Long Term Plan: The Core of CPEC

 

The LTP is the most detailed long-term plan that has ever been proposed for Pakistan, and its ramifications for the economy are deep and broad. Contrary to the image of CPEC as an enterprise involving roads and power plants, the LTP shows that the real nature of the engagement with China that is about to begin goes far beyond infrastructure investments and enhanced connectivity. The real game of CPEC appears to be to prepare the economy, society and culture of Pakistan for a massive influx of Chinese investments and personnel. This could indeed prove to be a positive development, and provide the economy with a boost given the scale of the investments being contemplated.

   

There is therefore a need to separate myths from realities. CPEC is not merely about ‘agriculture’, ‘surveillance of cities’ or ‘visa-free entry of Chinese nationals’, as quoted by media. CPEC is about trade, infrastructure investments and increased Pak-China cooperation in a number of sectors.

Some might recall that details from the LTP in question were published by Dawn in a long-detailed report in May, and the same minister had reacted sharply at the time, saying that the details are “factually incorrect” and the real plan will be made public once it has been finalised. In addition, there was a detailed financial strategy, which called upon the government of Pakistan to expand the role of the yuan in its economy, turn more to raising debt from the markets in Hong Kong, and dedicate increasing resources from its own budget, as well as provincial and local bodies’ budgets, towards CPEC-related priorities.

The LTP was begun in November 2013 (see detailed timeline in previous tab), when the National Development and Reform Commission (NDRC) of the Government of China asked the China Development Bank (CDB) to compile a detailed roadmap to guide the engagement with Pakistan that had begun in May of that same year. For the next two years, till December 2015, the CDB worked with teams from the NDRC, as well the ministries of Transport, National Energy Administration and China Tourism Planning Institute to develop a detailed plan to be implemented over the next 15 years, till the year 2030, that will open the doors for Chinese enterprises – private and public – to enter every area of Pakistan’s economy.

The original plan drawn up by the CDB is 231 pages long, and is an astonishingly detailed roadmap of the pitfalls and opportunities that Chinese enterprises can expect as they venture into every area of the economy and society. It contains specifics of what is going to be built by the Chinese over the next decade and a half, and its detailed description of Pakistan’s economy and its attendant risks shows clearly that the Chinese are fully aware of what they are getting involved in. More recently however, a 30-page summary plan, dated February 2017, replaced this initial detailed draft and formed the basis of developing a formal agreement on CPEC between Pakistan and China. This summary plan was structured around five chapters. The long-term plan is effective until 2030, spanning short-term projects that will be completed by 2020; medium-term projects by 2025; and long-term projects by 2030 or later. The summary plan only provides broad principles of cooperation, to set the tone for working out the details in future.

    

For instance, thousands of acres of agricultural land will be leased out to Chinese enterprises to set up “demonstration projects” in areas ranging from seed varieties to irrigation technology. A full system of monitoring and surveillance will be built in cities from Peshawar to Karachi, with 24 hour video recordings on roads and busy marketplaces for law and order. A national fibreoptic backbone will be built for the country not only for internet traffic, but also terrestrial distribution of broadcast TV, which will cooperate with Chinese media in the “dissemination of Chinese culture”.

The plan envisages a deep and broad-based penetration of most sectors of Pakistan’s economy as well as its society by Chinese enterprises and culture. Its scope has no precedent in Pakistan’s history in terms of how far it opens up the domestic economy to participation by foreign enterprises. In some areas the plan seeks to build on a market presence already established by Chinese enterprises, eg Haier in household appliances, ChinaMobile and Huawei in telecommunications and China Metallurgical Group Corporation (MCC) in mining and minerals. In other cases, such as textiles and garments, cement and building materials, fertiliser and agricultural technologies (among others) it calls for building the infrastructure and a supporting policy environment to facilitate fresh entry. A key element in this is the creation of industrial parks, or special economic zones, which “must meet specified conditions, including availability of water…perfect infrastructure, sufficient supply of energy and the capacity of self service power”, according to the plan.

Industries and industrial parks is one area, where Pakistan has the greatest potential to gain but there is a need to proceed with cautious optimism. How does China see these opportunities unfolding in this area are through following the private sector. All the industrial and business ambitions highlighted so far are based on existing Chinese investments. In household appliance sector for instance, the Haier & Ruba Economic Zone provides a perfect example, which was established in 2006 and considered a remarkable success. In addition to Haier, other famous enterprises from the Chinese household appliance industry, like Gree and Changhong have also invested in Pakistan. These investments have been successful and Chinese know that there is a potential to deepen these investments.

   

Moreover, there is no denying that Pakistan, with a population of 200 million people provides an attractive market, not just for Chinese but for any international player. Any initial investments are likely to be in industries catering to local consumer markets to ensure safer returns for investors. Whether Pakistan will be able to attract Chinese and other international investors to set up industries for export will to a great extent depend on how well the government attract and facilitate these investors through providing health investment climate and appropriate skilled workforce. The concerns about local industry facing tougher competition are well founded to some extent but in the longer run, such pressures have been known to beneficial for local industry making it more competitive. This however, would mean local businessmen gearing up for this new scenario and look for new opportunities and partnerships to grow and transfer technology rather than be isolated, inward looking and rely on protectionist policies.

Agricultural development is a priority area under CPEC and there is a strong Chinese interest to invest in agricultural inputs production and agriculture infrastructure. Efficient logistics provide an essential pre-requisite for an effective participation in global agriculture value chains. Pakistan with its untapped agriculture potential provides a tremendous opportunity, where targeted investments can generate healthy returns for both sides. The priority interventions manifest areas, where Pakistan has long been trying to seek help from international donors.

Contrary to popular belief, there are no existing demands from Chinese to ‘give out thousands of acres of land’. Instead China wants to adopt a cautious approach in certain areas. That is the reason, why even the initial draft long-term plan mostly talked about ‘demonstration’ projects’ especially in areas of improved technological cooperation. Any future interest of China in agriculture would be contingent upon how Pakistani side responds these demonstration projects.

Tourism is likely to grow with opening up of national economy. Despite having numerous World Heritage Sites in the country, international tourism in Pakistan, unfortunately claims only 0.4% of GDP. Foreign direct investment in tourism sector is likely to place Pakistan on international tourist circuit.

Financial cooperation forms an important part of CPEC. Free and unrestricted flow of capital provides an important pre-requisite for attracting foreign direct investment. The proposed initiatives stress on reducing the reliance of both countries on dollars or euros, for bilateral trade as well as to create access for infrastructure projects in Pakistan to newly created institutions for Belt and Road like Asia Infrastructure Investment Bank.

Saadat Hassan Bilal , PhD Scholar SPIR Quaid-i-Azam University Islamabad.

 

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