China getting the edge over US in Pakistan
karachi — China is overtaking the US as the largest direct foreign investor to Pakistan, with the South Asian nation increasingly favouring its neighbour’s “One Belt, One Road” trade route that’s funneling in billions of dollars and revamping decrepit infrastructure.
With relations frayed between the US and Pakistan, China has been strengthening its ties to the nation of about 200 million people after it pledged two years ago to loan and finance about $55 billion in a so-called China-Pakistan Economic Corridor. US direct investment in Pakistan stood at $505 million from July 2013 through January this year, compared with $1.82 billion that came from neighbouring China, according to central bank data.
“As the US looks inward, China is reaching out,” said Bilal Khan, a senior economist at Standard Chartered in Karachi. “Against this backdrop, the US could steadily lose its share in FDI to Pakistan as China’s rises.”
It’s part of Pakistan Prime Minister Nawaz Sharif’s plan to boost economic growth to the highest in about a decade. For the Chinese, the Silk Road plan aims to revive trade across Central Asia and into Europe via a network of railways, ports and highways.
Beijing is also increasing its corporate footprint in Pakistan, with a record 77 Chinese companies registered in the South Asian nation during the last three years, according to the Securities and Exchange Commission in Islamabad.
Even the cash coming in from the US isn’t fresh and is usually reinvestments from companies already based in Pakistan, such as tobacco company Philip Morris International’s $105 million injection of funds to improve manufacturing facilities and install new machinery last year.
This is despite large multinational firms, such as Proctor & Gamble and General Electric, having a foothold in the country — the latter in January supplied seven locomotives to Pakistan Railways as part of a $400 million 10-year deal for the eventual purchase of 55 train units.
“We are not on their radar,” M. Abdul Aleem, CEO of the Karachibased Overseas Chamber of Commerce and Industry, which represents 195 foreign firms, including 31 from the US, said of American investors. “They tend to stay away when it comes to Pakistan.” The China-Pakistan Economic Corridor (CPEC) lies “right at the crossroad” of two major networks China is building, said Chen Fengying, an expert on global economy with the China Institute of Contemporary International Relations.
Bilateral investment has grown rapidly also because the two countries have built up trust over the years, she said. “Pakistan is the only country being called as an ‘allweather strategic partner’ by the Chinese government, signaling a sense of unwavering support under all conditions.”
China’s government plans to hold a summit, called the Belt and Road Forum for International Cooperation, in Beijing in May involving about 20 heads of state.
Meanwhile, political analysts say there is more than simple economics to the recent slowdown in US investment in Pakistan. Shaista Tabassum, chairwoman of the international relations department at the University of Karachi, said the two countries are moving further apart.
“It is moving slowly down,” Tabassum said about the two nations’ relations. “The CPEC has many economic benefits coming, which Pakistan expected the United States should have given to it.”
There are also concerns US President Donald Trump may cut economic and military funding to Pakistan, which is the sixth-largest recipient of American aid. — Bloomberg