- Saturday, 27 August 2016 15:23
by Dr. M Akram Sheikh
Professor-Emeritus-NUST, Co-Chair Global Think Tank Network (GTTN) and Co-Chair China-Pak Joint Think Tank. Former Federal Minister/Deputy Chairman, Planning Commission of Pakistan
The National University of Science and Technology (NUST) hosted the prestigious Beijing Forum in Islamabad, for the first time outside China.
As the keynote speaker, I complimented both Peking University and NUST for ‘this extremely important partnership of far reaching significance.’
The growing, and weather-tested China-Pakistan relationship is emerging fast as a model for many countries to emulate. Hosting the Beijing Forum for the first time outside China here at NUST signifies, without any doubt, that our relationship is built on strong foundation of mutual trust, non-interference in the internal affairs of each other, and complete faith in each other’s positive intentions.
To achieve a peaceful and harmonious world, we must affirm our commitment to building a society that would harness the full capabilities of a diverse population that would nurture sustainability, diversity and courage to bring a better tomorrow.
The question that, I am sure, often haunts all of us is: "Why is the world presently in a situation which could at best be described as a quagmire?" Some academics put the blame squarely on the growing wealth inequality. The example of U.S. would generally apply to other countries following similar systems and practices. The gap between the CEO and the average U.S. worker’s pay is 325 to 1, up from 42 to 1 in 1980. Most of these countries follow the systems of modern political democracies where the public mandate, unfortunately, is used by the ruling elites (elected and their unelected friends) to exploit the masses to enrich themselves.
At present, the world is facing issues and crises mostly created by the excesses of small, but extremely powerful, individuals, groups and societies. I have not consciously mentioned countries or nations as I believe that even in the developed democratic countries, the powerful individuals or groups dictate policies, which could even be against their own populace.
You would agree with my thought process if you look at the poverty figures of various countries. According to the CIA World Fact Book, the poverty figures are: Turkmenistan: 0.2 %; Taiwan: 1.5 %; China: 6 %; Austria, France, Germany, U.K. and USA: around 15 %; Japan: 21 %; Pakistan: 22 %; and India: 30 %.
There are numerous factors contributing to the state of poverty in various countries but the most important, and the major root cause, is the unlimited demand and consumption for material wealth of the powerful individuals, groups and trans-national organizations exploiting limited natural resources all over the world with complete impunity. The development paradigms and the economic systems followed by the developed world are based on almost unlimited and uncontrolled exploitation of the weak whether an individual, group, society or a country.
This situation continues to deteriorate because of the continuing myopia of the super-rich in an increasingly uneven world. A new report issued by the Swiss bank, Credit Suisse, finds that global wealth inequality continues to worsen and has reached a new milestone, with the top 1 percent owning more of the world’s assets than the bottom 99 percent combined.
China has had an unprecedented phenomenal growth during the last four decades, but the country is becoming more unequal as it gets richer.
The regional disparity in wealth is also alarming. North America and Europe account for 67 % of the household wealth but contain only 18 % of the population. China, with 21 % of the world population, accounts for 9 % of the wealth. For Africa and India the population share exceeds the wealth share by a factor of more than ten.
I am pleased by the overarching theme of “Harmony of Civilisations and Prosperity for All” of the Beijing Forum because it is the need of the hour to reflect, discuss, deliberate and find universally acceptable solutions to these important issues.
As a development planner, I have no hesitation in asserting that a holistic and people-centric approach to issues of poverty reduction is the only viable option to create a harmonious society and a sustainable world, which is a minimum requirement to achieve the laid down objectives.
The health, education and gender gaps need to be specifically addressed through focused investments and effective strategies. But the most pivotal point is that these human development gaps are not causes of the real malady; the core issue is poverty itself. Unless there is a definite improvement in household income especially of the lower quintiles, sustainable development will remain difficult to achieve.
Thus employment, access to skills and market-related education should occupy a central place in national and global development strategies. While the poorest of the poor require safety nets, the ultimate objective of promoting self-reliance and decent employment and skill-development policy alone can benefit the poor.
World peace depends on global cooperation, and I believe that the major root cause of terrorism is the abject poverty and the unjust systems which the elites would like continued in their vested interests.
I must recognize that a distinct social policy framework was successfully adopted by China a few years back as a viable tool of poverty reduction.
On similar pattern, Pakistan finalised a social protection strategy to reach the poor and vulnerable in June 2007. The purpose was to reform and upscale the existing safety net programs, improve the targeting system and put in place an effective institutional mechanism.
