It is said that in 1960 when Chinese Chairman Mao Zedong sent off General Gengbiao, his second ambassador to Pakistan, he advised him: “Look after Pakistan; it is China’s window to the West.” Thus, the fact that Pakistan was a catalyst in connecting China with the United States in 1971 – when the former U.S. secretary of state, Henry Kissinger, paid two crucial visits to China to establish bilateral relations during the height of Cold War and to isolate the Soviet Union – comes as no surprise. Pakistan’s centrality to China’s transition from a regional to a global power remains an established fact. It even draws comparisons to the significance of Israel to U.S. strategic interests in the Middle East and beyond – Chinese General Xiong Guangkai once famously quipped, “Pakistan is China’s Israel.”
Pakistan, however, refuses to be self-reliant. Having remained dependent upon the United States – defining its geostrategic importance through a ‘transactional relationship’ over the past 70 years – Pakistan has now chosen to fully integrate into China in the new world order. Considering the US$62 billion Chinese investment in Pakistan through the China-Pakistan Economic Corridor (CPEC), a flagship project of China’s Belt and Road Initiative(One Belt One Road – OBOR), and in light of Pakistan’s lavish concessions to China through sovereign guarantees in return, a nuclear Pakistan is on course to becoming a Chinese satellite state.
Most importantly, having shared liberal democratic values, Pakistan must not alter its future course or terminate its ties with the West.
In his book The Warrior State: Pakistan in the Contemporary World, Canadian scholar T.V. Paul finds Pakistan suffering from a historical “geostrategic curse” that results in its addiction to foreign aid for survival. Similar to how countries that have abundant natural resources can suffer from a “resource curse” or an “oil curse” (called the paradox of plenty) and end up with less democracy, poor economic growth and lack of development, Pakistan has been (wrongly) encashing its geographic location in South Asia at the gateway to the Middle East and Central Asia through foreign aid, assistance and external loans. Paul concludes: “Pakistan became a rentier state, living off the rents provided by its external benefactors for supporting their particular geostrategic goals.”
Despite describing their relations as “iron brothers” – without having any historical, cultural or religious commonalities or societal linkages – it has been Pakistan’s ‘geopolitical compulsions’ and China’s ‘geostrategic ambitions’ that keep the two countries together. Apart from military and nuclear assistance (for China’s own wider geopolitical interests), China has never offered Pakistan any financial aid or assistance; neither did China come forward to help Pakistan in the two wars against India in 1965 and 1971, plus the Kargil conflict in 1999. Indeed, as Johns Hopkins University adjunct professor Touqir Hussain notes:
Yes, the relations with China enjoy a national consensus and remain a success story [for Pakistan] but largely because the Chinese laid down the terms of engagement and drew up its broad parameters. And they did it so shrewdly it gave Pakistan an illusion of being an equal partner.
Pakistan, however, finds itself constrained to put all its eggs in China’s basket owing to the excessive U.S. leaning towards Pakistan’s archrival, India. The United States has cultivated a closer strategic relationship with India since the end of the Cold War. Beginning with President Clinton’s visit to India in 2000 (forgiving India’s nuclear tests of May 1998) and followed by President Bush’s famous Indo-U.S. nuclear deal in 2005, this relationship was further strengthened by President Obama and his Pivot-to-Asia policy that finalized nuclear and defence (logistics) agreements with India in 2008, 2015 and 2016 respectively. This close relationship has only added to Pakistan’s consternation and caused it to look elsewhere for security guarantees and economic development.
Generous Incentives and Fiscal Liabilities
In my 2014 paper on Sino-Pak relations entitled, The Beijing Bend: Future Trajectory of Pakistan-China Relations, I tried to uncover the extent of (close) political and defence ties between the two countries (see here and here); however, a leaked “CPEC master plan” – also called the Long Term Plan (LTP) – prepared by the China Development Bank and Chinese National Development Reform Commission, the biggest stakeholders in CPEC, reveals hair-raising details on how China plans to virtually colonize Pakistan.
