Introduction: A delegation from China Institutes of Contemporary International Relations (CICIR), China comprising Prof. Ji Zhiye, President, CICIR, Dr. Hu Shisheng Director, Institute for South & Southeast Asian and Oceania Studies, Ms. Li Xin and Mr. Li Wei visited Pakistan from March 17, 2015 to March 23, 2015. The delegation visited various institutes and government ministries in Islamabad and Karachi. Mr. Khurram Abbas, ARO was the conducting officer of the delegation. Detailed report of the delegation’s visits is as under:
Delegation’s visit to IPRI and In-house Discussion
Presentations by IPRI Scholars:
Mr. Muhammad Munir, Research Fellow, IPRI gave his presentation on “China-Pakistan Economic Cooperation: Pakistani Perspective”. He said that rising China has the potential to help Pakistan through trade and investment. He informed that China is Pakistan’s largest trading partner at the bilateral level, while at the regional level Pakistan is China’s second largest trading partner in South Asia. India’s trade with China is more than any other South Asian country. Mr. Munir pointed out that Pakistan’s trade volume with China saw an increase of 10 percent in 2014 as compared to 2013. The trade volume between the two countries was registered at 12.8 billion dollars during the last 10 months of 2014. He informed the delegation that Pakistan-China economic interdependence has grown rapidly in the last fourteen years (2001-2014). In 2012, China was Pakistan’s first largest source of imports and it was second largest market for Pakistan’s exports. Pakistan’s exports to China grew rapidly following the signing of a free trade agreement (FTA) in 2006.
The delegation was briefed about the benefits to China in bilateral economic cooperation. Mr Munir told the delegates that China’s economic investment in Pakistan will stabilize Pakistan. Economically strong Pakistan would be in a better position to counter extremism and terrorism in its tribal areas and will prevent spillover effects in China’s western regions. Furthermore, the economic corridor will help China in developing its Xinjiang region. It will enable China to have shortest access to the main maritime routes for its trade. The corridor from Gwadar port to Xinjiang province would secure Chinese energy supplies through the Strait of Hormuz and the Persian Gulf and would allow China to diversify its energy routes. Pakistan would also get benefit from bilateral economic cooperation in years to come. Various mega projects in several fields such as energy, infrastructure and connectivity would revitalize Pakistan’s economy and would help in overcoming the power shortage in the country. The infrastructure and energy sector development would create thousands jobs for youth. In November 2014, Chinese government had announced that it would finance these Chinese companies to build 45.6 billion dollars’ worth of energy and infrastructure projects in Pakistan as part of CPEC. Moreover, China has promised to invest around 33.8 billion dollars in various energy projects and 11.8 billion dollars in infrastructure projects which will be completed by 2017. Furthermore, 15.5 billion dollars’ worth of coal, wind, solar and hydro energy projects will add 10,400 megawatts of energy to the national grid of Pakistan.
Mr. Muhammad Hanif, Research Coordinator, IPRI, made his presentation on “New Government in India: Future of Pakistan-India Relations”. He briefly described the background of two neighbouring countries. Later, he highlighted positive and negative factors which would determine the future relationship of Pakistan and India. He was of the view that Mr. Modi had been RSS activist for several years. Therefore, his policies would likely remain under RSS pressure in decision making towards Pakistan. Moreover, the landslide victory in Lok Sabah would increase the arrogance of Mr. Modi. The visits of Presidents’ of the major powers such as the US, Russia and China to India, Modi’s visit to Japan and signing of defence and economic related agreements with these countries will further add to Modi’s overconfidence. Therefore, Modi’s response would be harsh during tense situations between the two countries. Furthermore, Modi’s intentions about the resolution of the core issue, i.e. the Kashmir looks doubtful since in it’s election manifesto BJP had advocated repealing of Article 370 of the Indian Constitution to cancel special status of Kashmir. The unilateral cancelation of Secretary level talks in August 2014 on the pretext of Pakistani High Commissioner in India meeting with one of the Kahmiri leader indicated BJP’s aggressive attitude towards Pakistan and its inflexible policy on Kashmir.
Some positive factors which could influence Pakistan-India relations include the interest of business community in building cordial relations and Modi’s agenda of economic development which might persuade him to settle disputes with SAARC countries. The formation of coalition government in Indian Held Kashmir with PDP would constrain BJP to repeal Article 370 of Indian Constitution and convince Modi to start dialogue with Pakistan since PDP is insisting for that. Major powers such as the US and Russia have good relations with Pakistan; hence, leaders of both countries might influence India to improve relations with Pakistan. Mr. Hanif stated that Pakistan’s government is also interested in developing cordial relations with India based on resolution of all disputes including Kashmir through composite dialogue process.
