SVI In-house Seminar/Panel Discussion: Report – February 7, 2019 Belt and Road Initiative and China-Pakistan Economic Corridor: Impact on Developments in South West Asia

SVI In-house Seminar/Panel Discussion: Report – February 7, 2019 Belt and Road Initiative and China-Pakistan Economic Corridor: Impact on Developments in South West Asia

Compiled by: Waqas Jan
Reviewed and Edited by: S. Sadia Kazmi
STRATEGIC VISION INSTITUTE (SVI), ISLAMABAD

As part of its continued focus on examining the impacts of CPEC, the Strategic Vision Institute (SVI) under its China Studies & Information Center (SVI-CSIC) organized an In-House Seminar titled “Belt & Road Initiative (BRI) and China-Pakistan Economic Corridor: Impact on Developments in South West Asia” on 7th February 2019.
Chaired by Dr. Zafar Iqbal Cheema, President/Executive Director of the SVI, the seminar was aimed at fostering a lively discussion on the economic rise of China as well as the increasingly prominent role being played by the CPEC and the BRI within this frame work. It drew on the expertise of a broad range of both local and international experts
whose specializations spanned across regional politics, economics, development studies, diplomacy, peace and security. These included Prof. Shahram Akbarzadeh (Research Professor, Alfred Deakin University, Australia), Prof. Baogang He (Professor and Chair in International Relations, Alfred Deakin University Australia), Dr. Zahid Shahab Ahmed (Research Fellow, Alfred Deakin Institute for Citizenship and Globalization, Australia), Mr. Zhao Lijian (Deputy Chief of Mission, Embassy of People’s Republic of China in Pakistan), and Dr. Vaqar Ahmed (Joint Executive Director, Sustainable Development Policy Institute [SDPI], Pakistan).

Formally inaugurating the session, Dr. Zafar Iqbal Cheema warmly welcomed all participants and expressed his heartfelt gratitude for their attendance. In his introductory remarks he explained how he was looking forward to an inclusive rather than exclusive discussion that was cognizant and appreciative of the existence of multiple perspectives on the issue at hand. He linked this to how the SVI has prided itself on remaining an independent and autonomous body that has continued to strive for objectivity and impartiality in its contributions to an overall discourse that is multidimensional, while at the same time remaining well cognizant of the national interests of the country.
Speaking on the fast evolving discourse on the BRI and CPEC, he explained how both these initiatives serve as the logical and inescapable consequence of China’s rise as an economic power. He elaborated on how CPEC for instance, while an extension of the BRI, has also been facilitated to a large extent by the long and prospering history of China-Pakistan relations which have remained friction-free for the most part. This is in contrast to Pakistan’s relations with the West and for instance the US which have been at times characterized as being more transactional in nature. Briefly summarizing the consequences of Pakistan’s foreign relations over the last few decades, Dr. Cheema pointed out that the onus also lies on Pakistan to manage its complex web of relations with better regard to its national interests such as its economy which it had unfortunately mismanaged considerably over the years.

With respect to the BRI, he pointed out how both the BRI and CPEC have been viewed from diverse and at times opposing perspectives. The designers and architects of the BRI for instance have purportedly approached it from a geo-economic perspective. This has entailed a focus on promoting greater economic connectivity, development, and trade through the development of Special Economic Zones and large infrastructure at the regional level.

At times contrary to this perspective has remained the geo-strategic perspective, which is rooted more in the wider region’s super-power politics. That China is expanding into Pakistan and the wider region, at the expense of the United States. Viewed as a zero-sum game, this perspective is based on the premise that China’s expansion would in multiple ways limit US influence, economically, politically, militarily and even psychologically. Hence, it is not uncommon to find some Western scholars that view the BRI and CPEC from such a perspective within International Politics. And then there are also other perspectives of similar and opposing arguments. There are multiple regional perspectives, including Pakistan’s national perspective all of which are grounded in certain assumptions and premises based on their varying scope of analyses. There is even a Middle Eastern and Iranian perspective that is being presented today which adds to the rich discourse on the impact of China’s rise as an economic power.

After his introductory remarks Dr. Cheema invited the first speaker to deliberate on the subject.

