Is the Pak-Cheen dosti really that zindabad?

Published: December 4, 2016
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China Pakistan Economic Corridor (CPEC) appears to be Pakistan’s Achilles heel. PHOTO: AFP.

Pak-Cheen Dosti Zindabad!’ is a household anthem, isn’t it? A sea-pack, sorry, China Pakistan Economic Corridor (CPEC) appears to be Pakistan’s Achilles heel. Under this partnership, Pakistan is to receive a $51 billion investment over the course of three to eight years in the form of power projects, roads and railway upgrades, transmission lines, infrastructure, hospitals, technology and much more. Undoubtedly, such an investment is a welcome sign for Pakistan but the deal is strategically far more important to China than it is to Pakistan.

We were on the brink of dragging the over-burdening economy with no imminent increase in exports, tax revenues, technological revolution, let alone our despicable state of health and education sector with millions of people entering the employment (or rather unemployment) pool every year.

International Monetary Fund (IMF), ABD, and World Bank are “lending” money to us to bridge over the burgeoning trade and fiscal deficits – a short-term treatment to a permanent disease. If it weren’t for the sharp decline in oil prices and the emerging market crises in Brazil, Russia, Turkey, Thailand, Saudi Arabia, South Africa and Nigeria, Pakistan would not have been championed among the “Next 11” economies by the same Jim O Neil who coined the Brazil, Russia, India and China (BRIC) association. Thus dawns the sudden realisation of a visionary global leader, Mr Xi Jinping.

There were subtle shifts in global politics as cracks started to emerge within the traditional bonding between the oil-producing nations and the (then) top oil consuming nation, United States (US). Uncle Sam is bidding a covert farewell after mastering revolutionary technology to extract shale oil/gas for self-sufficiency and exporting purposes. Consequently, a nuclear deal with Iran and the overriding of Barack Obama’s veto would enable US citizens to legally sue Saudi Arabia for the 9/11 attacks. This had prompted the Saudis to threaten the US dollar by selling assets worth $750 billion. Falling oil prices not only reduced the US’s reliance on oil-producing Muslim countries, but also roughened up the financial health of another foe, Russia, while patching up with a smaller fish, Venezuela – which holds the largest oil reserves in the world.

Moreover, the US strengthened its alignment with the political allies economically as well, by projecting two new trade treaties – Trans Pacific Partnership (TPP) including US, Japan, Canada, Mexico, Malaysia, Vietnam, and Singapore among the notables, and the Europe-centric Transatlantic Trade and Investment Partnership (TTIP).

However, when one tie breaks, another is made. Putin was quick to not wait around for a calamity to strike and, in May 2014, forged an economic contract worth $400 billion with China for gas supplies. Soon after, the global powers of the world shifted their focus and investment from the Middle East towards the South China Sea, as it holds a passage that navigates one-fifth of the global trade of goods (including oil) and connects the Pacific Ocean with the Indian Ocean.

Amidst all the global hustle and bustle, China decided to opt for Plan B – a nuclear armed, economically weakened, regionally cornered, and tremendously populous Pakistan which has been an all-weather friend and ally. When China experiences a rainy day, Pakistan is the umbrella it banks on. Most of the CPEC related projects are investments that give China phenomenal returns. The energy projects carry one of the highest dollar-paying returns from a sovereign country to its investors, as the current tariff offered on solar or coal is one of the highest in the world, showing eagerness and profitability for the Chinese government.

Similarly, the loans on highways, railways, and port constructions have caveats that require the loaned amount to be invested back into China through the engineering, procurement and construction (EPC) contract and the duty-free machinery import, along with no income tax or sales tax. In the past, we took loans from global agencies which only cared about their gains. However, now we are loaning money from the Chinese government that is willing to bet on Pakistan’s prospering future despite global pressures from other countries to isolate it. Hence, this has turned out to be a win-win situation for Pakistan and China. As one famous Urdu verse goes,

Jab tak Pakistan bika na tha toh koi poochta na tha,

Tum (China) ne mujhey khareed key anmol (emerging market) kar dia.

(Until Pakistan was sold, nobody would ask about it,

You (China) bought me and turned me into an emerging market.)

