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China, Pakistan, and the Reformation of International Trade

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China, Pakistan, and the Reformation of International Trade

September 15, 2016 | Filed under: Economy, Politics

By Shemrez Nauman Afzal

Today, the CPEC seems like just a multi-billion dollar agreement between two countries… but half a century from now, the Asian citizenry – and the rest of the world – will consider it something akin to what Bretton Woods was for post-war Europe; albeit more inclusive, more equitable, and with a much grander long-term economic impact, since it is the fulcrum of China’s massive “One Belt, One Road” (OBOR) and “Maritime Silk Road” (MSR) initiatives.

The CPEC Summit and Expo was hosted by the Government of Pakistan’s Planning Commission – the state’s nerve center for infrastructure management and development planning – last week, on August 29 and 30, 2016. Inaugurated by the Prime Minister of Pakistan, Mian Muhammad Nawaz Sharif, participants to the Summit and Expo conference were Pakistanis and Chinese: in addition to what this scribe would consider token attendance from the federal capital’s diplomatic corps and some foreign journalists.

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In his inaugural speech, the Prime Minister said that CPEC will be a “game changer” for Pakistan, but a “fate changer” for the entire region. Many English newspapers in Pakistan, though giving the event prime-time coverage, conveniently ignored the depth of this policy vision statement, and chose to focus on the semantics alone. That mistake must be corrected.

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Why is CPEC a “game changer” for Pakistan and what “game” is it actually changing? Mired in extremist divisions and the existential threat of terrorist attack from which virtually nobody is safe, the CPEC initiative provided a much-needed morale boost as well as an enormous injection of high-yield low-interest capital financing primarily for infrastructure projects. Chinese President Xi Jinping’s visit – and the dastardly attack on the Army Public School in Peshawar where 132 bright young Pakistani lives were abruptly, prematurely and horribly ended – gave Pakistan the opportunity, the strength and the courage to make some important decisions regarding the future course that the nation must chart for itself. The country’s entire anti-terror apparatus was transformed under the National Action Plan, and the quantum and frequency of terror attacks diminished (by approximately 70% according to some quantitative analytics) because the capability was developed – and the will was wholly summoned – to preemptively deter terror attacks on the basis of actionable intelligence that was gathered and used to eliminate militants and terrorist proxies before they could carry out the attacks that they were planning to carry out. But that was a decision Pakistan made on its own; and the implementation of this National Action Plan is still being improved, modified, and (for the first time in Pakistan’s history) being discussed and deliberated upon in the houses of Parliament as well as in public discourse on mainstream media almost every day. It has become a firm decision – backed by national will – to engage in this war that has been imposed on us, and to achieve victory by foiling the enemy’s dastardly designs and taking Pakistan’s war against terrorism to their logical conclusion; i.e. enabling the terrorists to meet their maker.

President Xi’s April 2015 visit, and the implementation commencement of CPEC’s ‘Early Harvest‘ projects – energy infrastructure that is designed and destined for completion between 2018 and 2020 to add more than 10,000 MW to Pakistan’s energy grid – was the biggest milestone in Pakistan’s modern economic history. No other global strategic partner had ever put so much faith – or so much money, almost US$46 billion – in improving Pakistan’s existing infrastructure and building it from scratch in places where it never existed. Hence, Pakistan had been given a once-in-a-lifetime opportunity to truly consolidate the fundamentals of its national economy, and then build it into a integrated framework that could easily fit into the 21st century international trade matrix. This is why Pakistan’s bilateral relationship with China has transformed from a merely geostrategic one into a ‘geo-economic’ partnership. The CPEC is also a part of China’s 13th 5-year development plan because, according to Chinese ambassador to Pakistan, Sun Weidong;

“The CPEC is a vision. It is an important consensus reached between our leaders and the governments, and enjoys the full support of our two peoples. It will strengthen the time-tested China-Pakistan friendship, bring our two brotherly countries more closer, and lay a solid foundation for building a China-Pakistan community of shared destiny.