Even though China has a problem of income inequality as an issue, one must acknowledge the Chinese herculean achievement, of pulling almost 600 million Chinese out of the poverty net, and compliment them for successfully reducing poverty better than any other big country.
To ensure sustainable future, fair and appropriate unified actions would be required by all countries. The world has already experienced global economic integration in various cases but the element of exploitation of the poor and weak by the powerful elite has continuously worked against the interest of not only poorer countries, but even poorer individuals and groups within the rich and powerful countries.
We need to continue moving towards an even greater economic integration but ensure sustainability of cultural diversity. Any efforts by any powerful group or a country to strive for creation of a so called global culture should be avoided; in fact, we should encourage different cultures to co-exist.
The excesses perpetrated, particularly by the advanced and developed countries have played havoc with the environment and the climate change. We need to put all our efforts to build societies and civilisations in which humans and nature coexist in a harmonious relationship to ensure a sustainable future for humanity- an essential pre-requisite for a harmonious world.
Since the emergence of modern capitalism some three centuries ago, we have seen more than thirty major crises, i.e.: on an average about one every ten years. Hedge funds, private equity funds, stock markets, international banks and super-rich have almost always overextended themselves for the well-known reasons.
In this respect, the Nobel Laureate, Prof. Joseph Stiglitz has written and spoken extensively. I would just cite here two of his very brief and apt quotes.
First: “America had created a marvelous economic machine, but evidently one that worked only for those at the top, i.e.: of the 1%, for the 1% and by the 1%.
Second: “Part of the reason for this is that much of America’s inequality is the result of market distortions, with incentives directed not at creating new wealth but at taking it from others.”
I can’t help recalling the words of extreme wisdom, spoken at the inauguration of the State Bank of Pakistan on 1st July, 1948 by our Founding Father Mr. M. A. Jinnah: “The economic system of the West has created almost insoluble problems for humanity. It has failed to do justice between man and man and to eradicate friction from the international field. On the contrary, it was largely responsible for the two world wars in the last half century.”
These remarks are equally valid today and in fact could be a prophecy for the future.
You would agree that for the “Harmony of Civilizations, Shared Common Destiny and Prosperity for All”, the world leaders need to work to establish a Just Economic System to ensure equity which is fundamental for achieving Peace.
I, therefore, urge the intellectuals and participants of the Beijing Forum to commit to work for a just and sustainable World Order. A move in that direction would be only possible if we agree that business as usual of exploiting the weak and the poor individuals, groups, societies or countries cannot go on.
I am conscious that this is easier said than done as the people and countries currently exploiting are the ones who wrote all the rules of the “greed game” to encourage haves to have more; the have-nots seldom appearing in their plans or calculations. The academic institutions and think tanks of the developed and under-developed countries, therefore, need to carry out an in-depth analysis so that exploitation by the elite groups is replaced with a just economic system. Needless to say that the role of China would be pivotal if any headway is to take place in this direction.
In the fall of 2013, President Xi Jinping put forward the strategic framework of building the “Silk Road Economic Belt” and a “21st Century Maritime Silk Road,” referred to in Chinese parlance as the “One Belt, One Road” (OBOR) initiatives. OBOR represents a modern reinvention of the ancient Silk Road that emphasises win-win cooperation with a global impact. Chinese official sources also observe that if the OBOR vision is realised, it would create a promising economic corridor, directly benefiting a populace of 4.4 billion people, or 63 percent of the global population. The "Belt and Road initiative", which should positively impact this entire region, is the hallmark of "community of common destiny for all mankind" as emphasised by President Xi Jinping repeatedly.
To understand the full impact of OBOR initiative, it must be recognised that China has done this in conjunction with the other bold initiatives of establishing the Asian Infrastructure Investment Bank (AIIB) and the BRICS’s New Development Bank (NDB). Collectively, these would shape the economic landscape in Eurasia with important consequences for global business.
I believe that with these initiatives, President Xi Jinping intends to reinforce the emerging global narrative that China would like to influence and provide leadership to help raise the standard of living of this large segment of the world population.
To my mind, failure to execute these plans is, therefore, not a Chinese option. To the extent of Pakistan’s association, failure should also not be Pakistan’s option.
"One Belt One Road" is China's masterplan covering very large area, population and investment. This plan has all the ingredients for creating a harmonious and a prosperous region subject to the condition that it is implemented with honesty and the right spirit and intentions by the leaders of the countries who would be benefitting from this historic initiative.
