China Pakistan Economic Corridor Review and Analysis

BIPP 10th Annual Report 2017 The State of the Economy China Pakistan Economic Corridor Review and Analysis The Shahid Javed Burki Institute of Public Policy at NetSol 15 Copyright © by The Shahid Javed Burki Institute of Public Policy at NetSol No Part of this book may be published without permission Published by The Shahid Javed Burki Institute of Public Policy at NetSol i The Shahid Javed Burki Institute of Public Policy at NetSol non-governmental sectors who are committed to improving public policy development and imple- The Institute aims at synergizing the research, edu- mentation in Pakistan. The members are: cation, and think tank functions to become a knowl- edge hub and Centre of Excellence in Public Policy. • Mr. Shahid Javed Burki Chairman BIPP’s mission is to improve welfare of the citi- • Mr. Shahid Najam Vice-Chairman zenry with particular emphasis on identifying pol- • Dr. Parvez Hasan Director icy measures that will lead to inclusive growth, so- • Ms. Nasreen Kasuri Director cio-economic stability, and sustainable development besides fully harnessing the potential for regional • Mr. Shahid Hafiz Kardar Director and global integration. BIPP’s areas of interest are • Mr. Salim Ghauri Director social, economic, environmental and political devel- • Mr. Khalid Sherdil Director opment, trade and foreign policy. • Dr. Iftekhar Ahmed Chowdhury Director BIPP’s Board of Directors comprises eminent economists, experts, members of academia and de- Dr. Mahmood Ahmad and Mr. Asim Imdad are the velopment practitioners from private, public, and Advisers of the Institute. ii Foreword Reading Pakistan’s History from Different Angles Before sitting down to write the Foreword for this kistan has the youngest population. The median age year’s annual report published by the Shahid Javed is only 25 years that means that some 104 million Burki Institute of Public Policy at NetSol (BIPP), I people are below that age. In the megacities of Ka- reread what I had said in some of the earlier reports. rachi and Lahore, the population is even younger; One thing that sprang out of these writings was a perhaps 75 percent of their population is under the sense of optimism about the country’s future. Given age of 25. Given proper education and training the all the negative stuff that has been noted about Paki- youth can help transform the Pakistani economy, in- stan, especially in the foreign press, it is legitimate creasing the presence of the modern service sectors. to ask whether this point of view is justified. I am To this list, we can now add another — Pakistan’s asked this question when I speak about Pakistan in location. It is because of this that China has devel- front of foreign audiences. I answer by saying that oped a deep interest in Pakistan that has led to the my training was in development economics, a disci- formulation and implementation of the China Paki- pline I followed in my professional life. Pessimism stan Economic Corridor, CPEC. In writing this re- and development work don’t sit well together. port we have looked at the large Chinese program, But that is not the only reason why we at the In- the Road and Belt Initiative, RBI, of which CPEC stitute are positive about the country’s future. It has is an important component. The RBI is a part of the several attractive attributes that often go unnoticed new development paradigm Beijing has adopted to by those who observe it as well as those who are en- deal with its own changed circumstances as well as gaged in the making of public policy. It is these two those that have occurred in the world in which it audiences that we have sought to reach at the BIPP. must operate. The list of positives is fairly long. It includes Paki- China has outgrown what the World Bank once stan’s impressive but still not fully used agricultural described as the East Asian miracle economies mod- endowment. That was the subject of the 2016 BIPP el.2 According to it, the state guided the enterprises, report.1 Traditional skills in metallurgy and ma- private as well as public, to produce cheap manu- chine-making also remain to be fully harnessed. The factures for consumption in the expanding western area bounded by Lahore, Sialkot, Gujranwala and markets. China no longer has low-wageworkers and Gujrat could become a significant contributor to the the western markets are not growing as they were in development of value chains that are becoming cen- the last quarter of the previous century. China is now tral to the rapidly changing international production interested in building supply chains for its technol- system. Of the world’s more populous countries, Pa- ogy-rich products, shift production to the relatively iv empty lands in its western part, use land routes to partition. They provided Muhammad Ali Jinnah the trade these products and bring in imports needed by mass support that was not available from the Muslim those who would move to the west. Pakistan could majority provinces of Northwest India. Moreover, fit very well into this scheme as a player in this new when Pakistan came into being, political power world. But to move into this world, Pakistan must passed into the hands of the leadership groups resi- understand where it is today, from where it has come dent in the western part of the country. This was not and where it needs to go. To answer these questions acceptable to the Bengali political elite. This lack of we need to bring into the discourse a number of oth- political equilibrium resulted in Bengal’s third parti- er disciplines in addition to economics, politics, so- tion, the creation of Bangladesh in 1971. ciology and anthropology. We could also make use I followed this work with a book that appeared in of fiction to develop a better understanding of what the United States under the title of Pakistan: A Na- is happening in the country. tion in the Making.4 In this book, published in 1986, I have studied Pakistan for almost four decades. I maintained that while Jinnah had succeeded in cre- My first book, Pakistan Under Bhutto, was pub- ating a Muslim state in what was once British In- lished by London’s Macmillan.3 The book was mis dia, he did not manage to create a Pakistani nation. titled. It was less about Zulfikar Ali Bhutto, Paki- That was still very much a work in progress. The stan’s first elected prime minister, and more about absence of political cohesion and uneven economic the political economy of the Pakistan Movement. and social progress has kept the country seriously I argued that there was a paradox concerning what divided. Even though Pakistan is making greater po- came out of that movement. The western part of the litical progress than any other Muslim country in the country it created was in an area that did not partic- world, much work remains to be done. As I write ularly want the division of British India on religious this on February 23, 2018, the Supreme Court has grounds. The Muslim population of the province of issued its judgment according to which the consti- Punjab was comfortable with the arrangement it had tution cannot be superseded by an act of parliament. reached with the non-Muslims as well as with the This was done when Mian Nawaz Sharif, having British administration. The Muslim citizenry of what been barred from membership of the National As- was then called the North-Western Province wanted sembly under the provisions of Articles 62 and 63 of to get liberated from the stranglehold of tribal lead- the Constitution, was elected to the chairmanship of ers. This, they thought, would be possible within the the Pakistan Muslim League aftersuch a move was context of what Mahatma Gandhi preached in terms enabled by an act of parliament. This move was not of social change. They too were luke-warm about permissible under the Constitution. The basic doc- the idea of Pakistan. ument can be amended but not overruled by an act However, the Muslim population of Bengal was of parliament. This decision further advances Paki- extremely enthusiastic about partitioning India. The stan’s political progress. Bengali Muslims had campaigned for it in the early At this time, I am engaged in compiling a book part of the twentieth century and won the partition of essays to celebrate Pakistan’s 70th birthday. The of their province on religious grounds but saw its scholars who have contributed to this volume have annulment in 1911 when the British succumbed to looked at Pakistan’s turbulent history from several the pressure mounted by the Hindu-dominated Indi- different perspectives. They have analyzed the many an National Congress and reunited Bengal. For them problems the country has faced but have separate- the creation of Pakistan was to be Bengal’s second ly come to the conclusion that a better future lies v ahead. The country has shown remarkable amount ed, and in Hamid’s case, shortlisted for this year’s of resilience and has learnt a great deal from the Man Booker Prize, any roll-call of storytellers must past. include Nadeem Aslam and Muhammad Hanif to I have gone into this brief recounting of history to name but a few.”6 Most of these writers of fictions make what I believe is an important point. It is hard have used political turmoil and extremism as the to plan a country’s future without understanding its background for their work. At some stage we in the past.

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