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Can China help Pakistan?

With the new governments ready to assume duties both at the federal and provincial levels, all eyes are on significant challenges and immediate risks, which necessitate comprehensive scrutiny.

These challenges include societal divisions, economic volatility, climate change, unemployment, inflation, and security threats, all of which prominently shape the current risk landscape. Furthermore, we see new struggles including the pervasive spread of misinformation, exacerbating these challenges as highlighted in the WEF Global Risk Report for 2024. We also observe the emergence of new geopolitical tensions, prompting a reassessment of our approach to external diplomacy.

The new government will face immediate risks. Looking at the difficult combination of risks and their mitigation, it is safe to assume that a lot of collaboration will be required to tackle the situation as traditional governance and diplomatic mechanisms prove inadequate in navigating the complexities of our volatile scenario.

Amid this critical period, the country’s leadership must proactively evaluate vulnerabilities, stay attuned to evolving dynamics, and strengthen its frameworks and strategies for risk mitigation.

Cultivating a culture of creativity and collaboration is essential to collectively enhance resilience in the face of these multifaceted challenges and meet the expectations of the young population who feel that their voices are not adequately represented in the political process, leading to feelings of disenfranchisement and disconnection from mainstream politics.

High unemployment rates and limited economic opportunities contribute to apathy towards the political system as young people prioritize immediate economic concerns over political participation.

Addressing these challenges requires efforts to promote transparency, accountability, and inclusivity within the political system. It also requires initiatives to empower and encourage young people to actively participate in shaping the future of our country. The help that Pakistan needs expands beyond financial aid and loans and perhaps towards more foreign direct investment (FDI), green infrastructure and industrial development, and a technology-led secure environment.

For all this to happen, the new government will have to look towards its friends and partners abroad, and at this time, China stands out to be a partner on which Pakistan can rely. In a recent statement on the post-election scenario, the Chinese foreign ministry spokesperson stated that “China stands ready to engage with the new government, working hand in hand towards mutual prosperity and development. It is imperative that all stakeholders prioritize political cohesion to pave the way for progress.”

But while we chart our ways and list the avenues for cooperation, we should be clear on how and where China can help us and craft our diplomacy accordingly. Encouraging investment in a country despite security concerns requires a strategic and multifaceted approach for which a whole-of-government strategy can only work.

On the Chinese part, it may have to adjust to the evolving situation in Pakistan. In the past 10 years, China’s involvement in Pakistan through the CPEC initiative has yielded significant benefits. This initiative has generated over 200,000 employment opportunities, facilitated the development of 6000MW of electricity, and constructed over 500 kilometres of roads, fostering rural-urban synergy and regional connectivity.

The forthcoming commissioning of the Gwadar airport, funded by a Chinese grant of $230 million, set to be operational this year, will further bolster regional connectivity. However, a recurring issue has been the failure to attract Chinese private businesses, apparently due to the absence of a conducive business environment for foreign private-sector enterprises and the prevailing capacity and security issues.

One clear example is the non-utilization of the complete $1 billion Chinese grant in the social sector development – a joint working group (JWG) was established to carry out the related work – and the below-par development of the SEZs launched under CPEC.

Similarly, there has been limited interaction by the CPEC Business Council, which was established with a lot of expectations. Thus, despite possessing significant resources, Chinese enterprises have encountered challenges in relocating to Pakistan and have preferred Bangladesh, Laos and Vietnam.

Addressing these challenges requires effective collaboration among various stakeholders, including federal and provincial governments, as well as business chambers for collectively addressing these issues to facilitate smoother integration and investment from Chinese enterprises into Pakistan’s economy.

While some argue IMF-related matters may further slow the progress of CPEC, there are several sectors in which Chinese support may be sought immediately despite the debt-related narrative, starting with the support in the immediate development of the prioritized SEZs (including the Karachi Steel Mills area and Islamabad zone) where profit expectations, policy continuity, and utilities-related risk mitigation are the primary concerns for investment mobilization.

This can be initiated by maintaining open lines of communication with existing Chinese investors and providing regular updates on market conditions, regulatory changes, and any developments that may affect their investments facilitating people-to-people exchanges and commercial ties (starting with interaction with the All-Pakistan Chinese Enterprises’ Association).

Implementing strategies marked by flexibility, moderation, precision, and effectiveness is essential to achieve this goal. Enhancing marketing efforts in China regarding Pakistan’s economic potential and guiding investor perceptions towards confidence in its bright prospects is equally important.

Despite the current economic challenges, Pakistan offers significant potential as a profitable investment destination. Promoting the ‘Invest in Pakistan’ slogan is vital in attracting Chinese investment. Building the confidence of existing investors and turning them into champions for attracting more investors requires a strategic approach focused on relationship-building, transparency, and showcasing success stories.

The prime minister and the planning minister should request the convening of the Joint Cooperation Committee (JCC) meeting in Beijing and show their commitment to the completion of existing projects and also present projects in specific sectors like agriculture and livestock, telecommunications, renewable energy, labour-intensive industries including textile while urging for support in SEZ development.

However, before this, it is imperative to strengthen the CPEC cell/authority at the Ministry of Planning, Development and Reform (MoPDR) and enhance the capacity of the provincial investment nodes. While the attention on mining projects may be deferred to a later phase, immediate action may be taken to establish marine, fruit and food processing zones and pharma industries in Azad Jammu and Kashmir, Balochistan, and Gilgit-Baltistan within the industrial cooperation framework of CPEC and transmission and distribution projects in the energy sector.

The new government could introduce special exemptions for Chinese tourists, aimed at bolstering general opinion and confidence This can be further accelerated by encouraging Pakistan’s private sector to modernize its business processes, invest in joint research and development, improve human capital, seek international certifications, and meet quality standards.

This requires an approach that entails regular, meaningful and timely engagements with Chinese political and business leaders, showcasing projects and investment incentives, essential for addressing political, economic, and social uncertainties. Despite the hurdles, whether financial or security-related, the core principles of attracting investments remain the same for all and we need to focus on them.

Regarding the question of whether China can provide industrial cooperation and sectoral development support to Pakistan in the short and long term, the resounding answer is ‘yes’. However, for this to materialize, it is a fact that Pakistan must first take steps to strengthen its position by establishing competitive advantages and leveraging the natural endowment through complete top-down synergy and political will.

For the Chinese, it does not matter whether we have a CPEC authority or a cell at the MoPDR and in provincial secretariats, as long as it is an efficient one-window for investment support and grievance redressal, similar to that in other partner countries. Building trust and efficiency will be key for immediate results.

Dr Hassan Daud Butt, "Can China help Pakistan?," The News. 2024-03-16.
Keywords: Political science , Political issues , Political will , Transparency , Accountability , Bangladesh , Laos , CPEC , JWG