Opening up CPEC

Updated 21 Jun 2017


LAST week, an exclusive published in this newspaper gave some insight into what the Chinese want from CPEC. Furnishing the story are details from a 231-page plan, ostensibly authored by the National Development and Reform Commission of the Chinese government. Once the story broke, it didn’t take long for the Pakistani government to issue a vehement denial. The minister for planning and development, and CPEC focal person, Ahsan Iqbal, shot it down, while questioning its veracity and its intention. This, needless to say, was an overreaction; that too is based on a misreading.

The government’s reaction to any such story, or more generally all things CPEC, is now fairly predictable. There is a deep-seated desire to regulate the conversation by sharing information as and when considered necessary. Part of this is understandable: large segments of the Pakistani media sphere are perversely irrational and woefully unequipped to discuss economic matters. This will be adequately demonstrated by the ignorance on display in a week’s time during the budget session. To avoid what it deems is unnecessary controversy, the government has opted for selective dissemination.

This regulation of discussion is built into the way CPEC has been conceived. It is a top-down plan being financed by an allied country that knows only top-down planning. For it to succeed, noise has to be minimised and institutional hurdles (such as PPRA rules for procurement) need to be limited.

Both the relative secrecy and the almost sacred status of CPEC in Pakistan’s policy space are supported by all decision-makers. While there were quibbles around regional inequalities in an initial phase, those conversations have largely been silenced through a combination of partial disclosure and constant back-channel talks, including by Chinese authorities. To use a tiresome cliché, the Pakistani political and military elite appear on the same page when it comes to the corridor and the conversation around it.

From what we’ve seen of CPEC so far, the aggregation and input of domestic interests looks to be largely absent.

It is also easy to understand why all major parties and the military are on board with this strategy: CPEC enables the Pakistani state to bypass a historical roadblock — sufficient mobilisation of capital. To put this into perspective, Pakistan’s private-sector investment as a percentage of GDP has averaged around 12 per cent for many years. This is demonstrably insufficient to kick-start growth and provide dignified employment to two million annual labour force entrants. The absence of capital for productive use in Pakistan compares unfavourably to other South Asian economies. Last year, India’s investment to GDP ratio was 29pc, while Bangladesh’s was 27pc.

Simultaneously, the Pakistani state has also struggled to raise sufficient public-sector investment to address development needs. A persistent lack of bureaucratic capacity and competence, combined with perverse incentives and insufficient political will, means rent-seeking and extraction prevail over systematic, broad-based taxation. Therefore, as a positive shock of sorts, CPEC offers an opportunity to break out of this low equilibrium through its sheer scale and helps resolve a central problem for our governing elite.

By exercising a CPEC-centric vision, and by regulating the conversation around it, leaders from all major parties in Pakistan are fulfilling the paternal aspect of their overall job. This aspect, exhibited by political elites the world over, involves providing a general direction for socioeconomic development, somewhat free from societal demands and interests.

However, paternal guidance in setting the national agenda is only one part of a political party’s job. The other, and some could argue, more central task is tempering that paternalism through the representation and aggregation of their electorate’s interests. This is particularly true for a country that constitutionally claims to be a federal democracy.

From what we’ve seen of CPEC so far, the aggregation and input of domestic interests looks to be largely absent. This is worrying for both the moral-ethical foundations of our political system, and for the eventual health of our economy. Recent reports cite growing fears of local businessmen, worried about the influx of Chinese capital and goods. Already smarting from several free-trade agreements, greater integration with the Chinese economy could hamper several segments of domestic manufacturing. There is also mounting concern from labour activists, unclear about the kind of wage and workplace regimes incoming Chinese investment will generate.

Finally, the swiftness and vehemence with which government officials rejected last week’s story on the CPEC plan suggest they want to keep a lid on another, far more volatile front: agriculture. If the current version of the plan retains the same core priorities, it means Chinese investment in agriculture, so far kept out of the discussion, will be central to CPEC. It means there will be large-scale land appropriations, new interventions in the agriculture supply chain, and possible disruptions in the way the rural economy currently works.

Unlike businessmen and labour, our governing elite — for better or for worse — cannot ignore a sector that still employs 40pc of the labour force, and still remains the lynchpin of electoral politics.

By refusing to elaborate on CPEC’s rollout in Pakistan’s rural economy, the ruling party through its lead, and all other political parties, through their pliant acquiescence, are shutting out a politically potent segment of the population. If this continues, the gulf between all those tasked with governing and those they’re supposed to represent will widen, opening up the possibility of political instability and conflict.

I am partially sympathetic to the argument of keeping sectional interests (especially privileged ones) out of policymaking. For too long, Pakistan’s development agenda has remained hijacked by industrial rent-seekers, tax-evading traders, and rural parasites, who combined have prevented equitable growth and greater redistribution. But the alternative of a Pakistani state elite working behind a paternalistic shroud of secrecy does not inspire much confidence either. CPEC’s potential will, in all likelihood, be better harnessed through a more transparent conversation; especially one that offers greater room for discussion and critique.

The writer is a freelance columnist.

Twitter: @umairjav

Published in Dawn, May 22nd, 2017