Bracing for a 46 billion dollar future

Updated Apr 22 2015


Prime Minister Nawaz Sharif and Chinese President Xi Jinping inaugurating projects through video link at the prime minister's office. —Online
Prime Minister Nawaz Sharif and Chinese President Xi Jinping inaugurating projects through video link at the prime minister's office. —Online

Consider it Pakistan’s Marshall Plan. China’s $46 billion infrastructure spending is a once-in-a-lifetime development opportunity, which can put Pakistan on the path to development and self-sufficiency.

The recently concluded visit of the Chinese President Xi Jinping to Pakistan has laid the foundation of billions of dollars in investment in Pakistan’s crumbling infrastructure. Thirty-seven billion dollars alone have been earmarked for fixing the power infrastructure to address the chronic power shortages that have crippled the economy and the society.

Read the editorial: China raises the stakes

The investment in Pakistan is similar in size and scope to the Marshall Plan for the reconstruction of European economies after the Second World War. Named after the American Secretary of State, George Marshall, the plan invested $13 billion ($120 billion in current dollars) in the war-devastated European economies.

United Kingdom, France, and West Germany were the largest recipient of funds under the Marshall Plan whose implementation began in April 1948. Almost 67 years to date, Pakistan’s Marshall Plan is being launched.

Better than Western plans

The Chinese investments in Pakistan differ from those which came from the United States and other large donors. I have previously questioned on the same pages if Pakistan needed help from US aid:

“In 2010, the US economic assistance to Pakistan equalled $1.8 billion. While the amount is indeed large, however, on a per capita basis, this translates into a mere $10.3 for the 180-million Pakistanis. Should we believe that Pakistan’s survival has rested on a mere $10.3 per person in civilian assistance from the United States?”

In addition, the Western donors have a sprinkling bias. Instead of focusing on one key project, such as eliminating cholera or malaria, Western donors like to spread their investments over a large number of small projects. As a result, billions of dollars disappear, making only marginal – if any at all – improvements in the lives of the people.

Take a look: Chinese investments dwarf American package: US media

The Canadian-sponsored development in Afghanistan has not been any different.

The Canadian aid agencies launched myriad projects in Afghanistan. From gender-mainstreaming to education, funds were disbursed for a number of different projects. But in terms of tangible results, there is not much that can be highlighted for the billions invested by the Canadian development agencies.

The Chinese have learnt from the mistakes of the past and that of others. Instead of sprinkling the investments over a large number of small projects, they are concentrating on infrastructure and power.

At the heart of the investment plan is the China-Pakistan Economic Corridor (CPEC) that will build a network of roads, rail, and pipelines to link the port city of Gwadar in Balochistan with China’s northwestern Xinjiang province.

Interestingly, China’s northwest is easier and faster to access from the Gawadar port than by the eastern ports in China. Access to Gawadar port opens up access to the markets in Middle East and Africa. China has big plans to expand in the emerging African markets. The corridor will serve as the modern-day Silk Route and thus holds great promise for the economic and social development of Pakistan.

Transparency, a big concern

However, the same corridor is also the source of great secrecy and lack of transparency.

Not much is known about the specifics of this corridor. Which districts it will pass through and which it will avoid has already contributed to a great deal of friction amongst legislators in the ruling party.

Realising that the proximity to the corridor will translate into greater prosperity, legislators are already busy trying to influence the planners to force the corridor to pass through or near their constituencies.

Read on: Chinese whispers

No wonder eminent economists in Pakistan have expressed concerns about the lack of transparency regarding the CPEC. Kaisar Bengali and Ashfaque Hasan Khan, two leading economists, questioned the government’s reasons to keep the plans secret.

Gwadar should be developed right

Equally important is the development of the Gwadar port city.

Already, land mafia and the upper classes have laid claims over prime land in the vicinity of the port in Gwadar. While Gwadar aspires to be a world-class port city, it does not have even one half-decent hotel to provide accommodation for managers and traders who are expected to arrive in a globalised port city.

In fact, the land use around the port has been taken up for residential land uses, thus frustrating any attempts to develop Gwadar as the logistics hub near the Strait of Hormuz.

The need of the hour is to cancel all land transactions that took place in the past 20 years in Gwadar and start afresh with a strategic master plan for this city.

The aim should be to develop the city as a Special Economic Zone, much like Shenzhen, which transformed from a sleepy fishing village to a leading seaport that handled over 23 million containers annually in the recent past.

Also read: Gwadar: on the cusp of greatness?

While the Chinese may be ready and willing to invest, Pakistan has to be ready to receive the infrastructure investments. The absorption capacity of Pakistan’s economy is rather limited, owing to the shortage of skilled labour, security threats to foreign workers, political instability, and poor governance regimes. The inability to absorb the investments could force the Chinese to move their investments elsewhere. We should not allow this to happen.

Flush with cash, because of the high savings rate, China needs to find exciting opportunities for their risk capital. Pakistan offers the right mix of risk, opportunity, reward and proximity to Chinese and global markets. This is an opportunity not to be missed.

The government, opposition, masses and the military must rise to the occasion.