According to the master plan, the Pakistani government has already agreed to (briefly):
Deep and broad-based Chinese penetration into Pakistan’s economy, as well as society;
Leasing thousands of acres of agricultural land to China;
Establishing a full monitoring and surveillance system (with 24-hour video recording) of all major cities in Pakistan;
Installing national fiber optic cable, not only for the internet but also terrestrial television broadcasts with Chinese media “disseminating Chinese culture”;
Building Chinese market presence in electronics and telecommunication, textiles and garments, cement and building materials, fertilizer and agricultural technologies;
Visa-free tourism for Chinese nationals visiting Pakistan – ironically not on a reciprocal basis; and,
Introducing “coastal tourism” and “nightlife” into the Islamic Republic.
Kept under close wraps, and even hidden from the smaller Pakistani provinces – as well as the Gilgit-Baltistan region in the north – the LTP envisages taking initial shape by 2020 by overcoming (so-called) bureaucratic, technical and social bottlenecks, only to look forward to CPEC’s Vision 2025, covering all areas of bi-national cooperation that include:
Connectivity: Construction of an integrated transport system;
Cooperation for implementing Gwadar city Master Plan;
Information network infrastructure;
Trade and industrial parks;
Strengthen drip irrigation technology for water efficiency;
Strengthen production of horticulture products;
People to people contact Cooperation in areas connecting people’s livelihood and non-government exchange; and,
Cooperation between financial institutions;
Cooperation between financial markets;
Financial cooperation between Free Trade Zones (FTZs).
Pakistan’s Gwadar deep seaport has already been handed over to (state-owned) China Overseas Ports Holding Company on a 40-year lease until 2059. The enterprise holds a 91 percent share in the gross revenue that comes from terminal and marine operations and enjoys an 85 percent share in the gross revenue of the Gwadar free trade zone. As the Chinese begin to show interest in a new airline and investment in Pakistan’s banking sector, the Bank of China has already begun its operations in Pakistan and a Chinese consortium has bought a 40 percent stake in the Pakistan Stock Exchange. Meanwhile, Shanghai Electric is “committed” to buying K-Electric, the electricity distribution company in Pakistan’s most populous city of Karachi.
Paul concludes: “Pakistan became a rentier state, living off the rents provided by its external benefactors for supporting their particular geostrategic goals.”[iv]
While China pushes Pakistan to quickly finalize the nine special economic zones (SEZs) along the CPEC route, worries are growing about granting all CPEC-related contracts to Chinese companies, by-passing Pakistan Procurement Regulatory Authority (PPRA) rules; the award of a US$382 million Lahore Airport project to China Construction Third Engineering Bureau is a telling example. The nine SEZs across the country include:
Rashakai Economic Zone, M-1, Nowshera;
2. China Special Economic Zone Dhabeji;
3. Boston Industrial Zone;
4. Allama Iqbal Industrial City (M3), Faisalabad;
5. ICT Model Industrial Zone, Islamabad;
6. Industrial Park at Port Qasim near Karachi;
7. Special Economic Zone at Mirpur, Azad Jammu, and Kashmir;
8. Mohmand Marble City; and,
9. Moqpondass SEZ Gilgit-Baltistan.
Considering the exclusivity of these SEZs to only Chinese entrepreneurs, however, the industrial zones are already being called “China enclaves.”
In what is seen as “Pakistan’s Chinanization,” Pakistani businesses are nervous of losing out to the monopoly of Chinese competitors who have been showered with liberal tax breaks and import concessions to the extent of lifetime waivers on corporate tax payments in spite of their guaranteed profits. Chinese investors’ preference to deal with the government rather than local partners has further left Pakistani entrepreneurs grumbling about Chinese rigidity.
Pakistan’s China infatuation under former President General Pervez Musharraf led it to enter into a Sino-Pak Free Trade Agreement (FTA) in July 2007, which granted duty concessions on a 35% tariff line to China without considering the huge trade imbalance between the two countries (in China’s favor). As a result, Chinese goods flooded Pakistani markets rendering local manufacturers unable to compete. In the last fiscal year, Pakistan’s exports to China were a mere US$1.5 billion against US$14 billion of imports from China. Waking up belatedly, Pakistan now seeks to remove the trade imbalance between the two countries.