Prof. Shahram Akbarzadeh presented his views on the “BRI and China’s Appeal to the Muslim Middle East”. Speaking on the idea that the Belt and Road Initiative was in some way a revival of the ancient Silk Route, Prof. Akbarzadeh explained that he had significant doubts regarding the veracity of this claim. He believed that this idea was propagated more of as an attempt to romanticize and further characterize the BRI as he was unsure of how connecting Australia for instance relates to the ancient Silk route. He went on to explain how this idea of linking the BRI with the silk route had so far worked as nothing more than a great marketing gimmick by the BRI’s planners and architects. He did acknowledge that based on China’s rise as an economic power, the BRI was a direct manifestation and product of China’s need to connect with rest of the world. By investing in large-scale infrastructure and new trade routes, the BRI represents a wise and clever way to sustain its long-term growth. In addition, it indicates China’s willingness and commitment to think and plan for the long-term. However, it is worth noting that even though China is thinking long-term, it has confined itself more or less to the economic sphere without really pushing for a global political agenda. This is an important factor as it has major implications on how China is perceived and reacted to by others in the region.

Hence, in talking about a Muslim response to the BRI it is also important to underscore that each region’s response and experience with the BRI has been different. South-East Asia’s experience with the BRI has been markedly different from South Asia’s for instance. Giving the example of Muslim rule in Malaysia he explained how the existence of a large Chinese population there gave way to its own internal dynamics. Thus, keeping in mind such qualifications he explained how his current presentation was restricted more to how the ruling elite in the Muslim Middle East in the present perceives the BRI and China’s long-term vision. Prof. Akbarzadeh was of the opinion that at the present the overall perspective in the Middle East regarding the BRI is very positive if not overly enthusiastic. This was because of two reasons, the economic and political aspects. The economic aspect is in itself quite self-explanatory. Enhanced trade, greater investment in infrastructure, and more diversified sources of capital are the areas where Middle Eastern countries are already looking to explore opportunities. However, what is of more importance and interest to Prof. Akbarzadeh is the political aspect, which has remained considerably understudied specifically from the perspective of the ruling elite of the region.

The fact that at present China is not really pursuing a global political agenda stands in direct contrast with the United States. While the US is proud of advocating and pushing for certain ideals to be implemented, China has refrained from pushing a global political agenda. In fact, China has been renowned for quite famously adhering to the principle of non-interference in the affairs of other states. This contrast is further evident for instance from the direct involvement of the US in its military interventions in Iraq, Libya and Syria on the one hand, and a China that has abstained and often voted against such interventions on the other.

Hence, China is not concerned with the extent of political openness in the Middle east or for instance, with the state of human rights in the Middle East. This is in contrast to Western investments and/or assistance that is often directly tied with an insistence of improving the state of human rights, political openness and/or democracy in the Middle East. This has worked in China’s favor with regard to its expanding influence in the region.

However, in contrast to the US, China does not have the capacity to exert the level of soft power and cultural influence that is exerted by the US in the region. While the United States may have jeans and Hollywood, Prof. Akbarzadeh doubted whether there would be many in the Middle East that would be committed to Confucianism or Communist ideology. This relative lack of cultural appeal greatly limits the extent to which China can exert a level of soft power and cultural influence that is on par with the United States.

Going back to how the ruling elite in the Middle East perceives the rise of China, it is important to highlight that China’s appeal to the Middle East is enshrined more in the business-like manner in which they are based. This carries with it an added bonus for small powers for which China presents a sort of alternative to the US hegemony and unilateralism in the region. This proves immensely useful in for instance extracting greater concessions and benefits in negotiations with the US as there is now a second power attempting to exert influence in the region. For instance, if the US were to push too hard on human rights as part of a certain deal, such small powers now can always resort to exploring closer ties with China as an alternative.