Let me take a few moments to share with you the genesis of China-Pakistan cooperation spanning the past several decades, with which my own association has sustained since 1968. This was the time when China was helping us to establish the Heavy Engineering Complexes in Taxila where I was closely associated for long and had the privilege of hosting, working and befriending the then Engr. Jiang Zemin, who subsequently became President, Peoples Republic of China, and played an outstanding role in the rapid and sustainable development of not only China, but also in strengthening relations with Pakistan.
I have seen, first hand, the transformation of China over the last four decades; my first visit to China was in 1976. The economic growth and development of China during this period remains unique and unprecedented in human history. The relations between our two countries have remained a model for other countries to emulate as far as the friendship at the diplomatic, security and people to people level is concerned, but it has left a lot to be desired on the economic and trade fronts.
During the last decade, the two countries moved towards “Strategic Economic Cooperation/ Partnership" and the Five Year development Agreement signed during President Hu Jintao's visit was a very significant move in this regard. Regarding the “Corridor” plan, the Agreement states: “China is keenly following on Pakistan's envisaged National Trade Corridor. Both sides agree to intensify joint study in this area.”
The relations between China and Pakistan got a big boost during President Xi Jinping's visit during April, 2015, when the relations were further elevated to “an all-weather Strategic Cooperative Partnership”; CPEC being the most important part of this partnership.
CPEC is one of the most important visionary initiatives of our two States, for which I must compliment the governments and leaders of both China and Pakistan. However, the Corridor programs are only means to an end and NOT the end itself. The objective, from Pakistan’s pronounced point of view, has to be: A prosperous and a just State which “Cares” and gives “Self Respect” and “Quality Life” to all its Citizens in a “True Modern Welfare State”, with universally measureable key performance indicators
The centrepiece of the Corridor has always been the development of Gwadar as a Deep Sea Commercial Port, an Oil City with world class refining & petro-chemical facilities and light to medium industries with links to China. Sufficient capacity for Gwadar Port, jointly with world class internationally competitive infrastructure and logistics chain connecting Gwadar with Khunjrab through the shortest and most appropriate route, would need to be developed to provide an effective additional corridor as compared to Malacca Straits.
Without the upgradation and extensive development of world class infrastructure and logistics chain, Pakistan just cannot hope to achieve 7-8% GDP growth essential to provide a decent quality of life to her citizens.
With increasing volumes of trade, corresponding development and enhancement of entire logistics chain, including the capacity enhancement of all the existing and required new ports along Pakistan's coastal belt would be necessary.It was envisaged that in twenty years Gwadar could be developed to a similar, or even better level, than Shenzhen of China, which also used to be a small fishing village.
The Way Forward
Let me submit here a few ideas about how to navigate all our challenges and take better advantage of the opportunities in front of us.
CPEC must reflect the consensus, interest and aspirations of all stakeholders beyond partisanship. Also, since the program would be implemented over a long period of time, it is essential that changes in either government do not lead to any disruption in this program. Any short term decision must reflect the long term perspective within the overall agreed parameters between the two countries.
The current agreed list with total projected investments of USD 46 billion (comprising of Projects relating to Energy USD 34 billion, Roads USD 6 billion, Existing Railway Network USD 3.7 billion, Lahore Orange Line USD 1.6 billion and Gwadar USD 0.8 billion) is just the beginning of this great Initiative. The current list of projects just does not add up to the“Corridor”. The energy related projects are the need of the hour in Pakistan, irrespective of whether CPEC Initiative was there or not.
As a mandatory policy, the projects should only be selected with long term National Objectives of making Pakistan a prosperous country in one generation timeframe and providing China with the most competitive trade and economic alternative route to Malacca Straits.
Additionally, the execution of various projects and programs, under the umbrella of China-Pakistan Strategic Partnership, must create enabling environment for investments in all required sectors to put Pakistan on exponential growth trajectory including a corresponding increase in Pakistan’s exports to balance our trade with China and other countries.
The total investment over the next 15-25 years would have to be many times more depending upon Pakistan's economic growth and the quantum of Chinese world trade using this route, which would entirely depend on us, that is, how attractive we would make it for the stakeholders. We should provide conducive climate to attract Chinese and other investments (local and foreign) for multimodal transport systems and the overall Land Development including establishment of 50-100 Urban and Industrial Centers along various Corridors.
As such, Pakistan would need to invest 5-6 % of the OBOR cost estimate, i.e.: about USD 1 trillion over the next 15-20 years.
OBOR and CPEC have all the ingredients of achieving the objectives of “Prosperity for All in this Region”; encouraging the concept of “Shared Common Destiny” and create the right environment for “Harmony amongst different Civilizations. However, this would only be possible if this entire “Initiative” is planned and executed by all stakeholders in a “holistic, integrated, consultative and coordinated” manner.
