Is
Pakistan becoming a client state? Dr Shabir Choudhry
London 09 August 2018
Some Pakistani and non-Pakistani political and
economist analysts feel that China Pakistan Economic Corridor is like East
India Company, which will eventually colonise Pakistan. Some of them say
Pakistan is fast becoming a ‘client state’ of China, as the country has become
too dependent on China in many respects.
Client State
True,
China is very important for Pakistan, as China is always there to help out
Pakistan when the country is in difficulty. However, Pakistan must learn to
work hard to depend on itself and become self-reliant. This relationship of
dependence cannot and must not continue, unless Pakistan is prepared to lose
some aspects of its sovereignty, and become a ‘client state’ of China.
Image of
Pakistan, in view of many international analysts is that of a ‘client state’ –
a state which is subservient to a major or more powerful state. Pakistan has
had this kind of reputation in its past dealings with America and Saudi Arabia.
Some analysts think, China has also assumed role of a ‘guardian’ of Pakistan.
In view of Monika Chansoria, a client
state, is ‘economically, politically, and militarily subordinate to and
dependent on another more powerful and influential state in international
affairs. On these lines, Pakistan is rendering itself a neo-colony of
China as Beijing crafts a more-than-ambitious plan to integrate sea and land
routes across Eurasia under the Belt and Road Initiative’. 1
If we accept this definition of a ‘client state’, then hasn’t Pakistan
been a ‘client state’ in the past, especially if we examine the relationship
between Pakistan and America, starting in 1949, and up to very recently?
America influenced every major policy of Pakistan, even domestic and military
related policies. Now both countries don’t see eye to eye on major policy
matters; and Pakistan is apparently seen as a country that has contributed to
America’s failure in Afghanistan.
Even Saudi Arabia and
tiny United Arab Emirate also influenced Pakistani policies from time to time.
However, countries do have self-respect, and can come out of the shadow of
others when they have some economic and military strength. Also, when they have
established friendship with some other strong and reliable countries.
Monika Chansoria thinks
Pakistan’s international standing is in ‘disrepute’, and as a result,
major international loan providers are reluctant to provide more funds to
Pakistan that the country can pay instalments on the existing loans. Despite
this vulnerable financial situation, China is the only country which seems to
be proactive in providing billions of funds to Pakistan, even for those
projects that are not economically sustainable.
In her view, China hoodwinks ‘vulnerable
countries by extending its ‘financial tentacles via investment, aid, grants,
joint ventures and equity ratio. In particular, the loans offered can be
categorized as preferential buyer’s credit, concessional loans,
and interest-free loans’. 2
It is important to note
that China has ‘outshined’ Japan, and has become the biggest bilateral
lender to Pakistan. Sane people question, why is that Pakistan has refused
loans from Japan; and is prepared to bend its back to obtain more loans from
China. Also, people need to know that loans offered by Japan for infrastructure
projects had much lower rate of interest than offered by China.
Why would Pakistan do
that? Is it because Pakistan ‘has become a client state of China’? Or is it
that Pakistan want to use those funds for something else, and Japan may not
allow that, as loan is sanctioned for building infrastructure?
Alternative view is that Pakistan refused the loan
from Japan on clear instructions of China. Beijing feared if Japan was allowed
to take part in infrastructure projects, then that would compromise influence
of China. Beijing want Islamabad to become a dependent state; and if Pakistan
has access to other friendly countries in case of serious economic problems,
then that will considerably reduce influence of China. It must be pointed out
that there are other countries and financial institutions who want to invest in
viable infrastructure projects; and are looking for suitable clients in Asia.
Dr S Akbar Zaidi, a
Pakistani scholar and author of two brilliant books on Pakistan, while speaking
as a keynote speaker in a conference organised by a Think Tank, Calcutta
Research Group said:
“CPEC is a part of China’s One Belt One Road
initiative to expand its influence in the world and Pakistan is just the
geographical space used by Beijing to reach the warm waters of the Persian
Gulf. But in the process, Beijing blueprint will ensure complete control over
Pakistan…It is indeed a game changer, but not in the way our ruling classes
have projected it to be. It will enslave Pakistan and undermine its
sovereignty”. 3
Some critics of the CPEC believe that
Pakistan is sleep walking in to quagmire, or a trap set up by Beijing. They
feel some members of the ruling elite knowingly pushing Pakistan towards this
trap for personal economic gains. Dr Akbar Zaidi is author of two brilliant
books on the topic, and is among those thinking Pakistanis who sincerely
believe that Pakistan is pushed on a road to enslavement. He says:
After One Belt One Road gets
ready, Pakistan will become China’s colony. 4
Some analysts fear that Pakistan may become 35th province
of China; or may become third special administrative economic region,
like Hong Kong.
