Sakib Sherani is a former member of the Prime Minister’s Economic Advisory Council, and ex-principal economic adviser to the Ministry of Finance. He currently heads Macro Economic Insights, a consultancy based in Islamabad.
23 August 2021
In a major policy shift, Pakistan has recently unveiled a pivot towards “geo-economics” as the anchor for foreign policy. As a vision and aspiration, it represents the right approach and thinking. With the dramatic events in Afghanistan approaching a climax of sorts, it also appears that for the first time, a historic window of opportunity has opened for Pakistan to put this vision to work. However, while the external environment appears to have become conducive, especially to the country’s west and north-west, Pakistan’s policy makers will have to steer the project through internal ‘hoops of fire’ and past internal contradictions.
Foremost amongst these is strategic clarity. Despite the fact that China is Pakistan’s strategic partner and all-weather friend, and has invested heavily in the China-Pakistan Economic Corridor (CPEC) project, which has the potential to transform Pakistan’s economy, our policy stance with regards to CPEC does not appear to be fully congruent. Various senior policy makers continue to exhibit a tilt to the West, which is now engaged openly in strategic rivalry with China.
Recent statements by senior Pakistani officials are emblematic of these internal contradictions. The US has been implored to take Pakistan on board once again, otherwise, it has been stated, the South Asian nation will exercise ‘other options’. The intended or unintended messaging to China is that despite its US$ 62 billion investment in CPEC, Pakistani policy makers continue to view the all-weather friend as a ‘second best’ option, after exhausting all avenues with the US. This is completely contrary to not only how the prime minister appears to view the Pakistan-China relationship, but also to Pakistan’s strategic imperatives.
The US is embroiled in an escalating strategic competition with China, and views the rise of China as a foremost threat to its global dominance. The rise of China’s economy and its increasing global share had raised red flags in Washington DC since the early 2000s. However, the crossing by China in the last few years of several ‘red lines’ for US strategic planners upended the conventional thinking within the American security establishment on how to tackle China’s rise. These include the acquisition of high end technological capability, a challenge to the international ‘rules-based’ order set up by the US to ensure its continued global hegemonic dominance, building of maritime power, and last but not least, the projection of soft power via the Belt and Road Initiative (BRI).
Into this milieu, enter the China-Pakistan Economic Corridor (CPEC). The US has made every effort to wean Pakistan away from it. It has used public diplomacy to warn of the consequences, leaned on the Pakistani leadership privately, according to media reports, while also bringing the IMF into play.
Unfortunately, in Great Power rivalry there can be no fence-sitters or casual by-standers. While Pakistan should aim to de-hyphenate its relationship with China and the US, realistically it will be increasingly difficult to ‘balance’ its relations with both, especially if the expectation from the US is that Pakistan will tone down its strategic relationship with China in any way.
A quick review of who brings what to the table for Pakistan is illustrative. The US has had a transactional relationship with Pakistan for decades, subjecting its ‘ally’ to arms embargos and financial sanctions on multiple occasions since the 1980s. Under the Obama administration, the relationship broke down almost completely with the unprovoked killing of 24 Pakistan army soldiers at the Salala checkpost by US forces in Afghanistan in November 2011.
As the war in Afghanistan heads towards defeat for America, Pakistan has been increasingly subjected to a campaign of demonization, with successive US administrations scapegoating the country rather than taking ownership for the outcome.
China, on the other hand, is a strategic ally of Pakistan since the very beginning. It has provided steadfast and unflinching diplomatic, financial, military and people-to-people support for Pakistan for virtually the entirety of the latter’s existence. It is now Pakistan’s main arms supplier at a time when the US has again blocked the transfer of weapons to the country, while deepening its own defence partnership with India.
By putting together and leading the US$ 62 billion China-Pakistan Economic Corridor, China is now playing a potentially transformational role in Pakistan’s economy. CPEC is Pakistan’s biggest geo-economics opportunity and should be grasped with both hands, as well as leveraged within the region. In short, CPEC should be the lynchpin and anchor of Pakistan’s geo-economics vision.
In addition to strategic clarity, another important pre-requisite to deliver the potential of immense opportunity and benefits from CPEC is strategic planning. Pakistan has been unable to conceive a grand design for CPEC. An economic corridor is not a string of projects and a clutch of highways. CPEC’s grand design is also not limited to being a transit corridor for two-way shipments to and from China using Gwadar port.
The integration of Pakistani firms into the Chinese supply chain, and the relocation of ‘sunset’ industries from the mainland should have been the clearly-articulated central aim and purpose of CPEC for Pakistani planners from the start.
By focusing on this ‘mission’, constraints to growth (specifically to exports) would have been identified and seriously addressed – such as bottlenecks in logistics and physical infrastructure, the low skills level of the domestic labour force, impediments embedded in the country’s taxation regime etc. If such a coordinated, single-purpose exercise had been embarked upon several years ago, Pakistan would have been better positioned by now to achieve its objectives from phase two.
While at the moment we appear quite far from achieving the potential benefits inherent in an economic corridor such as CPEC, all is not lost. Improved strategizing and better planning even at this late stage can retrieve the situation, albeit further out than desirable. Once Pakistan has aligned CPEC with its foundational objective of improving its external competitiveness and enhancing exports, it should then leverage it as a conduit for east-west and north-south regional connectivity. The first order of business, however, should remain delivering on the promise of CPEC.
Disclaimer: The views expressed in the article are of the author and do not necessarily represent the institute’s policy.