The iron brother’s iron clasp
Author: Tara Kartha, distinguished fellow, Institute for Peace and Conflict Studies, New Delhi.
Even as a new government took over in Pakistan, formal good wishes came from many, including India. Prime Minister Narendra Modi’s brief wishes however timely, was in contrast to the fulsome praise from Pakistan’s iron brothers across the Karakorum pass. Prime Minister Shahbaz Sharif not only referenced the China Pakistan Economic C Corridor (CPEC) in his maiden speech in Parliament, but has since moved to ensure that Chinese interests are guaranteed, even while appointing his team to make sure a key ally gets what it wants.
From being merely an ‘iron brother’ in relations with India, Beijing is now critical to Pakistan’s very survival, given not just its huge lending – which research indicated to be about $69 billion, nearly $23 billion more than World Bank estimates, and consequently its huge debt, the exact amount of which is again opaque. Data from the International Monetary Fund (IMF) shows that Pakistan’s outstanding bilateral debt to the Paris Club countries was less than half of what it owed China at $23 billion. It’s not just the extent of debt. It’s the inability to pay it back. Pakistan's debt-to-Gross Domestic Product ratio is already above 70% and the IMF and credit ratings agencies estimate that the interest payments on its debt will soak up about 60% of the government's revenues this year. That is the worst figures of any sizable economy anywhere. For China, this is an unbuckling of the Belt and Road Initiative, a sure road to disaster for Chinese banks.
Which is probably why Pakistan jumps to it when Beijing makes its displeasure known. In an unusual move, then Chinese foreign minister Qin Gang, during a visit, told the host nation "We sincerely hope the political forces in Pakistan will build consensus, uphold stability and more effectively address domestic and external challenges so it can focus on growing the economy," at a press briefing alongside his Pakistani counterpart, Bilawal Bhutto Zardari. That was last May. The same month, the army moved in on Imran Khan and his followers, and the alleged contrived mayhem of those arrests. China’s dislike to Imran was apparent, as he demanded better terms for Pakistan, with more local employment, leading to a slowdown in CPEC projects through his tenure.
The first instance is the army dominated Strategic Investment Facilitation Council (SIFC) established a month later, and rushed through Parliament. Needless to add, the whole is dominated by the Army, with the chief a member of the apex committee, an army official being the director general of its executive committee and its national coordinator. The body’s implementation committee will also be headed by an army officer. Essentially it opens up a virtual sale of the economy to outside ‘friendly’ powers like Saudi Arabia or Turkey. Not that it has many takers yet. UAE has confirmed that it taking over a wharf at Karachi port for $220 million over a period of ten years. Doha is in ‘talks ‘with Pakistan to jointly run the terminals of its three main airports even as the Saudis are not yet weighing in for the much touted $12 bn oil perts refinery at Gwadar. Meanwhile experts note that China is not part of this tranche of much touted ‘plans’. What it wants is for outside investment to pull Pakistan out of its financial hole. Which is why one of the first acts of the new government was to hold a Special Session of the SIFC.
Consider also the critical cabinet appointees. None of the Nawaz Sharif loyalists like Rana Sanaullah are to be seen, or even new Ishaq Dar, who has been given the foreign ministry, where he has little or no leg room given the overwhelming army direction of this critical area. Aleem Khan, the leader of the Istehkam-e-Pakistan Party (IPP), has been assigned the vital privatisation ministry and Board of Investment (BoI) portfolio. The BoI is critical to the plans of the SIFC, and in the IMF’s directive to privatise State-owned businesses that are heavily in debt. Aleem Khan has a bitter fall out with Imran Khan earlier, which makes him an even better choice. A large Chinese delegation has already visited BoI offices, even as business houses are calling for a dyad between CPEC and SIFC. Another important cabinet post is the re-induction of Ahsan Iqbal Chaudhry, as federal minister for planning, Development & Special Initiatives, and who was closeted with the Chinese in handling CPEC. He is also strong critic of Imran Khan.