It
will be pertinent to add that a Pakistani Senator Tahir Mashhadi, Chairman of the
Standing Committee on Planning and Development, described the CPEC corridor “another
East India Company.” 5
Concerns of America and
others
The US
Secretary of State Mike Pompeo expressed his
concern in the following words:
"We
aspire to a regional order - independent nations that can defend their people
and compete fairly in the international marketplace. We will help them. We will
help them keep their people free from coercion or great power domination."
6
Former
US Under Secretary of Defence, Jed Babbin, in his article published in
reputable Washington Post under title of ‘Bailing out Pakistan’ said:
‘The
second reason not to bail out Pakistan is China growing de facto
colonization of Pakistan through CPEC…. China is conducting what some call
“debt trap diplomacy,” through which Pakistan is becoming so indebted to China
that it will be compelled to follow China’s
policies in Southwest Asia and beyond. In fact, the debt trap has already been
sprung with the eager assistance of the Pakistan’s government, ISI and army’. 7
China is spending more than $900 billions on Belt and
Road Initiative. The CPEC, although important component of the BRI is around
$62 billions. China is investing this amount not as a goodwill or because they
like people of Pakistan. They have a big agenda which is hidden under many
layers. Pakistan needs money for its survival. China has money and want to use
Pakistan as a stepping stone to move forward. Countries which have vulnerable
economies, and accept the Chinese investment in mega infrastructure projects,
in practise sign away certain aspects of their sovereignty.
Monika Chansoria thinks the CPEC will result in
Pakistan losing its sovereignty. She writes:
‘At the time of repayment, when things come to
a head, Beijing is known to convert the debt conditions and exert pressure on
the debtor country to fulfil China’s regional
geopolitical objectives and strategies…By means of financing the entire CPEC,
Pakistan has compromised its sovereignty and reduced itself to a client state
and neo-colony of the People’s Republic of China’. 8
Monika Chansoria asserts that clear objective of the BRI is ‘to
strategically reshape the Indo-Pacific. Its overarching geo-economics thrust
and infiltration, combined with an ambition to extend China-centric
infrastructure and strategic equations across the region’. 9
In her view, One Belt
One Road initiative in reality, is ‘an instrument of Chinese hegemony and an
attempt to re-establish the Middle Kingdom’.
Trump administration, supported by some other countries,
think that China wants to have a ‘string of pearls’ in the region to advance
their economic and strategic agenda. With that in view The American Secretary
of State, Mike Pompeo said:
‘Beijing has already gained control over
a port in Sri Lanka, an island country that bestrides key international
shipping lanes. It has invested in Pakistan's Gwadar Sea Port that could give
the Chinese military access to another facility west of India’. 10
Pakistani response
Asad Umar, a leader of Pakistan Tehreke
Insaf, who will be next Finance Minister under new government rejected US Secretary
of State Mike Pompeo’s statement concerning loan of International Monetary Fund
being used to pay off Pakistan’s debt to China. He said:
“One friendly advice to the Americans,
we’ll worry about our Chinese debt, but I think they better handle their own
Chinese debt first. We have a serious external debt problem, I’m not saying we
don’t, (though) we don’t have a Chinese debt problem.” 11
Asad Umar acknowledged the Pakistan
debt problem; and said:
“Either the nation can go to the IMF or
friendly countries or sell bonds to overseas Pakistanis and raise the amount.”
However, he ruled out privatisation of state enterprises. “Neither Pakistan
International Airlines nor Pakistan Steel Mills will be privatised,” he added. 12
Perhaps, Asad Umar forgot that he is giving this advice
to world’s only superpower, a country that is the biggest military and economic
power. Yes, America has taken huge loans from China, this loan was in May 2018,
$1.18 trillion. However, unlike Pakistan, America has the ability to pay back;
and for that they don’t have to go to any financial institution with a begging
bowl.
With Nawaz Sharif in Office, China felt
confident about the completion of the CPEC, as they knew the man can deliver because
he understood that building of infrastructure is a fundamental element of
economic progress. Once the establishment, due to their hard work and
manipulation got him out of way, the alarm bells rang in Beijing. They withheld
some of the investment; and waited to see who will form the government after
the next general elections.