Mr. Muhammad Nawaz Khan, ARO presented his view point on “Political and Economic Situation in Pakistan.”He said that political maturity, sound economic policies and security stability are interlinked. In this regard, Pakistani political parties have gradually become mature. He gave the example of recent transfer of power from one democratic government to another democratic government. Moreover, Senate elections and selection of Chairman Senate are examples of political maturity. The political parties seem united on national security issues; hence, they actively participated in All Parties Conference (APC) and unanimously passed National Action Plan (NAP) to counter terrorism.
On Pakistan’s economic situation, he briefly shared various economic indictors. He said that Pakistan made remarkable economic recovery over a short period of time, which was widely acknowledged by independent analysts, international financial institutions, international think tanks and research groups such as Japan External Trade Organization (JETRO) and declared Pakistan as likely to be the second best place for FDI. Moreover, Goldman Sachs forecasted that Pakistan, which was currently at 44th position in the world, would be world’s 18th largest economy by 2050. Similarly, Overseas Investors Chamber of Commerce & Industry (OICCI) raised Pakistan’s index from negative 34 to positive 2.
Mr. Nawaz compared economic development between financial year 2013-2014 and 2014-15. He informed that economic growth had averaged around 3% in the five years of the previous government while in 2014-15, Pakistan’s economy was growing at the rate of 4.14%. This was the highest growth rate in the last six years. Moreover, Per Capita Income (CPI) stood at 1339 US dollars in the last financial year but in 2014-15 it was 1386 US dollars, showing a growth of 3.5%. Likewise, inflation had averaged around 12% during the five years of the previous government while it was estimated at 8.6% in 2014-15. The industrial sector grew by a meager 1.37% during the last financial year of the previous government but it had registered a growth of 5.84% in 2014-15. Fiscal deficit was 6.8% during the last financial year of the previous government. Now it was 5.8%. The target had been set to reduce fiscal deficit to 4.9 percent in 2015-16.
- China had a focus on the implementation of five year plan for China-Pakistan cooperation which was announced in 2013 as the previous five year plan was not completely implemented. China-Pakistan Economic Corridor (CPEC) would be central to China-Pakistan cooperation in the near future. China had increased investment in various sectors including energy sector and infrastructure development. Gwadar port which would operationalize in April 2015 had various benefits for Pakistan and China including development of refinery industry which would help in creating jobs for local people. Gwadar city would become hub of commodity distribution centre in the region. The port was near the strait of Hurmuz; hence, it would provide cheaper access to Gulf region. This geostrategic proximity of the port would reduce transportation cost. The CPEC project would provide jobs to Chinese experts and labour.
- Prof Zhiye, President CICIR said that the momentum had been set for economic cooperation between the two countries. The cooperation between Pakistan and China had evolved over the years from trade sector to finance and direct investment in each other’s country. Moreover, China was keen in infrastructure development particularly the industrial infrastructure development. The heavy Chinese investment in energy sector laid a solid foundation of economic and long term cooperation between Pakistan and China. He said that there was no lack of trust between Pakistan and China. Moreover, both countries had shared plans of China-Pakistan Economic Corridor (CPEC). However, the trade imbalance was a problem which needed to be addressed. Prof Zhiye predicted that the trade imbalance between both countries would however, continue in the near future due to Chinese heavy investment in industrial infrastructure development where Chinese companies would install Chinese machinery. However, he suggested that Pakistan should focus on other regions for exports in order to balance the trade deficit with China.
- Chinese delegation suggested a ‘Supreme Preferential Agreement’ between Pakistan and China. They proposed that there should be a Special Economic Zone (SEZ) between Islamabad and Lahore. This zone would increase trade activities between Pakistan and China.
- Pakistan and China wanted to see peace in Afghanistan. A peaceful and stable Afghanistan was in the interest of both countries. The security of China-Pakistan Economic Corridor (CPEC) was interlinked with Afghanistan’s stability. Therefore, it should be a priority for both countries to help Afghanistan to meet post 2014 challenges.
- A member of Chinese delegation expressed that India would use all means to develop good relations with major powers in order to accelerate its pace of development. Hence, Sino-India economic relations were likely to improve in years to come. Moreover, the economic cooperation might lead both countries to a favourable and stable border security. China perceived Indian approach to major powers as a hunt for new economic opportunities. Therefore, China did not believe that India was counter balancing China by making new friends at international level. They informed that Mr. Modi had created three industrial parks in Gujarat in 2014 with the help of China. Moreover, China was providing technical support in improving the railway infrastructure of India.