Meanwhile, China has turned out to be a demanding business partner for Pakistan. Beijing has lately been insisting on using Renminbi (RMB) – the official Chinese currency – as legal tender in the Gwadar Free Trade Zone to avoid exchange rate risks associated with the U.S. dollar and the Pakistani rupee. Despite the request being (temporarily) turned down by Islamabad as an affront to its “economic sovereignty,” the government seems willing to accede to the demand.
Among many of Pakistan’s ills and its (self-inflicted) problems, the perfidy and ineptitude of successive governments keep adding to the nation’s misfortunes. As I have observed in several of my earlier publications, democracy has yet to arrive in Pakistan. Pakistan’s fortunes – as well as its future – remain hostage to its uncommitted and unfaithful political elite, which loots and plunders the national wealth and its assets at will, throwing the nation in the dungeons of perpetual poverty and shackles of foreign debt. For the first time in Pakistan’s 70-year history, a three-time prime-minister (Nawaz Sharif) is being held accountable for corruption and having “assets beyond means”, as revealed through Panama leads in 2016.
Pushing the costs of the project higher by the day, Forbes foresees Pakistan getting more indebted to China.
However, as history stands witness, Mr. Sharif is expected to walk scot-free, either through a political deal with national institutions or an intervention by foreign stakeholders. One of the latest examples is General Musharraf’s ignoble National Reconciliation Ordinance (NRO) of 2007. Ironically facilitated by international power guarantors, the notorious NRO dropped all criminal cases against political elites in the name of “national reconciliation”. Despite Pakistan’s Supreme Court declaring the NRO “null and void,” successive governments refuse to hold their fellow politicians accountable.
Despite seeing value in CPEC, transforming Pakistan’s emerging economy into a mature one, Forbes magazine has expressed concerns about the project hurting the country by adding to Pakistan’s corruption. Pushing the costs of the project higher by the day, Forbes foresees Pakistan getting more indebted to China.
Anxiously watching Pakistan already living beyond its means, as evidenced by persistent current account deficit (US$3867 million) and Pakistan’s external debt jumping to US$88891 million by the fourth quarter of 2017, Forbes predicts Pakistan “swapping its debt with equity,” similar to the Chinese model adopted in Sri Lanka’s Hambantota port: granting the port’s ownership to Chinese government’s China Merchants Ports Holdings for 99 years in 2017 – in essence turning Sri Lanka into a “semi-colony,” in a subtle way.
As CPEC comprises two major areas of investment – coal-powered electricity generating plants and infrastructure development – the government’s dubious silence on what comes under Foreign Direct Investment (FDI) and how much falls under foreign loans (allegedly on unfavorable terms with additional country-risk specific insurance surcharges) makes CPEC’s outlay questionable.
While the country is already plagued by a circular-debt that comes from ill-thought out “sovereign guarantees” given to the Independent Power Producers (IPP) during the early 1990s, the accumulation of unpaid electricity bills, the inadequate transmission system and electricity theft (through meter-tampering and illegal connections), keep adding to line losses and power blackouts.
However, in its indiscreet haste of installing 19 coal-powered plants worth US$15.56 billion, the government has guaranteed a 17 to 20 percent return on investment/equity (ROI in dollar terms) to Chinese investors; adding the customs exemptions and generous tax allowances, the ROI shoots up to some 25 percent of profits.
Small wonder that the Chinese firms investing in coal-powered plants in Bangladesh on projects related to OBO’s Bangladesh-China-India-Myanmar Economic Corridor (BCIM) are said to be offering electricity at US$0.062 per unit as against Pakistan that buys it at US$0.092 per unit – way beyond the reach of an ordinary person.
As if this was not enough, Pakistan’s National Electric Power Regulatory Authority (NEPRA) – ostensibly having a consumer protection mandate, but under the government’s direction – has agreed to extract the security costs of CPEC from the hapless consumers through their back-breaking electricity bills for the next 20 to 30 years. Security costs involve monies spent on securing the three CPEC routes and nine SEZs as above from terrorist attacks – a herculean task.
Moreover, having little or no regard for the dreadful climatic and environmental effects of coal-powered plants, the Pakistani government has further assumed 22 percent of power-producers’ liability, in case of their payment default, through sovereign guarantees. Such imprudent concessions may turn the trumpeted “game changer” corridor into a nightmare for the people of Pakistan in the future.
