The welcome accorded to Prime Minister Imran Khan during his visit to China has been unprecedented in terms of giving him exposure to the Chinese media and key institutions particularly in arranging his address to the prestigious Central Party School, under the jurisdiction of the Central Committee of the Communist Party of China, whose day-to-day affairs are run by an executive vice president regarded as having the same rank as a cabinet minister. For foreign heads of government to be allowed to address the students of the party school where past (as well as future) Chinese leaders are trained is a rare event and hence the honour accorded to Prime Minister Khan cannot be understated.
President Xi Jinping, while addressing the opening ceremony of China International Import Expo (CIIE), reiterated his stance to promote globalization and fight protectionism, the latter increasingly associated with US President Donald Trump’s decision to launch trade wars with countries the US has a trade deficit with, while ignoring the comparative cost advantage of one country over another that benefits consumers of both partners. President Xi committed to China cutting import taxes further and to open Chinese economy to the world – a long-standing demand of the US, Europe and Japan.
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President Xi also stated at the opening ceremony of the CIIE that: “the economic and social well-being of countries in the world is increasingly interconnected. The reform of the global governance system and the international order is picking up speed.” Imran Khan, picking up this refrain, highlighted the gains for not only China and Pakistan but also the rest of the world in engaging in the China Pakistan Economic Corridor (CPEC), a major component of President Xi’s One Belt One Road (OBOR) initiative. In other words, CPEC’s success was seen as success in promoting globalization and fighting protectionism. In addition, Prime Minister Khan during his address at various fora in China also referred to corruption being a major deterrent to development in the country and referred to his administration’s focus on reforms targeting corruption as well as improving governance – the latter being a major source of almost perennial concern during previous administrations.
The importance of CPEC and improving governance through targeting corruption has resonated in nearly all speeches made by Prime Minister Khan in China. However one critical theme that has so far been ignored by the Khan administration, not only during the visit to China but also within the country during its two months in power, and repeatedly highlighted by Business Recorder, has been its failure to present a set of detailed plans for reforms in all sectors of the economy and a blueprint on how to resolve the twin deficits – budget deficit and the current account deficit. While the Saudi government has agreed to extend 6 billion dollars – 3 billion dollars as balance of payment support to be returned by the end of a year and up to three billion dollars in deferred oil facility for three years, yet China with its exposure to multilateral financial institutions was unlikely to extend any assistance without first evaluating the government’s detailed plans. And therefore it is not surprising that while the Chinese leadership has indicated that it would assist Pakistan to meet its compelling foreign exchange requirements, that are estimated at around 12 billion dollars yet it would do so after further deliberations. Hence the setting up of joint working groups as well as CPEC Joint Cooperation Committee to explore new areas of cooperation can be seen as a step towards China providing guidance on what is doable or not.
Imran Khan must acknowledge that so far his administration has been successful in generating bilateral assistance, which he had vociferously opposed while in opposition, which maybe partly attributed to external events, including the murder of Saudi journalist Khashoggi in Istanbul, and US Secretary of State Pompeo’s warning to Pakistan that the US would oppose any bailout package by the International Monetary Fund (IMF) that would be used to pay off loans to China. However, the onus of formulating a viable reform plan rests with the government and it needs to come up with out-of-the-box measures able to put the economy on track. It is unfortunate that to-date the supplementary budget as well as measures such as raising utility rates and reducing subsidies do not provide any comfort level that the country has embarked on a plan to achieve development. While task forces have been established yet details need to be provided for the markets to react positively to the Khan administration’s policies. The country as well as Pakistan’s closest all-weather friend China awaits the unveiling of these detailed plans.
(This news/article originally appeared in Business Recorder on November 6th, 2018)