Daily Times

China has signed with Pakistan $42-72 billion worth of contracts for China’s investment in infrastructural and energy projects in Pakistan, linking China to the warm waters of Indian Ocean and beyond through Pakistan.

This gives China an economic outlet to the Persian Gulf, Asia, Africa, The Far East, Australia, Europe and America, especially USA through the Pacific Rim. This Corridor would also link China to Iran, Afghanistan and Central Asian Counties – all this gives China, which is the fastest growing economy in the world (now the second largest economy), a strategic edge against its economic rivals – USA, Japan and EU – the last two are receding economies due to aging population and lack of natural resources.

It should be remembered that this is not the only such investment that China has done in the developing world and the region. Beijing offered such a corridor to India (India politely refused) but Sri Lanka and Bangladesh did oblige. Also, African states are where China has seriously started investing in development projects, which means it has started showing its economic strength and influence in the region. Unlike colonial Europe and USA, China has expanded its influence through economic means and not through gun boat diplomacy, as was the case of the past colonial masters of these nations in Asia and Africa

It should be understood that apart from long-term economic and trade advantages to China, the immediate impact was also reinvesting the vast money accumulated by state owned and private businesses. Languishing their banking system, it needed an outlet, otherwise this money would have lost its value in monetary terms.

The creation of the International Investment Bank by China recently was also in the same direction. Also Chinese firms would have secured businesses and investments in Pakistan for the near future. To help understand the impact of CPEC on Pakistan and the region, Daily Times talked exclusively with Dr Qais Aslam, one of Pakistan’s leading economists and currently head of economics department, University of Central Punjab.

Q: What will be the impact of China-Pakistan Economic Corridor?

The Economic Corridor gives businesses in both countries a cost advantage under gravity approach as it shortens the distance between exporting and importing nations.

Construction of this road and rail link should create jobs and businesses for many related industries, starting from construction, cement to metal works, etc. This link should also induce regional SMEs in Pakistan to take advantage and create clusters that can enhance income generating capabilities of people of the region and areas that would be directly linked to this Corridor. Many new avenues and opportunities should arise, especially for TIR’s or international truckers and drivers to pin point just one such job creating industry.

Q: Will the Corridor affect Pakistan’s relationship with US?

It should be noted that China has been very particular in investing in those areas of Pakistan which were least developed and where for the last 65 years USA or European, and for that matter even local investment, had not been seen to have happened. The Corridor, through China’s investment, would also give access to USA and other allied businesses to invest in mineral rich Baluchistan and KP as well for their firms to invest in tourism in these areas.

China has kept away from areas where USA has been investing traditional, especially urban Pakistan. Also, strategically USA and China are linked in a way that USA is the largest foreign investor in China with 50 percent of USA’s foreign investments are in China and 50 percent of China’s export are for USA’s markets. China has a large population living in USA and Chinese students and researchers are the biggest contingent of foreign students studying in American universities.

Thirdly, Pakistan is buying its military hardware from USA which is not affected by this Pakistan-China Economic Relationship.

Rivalry between American and Chinese firms will exist but that is the spirit of free market competition and should give Pakistani consumers better quality and relatively cheaper goods from all markets concerned. USA has already commented to its relationship officially by stating that China has learnt from USA’s mistakes. That was when American investments in Pakistan were too little, of about $7 billion for a period of five years making it a little more than $2 billion a years for many projects, which had no significant impact on Pakistan’s growth and poverty. At the same time USA could not befriend ordinary Pakistanis on the street, whereas China has made large investments in few relevant projects which would impact lives and economics of ordinary Pakistanis, going a long way in warming relations between the people of Pakistan and China.

Q: How will it help in achieving regional peace, stability and prosperity?

China, India and Russia are already part of BRICS economies as well as part of Canton Declaration of which Pakistan, Iran and Central Asia are also members, or have ‘observer nations’ status, creating a market as important as that of Europe. Most of these countries, except Pakistan and Iran, are also in G-20 nations of which USA, EU and Japan are also members and 85 percent of world trade among G-20 nations.

It should be remembered that USA has already a presence in Afghanistan; its MNCs have direct investments in CAR nations and it’s a strategic partner of Pakistan. Washington has also started warming up its relations with India as another rising power in the region and with Iran, therefore this Corridor would cement economic ties with all the economic, political and territorial giants of this region, and enable their firms to cooperate for greater economic stability and yes, this should increase the peace dividends over war dividends, and therefore, create more regional stability and peace.

Q: What will be the pros and cons of this project?

Pros for Pakistan are all the opportunities that investment in energy and infrastructure can bring to any region of the world – modernisation and expansion. This Corridor is like the building of rail (Iron Horse) in the Wild West of American heartland, linking USA from coast to coast. My fears are that like America, progress is going to come to Pakistan, and one and all would be able to fill their cups from the ‘river of gold’ that would flow through Pakistan in the shape of this Corridor. But like USA, where the indigenous Americans have been left behind in the American river of progress, in Pakistan too indigenous people from the region would be left behind, if our regional governments and stake holders do not prepare the capacity of our people for this change and opportunity.

About 10 percent of the elite business class of Pakistan is efficiently linked to the markets of EU, USA and Japan, and is reluctant to change direction in economic and psychological terms from its traditional trade partners towards China. About 75 percent of the industry of Pakistan is import substitute industry and is already struggling against free trade from the world and therefore would be decimated by better quality, cheaper Chinese goods that are to come to Pakistani markets. Only the remaining 15 percent of relatively smaller or medium entrepreneurs and new businesses would be able to, in the initial stages, gain from this economic relationship. But for that they will have to learn new ways to do businesses, bring their labour to learn international level skills and work habits and for firms to create better environmentally friendly and innovative management skills and quality standards. Only then this youth bulge of Pakistan’s population can gain from this blessing. But if we do not adapt to this changing economic environment then only China would send its own excess labour to finish the job and Pakistanis would remain unemployed and in poverty, selling strawberries and dry fruits at small business outlets to passing truckers and cars, enjoying just droplets of the trickle-down effect of this economic opportunity. I am also assuming that the contracts to the Pakistani businesses and stakeholders would be given transparently, and regional economic preferences would have more preference over political concerns, and issues of bad governance would not arise. Otherwise, the gains of this opportunity would go to China and the rest of the world, and Pakistan would remain the elitist state that it has become.

Q: Will it help Pakistan in becoming a regional hub?

Pakistan is in the middle of this network of economic giants and therefore if intelligently handled from Pakistan’s side we can gain both in political as well as economic terms due to this meeting of the worlds through our territory. But linking Karachi to Gwadar and Gwadar to Peshawar and down to the Silk Road to China has great strategic and economic advantages for the western and northern part of Pakistan. These regions should transform into economically viable areas with local as well as foreign linkages. But this linkage should undermine the importance of the old road and rail link from Peshawar to Karachi through Punjab and the Canal colonies, where the traditional economic heart of Pakistan lies.

It should be remembered that Punjab produces vegetables and light engineering goods and services for rest of Pakistan and imparts energy resources from other areas of the country. With the trade routes taking shape away from the heartland of the Punjab, the only option left would be to open its economic borders with India; otherwise the flourishing urban centres of West Punjab would be left out of the economic advantages that Pakistan has to gain from the Corridor.

It is also heart-warming to note that the political and military establishment of the country is on the same page. Also, the leadership all provinces agreed in the recently convened All Parties Conference on the route and importance of Pakistan-China Economic Corridor. For once the country and its leadership are all thinking and acting in the right direction.

This interview originally appeared in Pakistan Today