Hence, overall the future looks very bright for China. This is in terms of expanding ties, developing closer links and presenting an alternative to US leadership in the Middle East. In addition beyond the economic benefits of greater trade and connectivity there is an added diplomatic benefit in terms of China’s ability to influence for instance these countries’ foreign policy choices. This is evident in the Muslim Middle East’s response to (or lack thereof) of China’s harsh treatment of its own Muslim population in the Xinjiang region. Among the widespread accusations of torture, arbitrary arrests and widespread detentions, there has been little condemnation if any from the Muslim rulers of Middle Eastern countries while these reports have largely emanated from Western sources. Whether this is a by-product of China’s growing economic power or whether it is an issue that lacks the required appeal, what’s important is to realize that China’s rise has greatly influenced the foreign policy choices that are taken by the ruling elite of the Muslim Middle East.

Following Prof. Shahram Akbarzadeh the second topic presented was “BRI as an Extension of the Chinese Development Model” by Prof. Baogang He. Drawing from his vast expertise into the domestic politics of China and the wider region, Prof. Baogang He explained how his approach to the issue is enshrined within a domestic developmental perspective, using ideas from the study of the International Political Economy.

He discussed how before going into the actual concept it was perhaps easier to provide a concrete example of how and why China’s State-Owned Enterprises (SOEs) have taken such an interest in overseas development projects. He gave the example of one such SOE which is in charge of building dams across China. After having built all the required dams in the country the company with its unique technological expertise, trained labor-force, and vast supply chains had considerable excess capacity that was still lying un-utilized. Hence, it was only logical to take this excess capacity outside of China to build dams in countries where they were needed most such as in Myanmar and other places. This serves as one of the underlying reasons attributed as to why China has resorted to promoting such large-scale infrastructural and economic development outside of its borders.

He explained how keeping this example in mind, it was important to distinguish China’s approach to such large-scale development with the Japanese approach. He pointed out that there have been two development models that have so far been deployed on a large scale in East Asia. The Japanese model which gained traction in the 60’s is widely attributed to have brought about the rapid economic development experienced by East Asian and South-East Asian countries such as Korea, Singapore, Thailand and Malaysia. Based on the transfer of second-hand technologies first developed in Japan, private companies from Japan set up manufacturing plants during the 80’s for various consumer electronic goods such as televisions, cameras, etc. This was setup as part of a regional production network which oversaw the production and exports of such high-tech manufactured goods. China as part of the BRI is to some degree following the same logic that Japan had employed in the 80’s. What China however is doing differently is that instead of setting up factories across the region for mass produced consumer based goods such as televisions and camcorders, China is focusing on the development and export of infrastructure. These include dams, highways, railways etc.

Another key difference between the two models is that Japan’s objectives were more moderate in nature with regard to its regional production and supply network. This is apparent in the network being limited more to East and South-East Asia. China’s ambitions on the other-hand are more global in nature. They are building not only in Asia, but in as far as Africa, Latin America and the Pacific Islands. Hence, what China is aiming to build is a global production network based on global supply chains. This difference is marked further by the fact that the driving force behind China’s development model is state owned enterprises. This is in contrast to the Japanese model which is led primarily by private companies.

Prof. He emphasized that due to the Chinese state’s close involvement in the entire process, the sheer scale and magnitude of the Chinese model further sets it apart from the Japanese model in a number of telling ways. This includes for instance, the scale and scope of investments. If investments from private Japanese enterprises are accounted for by the millions then China’s investments account for billions of dollars in investments for massive projects.

Similarly, the amount of land involved in Chinese funded projects is also exponentially larger. Japanese factories required purchases of at the most 2-3 acres of land for building industrial zones, etc. In the case of Chinese projects focused on building large dams, or high-speed rail links, the scale of land involved runs over thousands of kilometers. The infusion of labor too is of marked difference in both models. In case of Japan, the extent of involvement of Japanese labor is limited to managerial and consultancy roles with a large involvement of the local labor force. In case of the Chinese model however, a large proportion of the labor force employed is Chinese as is evident from the 10,000-20,000 Chinese workers currently working on projects throughout Pakistan. The same is the case for sourcing raw materials. Whereas the Japanese model emphasizes sourcing raw materials from local sources, the Chinese model due to its sheer scale and potential benefits from economies of scale, relies more on supply chains based in China. For instance, the steel being employed in Malaysia for such large infrastructural projects is being sourced from China as it is cheaper than steel produced in Malaysia.

