Economic future of Pakistan

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ISLAMABAD:

Pakistan is looking for a plausible policy to overcome the economic crisis. The politics that can help achieve the goal of sustainable development and maintain a dignified place in the global community.

Pakistan initiated the process of dialogue and consultation and appealed to political institutes for assistance. Deliberations continue with two specific objectives.

First, Pakistan is looking for economic opportunities where it can engage. Second, he wants a reliable and trustworthy partner who can act as an anchor.

Fortunately, Pakistan has a galaxy of reliable and trustworthy friends, including China, Indonesia, Turkey, Gulf countries, Western friends, the United States, etc., who can be good partners. economic.

However, China stands out among all of them, due to its economic size, global influence and unique and permanent relationship with Pakistan. Moreover, China is already deeply engaged in economic cooperation through the China-Pakistan Economic Corridor (CPEC) and non-CPEC programs.

It is a less known and discussed fact that before the signing of the CPEC agreement, China’s total investment in Pakistan was around $15 billion. Huawei, Haier and Zong were among the top Chinese investors.

Huawei began operations in 1998 and is now one of the top paying technology companies with $43 million in 2018.

In addition to job creation (16,000 direct and 25,000 indirect), Huawei also invests in talent and human resource development through Huawei ICT Academies, Huawei ICT Competition and Seed for Future.

Haier is another Chinese company, which started its journey with $45 million and now has operations estimated at $1 billion. It is one of the leading home appliance brands in Pakistan.

Zong helped Pakistan revolutionize the telecommunications sector. It is the largest data provider with a 55% share and the largest investor in the telecommunications sector with an investment of $2.2 billion.

Even though the cooperation was going well, President Xi Jinping’s visit to Pakistan in 2015 changed the whole dynamic. Pakistan and China signed the CPEC agreement during his visit.

It is a comprehensive program, which addresses almost all of Pakistan’s economic challenges.

The first phase of CPEC helped Pakistan create 85,000 jobs directly and 200,000 jobs indirectly by engaging over 100 SMEs. This means that 285,000 families have benefited from phase I.

In addition, CPEC-related energy projects provided jobs for 23,000 people during Covid-19. CPEC’s contribution to load shedding management in Pakistan is well established and recognized.

The second phase of CPEC is expected to usher in a new era of economic growth and development. By emphasizing industrialization, agricultural development and modernization of science and technology, Pakistan will reap the benefits of sustainable development.

Social development cooperation will help Pakistan reduce inequalities in society.

Renewable energy (both under CPEC and outside of CPEC) is another area where China is striving to improve its footprint.

Chinese companies, in partnership with Pakistani companies, have started constructing the Diamer-Bhasha Dam, which has multidimensional benefits.

It has a storage capacity of 6.4 million acre-feet (MAF) of water and will produce 4,500 megawatts of cheap electricity. It will create 16,000 jobs during the construction phase.

The dam will help Pakistan irrigate 1.2 million acres of land, which will boost the employment of unskilled labor.

In addition, it will help address food insecurity and shortages of raw materials for industry through increased production of food and non-food products.

The Dasu, Karot and Azad Pattan projects are outstanding examples in the field of renewable energies.

In a nutshell, China, through CPEC and non-CPEC cooperation, has proven that it will stand by Pakistan no matter what happens.

On the contrary, Pakistan’s Western friends and allies in the war on terror have shown little interest in solving the country’s economic problems. On the contrary, they used and still use international organizations like FATF, IMF and other institutions to bend Pakistan.

lessons to learn

This is not rhetoric; it is based on an analysis of global political economy and power games. The analysis suggests two lessons for Pakistan.

First, whatever Pakistan does, the United States and the West will never support Pakistan until it abandons CPEC and China, which is not possible.

Second, the United States and the West will prefer India to Pakistan, even if Pakistan abandons China. It has a strong economic logic.

It is a well-known fact that the United States and China are embroiled in an intense economic and trade war. Due to the huge difference in market size, the United States cannot compete with China.

China is a huge market of 1.4 billion people. It can confront the economic war by giving impetus to the national economy. China has already started the process by adopting the dual circulation model and transitioning people to the middle and upper classes.

It is expected that 400-600 million people will be middle-class educated by 2035. HSBC says 160 million will be added by 2025.

In addition, 300 to 400 million people are expected to advance to the upper class. This means that 800 to 1,000 million people will change classes, which will give a huge boost to domestic consumption.

Thus, China can face any kind of sanctions and maintain the strong economic growth.

On the contrary, the United States is a market of only 333 million people, without comparison with China. European countries, the United States’ traditional allies, can’t help much either because their markets only include 750 million people. Moreover, both markets are saturated and offer few opportunities for expansion.

In this situation, India appears as the only option for the United States. India is aware of the fact and is trying to exploit the situation.

For example, on the one hand, India is part of the Quad 2+2 and other western initiatives and refused to join the Belt and Road Initiative (BRI). As a result, India benefits from a waiver on energy imports from sanctioned countries.

On the other hand, India is taking advantage of China through the Asian Infrastructure Investment Bank, the new BRICS development bank, the Shanghai Cooperation Organization (SCO) and by strengthening the trade. Trade between China and India reached $125 billion in 2021.

In this context, Pakistan must design a wise and intelligent policy by adhering to two fundamental principles.

First, Pakistan should stick firmly to the policy of Pak-China relations. Second, Pakistan should tell the United States that it is ready to work with Washington for a mutually beneficial relationship, but without any strings attached.

The writer is a political economist

Published in L’Express Tribune, June 27e2022.

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