The establishment assured the Chinese
that everything will continue as normal, no matter who forms the next government.
Now that the establishment selected Imran Khan for the post of new Prime
Minister of Pakistan the Chinese are trying to woo him as well. Beijing has
praised Pakistan’s importance and crucial role in the CPEC and how it will
benefit the region.
Meanwhile some other recipients of the
BRI are having second thoughts about various infrastructure projects. Malaysia is also an important country in the OBOR initiative.
However, the new government in Malaysia suspended work on $20 billions railway
project, funded by China. The Malaysian government is also reviewing
effectiveness of other Chinese projects.
There are reports that
Mynamar is also trying to renegotiate their $10 billions port project, funded
by China. Similarly, Nepal has also halted work on two hydroelectric dams to be
build and funded by China.
While commenting on
the CPEC related loans and Pakistan’s ability to pay back, one senior Pakistani official, involved in negotiations with China said:
"I can't see how
the money would be repaid".
Another Pakistani,
Nadeem Javid, who is Chief Economist associated with Pakistan’s Planning
Ministry suggested that China should rescue Pakistan with an interest-free loan
- "It would be a kind of favour". he said.
Perhaps this gentleman
doesn’t know that there are no free lunches in business matters and in international
politics. No one will do you a favour in politics and in international affairs
for nothing. If you seek some favour, you have to return that favour with
higher price.
While commenting on
the situation of Pakistan’s economy and the IMF bailout Package, Teresa Duban,
IMF Representative for Pakistan said:
"The
new government (of Pakistan) will have to do some adjustment, with us or
without us." 13
Priority of China
For China, One Belt One Road or BRI is a
programme which must be completed to accomplish China’s dream. The CPEC is
essential component of the OBOR, which will spread across 70 countries.
However, it is not possible to complete
the Chinese agenda, if some countries, which are part of the OBOR start halting
important projects or start having second thoughts on the projects. In view of
that, the CPEC and Pakistan has become more significant.
Therefore, it is no surprise that China
is willing to provide more cash to struggling Pakistan, and also sings laurels
for Pakistani role in the OBOR. Already, China has
provided emergency loans worth $3 billion at commercial rates to stabilise
foreign exchange reserves. We all know that commercial loans have high interest
rates; and that will add more burden on Pakistani economy.
Despite this emergency
loan, Pakistan would still need about $8-10 billions. China is absolutely right
in having apprehensions about the ‘financial implications of OBOR projects
under CPEC and Pakistan’s ability to pay back loans’.
In this context, China
has given new regulations to the Chinese companies investing in Pakistan; and
cautioned them that Pakistan’s capacity to repay debts “is extremely low.” Furthermore,
‘Returns on Chinese investments in Pakistan were “very low, and some may
become bad debts.” 14
This generosity of Beijing is viewed as “debt-trap diplomacy”, aim of which is to ensure that
Pakistan is fully trapped by burdening the country with heavy loans. Once
Pakistan is overburdened with loans that they cannot afford to pay back; it
would be easier to extract more concessions from Pakistan.
In this regard,
critics claim that Pakistan may end up making more concessions to the Chinese
in Gwadar. It is also possible that Pakistan may surrender other territories,
like they did in 1963 by ‘gifting’ Shaksam Valley to China from Gilgit that
China could link it with Aqsai Chin, a territory China conquered in 1962 war.
China doesn’t like
Pakistan to approach IMF because of apprehension that the IMF would demand more
transparency and impose certain restrictions. Alternative approach could be
that Pakistan contact friendly countries like Saudi Arabia and other Gulf
States; and seek help from rich Pakistani and Azad Kashmiri expatriates.
The difference could
be provided by China with some kind of ‘IMF-style bailout programme’. It
is believed that China was waiting for the outcome of the Pakistani elections, and
the new government to assume office that work on this could commence.
A
number of countries which failed to pay the Chinese loans ended up losing some
aspect of their sovereignty; or were forced to make certain compromises. Sri
Lanka also suffered the same fate. After failing to pay loans, Sri Lanka was
forced to lease out the port and other facilities to China for 99 years.
Some
critics fear that Pakistan will also face same dilemma. Pakistanis, however,
feel upbeat about it because of their experience, size and resources. Pakistan
is a big country with enormous untapped resources. They can afford to lease out
many things to satisfy China. Huge areas of Balochistan and occupied Gilgit
Baltistan are strategically very important and full of resources.