Winning trust through CPEC will provide access to “The Gwadar Port” which is complementing the traditional Silk Route and Mr Xi Xinpings pet project of One-Belt One-Road (OBOR). Economically, this shortens the transportation time for cut-throat Chinese manufacturers to their western buyers from 10 to nine days. The Chinese government will establish industries in their under-developed western provinces and invest to upgrade Pakistan’s railways to reduce lead times and stall the declining pace of China’s slowing GDP growth.

Far more important, or equally important, is the ability to secure oil supplies as almost 50% of the oil is imported through the Middle East and a less discussed project is a dedicated oil pipeline undertaken by Frontier Works Organisation (FWO) from Gwadar to Kashgar to be protected by military establishments from any terrorist attacks.

With the looming threat of change in world politics and the possibility of a war, the energy security through Gwadar would be of paramount importance should the Strait of Malacca or South China Sea gets blocked by arch enemies. A 10,000 kms distance for oil transportation through the politically unstable Pacific Rim and Strait of Malacca would be reduced to 2,500kms for China with a better, secure and more controllable geography.

According to a study by Photius statistics, in 2050, the world’s four most populous nations would be India, China, US and Pakistan. If the US is counting on India to counter China’s threat to its throne, then China has to count on Pakistan. Pakistan is just not China’s backyard; it very much is China’s back-up plan as well.

Arslaan Asif Soomro

Arslaan Asif Soomro

The author has a degree in Investment Management from Cass Business School, London and has also obtained CFA and FRM qualifications. He is currently working as a Senior Advisor to Swedish based Tundra Fonder AB.

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • harinder

    There are no free lunches in this world. Proved time and again. But presence of Chinese navy at Gwadar Port might give food for thought to India who tried to block Karachi port during Kargil affairRecommend

  • disqus_MKeynes

    There is a wrong assumption being made in this article that Chinese have hopes and expectations of Pakistan being able to pay back $45 billion USD which will balloon to $80 billion with interest and currency decline against USD. As long as Pakistan cannot pay back the amount, China will hold sway on both CPEC territory and domestic security policy as well as international foreign policy. Given Chinese treatment of Muslims, there is no chance of oil pipeline escaping Taliban/ISIS reprisals. Add to $80 billion dollars, the cost of securing the infra (pipes+roads+rails) on a 24X7 basis. Pakistan is going to go bankrupt, it is a question of time…so how long will China keep pumping its money into Pakistan over and above $80 billion that Pakistan will owe to it !!!!!

    Chinese control of sea routes in gulf and a new military base is addl cream on the top. The main benefits to Chinese are:
    1. Secure Pakistan as a market for declining fortunes of its engineering and service cos.
    2. Secure Islamic fundamentalism by getting control over Pakistani sovereignty.
    3. get pathways to Afghanistan and middle east. afghanistan needs lots of development and construction.
    4. Develop Xinjian as a manuf. base to supply Pakistan and Afghanistan
    5. Get top return on investment from Pakistan thru high interest rates and market linked currecy exchaneg rates.
    6. Get Gwadar base for military purposes
    7. Secure alternate supply lines for gas and oil via CEPEC
    8. Using CPEC, make Pakistan into a Chinese market for its goods whose European and US orders are declining. Pkistan will not do anything to couter because it is simply not in a position to react.
    Recommend

  • sParthiv

    Fools.. 2050 Pakistan will be the 4th populous country but economic wise it won’t stand in the top 10. Literally it means it would turn out to be like war torn Islamic countries like Syria or Iraq.Recommend

  • Rahul Patil pune

    “The energy projects carry one of the highest dollar-paying returns from a sovereign country to its investors” sums up the whole CPEC projectRecommend

  • goggi (Lahore)

    Either the very poor or very rich, there are no real happy people in Pakistan!!!

    Pakistani people have a golden chance to study and follow the success-oriented Chinese mindset and their great philosophies of Confucianism, Taoism, Yin-yang…..!

