Sharif’s trip to Beijing: Can the China-Pakistan economic corridor be revived? | Economy and Business News

Islamabad, Pakistan – Pakistani Prime Minister Shehbaz Sharif is scheduled to fly to China on June 4 for a five-day trip to hold talks with Beijing’s top leaders, at a time when Islamabad has become increasingly dependent on of its alliance with the second largest country in the world. economy.

Sharif will visit Beijing, Xi’an and Shenzhen, the southern city that China holds up as an example of its dramatic economic rise since the 1980s. Shenzhen was personally chosen by then-leader Deng Xiaoping as the country’s first special economic zone.

As Pakistan seeks to similarly revive its economy from stagnation, amid high inflation and a debt crisis, a multibillion-dollar economic project is at the center of its ambitions:

The $62 billion China-Pakistan Economic Corridor (CPEC), formally launched in 2015 by the two Asian nations, was considered by governments and many analysts in both countries as a “game changer” for Pakistan’s economy. . It included the construction of a landmark seaport, power plants and road networks across the South Asian country.

However, almost a decade later, doubts are emerging about the future of the project.

The CPEC is a key component of China’s ambitious Belt and Road Initiative (BRI), a massive network of roads, bridges and ports spread across nearly 100 countries that Beijing hopes will recreate the ancient trade routes of the Belt and Road. Silk that unites Europe and Asia.

But critics say the BRI is a vehicle for China to expand its geopolitical influence and drive poorer countries like Pakistan deeper into debt.

In Pakistan, the project included the construction of a seaport in Gwadar in the south, along with the development of the country’s energy, transport and industrial sectors. While there were initial successes, CPEC had a bumpy road in Pakistan due to the country’s frequent political, economic and security crises and effectively ground to a halt.

Now, a newly elected government in cash-strapped Pakistan is making a new effort to bolster CPEC.

Why Pakistan needs CPEC

Nearly 40 percent of Pakistan’s 241 million people are below the poverty line, according to the World Bank. Inflation, which reached a devastating 40 percent a year ago, is now hovering around 20 percent. An opinion poll ahead of February’s national elections suggested that nearly 70 percent of Pakistanis believe their economic situation will continue to worsen.

In 2015, when Sharif’s elder brother and three-time prime minister Nawaz Sharif entered the CPEC with China, Pakistan was facing a massive electricity crisis, hampering its industrial growth. Islamabad used the CPEC to develop a series of energy projects, despite warnings that it would rack up more debt.

Gwadar, the coastal city in the southwestern province of Balochistan, was chosen to host CPEC’s crown jewel: a deep-water port that could turn the city into a bustling economic hub. Meanwhile, a nationwide highway network was announced, intended to provide connectivity from the southwestern Chinese city of Kashgar to Gwadar, more than 2,000 kilometers (1,242 miles) away.

According to Ammar Malik, senior researcher at AidData, a research center at the College of William and Mary in the United States, while CPEC carried out some infrastructure and energy sector projects, it struggled to generate more tangible benefits for Pakistan’s economy.

“CPEC has certainly improved sectors like transport or energy or improved Pakistan’s ability to produce electricity, but you have to translate these benefits into economic productivity and economic growth, which has not happened,” Malik told Al Jazeera.

Government data on the CPEC website corroborates that claim. The CPEC lists 95 projects, the largest of which is about $33 billion planned as investments in the energy sector.

The data says that out of 21 power projects, 14 have been completed so far with a combined capacity of 8,500 megawatts, while another two are under construction and five are yet to start. Similarly, of the 24 proposed transportation-related projects, only six have been completed and 13 have yet to see any work on them.

The CPEC, as per the 2015 plan, was to include nine Special Economic Zones (SEZs), designated areas with lenient trade laws to promote growth. But so far none have been completed and work is in progress on four of them.

It is estimated that the CPEC will generate more than two million employment opportunities for Pakistanis, but government data says that less than 250,000 jobs have been created so far.

Meanwhile, Pakistan’s debt has continued to rise, putting serious pressure on its economy. When Nawaz Sharif came to power in 2013, Pakistan’s external debt stood at $59.8 billion. Today, while his brother runs the nation, the same obligations have ballooned to $124 billion, of which $30 billion is owed to China.

The debt burden on Pakistan’s dwindling foreign reserves has crippled a country that relies heavily on imports. Its central bank currently has $9 billion, enough to cover two months of imports. The cash crisis has forced Islamabad to reach out to close allies, including China, to shore up its economy.

Pakistan is also negotiating with the International Monetary Fund (IMF) for another rescue package, its 24th since 1958.

But why is China cautious?

The Chinese have repeatedly extended repayment terms on Pakistan’s loans, including some $2 billion due early this year. But China has its own concerns.

This year alone, five Chinese nationals working on various CPEC projects have been killed in attacks by armed groups, who have openly admitted to attacking Chinese interests in Pakistan.

Dozens of Chinese workers have been murdered throughout Pakistan since 2018, mainly in Balochistan, where an armed rebellion against the Pakistani state has been going on for several years. Baloch rebels now blame Chinese projects in the province for a theft of their resources.

Five Chinese citizens were killed in an attack on their bus in Khyber Pakhtunkhwa in March this year (EPA)

Stella Hong, a postdoctoral fellow in China public policy at the Harvard Kennedy School’s Ash Center, told Al Jazeera that Pakistan’s security situation “remains the most immediate concern” for the Chinese and may affect their future investments in the country.

“The violent incidents are also testing the mutual trust of the two governments. There could be growing reservations on the part of both countries about the other side’s commitment to this relationship,” he said.

Khalid Mansoor, who headed the government’s CPEC Authority for nearly nine months before being replaced in April 2022, said the main demand of the Chinese is foolproof security.

“But despite the recent attacks, I can say with confidence that the Chinese remain committed to the (CPEC) project,” he told Al Jazeera.

Weak governance

According to AidData’s Malik, the other big concern for the Chinese is governance – or lack thereof.

“In any good partnership, there are two partners and over the years I have heard Chinese people complain that it is not easy for them to do their jobs. They have not been given the support they seek,” he told Al Jazeera.

Hong agreed, saying Pakistan needs to do more if it expects Chinese companies to relocate and expand their operations in the country.

“Companies must be able to run viable businesses if they were to relocate to Pakistan’s SEZs or even Pakistan in general. But many seem to have been frustrated by the difficulties of getting things done in Pakistan,” he said.

But economist Safdar Sohail, who was part of the government panel that oversaw the implementation of the CPEC project when it was launched, hoped that the creation of a Special Investment Facilitation Council (SIFC) could help solve the governance problem.

Shehbaz Sharif formed the SIFC in his previous tenure as prime minister last year. The government body, represented by senior civil and military officials, is intended to serve as the primary decision-making forum to ensure the execution of economic policies.

Safdar believed that the SIFC could also eliminate bureaucratic problems that have affected the pace of CPEC projects in Pakistan.

“But I think to really realize the potential of CPEC, we need to have a forward-looking plan rather than short-term projects that can only increase our debt burden,” he told Al Jazeera.

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