Prof. He further went on to explain that these differences in the previously outlined factors of production as utilized by China have carried with them their own set of challenges. This is apparent in the troubling levels of local resistance faced in a number of regions and countries. For instance, the lack of involvement of local labor in projects particularly in Africa was highlighted as a major issue that was addressed accordingly. Similarly, the issue of managing the large swathes of land involved in major projects has also appeared as a major issue. This was exemplified in Cambodia where plans to construct a certain dam had to be scrapped because of widespread protests by the local population on the issue of land ownership of the designated site. The sheer size and scope of the capital involved as part of Chinese investments also carries with it its own risks of debts and non-payment issues. These often have to be settled by land and lease transfers as was the case in Laos where the government’s inability to pay back the investment for a railway project led to the government transferring ownership of large swathes of junk land over to the Chinese company for further development.

Hence summing up the discussion, China while building on the Japanese model has pushed forth its own approach and logic with regard to the transfer of technology and expertise across the wider region. This has had its own implications on the varying ways the Chinese development model has employed the use of land, labor and capital as factors of production. However, to link the Chinese impact of this approach with the wider region’s geo-politics is a different issue, one that is perhaps inferred prematurely considering how a large number of these projects are yet to be completed with their impact yet to be assessed beyond mere claims.

The next speaker Dr. Zahid Shahab Ahmed discussed the findings from his paper titled “CPEC and Nation-Building in Pakistan”. Drawing from his vast experience on peace and nation-building within the Pakistani context, Dr. Zahid Shahab Ahmed highlighted how his paper examined the domestic dynamics of CPEC based on the developments that took place between President Xi Jinping’s visit to Pakistan and the change in Pakistan’s ruling government up until the recent elections. Moving on to the framework of nation-building that was employed by him, Dr. Ahmed further explained how numerous scholars had emphasized varying ideas with regard to the role played by the state vis-à-vis external actors in terms of nation-building. He also explained how numerous scholars had applied this framework particularly to the CPEC. In general he cited how Indian scholars had looked at it more from a geo-political perspective while a number of scholars from Pakistan for instance have focused on the geo-economic side of things. He also noted that there had been a certain lack of focus on CPEC from a more domestic perspective which he aimed to fill through his research.

Further elaborating on the importance of a more domestic approach, he explained how a number of studies on nation-building carried out by external actors such as the World Bank had repeatedly emphasized the importance of an organic and more home-grown approach to nation-building, that even despite the injection of aid and foreign funding, external actors have always remained limited in their ability to promote and support such nation-building efforts.

China has nevertheless played a huge role within this framework, the effects of which have been studied to a large extent in its efforts in Africa and the Pacific islands. With regard to Pakistan however, the impact of China’s efforts have arguably been greatly dependent on the internal dynamics of Pakistan’s domestic politics. These in particular comprise of the broad-ranging inter-provincial tensions drawn across political, economic and ethnic fault-lines which form the basis of the vast majority of constituent politics within the country. These politics he argued have also seeped into CPEC with numerous projects and initiatives being carried out under CPEC causing friction amongst the political parties that in turn draw their support alongside these provincial tensions. This internal friction is thus used by the political parties to settle political scores at times holding CPEC hostage to these politics.

The implications these have had on CPEC were apparent even during President Xi Jinping’s visit to Pakistan when some sane voices were cautioning the political parties from turning CPEC into another Kalabagh Dam. This he argued presented a glaring acknowledgment of such tensions serving as a major limitation to the potential success of CPEC. Another major implication he argued was the significant improvement in the overall security situation of the country which he attributed to a large extent on CPEC. Similarly China’s experience in facing such issues in Pakistan has also had significant implications for CPEC’s importance as a pilot project for the overall Belt & Road Initiative. The flexibility which China has shown as a result of its experience in Pakistan is also indicative of the lessons China has itself learnt as part of its overall vision for the BRI. This is evident for instance in the changes made to the geographical distribution and layout of the Special Economic Zones that were re-negotiated based on the concerns of unequal development voiced by certain political parties.