Yet another development is interesting in the light of projected PHASE 2 plans of CPEC--which is to get China’s money back to China--involves large scale agriculture plans by the army. Recently, it has started with some 1,000 acres of land in the Zarmalam area of South Waziristan, set to be expanded. In Sind, M/s Green Corporate Initiative (Private) Limited, a company under the umbrella of the Pakistan Army has been given approximately 52,713 acres of “barren” land — 28,000 acres in Khairpur, 10,000 acres in Tharparkar, 9,305 acres in Dadu, 1,000 acres in Thatta, 3,408 acres in Sujawal and 1,000 acres in Badin — to be handed over to the company for the next 20 years to execute its ‘Green Pakistan Initiative’, which is aimed at modernising agricultural practices by bringing the concept of corporate farming in the country as part of SIFC. Interestingly, CPEC reports note that Pakistan’s exports to China rose 70% including products like sesame, seafood, rice, and other agricultural items. Some 200 Chinese businessmen were involved in making further deals. This for a country that is heavily dependent on food imports. Whether this will serve Pakistan’s own interests is yet to be seen.
Meanwhile the selection of the cabinet is also apparent in the defence ministry. Khawaja Muhammad Asif’s election was challenged by mother of Usman Dar of Pakistan Tehreek-e-Insaaf. Earlier, he had defended the government’s decision to try civilians in military courts calling their alleged attacks on military installations during recent protests an “act of rebellion against the State”. In the first week of March, the army chief was attending the rollout of the Haider tank, along with the Chinese ambassador and officials of Norinco. Between 2017 – 2021, China has supplied 72% of its defence inventory, and a possible buy is the HQ-9 system, a Chinese analogue to the Russian S-300 long-range SAM. It also launched the Ababeel, on a Chinese Transporter Erector Launcher. The same month, the US had sanctioned three Chinese companies for supplying missile and dual use technology to Pakistan. Recently, authorities in Mumbai impounded shipment of missile related and dual use equipment from China to Karachi. In June, China announced a deal on Chasma-5 (the Hualong 1) supposedly including a substantial discount, and represented as a victory for Gen. Asim Munir. The deal however has been in the works since 2017, going forward under Nawaz Sharif. Chinese assistance for Chashma, has long been seen as a cover for covert supply of equipment for its nuclear program. Meanwhile, it’s a mystery how Pakistan continues its frequent missile tests (three last year) given that a conservative estimate of North Korean tests is about $3 million for a short range missile and $10 million for a long range one. And this is a country that has barely enough for two months of exports.
Minister Ahsan Iqbal has been quoted as saying that five new economic corridors were envisaged in CPEC. That includes job creation, innovation, green energy, and inclusive regional development according to Xinhua. Meanwhile Pakistani sources note unease with the selection of projects like the 1,320-megawatt (MW) coal-fired power plant in Sahiwal in central Punjab, using imported coal from Indonesia and South Africa, travelling inland nearly 1,000 km, raising strong environmental concerns. There are also strong fears that ‘concessions’ given to Chinese manufacturers will run local businesses out. Meanwhile, the trumpeted agreement with China in October 2023, on the much delayed Mainline 1 railway project--a key project designed to connect Peshawar to the southern port city of Karachi, a 2,600-kilometre track, is again looking doubtful with the final price tag actually negotiated downwards to $6 bn from the assessed $9bn.
In sum, it seems that Islamabad is steering carefully to deliver a certain economic stability to the IMF and more so, the Chinese who hold the reins. Together with that the army has delivered a ‘political stability’ that can be translated to mean keeping out those who would question the terms and conditions of the relationship. The upside is that China declared support to “in safeguarding its sovereignty, independence and territorial integrity, in achieving unity, stability, development …” to Pakistan. That sounds dangerously like a security guarantee. For India, Pakistan even more firmly clasped in Beijing’s chokehold, is bad news. Even Rawalpindi would like a little wiggle room to ensure its own interests. For the foreseeable future, that’s not happening.
This article is authored by Tara Kartha, distinguished fellow, Institute for Peace and Conflict Studies, New Delhi.
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