Friendship needs economic boost

The Chinese premier Li Keqiang is in town and Islamabad is buzzing with excitement. After all Pakistan is Chinas iron brother, whereas, China is Pakistans all weather friend. But bilateral economic relationship has yet to blossom.
Take for instance, the case of foreign direct investments (FDI). Total FDI inflows in Pakistan between FY02-FY12 stood at $26.1 billion, of which Chinas contribution was $813 million, according to State Bank of Pakistan (SBP).
This is 3 percent of the total - peanuts for a country sitting rich with cash. In fact, if one subtracts the big ticket transaction of China Mobile in FY07, then there is almost nothing to boast about Chinese investments in Pakistan. So much for President Zardaris countless visits to Beijing!
Next, look at the external debt figures. Historical data released by the SBP show that Chinas loans to Pakistan have been significant when compared to total bilateral or non-consortium loans. It has ranged between 40-60 percent of total bilateral or non-consortium loans since 1975.
But as a percentage of total external debt, which includes loans taken from the likes of Paris Club and multilateral agencies, Chinese contribution pales. From 1975-2008, Chinese loans, as a percentage of total external debt, was 1-2 percent; only in 2009 and 2010 it inched up to 4 percent.
In terms of trade, Pakistans trade deficit with China more than doubled between FY04 and FY12. One may argue that having a high trade deficit with a neighbour is not so bad, if it is being offset by a higher trade deficit with a costlier geographically distant trade partner.
But high trade deficit with an all-weather friend should raise some eyebrows and therefore should be thoroughly analysed. It is for the very reason that the Chinese premier took notice of it this week, and told Pakistani media that his country will take measures to address it.
On that note, however, Pakistan also needs to step up its act on the currency swap offered by China in order to mitigate the impact of rising Pak-China trade deficit on exchange rate.
Still, the key question remains: if Chinese contribution to Pakistans FDI, external debt and trade balance is wanting, then what is all this hype of friendship about?
The answer lies in strategic relationship. Aside from Chinas involvement in infrastructural projects such as dams or Karakoram Highway, the Asian dragon has had scores of strategic ties with Pakistani military, from building weapons to selling them. The other strategic factor is its support to Pakistan at the United Nations, especially in matters related to India or Kashmir or both.
These are indeed signs of friendship - though with long-term mutual benefit. If China is helping Pakistan with ports and highways, then it could also benefit from Pakistans north-south trade corridor in the long run.
Chinese involvement with the Pakistani military is also mutually beneficial. Pakistan, being one of the biggest buyers of Chinese military hardware, is a testing ground for its defence technologies. In return, China also gets access (via Pakistan) to defence technologies of the West, the know-how of which is otherwise unavailable to her.
Clearly, there is nothing called true love; not at least in the modern world. And on that account, if Pakistan really wants to attract Chinese investments in the country, it is well advised to start off by at least providing security to the Chinese people.