With respect to the prevailing Federal-Provincial tensions, such flexibility also marked a wholly positive achievement of attaining political consensus and unity, the extent of which has remained more or less unprecedented. Hence, China has perhaps unintentionally or somewhat intentionally helped political parties in Pakistan achieve and maintain consensus on certain highly divisive issues that have served as major impediments to the country’s past growth and development. Issues such as the share of development or the provision of employment at the local level is where China has shown remarkable flexibility and careful attention to detail. It has been careful in appreciating and understanding the unique challenges that have arisen from within Pakistan’s domestic dynamics and has in a way helped foster the required political consensus on which any serious efforts at nation-building are heavily dependent. Hence, in conclusion it is imperative that this consensus that has been achieved as perhaps a by-product of CPEC continues to form the basis on which the Pakistani state can embark on a prolonged and serious impetus for nation-building that is mandatory for it to achieve its envisioned growth and development targets.

Speaking on behalf of the Chinese government, Mr. Zhao Lijian presented “China’s Perspective on BRI and CPEC” and emphasized how both CPEC and the BRI have been envisioned as a win-win cooperation mechanism for all the countries and international organizations focusing on inclusivity and greater connectivity. It is in essence an economic project that was proposed by President Xi Jinping. He also explained that in contrast the BRI has been often represented particularly in the West as a strategic and military cooperation mechanism as part of the overall propaganda against China. This he emphasized was not true.

Beyond Pakistan, in South-East Asia for instance, major projects such as the China-Thailand Railway and China-Laos Railway are also currently under construction. In addition, there are a number of projects in Africa, Western and Central Asia which have been completed or are currently underway. China has also considerably expanded its rail-links with Europe with more than 10,000 trains now reaching 43 cities in 15 European countries as of last August. In gauging the extent of China’s trade and economic cooperation it is worth noting that China’s overall trade volume has surpassed 5 Trillion USD as of mid-2018. In effect, China has become the largest trading partner of 25 BRI countries including Pakistan. Furthermore, Chinese investment within BRI countries has surpassed 70 Billion USD. China has already invested 28.9 Billion USD in Special Economic Zones (SEZs) within BRI countries. This figure however excludes Pakistan in which this phase of development has not started yet. This figure accounts for around 82 SEZs in which almost 4,000 Chinese Enterprises have set up operations. These have in turn generated tax revenues worth 2 Billion USD while providing more than 250,000 jobs within their host countries.
As part of providing the required financial coverage, China has also added funds to the Asian Infrastructure Investment Bank (AIIB) which it had first established. Right now more than 60 countries are being provided access to funds via the AIIB including Pakistan. Some of the projects currently underway in Pakistan such as the M4 Motorway and the Karot Hydro Power Project are also being funded by the AIIB, as part of the Silk Road Fund. In the meantime China is also exploring a number of other options to further expand the funding mechanisms linked with the BRI. These include setting up inter-bank consortiums with Shanghai Cooperation Organization (SCO) countries for which China has offered 30 Billion RMB. Similar inter-bank consortiums are also being set with the cooperation of Arab countries as well as Central and Eastern European countries. All of these efforts are being made to expand the pool of funds available to BRI countries for development projects.
Last but not the least, Mr. Lijian elaborated on the key importance laid on generating greater people to people exchanges as part of the BRI. He emphasized that no matter the scale and scope of development projects, all these efforts were useless if China was unable to win the hearts of the people. Giving an example of the impact of CPEC and the BRI has had on this area; Mr. Zhao Lijian explained how there has been a marked increase in the number of international students studying in China since the inception of the BRI and CPEC. In 2017, for instance there were around 300,000 students from BRI Countries studying in China. From Pakistan, based on estimates provided by the Pakistani embassy in China there were around 22,000 Pakistani students studying in China in2016. This number has also likely increased considerably since then. Still, just to put this number into context, the number of Pakistani students studying in the UK by contrast is around 14,000-16,000 while the number of Pakistani students studying in the US is just around 5,000. In addition, the BRI has also provided a considerable boost to tourism in BRI countries.