As Pakistan’s western flank remains vulnerable and unstable, CPEC’s security cannot be guaranteed.
Pakistan’s economy already finds itself in dire straits: the country’s external debt and foreign liabilities have risen to a staggering US$83 billion; foreign exchange reserves have depleted to US$13.86 billion, and the current account/trade deficit stands at US$4.4 billion (October 2017 figures).
Amid the acute financial crisis, CPEC’s debt-servicing – beginning in 2023-24, when early-harvest projects see their completion – may push Pakistan into default or economic meltdown with unknown consequences for the viability of the state and regional stability. With reports of Pakistan ending up paying US$90 billion over the next 30 years to the Chinese state and private-sector CPEC investors, the International Monetary Fund (IMF) has already warned to expect an outflow of US$4.5 billion every year, besides advising to “rationalize and limit tax incentives and exemptions.”
First of all, the United States’ response to CPEC remains unclear. Despite sending a delegation to attend the Belt and Road Forum in Beijing in May 2017, the U.S. is unlikely to support the initiative as it challenges America’s long-term strategic plans in South-Asia for which India is buttressed as a counterweight to China. U.S. defense secretary General James Mattis’s recent objection to CPEC “passing through a disputed territory” (Gilgit-Baltistan) has not only offended Pakistan but also distressed China.
China’s quest for an alternate trade route is natural considering tensions brewing in the South China Sea, which may result in a naval blockade of China’s maritime route passing through the Strait of Malacca by the Asian Security Diamond, as well as the newly-formed “Quad” consisting of the U.S., Japan, Australia and India. Amid increasing Sino-Pak military cooperation, the Gwadar deep seaport may well become China’s naval outpostamong its “Strings of [naval] Pearls” in Myanmar, Sri Lanka and Djibouti. Although refuted by Beijing, a Pentagon report has claimed that China is establishing military bases in Pakistan.
Second, India remains a major roadblock. Protesting the corridor passing through Indian-claimed Kashmir (in Pakistan) and Aksai Chin (in China), New Delhi has rejected the initiative. Citing the India-Pakistan dispute on Kashmir as a matter of concern, a report by the UN Economic and Social Commission for Asia and the Pacific (ESCAP) warned that CPEC might create geopolitical tensions with India and ignite political instability.
CPEC further challenges India’s plans to its Central-Asia and Eurasia connectivity through the Iranian Chahbahar port and North-South Corridor passing through Iran and Afghanistan. The arrest of an Indian spy (Naval Commander Kulbhushan Jhadev) in Pakistan in March 2016, confessing his subversive activities to sabotage CPEC in Balochistan province, demonstrates India’s determination to derail the project.
Pakistan, however, does not mince its words when it comes to blaming India for subverting CPEC. Pakistan’s Chairman, Joint Chiefs of Staff, General Zubair Hayat, revealed to a seminar in November 2017 that the Indian intelligence Research and Analysis Wing had “established a new cell with a special allocation of over [US]$500 million in 2015 to sabotage CPEC projects.”
In the last fiscal year, Pakistan’s exports to China were a mere US$1.5 billion against US$14 billion of imports from China.
Third, keeping its Uighur Muslim population in Xinjiang province suppressed, China keeps complaining to Pakistan (behind closed doors) against Uighur terrorists having sanctuaries and receiving training in Pakistan’s tribal areas. Driven by Islamic fundamentalist ideology, Pakistani jihadi-groups carry strong sympathy – and linkages – with their brethren under persecution by (a godless) China, and may not “recognize” the larger economic benefits of CPEC.
Fourth, Pakistan’s near-hostile relations with Afghanistan keep both countries testy and unstable. Pakistan keeps accusing the Afghan government and its intelligence agency of granting sanctuary to the Tehrik-e-Taliban (TTP) and other anti-Pakistan terror groups from where they launch attacks inside Pakistan. As Pakistan’s western flank remains vulnerable and unstable, CPEC’s security cannot be guaranteed.
