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Premier Shehbaz and Chinese model

By Naveed Aman Khan

June 12, 2024 11:56 PM

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Prime Minister Shehbaz Sharif's recent five-day visit to China remained very successful and historic. Despite the usual display of warm relations from both sides, hurdles remain in improving the economic partnership between China and Pakistan. He is seeking more foreign investment and looking to boost exports to help with the country's economic crisis amid security concerns. It seems sooner the fruits of the historic visit to China will reach the people of Pakistan.

Premier Shehbaz Sharif visited China at the invitation of Chinese President Xi Jinping and Premier Li Qiang, with whom he held detailed talks in Beijing. He also visited Shenzhen and Xi’an to help build business-to-business ties and to observe China’s advancements in agriculture, technology, and business facilitation.

To rectify the continual power and energy crises situation Pakistan needs to learn serious lessons from the first decade of the energy and infrastructure project. Both Pakistan and China have committed to forging an upgraded version of the multi-billion-dollar China-Pakistan Economic Corridor, boosting construction, mining and industrial cooperation. Pakistan owes more than US $7.5 billion in project debt to power plants set up under CPEC. The country also owes nearly US $ 2 billion in circular debt, or unpaid bills, to Chinese power producers. The corridor’s original issue was that Pakistan signed up a large number of projects that added obligations in foreign currencies and this conflicted with Pakistan’s domestic-oriented exchange rate and industrial policies. Those obligations have gradually and predictably narrowed Pakistan’s fiscal space.

The premier needs to upgrade a crumbling cross-country railway line as an example of CPEC projects that will add to the country’s debt burden. The scope of the much-delayed Mainline-1 or ML-1 project has been reduced to bring down the cost, but the roughly US $ 6.8 billion project is struggling to attract Chinese investment. Unable to boost exports on the back of new roads and added power generation capacity acquired through CPEC, Pakistan now faces a debt crisis where it is seeking new loans to pay past debt. China and Pakistan signed 23 agreements and Memorandums of Understanding, in a myriad of fields including cooperation on agriculture, infrastructure, industrial cooperation, inter-governmental development assistance, and market regulation, Chinese firms are interested in investing in Pakistan because it is a strategic partner.

While this upgradation will eventually be needed, there has been little consideration of the financial stress it will cause, and how the country will honour resultant obligations in the future. More than 100 Pakistani business leaders accompanied Sharif on the trip which included a convention with Chinese businesses. The economic impact extends much longer into the future, maybe 30, 40, or even 50 years. With a 30-year horizon or a 20-year horizon, it makes sense to continue to invest in Pakistan. The first phase of CPEC has been successful given the infrastructure development it brought. China will encourage companies to invest in Pakistan in accordance with the market and commercial principles, signalling that it will not push firms to take unwanted risks or to give any concession to Pakistani companies.

There is an opportunity here to bring lots of Chinese energy-intensive industry to Pakistan where a lot of surplus power can essentially be used. CPEC  phase 2 will actually be more about utilizing the infrastructure that is in the country and how it can be optimized. The renewed focus on CPEC would require Pakistan to first fix its finances. The Chinese are dealing with around 50 countries, all needing some kind of debt relief. If they give public statements, it will become a precedence. Pakistan’s nearly US $ 375 billion economy is facing a debt burden of almost US $ 290 billion. Pakistan's foreign debt is close to $130 billion. Around 13 percent of Pakistan’s external debt is owed to China.

China will have to restructure the debt Pakistan owes.

The security of Chinese nationals in Pakistan is a key concern for China. Five Chinese workers died in a suicide attack in northwest Pakistan in March this year, while at least a dozen more have died in targeted attacks in recent years. During the visit, Premier Shehbaz Sharif, along with the country’s powerful army chief, General Asim Munir, held talks with Chinese President Xi Jinping for more than three hours. China is serious with Pakistan on the security of Chinese nationals to avoid a backlash from its own people. The fact that the army chief accompanied the prime minister shows that Pakistan is taking security issues seriously. For the protection of the Chinese engineers and workers working on different projects in the country, Pakistan is committed to making it foolproof enhancing additional security forces deployment. Pakistan will have to continue to make every effort to hunt down perpetrators and make sure they receive severe punishment. Following the successful Chinese model Pakistan can excel in education, health, agriculture, IT,  science and technology, mining and power sectors. The government of President Xi Jinping very successfully has uplifted the living standards of more than 800 million Chinese. Pakistan needs to follow this economic vision of the Chinese President.

Naveed Aman Khan

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The writer is editor, book ambassador, geo political scientist and author of several books on media and international affairs based in Islamabad. He can be reached at [email protected] and X@AmanNaveed11

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