In conclusion, Mr. Zhao Lijian said that he too believed that there is a definite consensus from the Pakistani side in terms of being on the same page with regard to CPEC. He also acknowledged that for the most part where there were certain concerns raised with regard to CPEC, they arose mainly from a lack of information and/or misinformation regarding the initiative. These he explained have for the most part been addressed accordingly.

The next speaker, drawing on his extensive research on economic development within the country, Dr. Vaqar Ahmed presented the final topic on “CPEC’s Impact on Pakistan’s Economic Growth and Development”. Considering how the newly elected government is in the process of familiarizing itself with CPEC, he appreciated the timeliness of the In-house seminar organized by the SVI. In answering whether CPEC had any positive impact on Pakistan’s economic growth and development, he said that the short answer to this question was – yes it has led to gains in Pakistan’s economic growth.
This was evident in the fact that Pakistan finally crossed the 5% mark of the rate of real GDP growth after decades as a result of CPEC related inflows. These include FDI inflows from non-China related sources that have since built on that momentum generated by the CPEC. At present, the 22 Billion USD worth of CPEC projects that are currently in the pipeline are also quite promising. As these projects near completion it is also worth acknowledging the numerous benefits already gained over from the completion of the Early Harvest Projects under CPEC. These include the benefits gained not only from utilizing the idle capacity of the large-scale manufacturing sector but also the additional capacities that were added over the last three and a half years. These include steel, iron, cement, construction and building materials industries. As a result, the economy experienced considerable buoyancy from the private sector with fixed investments rising to levels that were unseen since the 2010 energy crisis. So yes, there has been a definite uptick in economic activity in terms of a marked increase in business confidence as a result of both domestic and FDI inflows.