Second, the CPEC is a platform. It is a comprehensive cooperation framework and identified the four major areas of energy, transport infrastructure, industrial parks and Gwadar Port. We also expect the fields of CPEC to be expanded to finance, science and technology, education, poverty alleviation and social development in the near future.

Third, the CPEC is an opportunity. It is based on the spirit of openness and win-win cooperation. It faces whole Pakistan and brings benefits to the people of China and Pakistan. It is also a fusion of multiple developments, aiming to peace, prosperity and well-being of the peoples of the region and the world at large.”

The outlines of this new geo-economic framework could be seen at the CPEC Summit and Expo: Chinese businessmen as well as executives from its industrial giants and SOEs (state-owned enterprises) were present along with their counterparts from Pakistan: industrialists, business magnates, economists, intellectuals, policymakers and senior bureaucrats. In various sessions of the Summit and Expo, the underlying impression from both the Chinese side and the Pakistani side was similar: the game hasalready started changing.

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So why and how is CPEC a “fate changer” for the region? Does the Prime Minister not know of India’s vocal opposition to the CPEC, since parts of the transport infrastructure run through territories that India considers disputed? Are Pakistan’s policymakers unaware that India and the UAE have inked a $75 billion agreement for long-term investment in the National Infrastructure and Investment Fund, (or NIIF) – albeit with much less fanfare than that being given to CPEC? The answer lies not in the supposed ignorance of the existing CPEC partners, but from the narrow-mindedness of those who stand opposed to it today. And the important qualifier made in the previous statement is: today.

At the CPEC Summit and Expo, there were few (if any) representatives from Central Asia, and no participants from Afghanistan or India, or even Iran or from African nations. Why? Because they don’t consider themselves as stakeholders of the CPEC initiative; they still subscribe to the view that the China Pakistan Economic Corridor is merely a trading highway for the economies of only China and Pakistan.

While most of the world approves of (and in fact, actively supports) the “One Belt, One Road” (OBOR) initiative as well as the “Maritime Silk Road” (MSR) projects of the Xi-Li Administration as an innovative maneuver to revive the global economy through energizing trade along the oldest routes known to mankind throughout history, the world is yet to understand that CPEC is the linchpin – a secondary backbone, so to say – of this enormous initiative to link up all of the world’s continents and their capacities and capabilities to trade with everyone else, and not just with those with whom their physical transportation or infrastructural linkages already exist by geographical chance or by ‘fate’ created by policies followed for hundreds of years. The OBOR and MSR would generate a unitary route that would connect Europe to China through Russia and Central Asia, while also linking up various Middle Eastern countries; on the maritime side, China’s so-called “string of pearls” will become a oversea route linking the east African coast all the way to the Asia Pacific and the Far East (according to the drawing board, even including New Zealand and Australia).

The following map (in Chinese) illustrates the placement of the CPEC main artery (in green), and its positioning between the OBOR’s New Silk Road initiatives, and the MSR (in light blue):


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So as China affirms and consolidates its position as the fulcrum of international trade in our epoch, what lies at the very center of the OBOR and the MSR in terms of a geostrategic territorial perspective? Pakistan, the trading gateway of the 21st century.

As far as security is concerned, both China and Pakistan have clearly told the world – particularly those South Asian forces which plan to sabotage the CPEC’s Western Alignment by fomenting separatism in Pakistan’s Balochistan province – that they will take “joint action” to thwart any and every attempt to “disrupt the process of CPEC”: this has at least been confirmed by Hu Shisheng, Director of the Institute of South and Southeast Asian and Oceanian Studies at the China Institutes of Contemporary International Relations.