    Time has come to convert all places in peaceful meditation centers !!!Recommend

  • ShivaTheCommenter

    There is NO such thing as FRIENDSHIP

    A wise man named Chanakya had righly said…..*There is some self interest behind every friendship….there is no friendship without any self interest*

    We have seen how China has supported Pak in all the wars she has lost…..
    For like this Russo-Indo bonhomie u see iz because India is the biggest market for Russian arms manufacturers and nothing else…..Once that goes down the friendship will fade away too

    So is the case of Pak and China

    Or else what does Pak have to offer on the table? No tech…No moneyRecommend

  • Alif Haziq

    wake up. Instead of justifying the ongoing enslavement, think how in future you are going to be bankrupted. without any production or improvement of pakistan people life and economy, how you going to get benefitted? politicians sold your country to china.
    Else pakistan could have asked for monthly rent for using its soil for transportation by china.
    CPEC will improve only china’s economy. no use for pakistan except some politicians and army officials got benefitted and all of them and their family will settle in US and UK. Its hard truth, see even all the employees are from china working there.
    Its purely china’s self Interest and no love for pakistan, pls check the facts and think yourself, wake up before its too late.
    بارك الله فيكRecommend

  • shri vinayak

    Kargil was not an ‘affair’, it was a cowardly war unleashed by Pakistan army after signing of Lahore Declaration between Nawaz Sharif anf Atal Vajpayee. It was Nawaz Sharif who was sent by a beleaguered Pakistani army first to Tony Blair and then Bill Clinton to bail it out.
    Coming to blocking of ports, there will always be multiple options. Pakistan noway can match India’s military power, and Chinese will never burn their fingers just like they didn’t during Kargil war.
    This CPEC is nothing more than another Chinese project-perceived, financed and even built by Chinese. No one in Pakistan knows it is financing, loan or investment and at what conditions. Chinese are brutally efficient and money minded. They brought their own manpower for construction and Pakistan raised special force to protect those workers!!! Their navy is already there. I think China has bought Pakistan.Recommend

  • Raj – USA

    Read this to understand the problems that Sri Lanka is facing with Chinese investments that just fleeced them. At that time Sri Lanka had bad feelings for India and thought that falling on China’s lap will be beneficial to them. Now, Sri Lanka is very close to an enemy of China and Sri Lankans hate China.
    http://www.forbes.com/sites/wadeshepard/2016/07/31/china-to-sri-lanka-we-want-our-money-not-your-empty-airport/#6ebf45011696

    It is the same with Pakistan’s relationship with China too. I would safely bet that most Pakistanis, even today, hate China. But the political elites who stand to gain from China’s kickbacks support them outwardly. In their hearts they too hate China and Chinese but cannot say it out.
    Even for China, CPEC is not going to save any transportation costs or even time. If it costs $1 per ton to transport by sea, it would cost $5 to transport the same over the same distance by rail and probably $12 to transport the same by air. Even if the distance is halved, it would result in any savings in transport costs for China. It would also not save any time in transportation from China’s east to the rest of the world too because China has to use land transport from China’s west to east and would also involve off-loading and transfer goods from one type container to another type numerous times en-route. Earlier, Pakistan was claiming that China will import oil from the Gulf through pipelines which was another hoax. The cost of pumping oil or gas from sea level to an elevation of over 25,000 feet through mountainous terrains where temperatures fall below freezing requires lot of energy and numerous pumping stations.

    Even the political elites that are promoting CPEC do not trust China. All political elites who get kickbacks from China do not invest a penny of it in China but invest them in places like Europe, USA, Dubai, etc. Even India is favored by them over China. Many have claimed that Nawaz Sharif has investments in India but not one has ever said that NS has investments in China.

    When Pakistanis start to pay for power at 3 or 4 times the average prevailing rate elsewhere in the world, and when they see that most of Pakistan is becoming polluted with emissions from coal fired power plants which China itself has discarded and sold to Pakistan, and when they see that the debt burden on CPEC loans is strangling them and when they see that Gwadar and many other places have been made no-go areas for Pakistanis and their army and only Chinese and their army are allowed in those areas, they all will become bitter enemies of China. They will then admit openly, though they all realize but do not want to admit now, that CPEC is nothing but China-Cutting of Gwadar and most of Pakistan by China and that Pakistan has lost most of its territory and Gwadar coast to China thinking that it will offer protection to them against India. When China is stationing its submarines and naval fleet in Gwadar and making it their naval base, do you think they will allow Pakistanis of Pakistan’s navy in the area? Already they have barred Baluch fishermen from fishing off the coasts of Gwadar and the Baluch fishermen have lost their sole livelihood. Watch BBC and Al Jazira documentaries on these. As to how much Pakistanis know about Baluchistan????? Watch this BBC documentary:
    https://www.youtube.com/watch?v=ertcSHMhjHMRecommend

