Economy gets another chance

Imtiaz Rafi Butt

November 13, 2018

As the new PTI led Government comes to grips with the complexities of tackling the
national economy, Imran Khan and his team have managed to acquire yet another
chance for the country. Just four weeks ago, the economy was on the brink of collapse.
Pakistan could afford only two months’ worth of imports and was unable to pay back
debt payments. From that point onwards, the country has come a long way in the turn of
events on November, 2018. There are multiple hurdles like corruption, internal and
external debt, the government bodies in losses, low tax net, smuggling and a host of
other problems that need serious intervention and the new Government seems
committed and in high spirits, and that too for cogent reasons.

From the point of financial insolvency and the decision to go to IMF for a bail out, Imran
khan and his team kept looking for alternate financing sources. After two attempts, the
Saudi Government agreed to give a financial nudge of around six billion dollars. All this
was done to reduce the exposure to structural adjustments of IMF and reliability on
more than one source of liquidity. The Saudi Government also promised huge
investments into uplift of Gwadar and industrial zones across Pakistan. But this was
merely a straw compared to what was required to save Pakistan’s economy. Aware of
the facts, the new Government sought relief from the Chinese Government and the
reply is did not come as a loan or bail out but much more.

Imran khan and a team of public and private stakeholders have made an astounding trip
to China. The visit conducted by Xi Jinping, the Premier and the Li Keqiand, the Prime
Minister. As a high point, Pakistan managed to sign fifteen MoUs with the Government
of China. These agreements cover a wide range of fields such as Trade, Commerce,
Industry, Technical education, Services, Banking, Construction, Cultural ties and military
assistance. China unveiled a special program for students of Pakistan who wish to
study in China. The plan is to double the number of students which stands at twenty five
thousand students annually. Another important step in the same sector was the
inauguration of Youth Communication Committee which will establish first-hand and
direct contact between academic experts and students from both countries. Similarly,
the MoUs are aimed at projects that have never a part of bi-lateral ties between these
two countries, such as, the space project 2012-2020. It is a unique and ground-breaking
achievement indeed.

In terms of trade and commerce, Pakistan and China have set their sights on lowering
dependency on dollars and have implemented a currency swap of around 20 Billion
Yuan which is an equivalent of 351 Billion Pakistan Rupees. It will take off a hefty
burden of foreign exchange from Pakistan and rationalise the utilisation of dollar in
trade. A currency swap is smart way of removing another non-tariff barrier. Two
countries that are regional partners have a lot to gain. A currency swap simply raises
the demand for both currencies in the open market while hurting the undue favour to the
dollar. It will save cost of doing business for Pakistani traders while making exchange of
goods and services, easier to manage for Chinese banks.

The talks and joint sessions between Imran khan and Xi Jinping are worthy of notice.
The Chinese Government acknowledged Pakistan’s efforts in countering terrorism in the
region and projected a three pronged strategy to move ahead. In the words of Xi,
Pakistan and China will become even stronger allies when they will unite against three
major challenges, namely; extremism, terrorism, separatism

A new plan was discussed and unanimously agreed upon between Foreign Offices of
both countries. Both countries have backed each other on forums like United Nations
and World Trade Organisation, this step of collaboration on these fronts made it official
that Pakistan and China are on the same footing when it comes to the three global
matters pointed out above. Cooperation of these matters will establish a solid
foundation, ensuring the security and protection of both countries. This also means that
China is against any version of the United States or India that Pakistan has a soft corner
for any kind of terrorist or extremist activity. Being a member of the United Nations
Security Council, Pakistan has much to gain from China’s perspective on terrorism.

Imran khan, for the first time ever, openly conveyed the objectives of the new
Government to Chinese counterparts. He stressed that he was keen on learning from
China, the way they have lifted 700 million people from abject poverty in less than 30
years. To this, the Chinese government openly offered poverty alleviation techniques
and projects. It must be borne in mind that Pakistan has never been offered assistance
in professional poverty alleviation matters while programs of the past like Benazir
Income Support Program have barely achieved their objectives. The first few years,
poverty alleviation demonstration projects will be initiated at once, as a pet rule, the
implementation is to start from the most poverty-struck areas of Pakistan. It is a pioneer
program never seen before. Perhaps the answers to dilemmas of Pakistan on helping
the poor are to be found not in the West but right here in Asia.

The Prime Minister Le Keqiang stressed the fulfillment of CPEC projects. In earnest, it
has been decided that the 8th meeting of the Joint Co-ordination Committee will be held
before end of 2018. The political point scoring and confusion that riled up rumours
against CPEC being lopsidedly against Pakistan, have been white-washed. Pakistan
needs the business activity that will be generated as a result of a 60 Billion Dollar
investment. Imran khan praised the Belt and Road Initiative and removed all confusions.
Pakistan is fully committed to the BRI and Gwadar will become the focal point of trade in
Asia. The completion of Gwadar and its full potential were highlighted time and again by
the Chinese officials. By 2020, Gwadar is set to become the hub of imports and exports
and a formal revival of the Silk Route. The taxes and freight activity alone will be a
major boost to the dwindling economy of Pakistan. On the other hand, it is of equal
importance to China as being the head of the Road part of the One Belt One Road
Initiative. China’s survival is also tied to CPEC and OBOR. The cost of Chinese exports
will be significantly reduced as a result of Gwadar and that will in-turn keep the Chinese
economy in a boom while the rest of the world, especially the West, moves in a deep
economic recession.

On the flip side, there are always those who look at the weaker points and criticise.
Western experts are of the view that Pakistan went to China with a plea for loans and
funding, which was actively denied. To this I would only say that yes, maybe, the
request for funds have not been accepted but China being a time tested friend has
offered much more in return. As they say, prosperity can only come from Trade and not
Aid. The combined effect of Saudi and Chinese assistance has given the country
another fighting chance, the IMF bail-out will not cripple the internal controls as
previously thought, all possibilities are open for Pakistan. With high hopes, this is the
last time we will ever need foreign funding to avoid bankruptcy. 

The Writer is Chairman of Jinnah