- What will really happen once the SEZs are ready is something that will only be known by its effects.
Two weeks ago, I wrote a piece about the special economic zones planned under the China-Pakistan Economic Corridor in which I drew attention to a news item that had come and gone largely unnoticed in which officials of the Planning Commission were quoted telling the Senate Committee on Planning and Development that “only Chinese investors will be allowed to invest in these SEZs”.
That article drew a sharp response from the Planning Commission and Miftah Ismael, special assistant to the prime minister who is heading the Joint Working Group on Industrial Cooperation, called me to give a lengthy and detailed rebuttal, saying no such exclusivity will be allowed. As a journalist I feel duty-bound to convey the contents of the responses I received, but must also add that these were not the only people who got in touch with me after that article appeared.
So let’s start with the government version. The Planning Commission sent a written response saying the article was “concocted and baseless, reported to mislead the masses”. They “condemned such distorted stories, appeared to be part of a campaign to malign the government efforts for development and economic prosperity of Pakistan”.
They claimed that a process to establish SEZs under CPEC had only just begun, and “[i]t is nowhere explicitly stated that only Chinese companies can invest in all SEZ”. Miftah Ismael went a step further, saying he would never acquiesce to such a request if the Chinese ever put one up, emphasising that even the Chinese side has not requested exclusive access.
What will really happen once the SEZs are ready is something that will only be known by its effects.
Fair enough. If the government side wants to stake out such a strong and unequivocal position on such an important matter, their view deserves to be known. But the chairman of the committee, Senator Tahir Mashaddi, continues to strongly say that the government delegation before his committee did indeed say what was attributed to them in the news report, adding that there was even a lengthy discussion on the matter after their remarks. “They often do this,” he tells me. “They often back away from things they say during these hearings afterwards”. The reporter who covered the hearing also strongly stands by what he reported, saying that he definitely heard the delegation say what was attributed to them.
So let’s get past this verbal impasse. If the government wants to today strongly emphasise that they will not negotiate exclusivity for Chinese investors in these SEZs, let’s take them at their word. After all, with time all will become clear, although hopefully by then it will not be too late.
The thing is, this is Pakistan, and the age-old adage that used to be said about the game of poker applies very well here: look around the table, if you can’t figure out who the sucker is, it’s you. In this country, the rules of the game are rigged long before they have been written down. Winners and losers are preselected before the game even begins. So what will really happen once these SEZs are ready is something that will only be known by its effects, not by the rules negotiated by any working group.
The point to note is this: thus far the country’s CPEC conversation has revolved around the question of routes, which province is receiving the largest share of the investment, and the financial terms on which this investment is coming in. But now it is moving into a new area: land.
Land is what this country is fundamentally about. Land is where the rubber meets the road. In my last column I gave the example of Sri Lanka, where things went wrong in a couple of large projects and their debts proved too burdensome for that country’s economy to manage. The penalty that Sri Lanka had to pay was land, swapped along with operational control of the port, in exchange for the debt that they could no longer service.
Since then I have learned that such examples are numerous. Tajikistan gorged itself on Chinese investment with much fanfare more than a decade ago. There too the arrival of the Chinese was hailed as a ‘game changer’ when the enterprise got under way. By 2009 or so, they had difficulty meeting their debt-service obligations. So they asked for some relief from the burdensome terms.
And you know what they had to give up in exchange for this relief? Land.
In 2011, the government of Tajikistan announced that they had just concluded a deal with the government of China, ceding control of 1,100 square kilometres of mountainous land to the Chinese under the garb of settling a centuries-old border dispute. The agreement had been reached in 1999, but finalised precisely at a time when Tajikistan’s debt difficulties began. The territory represents one per cent of the country’s total land area.
At the time, more than a third of the country’s total external debt was owed to China. By 2010, the year before the land deal, some 82,000 Chinese were working in Tajikistan, up from less than half that in 2007. The land that was ceded is now being tilled by Chinese farmers.
We have much to learn from Central Asia’s experience where Chinese investment has played a very positive role in building infrastructure. But the authoritarian nature of the regimes there meant very little of the growing collaboration was done with any transparency, and once the costs of the deals began to assert themselves, one of the instruments of settlement was land.
So now that Pakistan and China are at the ‘inception stage’ of a process to negotiate the creation of SEZs, and their associated infrastructure and raw material requirements, it is worth bearing in mind that the game is becoming very serious indeed. Nothing summons up the animal instincts of our economy quite like land does, and now that a party as large as the Chinese government is poised to enter that field, extreme care must be taken. Let nothing be agreed to in the dark.
The writer is a member of staff.
Published in Dawn, March 23rd, 2017
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