Regional developments during the last few weeks are sowing the seeds of new ties. The world's second and third largest economies, which are also political arch rivals, are strengthening their presence in South Asia. Japanese PM along with two dozen businessmen was on his maiden visit to Bangladesh followed by a short visit to Sri Lanka.
The Indian premier was on a five days visit to Japan earlier this month where his counterpart greeted him with a promise of $33 billion investment to build India. A week later, Modi was busy hosting Chinese President in India who has signed numerous MoUs ranging from cultural to economic ties! They are opening up new routes for Indian Pilgrimage, talks of strengthening cooperation in railways and commerce ministries were signing five years trade and economic development plans.
The overall Chinese package for India is close to $100 billion. Trade ties between the two countries have already blossomed despite tensions on borders-the bilateral trade is around $70 billion while it was less than a billion dollar thirty years ago.
Indian PM is playing his cards right and has done his homework before coming into power. At one end he is extending arms to Japan, on the other he is holding hands with China while the Chinese leadership has to take India more seriously as it has to counter significant presence of Japan in the region as well. Earlier this month, Xi Jinping also visited Maldives and Sri Lanka where he has shown interest in maritime silk route and Chinese deep sea connection with Sri Lanka that connects South East Asia with the rest of the world.
Meanwhile, Pakistan has missed the boat, again. Visits of Chinese and Sri Lankan presidents were due in the last month but were postponed. The apparent reason to foreign delegation is the political chaos in Islamabad where protesters are on roads for six weeks. The delay of Chinese Presidents visit to Pakistan is certainly a downer. The question is whether the protests are the sole reason for Xi not making his maiden trip to the country or there is something more to it.
His visit to Pakistan was planned ahead of India and that could have sent a signal of better relationship of China with Pakistan. Now Xi's successful trip to India has renewed the bilateral relationship of two economic giants.
In the last decade, India courted the West (North America, Western Europe and Australia: the global north) and became the back office of the world in services sector such as IT BPO, banking, medicine, tax and accounting operations. India got both those economic and security dividends (civil nuclear deal with the US, arms deals with the US and France, etc.)
During this period, Pakistan missed out due to its singular focus on security issues at home and abroad. There were expectations of military assistance from the US (CSF, monetary aid, equipment, etc.) more often than lobbying or asking for trade agreements, economic assistance or reforms advisory.
Now with US and NATO exiting from Afghanistan, Western interest in Pakistan is diminishing. The deferment of Chinese President visit is a setback, if not a debacle, for the Pakistani government that has seemingly put all its eggs in the Chinese basket to plug gaping holes in the country's energy and infrastructure sectors. China is Pakistan's biggest trade partner with an annual bilateral trade of around $15 billion.
President Xi's now-delayed visit had garnered high hopes in Pakistan. His engagements were supposed to be focused on bilateral investment opportunities. Already, China has reportedly pledged to invest $32 billion in Pakistan in energy ($20bn) and infrastructure projects ($12bn) in the coming 5-7 years. President Xi was also to inaugurate a portion of the Lahore-Karachi motorway, besides a couple of mega power projects that are being implemented by the Chinese companies.
There is an array of imported coal-based power projects in Punjab which are directly or indirectly linked with China. Chinese firms either own the projects or are operating the Pakistan government owned plants or Chinese banks are financing local groups projects. All of them are a bit delayed. The confidence of the local entrepreneurs rather shaky and business community is hoping for economic normalcy to regain soon.
The political clash amongst Pakistani leaders is doing no good for shaping up regional ties. The leadership both from the government and opposition attempted to politicize the Chinese delegation visiting Pakistan and that has further dampened the confidence, as the PTI perhaps does not perceive Chinese investment as a savior to Pakistan, while PMLN is passing the buck of investment to private sector. The Chinese are observing the situation and are probably waiting for the dust to settle before materializing mega projects.
There is already reluctance on part of Chinese investors to comply with Pakistan's public procurement rules. President Zardari tried to accommodate those concerns but he could not succeed in bypassing the rules. It is not clear whether or not the Sharif government has smoothened things out on that front, along with the issue of limited state capacity to execute massive projects.
It is clear that the Chinese investors cannot be bypassed from all the rules. But a middle ground can surely be found. If the Chinese are going the extra mile, perhaps their counterparts can also reciprocate through some legally-sound amendments in the pre-qualification and bidding processes.
Nonetheless, it seems that the Chinese have decided to swim deeper into Pakistani waters rather than their recent, occasional toe-dipping practices. It seems that the Chineses strategic and economic interests are finally converging-in and for Pakistan.
Pakistan's sea ports entice China. Gwadar's deep-sea port opens up Chinese access to the Strait of Hormuz, which connects the Persian Gulf and the Arabian Sea and is a major oil transport channel. Besides, the distance of Western China from Gwadar or Karachi ports is apparently shorter than from seaports in Eastern China.
It also makes more economic sense for China to use the shorter route for the mineral resources being imported from African countries. Such logistics, and the strategic connotations they imply, have apparently convinced China into developing port infrastructure in Pakistan and constructing highways along the Silk Route to facilitate goods transportation.
Pakistan is set to gain a lot. The economic vibrancy of its northwestern region was historically due to it being used as trade corridor. With China entering the fray in a big way, the corridor can be revived in coming years. However, of immediate importance for Pakistan are energy-sector projects, inter-city highways and railways, and intra-city metro bus/rail systems, which are to be built with Chinese investment.
There's a lesson for Pakistan: look inwards and constructively engage with your neighbours. By postponing his visit, President Xi may be advising Pakistanis the same.
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