Dr. Ahmed went on to explain that building on these gains, it was important to discuss how Pakistan can put its own house in order to be able to maximize this opportunity and gain optimally from the next phase of development as outlined in the CPEC Long-Term Plan (LTP). This includes development of the Special Economic Zones as well as other objectives laid out in the LTP. Based on field surveys carried out by the SDPI amidst the business community, Dr. Vaqar Ahmed shared his organization’s findings on how businesses can further leverage the opportunities and advantages being provided under CPEC. These include the potential gains to be made from future trade and investment cooperation as well as the development of certain value chains with China and the rest of the region. He explained how there were three broad areas which the private sector had highlighted based on their surveys.
First they would like to see the development of Special Economic Zones expedited, particularly the SEZs in Faisalabad, Dhabeji and Rashakai. Second they would like to see CPEC’s next phase further bolster Pakistan’s transit potential. There exist numerous opportunities for servicing or scaling up goods and services in transit for Afghanistan, Central Asia and even Iran. Third, the business community was in agreement that in terms of trade opportunities CPEC’s gains would be optimized if Pakistan and China are able to reach an early agreement on the revised Free Trade Agreement (FTA). This is important considering that while CPEC offers considerable level of infrastructural endowments; it is ultimately market access for Pakistani exports that would generate more trade opportunities through a more balanced FTA between both countries. This entails adjusting both tariff lines and non-tariff barriers for Pakistani exports to China perhaps more in line with those linked with Chinese trade with Bangladesh, India and other ASEAN countries.
Dr. Ahmed explained that the business community was also of the opinion that in terms of import development China had to perhaps go beyond just the development of hard infrastructure, and assist Pakistan in setting up one-window operations at Pakistani ports. While the FBR does have a goal to set these up by 2020 this needs to be expedited further with perhaps Chinese assistance. Based on responses from the country’s small and medium enterprises, there was a definite need to further formalize the industrial policy of each province out of which only Punjab had formally done so. While the Early Harvest program had already set the groundwork by significantly reducing the energy deficit, these policies need to be formalized for these benefits to be reaped successfully. There was also a desire from the business community particularly in Karachi to engage in joint ventures with Chinese companies where there were greater opportunities for technology transfer. This is yet another aspect that can be incorporated as part of the government’s policies with regard to its focus on development of the SEZs. There was also an emphasis on promoting the services sector as part of the next phase of CPEC’s development. For instance, Pakistan’s IT services sector comprising mostly of freelancers has experienced a considerable boom over the last few years. The export of these services to China holds immense opportunities particularly under the subsequent stages of CPEC. In general there is a lot of work that needs to be done in terms of re-assessing the range of potential imports from Pakistan by China. Based on some research Dr. Ahmed listed a wide range of goods and services as part of Chinese imports from countries such as India and Bangladesh. These include seafood, horticulture, coal, leather items, rice, vegetables, ground nuts, etc. most of which are items that can easily be supplied by Pakistan to China.
He also emphasized that of all the potential benefits to be accrued from CPEC, these should not be simply limited to trade cooperation but also investment cooperation. While acknowledging China’s efforts in promoting investments by Chinese Enterprises into the SEZs it had helped set up in BRI countries, he explained how Pakistani enterprises too wished to be linked with Chinese Enterprises as part of this emerging supply and production network. He cited his organization’s research in the Sundar Industrial Estate near Lahore where 12 Chinese companies from the private sector had so far set up operations. Similarly in Faisalabad there are 9 Chinese companies based in the M3 Industrial Estate. Hence, while there is a definite interest and opportunity, these Chinese companies are producing for the domestic market. Ideally Pakistan would like to see these Chinese companies come in and contribute to the country’s overall exports in the future. Therefore, coming back to the revised Free Trade Agreement (FTA), it is imperative that the FTA has a more focused investment promotion clause that while also avoiding instances of double taxation, it becomes easier for Pakistani companies operating in China to open their overseas branches and help facilitate the sale of Pakistani goods and services in China. Similarly, while relaying the views of representatives from the Chambers of Commerce (particularly the Sialkot Chamber of Commerce), Dr. Vaqar Ahmed explained how there was a desire to have more Chinese delegation visit these areas particularly with respect to the leather industry for developing trade and investment opportunities. They were also of the opinion that the government has been unable to support the development of certain niche export industries for which there is already considerable demand by import vendors in China. For instance, Halal Food and Meat exports were cited by the representatives from the Peshawar and Lahore Chambers of Commerce as lacking in government support. This was because most of these goods currently being exported were in fact being smuggled into China via alternative routes such as through Vietnam. Winding up, Dr. Vaqar Ahmed emphasized that despite the myriad of business and regulatory challenges within Pakistan, it was quite encouraging to see a number of Chinese companies come in and set up operations throughout Pakistan. These include companies producing consumer goods that after relocating their plants and machinery in Pakistan are achieving up to a 45% return on their investments. These also include Joint ventures with Pakistani companies that further pave the way for other opportunities for the growth and development of the wider industry. This he said was apparent for instance in the joint venture between Haier and Ruba which are transitioning towards producing high-end consumer goods and electronics such as laptops, refrigerators, air conditioners and washing machines, etc. These examples present thus one of the many encouraging possibilities of utilizing the proposed SEZs under CPEC to their full potential, given the right conditions.

The talks were followed by an interactive discussion and Question & Answer session.

Lt. Gen (R) Syed Muhammad Owais (Former Secretary Defense Productions) while commenting on the proceedings appreciated the broad scope of the seminar comprising of a diverse array of experts from the world over. He added that due to Pakistan’s geo-strategic position with regard to the BRI, Pakistan enjoys a unique advantage to contribute to the development of the wider region encompassing South Asia, Central Asia, the Persian Gulf, and the Middle East. However, as pointed out by Dr. Vaqar Ahmed, this depends on how fast and how effectively Pakistan can put its own house in order to be able to fully benefit from this initiative.

 

 

Dr. Inayat Kalim (Assistant Professor, COMSATS University, Islamabad) posed two questions to the panel. His first question was to Prof. Baogong He, to whom he asked whether the BRI would disturb China’s existing trade balance with BRI countries such as Malaysia. His second question was to Prof. Shahram Akbarzadeh to whom he asked whether China would disturb the pre-existing relations between the US and Middle Eastern countries. Prof. Baogong He responded by pointing out that the sheer scale of China’s development projects are more likely to add to the demand for local supplies, boosting trade rather than upsetting pre-existing relations. Prof. Shahram Akbarzadeh replied that China was not trying to export culture to the Middle East, unlike the US. Rather it is through the rationale of large-scale economic cooperation that China is making friends in the Middle East.

