MINISTER Planning Mr Ahsan Iqbal has been busy of late. He has had to deal with those nuisance protesters blocking the road, then play host to the Chinese delegation that flew in for the seventh Joint Cooperation Committee (JCC) meeting to finalise the Long Term Plan (LTP) for CPEC. Since it has been difficult to get through to him in the midst of these pressing engagements, I thought I’d share some questions I have about that meeting right here in hopes of an answer.
Why are the Chinese interested in making the yuan legal tender in Gwadar? What purpose does such a step serve, and how are Pakistan’s interests advanced by it? If this is about helping make the yuan an international currency, which is a major policy priority for China, then why only ask for it to be legal tender in Gwadar? Why not all of Pakistan? Most other efforts to make the yuan a global currency are focusing on making it into a reserve asset through yuan-denominated bonds and currency swap arrangements between the central banks of China and other countries. Pakistan too has such a swap arrangement for many years now. But reserve asset is one thing, legal tender is a different ball game altogether.
When did the government of Pakistan first receive this proposal which was raised and discussed at the JCC meeting concluded on Tuesday? According to details trickling out from that meeting, it was first raised in the Senior Officials Meeting held on Monday which was intended to prepare the ground for the higher-level talks on Tuesday where the important policy decisions were made. Is this true? Another report, quoting unnamed officials, says that “Pakistan conveyed its opposition to the demand a few months ago, but the Chinese side pressed it again”. So if they were told ‘no’ a few months ago, and returned to press the demand again, might they return a few months later and press harder still? Or is the ‘no’ they have been given this time final? Has this been raised in any of the previous JCC meetings?
How hard did the Chinese press the case for this proposal? Again, according to details trickling out, it appears there was extended debate around the idea. Is this true? What arguments did they advance for the proposal? Following the meeting, the secretary planning told reporters that the idea had been turned down, but the minister planning simply said it was being considered and “it is only a proposal at this point”. So which is it? Turned down or under consideration? Or perhaps ‘turned down for now but to be considered later’?
The CPEC plan raises far more questions than it answers. It needs to be made public.
By itself the proposal doesn’t tell us much, except that whatever plans the Chinese have for Gwadar are a lot bigger than what we have been told. Thus far, there are two countries that have officially allowed the yuan to be legal tender: Angola and Zimbabwe. In the case of Zimbabwe, the decision was aided by the fact that its own currency had collapsed in 2009, with an inflation rate of 500 billion per cent (yes, five hundred billion). They shifted to the US dollar and the South African rand as legal tender, then in 2015 allowed the yuan in.
By itself there is nothing inherently wrong with countries discussing and possibly mulling monetary arrangements whereby their currencies can acquire the status of legal tender in other countries. But in this case, a few sources of concern arise. First, it appears the demand is for one city only, which is odd, unless there is a plan to extend the coverage to the rest of Pakistan soon, in which case it is still odd to begin with one city, especially one so remote from the centres of economic activity in the country, for now anyway.
The LTP that was finalised on Tuesday (pending a few issues we are told) needs to be made public to prevent questions such as these from clouding the overall positive prospects that CPEC has for Pakistan. What is an important source of concern is how many other such surprises await us in the future as we go down this road. Recall that we are only at the very beginning, and the discussions taking place around the LTP — which is a detailed road map extending to 2030 that significantly increases the role of Chinese capital and enterprises in Pakistan’s economy — are precisely where the future shape of the project is being decided.
Nobody outside a small circle had heard of this proposal to bring the Chinese currency as legal tender in Pakistan. It is not mentioned in any public pronouncement, not on the CPEC website, not in any of the minutes of the JCC meetings held thus far, not in the LTP finalised in December 2016 at the sixth JCC and not in the shorter summary of that document circulated to the provinces in March of 2017. So the question is, what else is being discussed that would take the whole cooperative framework of CPEC far beyond the roads and power plants that we are encouraged to imagine when thinking about the project?
There is one fact that is becoming increasingly clear: CPEC involves a fundamental and profound reshaping of our economy and policy landscape in order to create the space for Chinese capital and enterprises to acquire stakes and participate in the economic life of the country. When this newspaper ran details from the LTP back in May, the minister planning referred to that document as a “live document”, meaning it was up for changes. Then, before the JCC meetings got going, he told us that the LTP under consideration is the same document. The time to come clean on all this has arrived. Let’s see the plan, as you promised, Mr Minister!
The writer is a member of staff.
Published in Dawn, November 23rd, 2017