Even though both the governments are doing their best in ensuring a smooth implementation, there remains ample scope for improving the planning and execution of CPEC.
The CPEC Initiative is potentially Pakistan's “Take Off”, and thus makes it imperative for all concerned to delink this program from any political and/or financial strings. Once on stream, this Initiative will open new vistas for our people and the country by putting us on fast track to take our rightful place in the comity of Nations. CPEC Initiative has the potential of Pakistan's GDP quadrupling in around 15 years if the Program is effectively implemented with only and only national spirit and objectives.
Now, I propose to discuss the way forward as I see it appropriate, based on my 50 years of experience in various capacities, including the Head of the Pakistani Planning Commission when the China-Pakistan Transport, Trade, Energy and Industrial Corridor was conceived and discussed with our counterparts in China.
One key aspect, which must be achieved is to make Pakistan a developed, self-reliant and a prosperous country through maximum possible “technology transfer” and acquisition of required competencies and technological capabilities.
It is of paramount importance that the detailed plan, covering all facets of Strategic China-Pakistan Cooperative Partnership including CPEC, are finalised on topmost priority by both the sides at the highest level. This is a huge and a colossal initiative and would require corresponding vision and willingness to take major policy decisions at the highest levels in both the countries to provide the right working environment for the relevant organizations of both the countries.
Also, appropriate policy, coordination and removal of difficulties and monitoring mechanisms need to be put in place by both sides to ensure fast track implementation.
Based on this understanding, an appropriate “blue print” should be prepared and shared with all provinces and stakeholders without any inhibition.
In addition to listing all the key components of this “partnership”, it is extremely important to generally agree about the expected quantum of China’s world trade (imports and exports) passing through CPEC as the planning, selection of route(s), design and execution of CPEC is entirely dependent on this most important aspect.
Our Chinese friends would logically like the shortest, appropriate and most economical routes for road and rail links, and we must not object to that and come up with the so called western, eastern and central routes, carrying out physical surveys and feasibility studies, which of course can and should be expedited to keep the execution of this entire initiative on fast track.
China’s current world trade exceeds USD 4000 billion; more than 60 % passes through Malacca Straits which is a “choke point”. The diversion of part of this trade and additional volumes from the western provinces to CPEC would only be possible if CPEC fulfills the required criteria of providing world class competitive infrastructure and logistics chain.
Even if CPEC attracts 10 % of this trade, it means a minimum trade volume of USD300 billion, growing with time. To comprehend this figure, please keep in mind our current trade volume. Imports are at USD40 billion and exports, is currently less than USD 25 billion.
From Pakistan’s perspective, our long term strategic plans must include and ensure:
- Multifaceted, holistic, integrated, consultative & coordinated approach - a MUST for Success. Also, an appropriate mechanism to eliminate the possibility of corruption must be agreed upon and enacted appropriately by both the governments - which is extremely important.
- Gwadar Port must be planned and developed as a "Deep Water Commercial Port" to handle the expected trade volumes and Gwadar City as the “Hub” of Petrochemical Sector, value added industrial sector and a vibrant economic activity center on the pattern of Shenzen by 2030 and a modern city like Shanghai by 2040.
- Appropriate road and rail links from Gwadar and Karachi to Khunjrab and Kashgar, German pre-feasibility study for railway link of Havelian with Khunjrab was presented to President Hu Jintao in April, 2008. Two pre-feasibilities (German and Chinese) were completed in 2008; the cost estimates ranged from USD12 to USD15 billion for a distance of around 650 km. Without the Rail Link, it would not be possible to handle the expected trade and transport volume.
- Setting up of various consortia (partnerships) for Dams, Transmission Lines and New Road & Rail-road networks. China has already offered USD50 billion for dams on River Indus. In April 2008, China had, in-principle agreed to set up a Consortium of China State Construction Company which constructed Three Gorges Dam jointly with FWO and NLC; funding had been offered by CDB - a Chinese bank larger than WB and ADB put together.
- Pakistan's topmost priority is the construction of series of Dams and Hydropower Projects on River Indus. This key area must be finalised on priority (already agreed by our Chinese friends). I believe that the start of Daimer-Bhasha, the first project in this series, would have absolutely no adverse effects on the on-going Coal-fired Power Plants.
