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China: A Catalyst for Pakistan’s Economy

May 29, 2023 at 10:55 am | Economic Affairs

China’s relations with Pakistan have been characterized by sincerity, mutual trust, and a shared commitment to promoting regional peace and stability

Prof. Engr. Zamir Ahmed Awan

It is true that Pakistan’s economy was among the fastest-growing in the region during the 1950s, 1960s, and 1970s. The country was seen as a model of development for many countries in the region, and its economic gains were admired and inspired other countries to learn from its success. It is also true that the focus on the Afghan war in the 1980s and beyond, as well as poor governance, lack of vision, planning, and sincerity, have contributed to the economic decay that has led to the current state of Pakistan’s economy.

The Afghanistan crisis has had a significant impact on Pakistan’s economy, with the country bearing the brunt of the war’s fallout. The unrest and war-like environment in the region have created instability and insecurity, making it difficult for Pakistan to attract foreign investment and conduct business. Additionally, poor governance and corruption have created a challenging business environment, discouraging both local and foreign investors.

Despite these challenges, there are reasons for optimism. Pakistan has a young and growing population, with a large pool of talented and educated workers. The country also has a strategic location, which makes it a vital hub for trade and commerce. The government has also launched various initiatives to boost economic growth, such as the China-Pakistan Economic Corridor (CPEC) and the Digital Pakistan program.

China-Pakistan Economic Corridor – CPEC

China has been a key partner in Pakistan’s development through the Belt and Road Initiative (BRI) and the China-Pakistan Economic Corridor (CPEC), which has already brought many benefits to Pakistan, including the creation of new jobs, the reduction of electricity shortages, and the improvement of transportation infrastructure.

Since its launch in 2015, China has invested around $30 billion in CPEC and pledged around 72 billion. Several projects have already been completed successfully, while others are under execution satisfactorily. Many projects are still in the pipeline or planning stages, and it is expected that after the completion of these projects, Pakistan’s economy will see a significant improvement and be ready for take-off.

CPEC is a crucial part of China’s broader strategy to increase its connectivity and economic ties with other countries in the region. For Pakistan, CPEC is a way to improve its infrastructure and increase its economic activity, which could ultimately help reduce poverty and improve the standard of living for its people.

Indeed, the Chinese investment in Pakistan through the CPEC is primarily focused on commercial projects and infrastructure development. These projects have been designed to address the critical needs of Pakistan, such as the shortage of electricity, inadequate transportation infrastructure, and limited internet connectivity. The construction of power plants and the improvement of the electricity grid has had a significant impact on reducing load shedding, which has been a significant challenge for Pakistan’s economy and society for many years. Similarly, the development of highways, railways, and other transportation infrastructure has boosted economic activity by reducing transportation costs, facilitating trade, and promoting tourism.

Special Economic Zones (SEZs) and industrialization are indeed a top priority for Pakistan under the China-Pakistan Economic Corridor (CPEC) initiative. The development of SEZs is aimed at attracting foreign investment and boosting economic growth by providing a business-friendly environment with tax breaks, streamlined regulations, and improved infrastructure.

The CPEC project also includes a focus on industrialization, which aims to establish a robust manufacturing sector in Pakistan. This is expected to create jobs, increase exports, and enhance economic productivity. The CPEC initiative also includes the development of infrastructure, such as roads, ports, and energy projects, which will support the growth of industry in Pakistan.

Regarding the Mainline-1 (ML-1) project, it is a crucial component of the CPEC initiative, as it involves upgrading and modernizing the railway infrastructure in Pakistan. The ML-1 project is expected to improve transportation efficiency, reduce transportation costs, and facilitate trade between China and Pakistan. The project is also expected to create employment opportunities and contribute to the economic development of Pakistan.

Cooperation in Agriculture Sector

Basically, Pakistan is a traditional agriculture nation and around 60 percent of its population is living in rural areas, depending on directly or indirectly on agriculture. Agriculture contribute almost 70 of Pakistan’s exports. Chinese assistance, technically and investment in Agriculture means prosperity of 60 percent of population of Pakistan. Furthermore. The impact of agriculture is instant and visible within a short span of time.

There has been a visible increase in agricultural products in Pakistan due to Chinese assistance and its export has also been witnessed enhancement.

The contract farming project between China Machinery Engineering Corporation and Sichuan Litong Food Group in collaboration with locals in Multan for the cultivation of Chinese chili varieties is a positive step towards promoting agriculture and increasing exports from Pakistan to China.

By increasing the yield and resistance to diseases of Chinese chili, Pakistan not only can increase its own agricultural productivity but also meet the demands of the Chinese market. This will not only help in earning foreign exchange but also strengthen the economic ties between the two countries.

Pakistan is implementing a plan to reduce its dependence on imported edible oil by cultivating a new hybrid canola provided by China’s Wuhan Qingfa Hesheng Seed Company. The hybrid variety, called HC-021C, has several advantages over other canola plants, such as higher yields, more branches, a shorter fertility period, and lower heights, making it less susceptible to wind damage.

