Pak-China’s New Leadership New Vision

Prime Minister Nawaz Sharif recently visited China and had very meaningful interactions at many levels. He met with his counterpart Li Keqiang and the Chinese President Xi Jinping and thoroughly discussed the matters of mutual interests. Pakistan and China enjoy an all-weather friendship. It is trustworthy and above all, time-tested too. Their multi-dimensional cooperation is built on the basis of mutual understanding, mutual trust and mutual support. Geo-politically, socio-economically and most of all geo-strategically, China has proved its significance and loyalty with Pakistan.

Both the countries pledged to pursue people friendly policies that could alleviate poverty, promote social and economic development and lessen roots of conflict. On its part, China vowed to support the efforts of the Pakistani government in addressing its urgent energy needs and continue to encourage and support Chinese enterprises’ investment in Pakistan. Pakistan and China agreed to promote the policies aimed at advancing the cause of peace, cooperation and harmony creating a win-win situation in the region.

In times of natural calamities or financial crises, it is the People’s Republic of China that has always rescued us from the deep seas of uncertainties to the shores of survival. That is why former Chinese Premier Wen Jiabao described Pak-China friendship as a pine tree, that remains evergreen despite the harshest of winters and it has stood the test of time like a strong horse.

Pursuing a strategic alliance with China remains the basis of Pakistan’s foreign policy and national consensus. Right from the beginning, Pakistan was adamant on its on policy of ‘one China’ and fully supported the country on the issues of Taiwan and Tibet. We also extended our support to the Chinese over the issues of human rights and Sinkiang. We endorsed the Chinese membership in UN General Assembly. Most recently, we stood by China on the issue of nobel prize controversy.

Salient Features of Joint Statement
Prime Minister Nawaz Sharif reaffirmed the strong commitment of his government to further promote and deepen the bilateral strategic cooperation. The two sides reviewed with satisfaction the development of China-Pakistan relations, and were of the view that this relationship had acquired growing strategic significance in the emerging dynamics of the 21^st century.

Both sides agreed to deepen the Sino-Pak strategic partnership in the new era. The two leaders appreciated that Asia was the engine of global economic growth and more than 40 percent of the global population resided in this vibrant and dynamic region. A major urbanisation and technological advancement was underway in this region, which would unleash enormous potential for regional economic development. Furthermore, the two countries decided to further deepen practical cooperation in all sectors and strengthen coordination and cooperation on international and regional issues.

China also reiterated to further strengthen its strategic partnership. It appreciated Pakistan’s long-term, steadfast support on issues concerning China’s core interests. China also vowed to continue extending its full support to Pakistan in the latter’s efforts to uphold its independence, sovereignty and territorial integrity.

On its part, Pakistan reiterated that friendship with China was the cornerstone of its foreign policy that enjoyed a national consensus, and appreciated the support and assistance of the Chinese government and the people for Pakistan’s sovereignty and socio-economic development.

“Pakistan will continue to adhere to its one-China policy, oppose Taiwan and Tibet’s independence and support China’s efforts in combating the ‘Three Evils’ of extremism, terrorism and separatism. We regard ETIM (East Turkestan Islamic Movement) as our common threat and stand united in combating this menace.

The two sides believed that maintaining the tradition of frequent exchange of visits and meetings between their leadership and fully leveraging arrangements, such as annual meetings between their leaders, was of great importance in advancing bilateral relations.

Both sides also agreed to enhance the role of mechanisms such as foreign ministers’ dialogue, strategic dialogue and other consultative mechanisms between the relevant ministries and departments, so as to strengthen the strategic communication and coordination between the two countries.

The two countries will strengthen cooperation in trade, investment, energy, agriculture, mining, food security, environment, finance and other fields,” the statement read. It was agreed that both sides would support enterprises of the two countries in conducting cooperation on establishment of industrial zones in Gwadar.

Economic Corridor
During the recent visit of PM Nawaz Sharif both sides signed eight documents of cooperation in various areas of economy for further enhancing of strong economic and technical ties. It would pave the way for inflow of multi-billion dollar Chinese investment in Pakistan and further strengthening the mutually-cherished bilateral strategic relationship.

The establishment of an Economic Corridor between Gwadar and the historic Silk Road city in western region Xinjiang region of China connected to Gilgit-Baltistan through the 15,397 feet altitude Khunjerab Pass would be a game changer in the region.

The ambitious Pakistan-China Economic Corridor plan involves an estimated cost of $ US 18 billion requiring construction of a string of tunnels in the mountainous terrain. The China Overseas Port Holding Company has offered to build an international-level airport as well as access roads in Gwadar. It is hoped that it would benefit the people of all four provinces as well as Gilgit-Baltistan and Azad Jammu and Kashmir.

