Seeking loan, not a medal, in China

AS 2,871 players from 84 countries are competing for a place on the victory stand in 109 events across seven sports in the Winter Olympics in Beijing, Team Pakistan simply wanted to be seen standing by its most trusted partner in the wake of the boycott of the mega event by the United States and its allies.

The visit, which is not technically a bilateral one, was used by the high-powered Pakistani delegation to discuss some urgent issues of mutual interest, including the China-Pakistan Economic Corridor (CPEC), with the Chinese leadership. The team, led by the prime minister, hoped to capitalise on this window of opportunity to reassure China over CPEC and Gwadar Port amidst the new wave of militant attacks in the country. It also expected to secure a $3 billion loan from China to ride through the current difficult patch, and also pitched Pakistan as an ideal investment destination to private Chinese investors.

As for the sporting event itself, the long shadows of the pandemic and politics have been looming over it for some time. Strict health protocols left no scope for public participation, while the diplomatic boycott revived the fear, the anxieties and the painful memories of the bipolar world.

At the event, Pakistan was represented in sporting terms by just one player; Muhammad Karim, an alpine skier, who made the cut. Team Pakistan, in political terms, also had a lone player, the prime minister, but he had multiple advisors and ministers in toe.

Dismissing the perception of cold Chinese attitude towards Pakistan, experts and corporate leaders were found hoping for healthy dividends from the current visit.

Senator Mushahid Hussain Syed, a journalist-turned-politician who heads the Pakistan China Institute, was confident of the positive outcome of the visit. “China has always delivered to Pakistan, diplomatically, politically, economically and militarily. There is no reason to assume otherwise in the current changing regional scenario”.

Loans, CPEC, investments and the type of investments marked the agenda of Team Pakistan at the Winter Olympics in Beijing… and rightly so

He termed the Western boycott ‘a meaningless exercise’ as many world leaders, including the UN secretary-general, was in attendance during the inaugural ceremony that showcased the best in the rising world power. He saw Pakistan’s participation as absolutely necessary. “The visit is primarily an expression of solidarity with our time-tested strategic partner”.

A former president of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), on condition of anonymity, shared his anxieties over the resurgence of more lethal nationalist outfits in Balochistan besides Taliban and its ramifications for the future of the CPEC.

“Chinese have already voiced their security concerns and can interpret the recent attacks as a failure on the part of the government to neutralise threats to their interests here. I very much doubt if words would be enough to allay such fears and pacify their nerves. At stake are CPEC and our relationship with the powerful friend. Optics, so far, are not comforting,” he said last Friday while the visit was halfway through.

A senior corporate lawyer, who had voted for PTI in the last elections, was rather on the edge. “We have never been proficient in handling commercial affairs with our partners, but the ruling party has breached all records. It has alienated everyone, resulting in costlier deals. We can deal with American hostility as we know what to expect. China is a different ball game. We only know it as a friend. I sincerely hope that we are not exposed to what it means otherwise.” He, too, did not wish to be named.

Ehsan Malik, CEO of the Pakistan Business Council, felt the government should play its cards more intelligently when dealing with China, the Asian powerhouse. He believed the current conditions were too compelling to let any opportunity pass, but decisions must be guided by homework as a misstep in desperation can be too costly to manage. He implied that Pakistan deserves a better deal with China.

“With commodity headwinds likely to last another six months and the Saudi deposit now exhausted, even with the $1bn each from the International Monetary Fund and the Sukuk floatation, Pakistan will need further assistance. No doubt, the public announcement of the request for the $3bn Chinese loan followed a green light from China. To put this in proper context, the $3bn facility represents less than a quarter of China’s annual exports to Pakistan.”

Mr Syed expected a reaffirmation from both sides to consolidate the second phase of CPEC, after the successful completion of the first phase. “The bilateral agenda is full: 2nd phase of CPEC, Pakistan-China coordination on regional issues of common interest, like Afghanistan and India, regional connectivity, and support to each other on their core interests.”

For Mr Malik, the real challenge is to attract the Chinese private sector which is relocating production to cheaper countries. “To make a case, the government should have conducted a detailed comparative exercise to project Pakistan as a better option compared to Laos, Cambodia, Vietnam and Bangladesh. The government must make concerted efforts to improve the business environment and close the gaps. I am aware of one Chinese joint venture located in an industrial estate, which at its own expense had to lay an 8km pipeline to get water!”

Mr Syed was confident that China’s private sector will invest in Pakistan, “provided we create a conducive environment for them and slash the bureaucratic red tape”. There are 37 approvals before a foreign investor is allowed to invest here, he said. “So, let’s have the long-promised one window operation implemented.”

Mr Malik identified low skills and productivity as key impediments to Chinese relocation. “Adjusted for this, minimum wages in Pakistan are about twice those of Bangladesh. The spike in security incidents is also a major put-off for Chinese experts who will be required to train the local labour force.”

Cautioning, he said: “We also need to be careful about the type of investment we seek from China. Pakistan’s 220 million strong consumer base makes it an attractive market. Most of the current foreign direct investment (FDI) here is of a market-seeking nature. Further investment from China of this variety will undermine the existing local and foreign investments. Pakistan needs FDI to generate value-added exports and import substitution.”

Published in Dawn, The Business and Finance Weekly, January 7th, 2022