaz), and the PTI.   

On the 70th anniversary of the Pak-China relationship, besides the challenges mentioned above, the main issue is the faulty economic policies of the PTI government, giving leverage to the IMF to dilute the tax exemption granted to beneficial CPEC projects while maintaining the exemption for the IFC-funded projects of Independent Power Plants (IPPs) — in the process destroying our growth due to the high cost of energy.

It is surprising that the PTI government is painting a rosy picture of the economy, and many so-called experts (especially self-assumed defence analysts regularly appearing in TV talk shows) portray Pakistan as a “fortress of Islam,” due to its nuclear capability and advanced programme in missile technology. However, it needs to be remembered that the Soviet Republic (the USSR) disintegrated due to its economic bleed while engaged in a war of its own making in Afghanistan. China has a prudent foreign and economic policy, avoiding armed conflicts with neighbours and doing trade even with countries with territorial disputes, for example India and Taiwan, despite the fact that with the backing of the United States, both confront China. The nuanced foreign policy of China towards India and Taiwan should be followed by Pakistan while dealing with its hostile neighbouring countries.

The economic challenges faced by Pakistan are due to a lack of regional trade, the oppressive taxes on a narrow base, amnesties, money and asset-whitening schemes, huge tax expenditure and monstrous debt with ever-increasing debt servicing, poor social spending and the high cost of running an inefficient gigantic state apparatus. All these are interlinked and require all-out reforms.

In these days of international recession due to the COVID-19 pandemic, Pakistan’s first and foremost priority should have been to take measures to ensure survival, revival and growth in all sectors. Till today, no concrete steps have been taken by the federal and provincial governments for meeting this emergent situation. Resource mobilisation should be given preference to build infrastructure, facilitate the growth of small and medium-sized firms in the industrial sector and small farms in the agricultural sector for an employment-intensive and equitable economic growth process. In all these areas, great scope exists with China, Iran, Turkey and Russia for achieving rapid growth, human resource development and a regional EU [European Union]-style bloc.

There is still time for Prime Minister, Imran Khan to realise that the iniquitous prescriptions of the World Bank/IMF of high taxes, complicated laws and enormous cost of doing business will not solve our fiscal woes. These will bring more miseries as an economy in recession cannot grow due to the economic toll of the COVID-19 pandemic. The viable solution is simple/low-rate taxes, reducing the huge tax expenditure by withdrawing exemptions available to the rich and mighty, and giving relief to taxpayers as they have suffered heavily during the lockdown wrought by COVID-19.

If the PTI Government wants to embark on the path to prosperity that China took in the last few years, it must drastically cut wasteful expenditure, eliminate circular debt, get rid of loss-bearing public sector enterprises and improve efficiency and productivity in all sectors of the economy. State lands, situated in the heart of cities, should be leased out for business and commercial ventures which would generate substantial funds, rapid growth and new jobs. For this, joint ventures with all the countries of the Golden Ring (China, Iran, Turkey and Russia) should be the top priority.

It is time we shed our “despair” and, with China as our main partner, utilise the CPEC and regional connectivity as an opportunity, to make the BRI a success.

On this historic occasion of celebrating 70 years of relations with China, we must not miss a great opportunity to reform our outdated elitist structures which are the main impediments for robust economic growth. A new era of economic development is at our doorstep, and it offers a great opportunity for Pakistan to dismantle and upgrade all its delivery systems. The elitist structures if not dismantled will offer benefits to only a selected few and not to common citizens like in China. According to a Reuters report, in November 2020, our great friend and neighbour “successfully achieved the daunting task of removing the last remaining counties from a list of poor regions, in what officials described as achieving President Xi Jinping’s longstanding political goal of eliminating extreme poverty by the end of this year. The milestone was achieved by lifting 93 million people out of poverty since 2013. Foreign ministry spokesman Zhao Lijian told a press briefing that China was prepared to share its experience with other developing countries.”

These are the lessons the PTI Government needs to learn from China.