The two sides also concluded an agreement on the Economic and Technical Cooperation. The agreement on Economic and Technical Cooperation between the governments of Pakistan and China was also inked. Two letters of exchanges were also signed one on training courses for textile, flood relief and disastrous management and the other for provision of equipment for eradication of polio. Another MoU was signed for cooperation and exchanges between Pakistan Muslim League-Nawaz and the ruling Communist Party of China. Another document was signed between the Strategic Communication Organisation of Pakistan and Huawei company for laying optic fiber for setting up communication link between Pakistan and China. An understanding has been reached with the Chinese for a planned Lahore-Karachi motorway project, terming the development a major achievement. A feasibility study on the cross-country motorway project will be completed soon and followed up with concrete steps to start the work on its construction, the prime minister told the state-run television.

China’s willingness to offer trade and investment opportunities to Pakistan is a sign that both the countries’ faith in each other is solid.

Different Mega Projects (Pakistani Request)/Chinese Response
The Pakistan PM said resolution of energy crisis, infrastructure development and comfortable and affordable transport facilities were among his government’s foremost priorities. Meanwhile, in a meeting with China Overseas Port Holding Company Limited President Sun Ziyun, Prime Minister Nawaz Sharif said there should be no delay in the infrastructural development of Gwadar and assured his government’s all-out cooperation to the companies engaged in Gwadar’s development.

Gwadar Port
Gwadar Port is on the conduit of three most commercially important regions of the world. The oil rich Middle East, Central Asia bestowed with natural resources and South Asia having the potential for growth, for 21^th century. It would be mutually beneficial for both the sides as well as for many other regional countries. It would increase China’s strategic presence in the Arabian Sea. China maintained one of the largest merchant ship fleets and it is estimated that due to Chinese management at the port it would definitely attract Chinese ships which would trans-ship into the Persian Gulf. It would be great boost for Pakistan maritime sector. Gwadar possesses great potential and its handing over to a Chinese company has offered unlimited opportunities to Pakistan in the fields of trade and commerce, joint ventures, maritime economy, and the last but not the least, naval defence in the days to come. Presently Transit Trade facilities are provided to Afghanistan from Karachi and the same can be extended to CARs from Gwadar.

Pakistan-China Energy Forum
During his first official visit the PM Nawaz Sharif addressed the Pakistan-China Energy Forum which was attended by over 50 prominent Chinese investors. Prime Minister said the fundamental challenge for Pakistan was to overcome the energy crunch which had been the greatest impediment in the country’s economic recovery. With the help of China, he said, Pakistan will overcome this power crisis. “This is gigantic issue which has multiplier socio-economic effect and with a friend like China, we are confident that we will be able to surmount all this” he added.

While interacting with a responsive galaxy of Chinese business and corporate leaders, he urged them to extend their help and cooperation for power generation and infrastructure development in Pakistan in line with the close strategic partnership between the two countries. Addressing the forum, the prime minister said his business and investment friendly government welcomes Chinese participation and assistance so that it can successfully accomplish its mission to revive a broken economy it inherited when it took power a month back.

He held out the assurance that his government would eliminate all the bottlenecks in the way of investment in the energy sector and other spheres.

Addressing to the Pak-China Energy Forum Nawaz Sharif said his government would welcome Chinese investment in the renewable energy sector particularly wind and solar as the country has potential of 60,000 MW in this field. He said Pakistan has coal reservoirs of 185 billion tons, sufficient to generate 100,000 MW for 300 years, adding that the quality of the coal has been certified internationally and a major chunk of it has been found in the Thar region in Sindh. The prime minister said the government’s Alternate Energy Development Board would provide updated guidelines to Chinese investors. He said the government has already been implementing an energy roadmap. Although the short-term policies would provide temporary relief but they were focusing primarily on long-term strategies. He said Pakistan was blessed with abundant solar light and strong winds, adding a Three Gorges Corporation was already engaged in a wind power project in the Jhampir area.

The Karachi-Lahore motorway and the Nandipur project are also to be thrown into the lap of Chinese companies. These projects had been lying dormant due to the previous government’s failed energy policies. Nandipur was initially a project being implemented by a Chinese company.

Bilateral Trade
According to Chinese Ministry of Commerce (December 2012) bilateral trade was $12.4 billion in 2012, up 17.6 percent from 2011. The total profit of Chinese companies in Pakistan was $2.7 billion in 2012, an increase of 17.1 percent 2011. Pakistan’s exports to China increased by 48.2 percent to $3.14 billion. Imports from China increased by 9.9 percent to $9.2 billion. Major imports from China include machinery and mechanical appliances, textiles and textile products, metals, chemical products, mineral ores, plastic scrap and transport equipment.

Pak-China trade relations have developed significantly during the last decade (2000-2010). Dawn of regionalism upholds the importance for increasing economic cooperation between the two countries. Three Chinese prime ministers visited Pakistan in 2001, 2005 and 2010, and reassured the country of continuous Chinese support in expansion of economic relations and development of infrastructure. Since then a number of vital projects such as the Gwadar sea port, up-gradation of the Karakoram Highway (KKH) and several other smaller and energy related projects have either been completed or are in the process of completion by the Chinese. China has helped in constructing a second 330MW unit at Chashma that started working a few weeks earlier. There is a lot of scope to boost Chinese cooperation and private investment in the fields of agriculture, energy, finance and banking, as well as science and technology.

