Old State, New Client
Irony died a million deaths on July 28 when Pervez Musharraf congratulated the Pakistan Supreme Court for getting rid of Nawaz Sharif. Musharraf himself is in exile and would have been in jail — after he conducted the last public coup against Sharif in 1999, banishing the latter into the safe arms of the Saudi royalty — if former army chief Ashfaq Kayani hadn’t given him safe passage.
Sharif distinguished himself by being tossed out of government all three times in his career. And, coming on the eve of its Independence Day, a more depressing fact for Pakistan can be recalled: no government has ever finished a five-year term.
There will be elections in 2018. But nobody, not even in Pakistan, is holding their breath for a rebirth of powerful civilian rule. The army, or an activist judiciary, can overthrow elected governments with impunity, and with terms like ‘ameen’ (honest) and ‘sadiq’ (righteous) tossed around, who has a chance? Not Imran Khan. Perhaps not even Shahbaz Sharif.
It’s an indication of the relative space Pakistan has in our lives that neither India nor US lost sleep over what happened last week. But China’s growing alarm came through. In an unusual statement, Beijing asked Pakistan to concentrate on its economy.
India does not have a Pakistan policy that has any informed strategy driving it. Now our approach to Pakistan is centred on counterterrorism. Think surgical strikes and the terrorist-flushing operations currently underway in Jammu and Kashmir. Tomorrow, it might be something else.
The Trump administration, too, is working out its Pakistan policy, whi- ch, from all accounts, may be less indulgent than before. But we will only know if we are woken up by a tweet.
Pakistan’s US cushion is getting harder and more lumpy. That leaves Rawalpindi with one comfort zone: China. Its potentially massive investment in the China-Pakistan Economic Corridor (CPEC), a flagship project for Xi Jinping’s One Belt, One Road (Obor) initiative, is a lifeline for both countries.
Sharif ’s ouster may have put a shadow on some CPEC projects. But by and large, the Pakistani security establishment will strive to insulate the CPEC’s promise from political and economic instability — ‘promise’ here being the operative word.
In the second half of 2016, Pakistan’s exports to China fell by almost 8%, while imports jumped by close to 30%, making the CPEC more about China and less about Pakistan, a fact that has kept Pakistan’s private sector from investing meaningfully into it. But the Pakistani army controls its future and its narrative, and economic growth for it means China and the CPEC.
But Pakistan’s economic numbers continue to remain grim. Government debt is 66.5% of GDP in 2016; external debt is high at $75 billion; forex reserves are down to $21 billion. The International Monetary Fund looms large again because Pakistan has not completed any of the promised tax reforms.
China will, therefore, have a greater involvement in Pakistan’s affairs and its destiny, particularly if Pakistan is headed south. This could mean a number of things: Pakistan’s agriculture sector will produce for China’s Xinjiang region, but with lower economic demand, and returns from the huge investment in the power sector will remain low.
China has brushed aside security concerns and the Pakistani army will do its damnedest to protect the CPEC. So, that’s less of a problem right now.
Pakistan’s dependence on China will increase exponentially, which will also entail more debt to Chinese banks at usurious rates. Just look at Sri Lanka.
At some point, China will have a greater say in Pakistan’s foreign affairs, particularly with regard to India, Afghanistan, terrorism, etc. China would probably be happier if Pakistan divests itself of its terror shield, but would not mind India coming under Pakistani terror pressure. That will only perpetuate Pakistan’s essential dilemma of keeping the terror factory going against India and Afghanistan, but hoping to insulate itself from it.
India will have less room to manoeuvre if China becomes an integral factor in Pakistan’s policy. Should India open channels of communication with the Pakistani army when New Delhi is ready to open dialogue? It’s tempting. And perhaps the most pragmatic way to go. China, the US, all go that way.
Would it seem as if we are abandoning the civilian democracy project in Pakistan? It may be a good thing to do. Pakistan could end up as a version of China’s North Korea exercise in South Asia, kind of like screen villain Ajit’s ‘liquid oxygen’ punishment: its nuclear weapons would keep it ‘alive’, but its economy would not let it ‘live’, and the Inter-Services Intelligence (ISI)terror establishment would be a permanent cause of worry for India. And China would retain just enough control to make it worth its while. China has one of the most active digital-investment and startup ecosystems in the world.… China is in the top three in the world for venture-capital investment in key types of digital technology, including virtual reality, autonomous vehicles, 3D printing, robotics, drones and artificial intelligence.
China is the world’s largest ecommerce market, accounting for more than 40% of the value of worldwide e-commerce transactions, up from less than1% about a decade ago. China has also become a major global force in mobile payments with 11 times the transaction value of the US. One in three of the world’s 262 unicorns (startups valued at over $1 billion) is Chinese,commanding43%of theglobal value of these companies.
The sheer scale of China’s internet user-base encourages continuous experimentation and enables digital players to achieve economies of scale quickly. In 2016, China had 731million internet users, more than the European Union and the US combined. Beyond scale, it is the enthusiasm for digital tools among China’s consumers that will support growth, facilitate rapid adoption of innovation, and make Chinese digital players and their business models competitive.
Nearly one in five internet users in China relies on mobile only, compared with just 5% in the US.… China runs a trade deficit in services but a trade surplus in digital services. The country’s outbound venture capital totalled $38 billion between 2014 and 2016.
From “China’s Digital Economy: A Leading Global Force”
Let Beijing dunk us in liquid nitrogen