Noted economist and former Dean of the LUMS School of Humanities, Social Sciences and Law (now the MAGSHSS), Dr. Ijaz Nabi once explained to an audience during a seminar in Islamabad (presumably the 2012 Islamabad Dialogue hosted at the Marriott) that historically, the land territory that is now Pakistan has always served as a gateway for trading caravans from different parts of the world. Though cultural contexts and historical anecdotes were invaluable in solidifying the argument, Dr. Nabi exhibited quantitative time-series data which showed how civilizations in the region evolved – and what routes they used to trade with each other. Therefore, Pakistan’s main economic strength does not even lie in manufacturing, or services, or in remittances, or even in its agronomy: it is vested in the strategic positioning of the land territory that – quite literally – connects the East with the West.

In an interview with reputed journalist Wajahat S. Khan for his show “Mahaaz”, aired on May 29, 2016, Senator Mushahid Hussain – while leading a ‘rainbow’ delegation of Pakistani parliamentarians from all parties and all regions of country, to the China People’s Institute for Foreign Affairs in Beijing – explained that the problems being heard about CPEC, even in Pakistan, is not that people don’t want it to go forward: people want to be included in the CPEC and taken on board with its projects and initiatives. “They don’t want it to not move forward”, he said, “they want to move forward with it“. There is perhaps no other more succinct or holistic explanation of the all-inclusive nature and design of CPEC.

Let’s look at this inclusive approach through another angle: one of the CPEC’s main components is the Gwadar deep sea port complex, envisaged as Pakistan’s second oceanic trading polestar after Karachi. According to most analyses, Gwadar – and its management and development by China – is considered the penultimate ligament in the so-called “string of pearls” linking China’s seaway trade routes to the Middle East and East Africa. According to this “all aboard” approach, Gwadar will be another link between Karachi and Mumbai (and a host of Indian seaports on their western seaboard) and Mali and Colombo and Trincomalee and Hambantota etc. on its eastern perspective, and Chahbahar and Hormuz and Aden and Mogadishu and Mombasa and Port Sudan (as well as the Chinese-financed Bagamoyo port in Tanzania due for completion in 2017) et cetera on the western perspective of the Gwadar port. Therefore, the “crown jewel of CPEC” – as duly recognized by PM Sharif in his opening remarks to the CPEC Summit and Expo – is a complement to the existing oceanic trading matrix (including the oil shipping lanes) in South Asia, not a challenge or new competitor to the same. Therefore, Gwadar is also “envisaged” as the link between China’s OBOR and MSR initiatives: some decades from today, it will be the city where peoples, trades and cultures from around the world will converge.

The inclusive approach argument can also be extended to the Eastern and Western Alignment land transport routes in Pakistan – the highways and railways running on the north-south axis – that are being upgraded, developed, and in some cases created anew by CPEC-related projects. Looking closely at the drawing board, projects with a launch timeframe for 2020-2025 are not the end of the CPEC: there are future plans – developed by Pakistan and promoted by China – to create highways as well as railroad linkages on the east-west axes at at least three different junctures. Though these would be connecting Pakistani cities in South Punjab to KP and north Balochistan, as well as Sindh to Central and southern Balochistan, they could also – and in the opinion of this scribe, they definitely should – be used to facilitate trade between Afghanistan and India. Without compromising on ideology or on strategic national interests, Pakistan would not only be facilitating new dimensions of trade in South and Central Asia, but would also be in a better position to “dictate” or “have their say” in the ‘Af-Pak-Ind’ region. How? Just think of the NATO supply routes and how they got blocked.

By adopting and implementing an inclusive approach towards facilitating trade between regions and promoting economic alliances instead of opposing or deterring them, Pakistan itself would – perhaps for the first time – actually be in a position to enjoy some leverage over its ‘adversarial’ neighbors in a multitude of ways.

So the game is already changing in Pakistan’s favor: more and more Chinese companies are expressing interest to become part of the CPEC initiative, to develop long-lasting partnerships and synergies with Pakistani commercial entities, and to discover new opportunities that arise when one starts exploring and developing areas which were hitherto pristine and unattended. Since the Sino-Pak relationship has been higher than the Himalayas and deeper than the ocean and sweeter than honey and stronger than iron – and other metaphors to this effect – for half a century, the CPEC is a practical culmination of this brotherhood and friendship: turning a geostrategic and international political partnership into a ‘geo-economic’ synergy where not only the governments, but the private sectors (as well as the peoples of both countries, in the near future) will also be intertwined in overlapping global economic relations and linkages.