Economic cooperation between Pakistan and China has expanded significantly in recent years. The two countries have bilateral economic cooperation in the form of the Joint Economic Commission, Economic Cooperation Group, Joint Energy Working Group and a Joint Investment Company, besides several other mechanisms.

A Free Trade Agreement is operational since 2008, covering trade in goods, investment and services. The trade volume between the two countries last year crossed the figure of US$12 billion with Pakistan exports increasing by 48 percent.

Pakistan and China have historically enjoyed strong bilateral relations. Numerous Chinese companies have made substantial contributions to our national economy. Chinese firms are currently engaged in infrastructure, energy, information technology and telecom, chemicals, fertiliser, engineering goods, textile machinery, automotives, agricultural implements, food and fruits processing and packaging, livestock and dairy farming and pesticides.

Chinese investment touched the figure of US$ 2 billion in 2012. But it is also a bitter reality in the last ten years; out of the 400 MOUs signed, only 40, or ten percent of them, have materialized. Moreover, China has an economic growth model and a security model. China’s economic growth model is almost completely dependent on the US and the EU. China’s exports are completely dependent on the South China Sea and the East China Sea and all commercial sea lanes around China are completely controlled by the Seventh Fleet of the US Navy. In order to further enhancing of bilateral trade between the two sides, China has to adopt the spirits of economic accommodation because balance of trade is in favour of China.

Red Lines

There are some red lines creating serious concerns among the potential Chinese businessmen and investors which are given below as:

Bureaucratic Hurdles: During the recent visit to China, the Prime Minister Nawaz Sharif was not so happy about the persistent negative role of the Pakistani bureaucracy in the promotion of Pak-China bilateral trade & commerce relations. Delays in most of the energy projects or infrastructures development have already produced serious dints in our macro-economy. Now, he advised to establish a Pak-China Implementation Cell in the Prime Minister Secretariat, Islamabad.

Deteriorating Law and Order Situation: Most recent tragic incident happened at Naga Purbat put our government at back foot at many fronts of diplomacy and business. All the Chinese businessmen and investors showed their serious concerns about security threats and poor law & order situation in Pakistan. They demanded separate Chinese-specific security arrangements throughout the country.

Negative Balance of Trade: Right from the beginning, balance of trade has been in favour of China which will have to revise for moving forward. The best available solution would be joint ventures in many fields making Pakistani commodities more diversified and competitive.

Declining Ratios of FDIs: China has never been one of the biggest investors in Pakistan which is astonishing. Chinese FDIs is must for the speedy revival of our macro-economy. Establishment of economic free zone would also be game changer in the days to come.

Language Barriers: We have been badly neglecting the language barriers between the two countries but it is the high time to initiate some concrete steps to reduce the gap. Learning of another country language means that you are serious, extending personal, people-to-people, commercial and diplomatic relations.

Limited Banking & Financial Exposure: Although both countries have “Swap of Currency” agreement but still pace on banking and financial transactions are not healthy and productive.

Joint Pak-China Free Economic Zoning: The concept of free economic zones is paying dividends in the economies of so many countries around the globe. This type of special arrangement would be fruitful for value-addition, diversification of exports and seeking high inflows of FDIs.

Concluding Remarks
China termed Pakistan as a “cradle of culture and civilisation” which could be used as a means to spread the message of peace, love and tolerance to the international community. On part of Pakistan, it considers China to be a land of wonders/miracles having people of great commitment, and it takes inspiration from China’s economic transformation that is unparalleled in human history. Pakistan and China need to engage in more financial agreements to improve the socio-economic conditions of both the countries.

Pak-China trans-border economic zone, upgrading avenues for trade, and other related measures, including customs harmonisation would enable both countries to bring to play and optimally utilise economic cooperation. Pakistan can help China in its plans to tap the trillion dollar ‘halal’ food market. Likewise, Chinese investors should explore opportunities in the country’s economic sectors like finance, banking, power, alternative energy, IT, engineering goods, textile machinery, agriculture, food, fruit processing, packaging, livestock, dairy farming and real estate.

Many research studies indicate the one of the main reasons for sluggish growth of the country’s economic ties with China. Lack of developed infrastructure, energy deficit, low labour productivity, poor innovation and technology to create value-addition in manufactured goods, high cost of production and doing business, insufficient foreign direct investment in manufacturing sector, lack of diversification in exports, poor law & order situation and the last but not the least, poor governance have been responsible for weak/average Pak-China economic cooperation/output in the past which need to be fixed now.

Stakes of socio-economy, geo-politics and geo-strategic nature are very high for both the countries and convergence of them would open another window of opportunity for both the sides to embark on it. Chinese extended energy cooperation would be game changer for the fragile economy of Pakistan. Development in renewables (wind, solar, nuclear) with the condition of technology transfer would be ideal for the country to march towards socio-economic prosperity.

Both countries have new leadership who has new vision about economy, governance, politics, peace and prosperity and even for regional cooperation. Let us hope that lion and dragon would be on same page minimizing human miseries, ratios of poverty, threats of terrorism, hegemonic designs of other movers and shakers and above all agenda for greater economic cooperation through the combination of public-private partnership, joint ventures, free economic zones and a strong political will.