In 1963 they gifted away around 2000 kilometres of
territory of Gilgit to China- a territory that legally
does not belong to Pakistan. China will surely will be interested in taking
over more resource rich territory of Gilgit Baltistan.
China is extremely
concerned about growing Islamic extremism and activities of jihadi militants in
Turkistan. Beijing believes that these people are indoctrinated and trained in
Pakistan or areas under control of Pakistan. A control of a big chunk of
territory of China’s choosing can help Beijing to keep an eye on these outfits.
America, India and some other countries are concerned
about OBOR initiative which will spread over 70 countries and may complete in
2030. These critics are apprehensive that the OBOR is ‘a tool to impose a
strategic plan to redraw the world’s geopolitical map through opaque deals
often contingent on using Chinese contractors’. 15
That aside, China and Pakistan are optimistic that 43
projects related to the CPEC will be completed by the set date of 2030, and
benefit both countries. I wish them good luck, as long as they don’t loot and
plunder any area belonging to my motherland - former Princely State of Jammu
and Kashmir. It must be pointed out that areas of Gilgit Baltistan are also
part of Jammu and Kashmir, and any attempt to change the legal status of these
areas will be resisted by the people.
The thinking people of Pakistan need to know that
everything related to the CPEC is not transparent. The people still don’t know
what quagmire they are getting in to. For example, the Wall Street Journal
report emphasised that ‘official figures show that Chinese-backed power
plants were promised annual returns on investment of up to 34 per cent,
guaranteed by Pakistan’s government, in dollars, for 30 years’. 16
No matter how dire is the economic situation of Pakistan,
the Chinese companies will take 34% returns on their investment annually, as
they obtained sovereign guarantees on this. It must be pointed out that instalments
on various kinds of loans obtained from various sources are additional to this.
There is old saying, if pigeon closes his eyes, it doesn’t
mean cat cannot see the pigeon. After Pakistan was officially put back on the ‘grey
list’ in June 2018, the Pakistani establishment has been working overtime to
ensure that Muslim League N, party of Nawaz Sharif, who dared to challenge the
might of the powerful army, and even started a treason case against their
former army Chief, must not win in the July General elections.
They have, once again, proved beyond any doubt that they
have the ability and skills to defeat all civilian leaders; and get their
favourite boy in the Prime Minister’s House. Now that they have successfully accomplished
that task, they need to concentrate on other urgent issues. Among them is
economy and demands of the international community in the form of FATF charter
of demand.
Representatives of the Financial Action Task Force, which
put Pakistan on the ‘grey list’ are reaching Islamabad on 13 August to assess
what progress has been made since June. I am sure they won’t be interested in
knowing how rigging in the elections were planned and implemented. They would
like to see what positive steps Pakistan has taken since their last meeting in
June
During their stay
in Islamabad between 13 - 16 August, the FATF delegation
will assess and analyse steps taken by Islamabad to execute the action plan it
issued to Pakistan. The delegation includes members of Asia Pacific Group on
Money Laundering, and ‘purpose of the visit is to have a detailed review of
a report submitted to the global watchdog by Islamabad’. 17
It
is expected that senior officials of National Counter Terrorism Authority, and
other relevant departments will brief the visiting delegation about what steps
Pakistan has taken since June. Pakistan has to satisfy them that the government
of Pakistan has no role in money laundering and does not support any terrorist
group.
Good luck Pakistan, but please don’t give away any of the
territory to China that is legally not part of Pakistan.
Writer is a renowned writer and author of many books. He is also a
senior leader of UKPNP and Chairman South Asia Watch, London.
Reference:
1. Belt
and Road Initiative Debts Reduce Pakistan to China’s Client State, Monika
Chansoria. http://japan-forward.com/belt-and-road-initiative-debts-reduce-pakistan-to-chinas-client-state/
2. Ibid
3.
Economic
Times, June 12, 2017.
4.
Ibid
5.
Ibid
9. Ibid
10. https://www.khaleejtimes.com/business/economy/imf-bailout-for-pakistan-shouldnt-aid-china-pompeo
12.
Ibid
13.
https://www.business-standard.com/article/news-ani/is-pakistan-on-back-foot-after-china-s-debt-trap-diplomacy-118072601155_1.html
15.
Ibid
16.
Ibid
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