But the world needs to know that CPEC is not an exclusive economic initiative. China has already asked India to evaluate ways and means through which it can partake in CPEC, and Pakistan also wishes that India stops feeling threatened by it: becausedeeper economic relations reduce the chances of geopolitical conflict even when nations are at odds with each other over ideology, or policy, or even territory. China itself is a perfect example of how it has minimized the risk of military conflict with aspiring as well as real adversaries (such as the U.S., Japan, Russia, and even India) by building trade relationships that have continued to grow – and transcend the realm of intangible ideology to realize the actual, physical gains from trade which create jobs, develop innovative products, create new marketplaces, and keep on reinvigorating the national economies of all countries. The following map – courtesy of the Council on Foreign Relations and Xinhua (with credits to James McBride and Julia Ro) – explains how China’s new development initiatives are transforming a figurative “global village” into a globally interconnected trade-driven mega-economy in the most literal and practical sense:

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Pakistan has chosen to move forward on a path that will change its fate and – as the Minister for Planning, Development and Reform, Mr. Ahsan Iqbal Chaudhry, has stated – transform itself into a high productivity and highly innovative economy that will prioritize quality and provision of essential services of all kinds to its citizenry. This will not only consolidate Pakistan’s existing economic infrastructure, but will revitalize it by creating new engines of growth and new sources as well as destinations of multilateral investment. Pakistan will not only become the trading hub between East and West – where Chinese goods find quick and easy access to the markets of Africa, while oil and gas and natural resources from the Middle East as well as Central Asia can be safely and speedily transported to energy-starved economies as far away as Europe or Southeast Asia – but with its beautiful landscape, variety of seasons, multiplicity of terrain and immense diversity of cultures, Pakistan will also become a coveted tourist spot for globetrotters and vacationers.

In fact, the most attractive component of tourism in Pakistan is almost all of today’s generation have heard of it, but very few have actually seen it: those who have seen it, have done so from behind the iron wall of security that the defenders of Pakistan have established to protect its citizens and residents from the militant followers of a twisted, mangled and distorted self-representation of Islam and Muslims (which must not at all be confused with legitimate orthodox interpretations of Islamic values that have existed for over fourteen centuries). While the geostrategic and now ‘geo-economic’ relationship between the Islamic Republic of Pakistan and the People’s Republic of China continues to grow and diversify, it is also absolutely essential to promote, foster and consolidate the people-to-people relations between these two time-tested friend and all-weather allies: for a friendship of the people brings the nations closer more so than any common enemy or any mutual tangible interest. The publics of Pakistan and China have always held each other in high esteem, considering themselves as brethren: through CPEC, they should be given the opportunity to experience the similarities and the differences in language, culture, lifestyle, and other facets by their own selves. One should not waver in the pursuit of knowledge, even if one has to go to China: so said the Sage of all ages, Prophet Muhammad (PBUH) – and when a Chinese citizen visits Pakistan, it will truly feel as if he or she is visiting their brother’s home; as President Xi Jinping said in April 2015 on his way to Islamabad.

The question now is: will the region follow in Pakistan’s footsteps to change their fate, and promote the new, more equitable model of international economic cooperation and development in the 21st century?Or will they continue to subscribe to the medieval notion that trade with one who is perceived as an ‘enemy’ is treason itself, and that a strategic adversary cannot be challenged (and successfully competed against) in the framework of the modern capitalist economy?

