Remodelling the Belt and Road: Pakistan picks up the torch
By James M. Dorsey
Pakistan, following in the footsteps of Malaysia and
Myanmar, is the latest
country to balk at the China and infrastructure focus of Beijing’s Belt and
Road-related investments.
Preparing for his first visit to China as Pakistan’s prime
minister, Imran Khan is insisting that the focus of the China Pakistan Economic
Corridor (CPEC), a US$60 billion plus crown jewel of the Belt and Road, shift
from infrastructure to agriculture, job creation and foreign investment.
“Earlier, the CPEC was only aimed at construction of
motorways and highways, but now the prime minister decided that it will be used to
support the agriculture sector, create more jobs and attract other foreign
countries like Saudi Arabia to invest in the country,” said
information minister Fawad Chaudhry.
Mr. Khan’s determination to ensure that more benefits accrue
to Pakistan from Chinese investment comes at a time that various Asian and
African countries worry that Belt and Road-related investments in
infrastructure risk
trapping them in debt and forcing them to surrender control of critical
national infrastructure, and in some cases media assets.
Preceding Mr. Khan’s move, protests against the
forced resettlement of eight Nepali villages persuaded CWE
Investment Corporation, a subsidiary of China Three Gorges, to consider pulling
out of a 750MW hydropower project.
Malaysia has suspended
or cancelled US$26 billion in Chinese-funded projects while Myanmar
is negotiating a
significant scaling back of a Chinese-funded port project on
the Bay of Bengal from one that would cost US$ 7.3 billion to a more modest
development that would cost US$1.3 billion in a bid to avoid shouldering an
unsustainable debt.
Fears of a debt trap started late last year when unsustainable
debt forced Sri Lanka to
hand China an 80% stake in Hambantota port.
Mr. Khan’s move takes on added significance given that
Pakistan appears to have decided to ask
the International Monetary Fund (IMF) to help it avert a financial crisis with
a loan of up to US$12 billion and discussions with
Saudi Arabia that could produce up to US$10 billion in investments
that would be separate but associated with CPEC.
Pakistani finance minister Asad Umar is expected later this
week to initiate discussions with the IMF during the fund’s annual meeting in
Bali. The decision was taken after Saudi
Arabia refused to delay Pakistani payments for oil imports, opting
instead to build a refinery and strategic oil reserve in the CPEC port of
Gwadar.
Pakistani officials see investment by Saudi Arabia as one
possible way of facilitating a Pakistani request to the IMF for help. They hope
that even an informal association with CPEC of Saudi Arabia, one of the United
States’ closest allies in the greater Middle East, may alleviate Washington’s
concern that IMF money could be used to repay Chinese debt.
Yet, even that is unlikely to prevent the IMF, backed by the
United States, from demanding that the veil of secrecy be lifted that shrouds
the commercial and financial terms of many CPEC-related, Chinese-funded
projects, as a pre-condition for assistance from the fund.
Apparently concerned about Pakistan’s intentions, China’s deputy
chief of mission in Islamabad, Lijian Zhao, insisted in an
interview as well as a series of
tweets that China welcomed Saudi investment and “always supported
& stood behind @ Pakistan, helping #develop it’s #infrastructure
& raise #living standards
while creating #job.”
Mr. Lijian’s comments followed a statement last month by
Chinese foreign minister Wang Ji after talks with Mr. Khan in Islamabad that
appeared to indicate that China, while acknowledging Pakistani demands, would
not address them immediately. Mr. Wang suggested that CPEC
would only “gradually shift to industrial cooperation."
Indications suggest further that China may be looking to
Pakistan’s military to shave off the rough ends of the government’s
determination to effectively renegotiate CPEC.
Pakistan’s
army chief General Qamar Javed Bajwa visited Beijing in August days
after commerce minister Abdul Razak Dawood suggested that the government may
suspend CPEC projects for a year.
Making his comments shortly after Mr. Wang’s departure from
Islamabad, Mr. Dawood also asserted that the previous government had negotiated
terms that were favourable to China rather than Pakistan.
China this week, in a move likely designed as much to
strengthen Pakistani counter-terrorism capabilities as a gesture towards the
country’s politically influential armed forces, made
Pakistan the second country after Saudi Arabia to receive killer drones and the
associated technology.
The US has refused to sell its more advanced killer drones
to either Saudi Arabia or Pakistan.
The Khan government’s desire to refocus CPEC tackles key
issues raised by critics of the project that potentially could impact China’s
plan to pacify its troubled north-western province of Xinjiang through a
combination of economic development and brutal repression and re-education of
its Turkic Muslim population.
The initial plan for CPEC appeared to position
Pakistan as a raw materials supplier for China, an export
market for Chinese products and labour, and an experimental ground for the
export of the surveillance state China is rolling out in Xinjiang.
The plan envisioned Chinese state-owned companies leasing
thousands of hectares of agricultural land to set up “demonstration projects”
in areas ranging from seed varieties to irrigation technology. Chinese
agricultural companies would be offered “free capital and loans” from various
Chinese ministries as well as the China Development Bank.
The plan envisaged the Xinjiang Production and Construction
Corps introducing mechanization as well as new technologies in Pakistani
livestock breeding, development of hybrid varieties, and precision irrigation.
Pakistan effectively would become a raw materials supplier rather than an
added-value producer, a prerequisite for a sustainable textiles industry.
The plan saw the Pakistani textile sector as a supplier of
materials such as yarn and coarse cloth to textile manufacturers in Xinjiang.
“China can make the most of the Pakistani market in cheap raw materials to
develop the textiles & garments industry and help soak up surplus labour
forces in (Xinjiang’s) Kashgar,” the plan said. Chinese companies would be
offered preferential treatment with regard to “land, tax, logistics and
services” as well as “enterprise income tax, tariff reduction and exemption and
sales tax rate” incentives.
For Mr. Khan to ensure that Pakistani agriculture benefits,
the very concept of Chinese investment in Pakistani agriculture would have to
renegotiated.
Similarly, Mr. Khan has yet to express an opinion on the
plan’s incorporation of a full system of monitoring and surveillance that would
be built in Pakistani cities to ensure law and order. The system would involve
deployment of explosive detectors and scanners to “cover major roads,
case-prone areas and crowded places…in urban areas to conduct real-time
monitoring and 24-hour video recording.”
The surveillance aspect of the plan that identifies Pakistani
politics, such as competing parties, religion, tribes, terrorists, and Western
intervention” as well as security as the greatest risk to CPEC could, if
unaddressed, transform Pakistani society in ways that go far beyond economic
and infrastructure development.
Dr.
James M. Dorsey is a senior fellow at the S. Rajaratnam School of International
Studies, co-director of the University of Würzburg’s Institute for Fan Culture,
and co-host of the New Books in Middle Eastern Studies podcast.
James is the author of The Turbulent World
of Middle East Soccer blog, a book with the same title and a co-authored
volume, Comparative Political Transitions between Southeast Asia and
the Middle East and North Africa as well as Shifting
Sands, Essays on Sports and Politics in the Middle East and North Africa
and just published China
and the Middle East: Venturing into the Maelstrom
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