This is the second of a two-part series detailing the 2020 National Security Policy’s (NSP) ill-advised focus on economic diplomacy – ill-advised as the world moves from unipolarity to multipolairty.
The National Security Policy (2022-26) identified elaborate objectives rather than focus on how to deal with emerging challenges posed by an emerging multipolar world order and used grandiose catchphrases: “to reposition itself (Pakistan) at the crucible of history by recognising emerging trends, investment in key areas that will lead the technological revolution in the coming decades, and a whole-of-government approach that leverages our advantages and addresses our challenges to find opportunity within a period of great change.”
The policy ignored Pakistan’s engagements with key players, past and present, and failed to provide a roadmap/guidance to subsequent stakeholders.
There are three evident engagements that predate the policy and continue to this day. First, 30 billion dollars out of a total of 130 billion-dollar total external debt is now owed to China though it is unclear whether the entire 30 billion-dollar debt is government to government or includes the sovereign guarantees extended to the 46 billion dollar projects signed under the umbrella of the China Pakistan Economic Corridor (CPEC) in 2015.
The remaining 90 to 100 billion-dollar debt is largely owed to the West and West led multilaterals as well as borrowing from the Western commercial banking sector. What complicates matters in Pakistan’s case is that China as well as the two other friendly countries notably Saudi Arabia and the United Arab Emirates refused to extend their pledged assistance to Pakistan last year unless the country was on an active International Monetary Fund (IMF) programme; or, in other words, neither the friendly countries nor the West had a comfort level with our pledge to implement reforms – a distrust based on Pakistan’s lack of implementation of agreed time-bound quantitative conditions and structural benchmarks in the previous twenty-two IMF programmes.
It is relevant to note that during the first four months of the current year neither Saudi Arabia nor China has extended the budgeted 9 billion-dollar time deposits, SAFE respectively, as opposed to last year, fuelling speculation that the reason may include economic as well as security concerns and more disturbingly that their support may no longer be linked to an active IMF programme.
Second, in spite of Chinese growing economic support (budget support as well as project support) more than 90 percent of our exports and imports are with the US and Europe (with the GSP plus status from Europe accounting for a significant rise in exports) while trade with China for the first four months of the current year was projected at only 813 million dollars.
And finally, remittance inflows are from the West, the United Arab Emirates and Saudi Arabia – however, the UAE is already a full member of the rival to the Western-led trade treaties, notably BRICS (Brazil, Russia, India, China and South Africa) while Saudi Arabia was invited to join by Russia but is hedging its bets to date. There are no remittance inflows from China.
Five years before the NSP was launched many CPEC projects were completed/near completion and Western bilateral partners and Western-led donor agencies, including the IMF/World Bank, had begun expressing serious reservations. In 2020, US Ambassador Alice Wells warned Pakistan that there is no transparency in CPEC projects and contended that blacklisted firms have won the contracts which would simply raise the country’s indebtedness.
Today Pakistan continues to be subjected to considerable pressure from the US-led West to amend trade and investment policies that it alleges incentivise China’s One Belt One Road initiative and which are not only detrimental to Pakistan’s national economic interests due to their debt enhancement potential but also provide unfair competition to their own business interests.
Today, the list of complainants is indeed exhaustive. India has opposed CPEC as a security threat since CPEC’s launch as, amongst other factors, it considers China’s acquisition of the operational control of Gwadar port as part of her string of naval bases in the region with the objective of encircling India - Hambantota in Sri Lanka, Sittwe in Myanmar and Chittagong in Bangladesh.
This persistent complaint has not impacted on bilateral trade between India and China which in 2023 was 113.83 billion dollars with China emerging as India’s third-largest trading partner. While India’s objections are easily dismissed given the two countries historical conflict yet those of the West are not as easy to dismiss for obvious reasons.
As per an exclusive Business Recorder report, the Ministry of Commerce has taken other ministries on board to deal with concerns of European companies including: (i) expropriation of Independent Power Producers as the settlement agreement in its present form (as per a recent letter by the German Ambassador writing on behalf of Siemens) is not acceptable to foreign investors, given the currency transfer of the settlement sum and payments of all parts of dividends to foreign shareholders on an account nominated by them, including an account abroad, is not being guaranteed; sensitive to the possible fallout of German concerns the Prime Minister has directed Tariq Fatemi, special assistant to the prime minister on foreign affairs, to address Siemens’ grievances though his capacity to deal with such a situation is not tried or tested; (ii) charge of discriminatory duty on auto industry of Europe to favour Chinese company M/s BYD (reference to the budget 2024-25 concessionary tariffs applicable to Electronic Vehicles (EVs) of value higher than 50,000 dollars (the price range of European manufactured EVs were revoked, which puts the EU car manufacturers at a disadvantage to their Chinese counterparts); and (iii) delays in repatriation of profits and tax refunds indicative of the continued paucity of foreign exchange reserves.
The thrust of the stakeholders today is on attracting foreign direct investment inflows and the forum, represented by civilian and military personnel, to ensure the prompt removal of all bottlenecks is the Special Investment Facilitation Council (SIFC). But IMF in its October 2024 report noted that “staff has highlighted the need to ensure a level playing field with regard to the investment environment and avoid a watering down in governance standards. These issues remain to be addressed.”
To further complicate matters the fatal attacks against Chinese nationals are compromising the country’s ability to strengthen the CPEC partnership – a justified sensitivity mishandled by Foreign Minister Ishaq Dar who in the presence of the Chinese Ambassador at a forum stated that he overheard a senior Chinese official saying to the Prime Minister that Pakistan is the only country where Chinese deaths can be overlooked; and, at another forum, the Punjab Chief Minister reportedly commented to the Chinese Ambassador that deaths in Pakistan are common enough – comments that reportedly understandably upset the Chinese Ambassador.
There is therefore an urgent need for the National Security Committee to task its planning and research committees to revisit the policy on an emergent basis, given the ongoing faux pas by some federal ministers. The membership of the committee includes the prime minister, and ministers of defence, finance, foreign affairs, information, and interior, and chiefs of all defence institutions. National security advisor’s position in the NSC remains vacant and may probably account for the ad hocism in our dealing with concerns by external powers.
One would hope that the existing NSP is revisited and transformed into a cohesive and implementable long-term policy.
Copyright Business Recorder, 2024
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