For those who subscribe to the latter view, this scribe would be remiss not to recommend to them a review of the trade balances of China with the U.S., with Japan, and with India – a mere glance at three bilateral economic relationships in terms of their quantitative indicators and statistics in just the last fifteen years alone. It would either serve as a component of an argument in one direction or the other, or – most likely – it would serve as an eye-opener and a welcome change of heart to involve themselves in a novel, inclusive, and dare one day ‘post-modern’ multinational economic initiative. Therefore, the hope still exists for the next CPEC Summit and Expo to play host to businessmen, intellectuals, policymakers, economists, visionaries and friends from Africa and the Middle East to Central Asia and the Far East, from the developed economies of Europe and ANZAC to the struggling nations in South Asia: practically, the second CPEC Summit and Expo will be an open invitation to all developing nations around the world to come together and transform the D-8, Emerging Markets and Middle Power national economies into an integrated reality that will actualize national, regional, and eventually, global dreams. So should the countries linked by the OBOR and MSR miss out on the next CPEC Summit and Expo just because of their static policies and narrow strategic visions? Or should they start preparing for it right now, and play their due role in transforming – nay, reforming – international trade policies and practices in the 21st century?

As the saying goes: better late than never!



Shemrez Nauman Afzal is a graduate of the Lahore University of Management Sciences (LUMS) and the University of Science & Technology, Beijing (USTB). He specializes in economic affairs, particularly international trade, political economy, public policy, economic security and institutional development.
 

Mangus Ortus Novem

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@Shotgunner51 thank you young brother for sharing this factual/insightful article with Pak Brothers.

As I have been saying for sometime now... CPEC is not just about infrastructure... it is a key building block of the new Asian geo-economic and geo-strategic architecture.

As the writer of the article elaborates... CPEC is just the beginning...as Sino-Pak economies integerate and more and more JVs come to fruition... a fast developing and prosperous Pak emerges which is in the strategic interests of China.

The age of confilict/conquest is ending and the new Civilisational paradigm of Win-Win inclusive development is emerging... CPEC is one giant example of this Fact.

Sino-Pak Brothers are joining hands to make this a glorious reality.

Bless Sino-Pak Friendship...as model for other asian nations to follow.

CPEC in a way is writing the History of the Future of Sino-Pak Community of Prosperity.

I wish Sino-Pak Friends/Brothers the very best of lives together!
 

ahojunk

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CPEC is a vision, platform and an opportunity. How very true.

CPEC is a $46 billion game changer from whatever angle you choose to look at it.

The physical infrastructure is the pre-requisite. I am not familiar with the situation in Pakistan but I hope the Pakistan government is able to capitalise on CPEC while its army maintains peace.

Good luck to Pakistan.

on the maritime side, China’s so-called “string of pearls” will become a oversea route linking the east African coast all the way to the Asia Pacific and the Far East (according to the drawing board, even including New Zealand and Australia).
I am happy to see that MSR also includes Australia, yay!

China has already asked India to evaluate ways and means through which it can partake in CPEC, ...
India should explore ways on how it could benefit from participating in CPEC because like it or not, it is happening.
 

Echo_419

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CPEC is a vision, platform and an opportunity. How very true.

CPEC is a $46 billion game changer from whatever angle you choose to look at it.

The physical infrastructure is the pre-requisite. I am not familiar with the situation in Pakistan but I hope the Pakistan government is able to capitalise on CPEC while its army maintains peace.

Good luck to Pakistan.



I am happy to see that MSR also includes Australia, yay!



India should explore ways on how it could benefit from participating in CPEC because like it or not, it is happening.
we will focus on BCIM corridor with China, also China is invited to participate in many of our Industrial corridor projects too
 

ahojunk

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we will focus on BCIM corridor with China, also China is invited to participate in many of our Industrial corridor projects too
.
China has invested $46 billion in making CPEC happen.

How much money has India invested in the BCIM corridor?

The reason I ask is simple - you need money to make things happen.
 

Echo_419

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China has invested $46 billion in making CPEC happen.

How much money has India invested in the BCIM corridor?

The reason I ask is simple - you need money to make things happen.
The corridor compromises of 4 nations, also we cannot participate in CPEC even if by some miracle we agree to invest in that thing we will simply not be allowed in on security grounds
 

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