  • Sami Shahid

    nice articleRecommend

  • Rohan

    Cpec is nothing but china Punjab economic colonisation.
    Pakistan sells itself to the highest bidder ,first it was USA then it is china.
    plus 46 bn loan with say 20% interest rate will result in 9bn of interest every year,pakistan does not have earnings to finance.Epic waste this cpecRecommend

  • goyaaka goiyaale

    good luck being chinese slave…..Recommend

  • vinsin

    So why you worried? Nehru supported idea of CPEC in his own time remember Korakoram highway. Anyway nowhere interests are as high as 20% anywhere around the world. USA always gave aid to Pakistan and it helped.Recommend

  • vinsin

    Gilgit – that is what Pakistan has to offer to China and no way India can ever take that.Recommend

  • vinsin

    Same thing can happen to India also. Many states would be Muslim majority and like Kashmir. Indian Muslims will demand another partition.

    Economic wise India would be in lot more trouble than Pakistan as has historically been the case.Recommend

  • vinsin

    Taliban/ISIS dont care of treatment of Muslims. Keep dreaming of Pakistan bankruptcy. India got bankrupt in 1990-91. Oil is not the future of the world – China get oil and gas from central asia and Russia.

    Dont worry, Time will tell.Recommend

  • vinsin

    Pakistan can still match India in diplomacy. Pakistan matched India in military power in 1947-48 war. Now Pakistan has nuclear weapons also. It is a soft loan with low interest rate. The idea that China should buy Pakistan was that of Nehru – Nehru believed and supported that idea by saying that that would bring world peace and make China as a powerful country against India and western powers.Recommend

  • Tommy Gunn

    Pakistan is being sold in bits & pieces to the Chinese by the Pakistani civilian & military elite in the garb of CPEC & gullible Pakistanis think that it will make them all rich. When all is said & done and the Chinese occupation of Pakistan starts, the elite of Pakistan will fly to US, UK & Dubai with their millions while the common Pakistani will be left holding the bag.Recommend

  • Ahmar khan

    The writer seems confused. On the one the article is questioning Chinese motives for the massive investment. CPEC is considered a “backup plan” in case things heat up in the South China Sea. Yet the article also mentions that going through Pakistan will reduce transit times by 9-10 days. A trade route that saves this amount of time is not some back up route but would be the primary trade route, strategically speaking.

    The writer also questions why CPEC and power infrastructure must be built though Chinese contractors. When has the US or Europe provided funds to Pakistan to be freely spent on any contractors of our own choosing? Take the case of Pakistan Steel Mills, built and funded by the former USSR. Does Pakistan has the capability to build such infrastructure through our own engineers and technicians? If not then obviously the Chinese are going to demand their own contractors.

    Pakistan has very little to lose from this corridor and everything to gain. Development of infrastructure, roads, power, communication and eventual earnings in terms of transit fares.Recommend

  • Miyagi Jr.

    CPEC is far more important to China than it is to Pakistan, Einstein.Recommend

  • Miyagi Jr.

    What is wrong with you!! why have you started talking sense all of a sudden???? This is not the regular vinsin I come across in comments.Recommend

  • Rohan

    USA gave aid,china has given loans for which they will charge interest and the rate as per najam Sethi is 20%Recommend

  • sParthiv

    what ever makes you sleep in the night. and for your info though muslims are a majority in kashmir it is still be a part of india. so how do you expect other states to part away ? muslims can never be a majority in india.Recommend

  • vinsin

    Ask Kashmiri Pandits and ya try to settle or buy properties their. Tell that in United Nations also.

    Muslisms are already in Majority in Pakistan, Afghanistan, Bangladesh and J&K.Recommend