Fifth, the stark cultural, linguistic and religious dissimilarities will further come out in the open as CPEC progresses. China is not only bringing its own cement and steel but also its own labor, citing language issues. The Pakistani people are, however, generally conservative in their outlook and are extremely particular about faith-defined values, moral practices and (halal) eating habits.
As the country gets flooded with a Chinese workforce, the social contrasts are certainly going to cause frictions in the Islamic Republic. A recent AFP report on the persecution of Xinjiang’s Uighur Muslim population quotes a Chinese official giving China’s mindset: “The government thinks this Islamic word is equal to separatism.”
Sixth is Pakistan’s own innumerable internal challenges:
Civil-military frictions: The political and military leadership carry divergent outlooks toward CPEC.[liv] While the government desires to keep the project fully under its control, the powerful army wants to be an equal player. The government’s lack of transparency in signing loans and offering sovereign guarantees to China, not to mention arbitrarily planning industrial zones (for political mileage/patronage and kickback purposes), has already unnerved the army, which has created a 13,700-strong CPEC protection force, called the Special Security Division.[lv] Censuring the civilian government, Pakistan’s army chief has already voiced his concerns publicly by saying: “The bottom line is, we must ensure that the people of Pakistan benefit from CPEC to enjoy the fruits of prosperity. This will require leadership, collaborative spirit and capacity building at a much higher pace and level. While the army will provide security to the project, the other national institutions will have to come forward and play their respective roles.”
The Route Controversy: CPEC is a fortune-changer, no doubt. In view of the potential magnitude of goods transported on a daily basis and the lives of people it would favorably affect, the Corridor will transform the destiny of the land. However, owing to the greed and short-sighted policies of the Pakistani politicians deciding the layout of CPEC, the Corridor ran into controversy and dispute from day one. While the government wanted CPEC’s prime-artery to traverse through its political heartland – the prosperous Punjab province – the smaller and less-privileged provinces rightfully demanded their due share from the prosperity generated by CPEC. The Corridor, presently, has three arteries: the western, central and eastern routes. The shortest route, of course, passes through the Khyber-Pakhtunkhwa province; however, considering its vulnerability to terrorism, the western route has been kept as the third and last priority. The eastern route is the longest and understandably costliest passage, thus leaving the government-desired central route to be adopted as the best choice.
Balochistan unrest: The Baloch insurgency in the restive province has not ended, although it has died down somewhat. The Gwadar port city remains prone to terrorist attacks, and so is the long CPEC route that traverses through the province where the government’s writ remains lacking due to perpetual neglect and denying the people of their due rights.
Shia-Sunni sectarian conflict areas: Sectarian killings in Pakistan keep the country volatile. Among the three CPEC routes, the western artery passes through, or close to, the Shia-Sunni violence-prone areas of Quetta, Dera Ismail Khan and the Kurram tribal agency. Sectarian killings in Pakistan keep the country volatile. For example, a twin-suicide attack and a blast in Parachinar and Quetta claimed 85 lives (largely from the local Shia and Hazara community) on 24 June 2017.
Furthermore, all three CPEC routes culminate at the hotbed of sectarian clashes – Kohistan and Gilgit-Baltistan – threatening the very security of the passage. In one of the most internationally-embarrassing terrorist attacks in Pakistan, nine foreigners, including three Chinese mountaineers, were killed at Nanga Parbat in Gilgit-Baltistan in June 2013.
Terrorism: Despite controlling the menace of terrorism through military operations – Zarb-e-Azab (in North Waziristan) and Radd-ul-Fasaad (an intelligence-based operation in the whole of the country) – internal terrorism continues to persist. The problem is that while the military stays focussed, the government sleeps over its 2014’s National Action Plan to rid the country of extremism and terrorism. CPEC’s western-route would be particularly hazardous, as it travels right next to the lawless tribal areas, which some of Pakistan’s self-serving politicians refuse to integrate into the mainstream country.
While it is Pakistan’s right to seek any geopolitical alignment and strategic partnership with any country it deems fitting, the true nature of Sino-Pak relations remains shrouded in mystery. Although denied by Beijing, there have been (unsubstantiated) reports of Chinese military presence in the Gilgit-Baltistan area and China’s plans of using the Gwadar port as its naval base. Recent reports of China seeking an agreement with Afghanistan to station its troops in the Wakhan Belt bordering Pakistan has fuelled suspicions of China’s long-term military presence in the region.