Ms. Rina S. Khan (Environmental Journalist, Express Tribune)in a question directed at Mr. Zhao Lijian asked to what extent can CPEC be considered as ‘Green’ as part of President Xi Jinping’s vision of promoting an eco-friendly civilization. Mr. Zhao Lijian elaborated that China was wholly cognizant of the environmental impact of CPEC and the impact it would have on Pakistan’s soil, water and air. He gave the example of how with regard to CPEC’s contributions to the energy sector, the energy mix being deployed was cognizant of this factor and was also focused on utilizing renewable sources of energy, such as solar, and hydroelectric power. Building on this argument he said that it was important to dispel certain myths that were doing rounds linking the coal power plants being setup through Chinese assistance with rising air pollution levels. He explained how even though China too was phasing out the use of coal power plants, the ones being set up in Pakistan were employing state of the art technology aimed at generating minimum levels of air pollution. He pointed out that these levels were still considerably lower than the air pollution levels being caused by existing oil- based power plants such as the ones still being used in Port Qasim. The effects on air pollution levels of these new coal based power plants has thus been exaggerated, especially considering how coal still plays a very important role even in the US Energy Department’s energy mix.

Mr. Saud Bangash (Resident Director, Pakistan Business Council) in another question directed at Mr. Zhao Lijian asked how Pak-China economic cooperation was improving value added manufacturing in Pakistan. Mr. Zhao Lijian responded by citing the example of Haier that was mentioned earlier by Dr. Vaqar Ahmed. He explained how the company went from earning around 1 Million USD in revenues during President Hu Jintao’s visit (in 2006) to currently generating revenues worth almost 900 million USD. He pointed out that the success of Haier has been hailed as one of the first successful examples of SEZs in Pakistan. He also mentioned the vast demand for Pakistani mangoes and kinnows in China also presented ample opportunities for Pakistan to further develop its export capacity as part of Pak-China economic cooperation. Dr. Vaqar Ahmed adding to the DCM’s comments, pointed out that there was a definite need to undertake a large-scale assessment to identify key areas where Pakistan holds the comparative advantage in trade with China. This entailed an important need to identify high growth sectors and the underlying reasons of why local enterprises were succeeding and/or failing within these sectors. This has to be carried out by taking into account these sectors’ investment potential as well as how to further streamline the regulatory environment including the use of exchange and foreign currency mechanisms.

Mr. Hassan Daud Butt (Project Director/CPEC Coordinator, Min istry for Planning Development and Reform) on the request of Dr. Zafar Iqbal Cheema, presented the closing remarks for the session. He provided an overall snapshot of where CPEC stands based on the present government’s priority areas with regard to economic growth and development. He emphasized that CPEC has demonstrated that by working together and by achieving synergy between the multiple arms of the government as well as between countries, all the evidence points to the fact that CPEC works. This was evident in the revival of the country’s numerous sectors including most recently the textile sector. Based on the new government’s key priority areas he pointed out that experts on education and healthcare are also closely working with China to help develop these sectors in Pakistan. Furthermore, even though we have lagged behind on our targets pertaining to the SEZS, these are also being addressed. The FTA is also in the process of being ratified and should be finalized soon. He further added that under the direction of the present government, the promotion of certain Human Resource Intensive industries are also being looked at with a view to generating greater employment. Mr. Daud also said that 2019 was an important year for Gwadar as a number of key developments are expected be launched and completed. He mentioned that the government was also keenly focused on managing the ecological impact of CPEC on the overall environment. This he said was directly linked to generating a positive impact on tourism that was vital to the overall success of CPEC particularly in key regions such as Gilgit-Baltistan. He assured the audience that both his Ministry and the government at large were keenly focused on ensuring that the increasing momentum generated by CPEC is carried further for accelerating the country’s overall growth and development.

In the end Dr. Zafar Iqbal Cheema thanked all the worthy participants for their valuable input on the topic.

Media Coverage:
The event was widely covered by the print media as is evident from the links provided below:

Express Tribune 1

Express Tribune 2

Nation

Business Recorder

Dawn

Newswire

Official media/CPEC official website
APP

CPECinfo

 

 




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