Currently, the hybrid canola is planted on 80,000 hectares of land in Punjab and Sindh, and a bumper harvest is expected, which will translate into tens of thousands of tons of edible oil. The company aims to produce 130,000 tons of canola seeds in the next year, which will generate 49,000 tons of edible oil worth $80 million.

This is part of a larger plan to develop the canola industrial chain through make-to-order partnerships with local refineries and farmers and by introducing China’s advanced harvesting and pressing technologies. Pakistan currently imports around $3.6 billion worth of edible oil, accounting for 89% of the nation’s total supply. By cultivating the new hybrid canola and developing the canola industrial chain, Pakistan aims to gradually increase its cultivation area and achieve self-sufficiency within a few years, which will save billions of precious foreign exchange.

China has provided assistance to Pakistan in various aspects of agriculture, including improving the quality of seeds and developing new varieties, pre- and post-harvest technologies, modern farming techniques, treatment, storing and packaging technologies.

This assistance has helped to improve Pakistan’s agricultural productivity and strengthen its food security. Additionally, China and Pakistan have also established joint ventures in the agriculture sector, such as in the production of hybrid rice, which have further contributed to the development of Pakistan’s agricultural sector.

IT Sector

Furthermore, the laying of optical fiber linkages has created new opportunities for Pakistan’s IT sector to expand and become more competitive. This, in turn, has enabled the country to enhance its exports and increase its foreign exchange earnings. All of these projects have a direct and positive impact on the lives of the people of Pakistan, creating jobs and increasing their access to basic services and infrastructure.

The objective of the Chinese investment in Pakistan is to promote economic development and create wealth for both countries. The CPEC project has been designed to serve as a catalyst for Pakistan’s economic growth and to help reduce its dependence on borrowing from international financial institutions.

Livestock treatment

China has assisted Pakistan in establishing a laboratory for Foot-and-Mouth Disease (FMD) and that it has helped Pakistan to gain a foothold in the international meat market. FMD is a highly contagious viral disease that affects livestock, and having a laboratory to diagnose and control the disease is essential for any country that wants to export meat.

Pakistan has a large population of livestock and is known for its animal husbandry, but the lack of facilities to meet export standards has been a hindrance to its ability to export meat. With the establishment of the FMD laboratory, Pakistan can now ensure that its meat meets international standards and is safe for export.

Exporting meat can bring in significant foreign exchange for a country, and it’s great to see Pakistan benefiting from this development. I hope that this will encourage other countries to invest in Pakistan’s agriculture and livestock sector, leading to further economic growth and development.

Higher education destination

China and Pakistan share a strong bond of friendship and cooperation, which is based on the principles of equality, mutual benefit, and mutual respect. China’s commitment to these principles has been a cornerstone of its foreign policy, and it has been demonstrated through its consistent efforts to deepen its relations with other countries around the world.

China has become a popular destination for Pakistani youth seeking higher education opportunities, and many Pakistani students are currently studying in China in various fields. It is also true that China and Pakistan have maintained a close relationship, which has been characterized by mutual cooperation and support.

Global peacemaker

It is known fact that China has never imposed sanctions on Pakistan or interfered with its internal affairs, it is important to note that the relationship between the two countries is not without its challenges.

China’s relations with Pakistan have been characterized by sincerity, mutual trust, and a shared commitment to promoting regional peace and stability. This has been reflected in China’s consistent support for Pakistan’s economic and social development, as well as its efforts to promote peace and stability in the region. In return, Pakistan has shown immense goodwill towards China, which is reflected in the results of the Pew survey.

Pakistan has played an important role in bridging relations between China and the Muslim world. The invitation of the Chinese Foreign Minister to attend the meeting of Foreign Ministers of OIC in Islamabad and the visit of Chinese President Xi to Saudi Arabia and the Middle East are examples of Pakistan’s efforts to strengthen ties between China and the Muslim world.

The peace deal between Saudi Arabia and Iran, brokered by China, is a positive development that can have a significant impact on the stability, peace, and economic development of the entire region. Both Saudi Arabia and Iran are rich in natural resources, especially energy, and have the potential for economic development.

As a friend and neighbor of both Iran and Saudi Arabia, Pakistan stands to benefit from the normalization of relations between the two countries. This could lead to increased trade and investment opportunities for Pakistan, as well as greater regional stability and security. Pakistan must continue to play a constructive role in promoting dialogue and cooperation among all parties in the region.

It is utmost desired that policymakers need to be smart, visionary, and open-minded in order to make informed decisions that benefit the country and its people. It is also important for policies to be regularly reviewed and updated to reflect changing geopolitical circumstances.

With regards to China, it is important to note that while it is a major economic power, technically well-advanced, sincere, and politically well-aligned with Pakistan. It is up to the policymakers of Pakistan to weigh the benefits and risks of a closer relationship with China and make decisions that best serve their country’s interests.

Finally, it is important for policymakers to be aware of the potential impacts of their decisions on the wider geopolitical landscape and to work towards creating a stable and peaceful global order, enabling the revival of Pakistan economy.

The Writer is a Founding Chair GSRRA, Sinologist (Ex.Diplomat), Editor, Analyst and Non-Resident Fellow of Centre for china and Globalization

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