In my 2015 paper (mentioned earlier), I cited an AFP report quoting Pakistan army’s Directorate of Inter-Services Public Relations. According to this report, pledging on behalf of Beijing, the vice-chairman of China’s Central Military Commission, General Fan Changlong, had extended close cooperation “to ensure proper management and security of CPEC” – a reference to CPEC’s joint patrolling by the two armies.
Pakistan, however, needs to be mindful of Chinese investments in Sri Lanka, Tajikistan and a few African countries going sour.[lxiv] It is widely believed the Chinese are not known for reviewing their loans, let alone writing them off. In such a backdrop, the rising costs of projects have compelled these countries to surrender a substantial amount of land to China to pay back their debt. While Sri Lankans surrendered their territory in return for a debt-equity swap on the Hambantota port, Tajikistan is also said to have ceded one percent of the country in lieu of unpaid loans to China.
CPEC can no doubt promise prosperity to the people of Pakistan, however, the country needs to rely upon its own potential, and while safeguarding its own national interests, emerge as a truly sovereign state. Offering irrational concessions to China may turn out to be back-breaking and strangulating. In his book The China-Pakistan Axis: Asia’s New Geopolitics, Andrew Small acknowledges that:
China’s supposed plans for military bases in FATA [Federally Administered Tribal Areas], Pakistan’s supposed intentions to lease China a tenth of its territory, and the purported presence of 11,000 Chinese troops in Pakistan’s north are only a few … questionable claims that are taken as ‘accepted truth.’
Pakistan should also carefully take into account China’s own outlook about its rising power status before handing over the keys to its destiny to a country that is aiming big at the world stage – rekindling the myth of China’s Middle Kingdom eminence representing Shangri-la (heaven on earth). At the 19th National Congress of the Communist Party of China, President Xi Jinping proclaimed: “The Chinese nation … has stood up, grown rich, and become strong – and it now embraces the brilliant prospects of rejuvenation … It will be an era that sees China moving closer to center stage and making greater contributions to mankind.” Having his ideology chronicled in the Communist Party charter, Xi laid out his foreign policy objective of influencing emerging nations by offering them an alternate Chinese-style socialist model (rather than following Western democracy) to “accelerate their development while maintaining their independence.”
Under the banner of “time-tested and all-weather friendship” between the two countries – which is bragged about as higher than the Himalayas, deeper than the Arabian Sea, sweeter than honey, and stronger than steel – voices in Pakistan are now questioning Chinese generosity as another East India Company in the making – a private British company that ushered in the subcontinent’s British colonization, subjugating the land for nearly two centuries. Christine C. Fair, an authority on South Asia, observed in Foreign Policy: “If [CPEC] is even partially executed, Pakistan would be indebted to China as never before. And unlike Pakistan’s other traditional allies, such as the United States, China will probably use its leverage to obtain greater compliance from its problematic client.”
At the end of the day, CPEC remains a Chinese priority for China’s own strategic interests. Although Washington needs to be equally blamed for abandoning Islamabad, Pakistan’s decision to seek a closer relationship with China neither diminishes its geostrategic significance nor undermines its role as a strong Muslim military and nuclear power.
Situated at the crossroads of five great civilizations: the Confucius civilization in the north, the Hindu civilization in its east, the Persian civilization in the south-west, the Muslim civilization in its west and having its own ancient Indus-Valley Civilization in its heartland, Pakistan has much more to offer to the world than how it sells itself. Most importantly, having shared liberal democratic values, Pakistan must not alter its future course or terminate its ties with the West.
It is less ironic but more consternating that having chosen to join the American camp immediately after its birth, having remained a steadfast U.S. ally during the Cold War, having been a frontline state in helping to stop the onslaught of a socialist Soviet Union from reaching the warm waters of the Arabian Sea, as well as fighting the war on terror as a major non-NATO ally, Pakistan is feverishly welcoming another communist country with open arms – but closed eyes – that may well turn Pakistan into a vassal state:“South Asia’s North Korea.”