View from McLeod Road: Why the Sino-Pak alliance is economically worthless

In the 12-year period between July 2000 and June 2012, net foreign investment in Pakistan amounted to about $29 billion, of that, just $0.8 billion came from China. CREATIVE COMMONS

In the 12-year period between July 2000 and June 2012, net foreign investment in Pakistan amounted to about $29 billion, of that, just $0.8 billion came from China. CREATIVE COMMONS

KARACHI: Pakistan’s leaders love using laughably outrageous metaphors in describing the country’s relationship with China, yet the truth is that this so-called alliance means almost nothing positive for the Pakistani economy.

All of Islamabad – indeed all of Pakistan – appears to be bending over backwards in laying out the red carpet to welcome Chinese Premier Li Keqiang. But the fact of the matter is that China will give Pakistan almost nothing, and this two-day trip is really only being made by the Chinese premier to avoid slapping Islamabad in the face completely, after having made his first trip abroad a three-day visit to India, in a key signal about the real shifts in Chinese foreign policy.

Pakistanis love to proclaim China as our “all-weather friend. In his last visit to China, former Prime Minister Yusuf Raza Gilani described the relationship as “higher than mountains, deeper than oceans, stronger than steel and sweeter than honey.”

On this trip, Premier Li described the relationship as “a tree, now exuberant with abundant fruits”.

This was not him being poetic. It was delivering a message that nobody in Pakistan seems to have gotten: that China’s ties with Pakistan are not some eternal alliance of friends, but a strictly utilitarian relationship in which Beijing uses Islamabad occasionally to scare the living daylights out of the United States and India to get what it wants in its negotiations with Washington and New Delhi, and then abandons Pakistan once that transaction is completed.

A look at the numbers suggests that the Islamabad-Beijing relationship has had very little benefit for Pakistan as whole.

In the 12-year period between July 2000 and June 2012, net foreign investment in Pakistan amounted to about $29 billion, according to the State Bank of Pakistan. Of that, just $0.8 billion came from China, and nearly all of that was China Mobile’s investment in Zong.

China’s investment in Pakistan is less than that of tiny Netherlands, which invested $1.4 billion during that time. The supposed “Great Satan” – the United States – invested the most in Pakistan: $7.7 billion, or more than a quarter of all foreign investment in the country. There is only one major Chinese company with actual investments in Pakistan: China Mobile. The number of major US companies investing in Pakistan? More than 30.

In Pakistan’s terms of trade with China, the relationship is virtually colonial in nature. In 2012, China sold Pakistan about $6.6 billion worth of goods, mostly electronic equipment and machinery. Pakistan sold China about $2.6 billion worth of goods, nearly all of that cotton yarn. By contrast, Pakistan runs a trade surplus with both the United States and the European Union.

But what about Gwadar Port and its benefits to Pakistan, one might be tempted to ask. There is no denying that Gwadar – if developed properly – can deliver massive economic gains to Pakistan as a whole and especially the impoverished people of Balochistan. The problem is that this is exactly what we said when we handed over the Saindak copper and gold mines to China a decade ago. How’s that working out for us? Not very well, by the looks of the Balochistan and federal governments’ revenues, and the utter lack of development in that area.

What about other Chinese companies building infrastructure in Pakistan? They are simply contractors being paid for construction work on projects financed mostly by Pakistani taxpayers or donations from the US, EU or multilateral donors.

The truth is that China is much more serious about its economic relationship with India than with Pakistan. Here is how we know: in Islamabad, the Chinese premier will, at best, sign a few memoranda of understanding, essentially worthless pieces of paper that say nothing of substance. In India, the visit was marked by Chinese companies signing legally binding contracts with their Indian counterparts worth billions of dollars. China’s trade with India is worth $68 billion and the two countries are on track to take it to $100 billion in two years.

The sooner Pakistan wakes up from the “China is our friend” delusion, the sooner we will stop giving control of the country’s economic resources for almost nothing in return. The harsh reality is that Pakistan means almost nothing to China, and that is why the relationship with Beijing has yielded almost no tangible benefits for the Pakistani economy.

About the writer: Head of business reporting at The Express Tribune. 

Published in The Express Tribune, May 23rd,  2013.

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