- Formation of JVs for existing Railways network, HMC (Taxila), Pakistan Steel (Karachi), Gwadar Port, Gwadar Airport, Gwadar Oil City including Refineries and Petrochemical Units, Oil & Gas Pipelines, Telecom, etc, along with Technology partners from the Developed World. The requirement for plant, machinery and equipment is going to increase exponentially; the Chinese are ready to invest heavily in Pakistan but the matter is getting delayed due to usual bureaucratic hurdles.
The JV partners from Pakistan should be Pakistan Railways and National Logistics Cell. China State Railway Organization is invited to invest in the upgradation of the existing network for meeting the needs of enhanced trade and passenger volume.
A policy of inviting and incentivising the leading global companies as “technology” and “equity” partners from the developed world should also be formulated on priority.
- In order to encourage and incentivise Chinese and other foreign investments, appropriate public policies with no “red tape” should be formulated on top priority and enacted.
Additionally a CPEC Fund, particularly for the private sector to incentivise them for relocation of Chinese industries in to Pakistan, should be established in consultation with our Chinese friends.
- Independent Public Private Partnership on the pattern of Tennessee Valley Authority (TVA) for developing and managing Gwadar City, various SEZs and the New Urban and Industrial Centers to be developed along the Corridors.
Local community's mobilisation and effective participation as an important pillar in the socio-economic development should be built in the governance structure.
- Land Use Planning and Development Strategy along the various Corridors:
*Formulation of appropriate public policies to ensure sustainable generation of resources for the development of world class infrastructure and logistics chain.
*Prepare to cater for the greatly enhanced trade and transport of Chinese goods through Pakistan in an efficient and competitive manner. Both hard and soft infrastructure are equally important.
*Proper implementation of this concept can generate enough resources to finance up to 70-75% of the required National infrastructure and logistics chain.
- Development of capacity and enhancement of technological capability for implementation of various assigned works as partners and not as sub-contractors.
- It is imperative to establish the concept of co-financing, co-designing, co-manufacturing, co-construction and co-operations for self-reliance and to maximise indigenisation & employment generation.
*The Chinese friends had agreed to this mode of working in 1994-95 for setting up Power Generation Plants in Pakistan. The 1992 Directive of Prime Minister Nawaz Sharif for disallowing the import of “turnkey plants” should be implemented in letter and spirit as was done by our Chinese friends to be self-reliant.
- Physical surveys must be undertaken to finally select the various “Corridors”, which would not only provide trade and transport logistics of international standards but in fact be “Trade, Transport, Communications, Energy, Industrial and Industrial Cities Corridor”.
*The roads and railways currently included as CPEC projects would hardly suffice for a very limited time frame and only provide connectivity, and not the required world class infrastructure and logistics chain for the anticipated “trade volume”.
- Our existing ‘processes and procedures” would not be able to deliver the quality and pace required for the implementation of this great “Initiative”.
*Appropriate “new systems and procedures” must be adopted to meet the required objectives and goals.
- Pakistani organizations should work both as consortium partners or joint venture partners, and not as sub-contractors.
*Implementation of co-financing, co-planning, co-designing, co-manufacturing, co-construction and co-operations concept would be a must for “technology transfer”.
- The most vital success factor, namely financial and economic viability of this initiative rests on the appropriate selection of most viable routes for which land selection & acquisition, land use, land planning and the implementation strategy need to be meticulously planned and implemented.
- On the organisational front, it is essential to establish a “Policy and Coordination (P&C) Board” headed by the Prime Minister and comprising key stakeholders from all provinces. COAS should be included as a permanent member as the “security apparatus" would be his domain.
*All discussions relating to political considerations should be restricted at this forum.
- A National Task Force, headed by a senior competent leader having vision, understanding and drive to ensure timely implementation of the decisions of the P&C Board should be set up. This Task Force should be assisted by various specialised subject and provincial committees manned by competent professionals and government functionaries selected on merit and merit alone.
- Merit based decisions would ensure continuity irrespective of the changes in governments. However, appropriate Constitutional Provisions should be enacted.
- I believe that both China and Pakistan would welcome association of all countries and international financial institutions willing to participate in this historic Initiative.
During the periods of 2005-08, we had the World Bank, IMF, Japan Bank of International Cooperation and China Development Bank participating in almost all our meetings on National Trade, Transport, Energy and Industrial Corridor.
- Needless to say, that all stakeholders should strongly shun every kind of negativity and remain positive.
- Neighbours, like India and Pakistan, must put in place an effective system of resolving all disputes in order to fully benefit from this extraordinary and huge opportunity of regional economic cooperation.
Based on my 50 years experience, I believe that both governments would require assistance from their Think Tanks. I am conscious that the Chinese government extensively benefits from the intellectual and independent advice.