Sense and Sensibility Behind PM Khan’s Trip to Saudi Arabia, China

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IRSHAD SALIM; Oct 25, 2018: Prime Minister Imran Khan aims inclusion of his ‘Naya Pakistan’ grand housing  initiative in the China Pakistan Economic Corridor (CPEC) framework, and build five million affordable homes for the middle and low-income during the next five years,  a task that seems doable to some and impossible to others.

If PM Khan can succeed on this strategy, it could become a game-changer socio-economically for the country and its “left-behind” populace, provided all the T’s are slashed and the I’s are dotted with transparency and in a corruption-free ecosystem.

Related: How Realistic and Practical is Imran Khan’s 5m Houses, 10m Jobs Initiative

For China it’s doable: It already has three things to offer Pakistan under CPEC – China offered a similar idea  to Saudi Arabia a year and a half ago– that is, to undertake a grand housing plan on a fast-track basis to meet the growing housing shortage in the kingdom. The three things China has are: investment and finance, 3-D printing technology well suited to manufacture structures on less than half the time traditional technique would take, and an impressive track-record of delivering projects even in adverse conditions.

During his talks with the Chinese leadership in Beijing next week, Khan said he will also focus on transfer of technology and joint venture partnerships between Chinese and Pakistani private sector enterprises.

That would be an added-plus to the CPEC-centric relationship if the country’s most trusted ally and ‘all-weather friend’ gives a nod starting with the grand housing ‘Marshall Plan’.

The premier’s 3-day visit to China begins on Nov 2 with a heavy agenda though –topping the list is seeking additional loans from the country’s ‘iron brother’ –to offset balance of payment crisis and cushion the country’s depleting forex reserves. China has previously provided loans on quick turnaround basis.

PM Khan hopes to get more loans on longer and comparatively softer terms and conditions than the  international lending institution IMF could and would eventually offer.

Even a partial bailout pledge from China against a total of $18 to $20 billion Pakistan needs over a year would help –it would also strengthen his team’s hands in negotiating a better deal with the IMF come November.

Pakistan needs three types of loans: Immediate, short-term, and a long-term one.

Last week, PM Khan succeeded in getting a $12 billion bailout package from the country’s traditional ally and time-tested supporter Saudi Arabia. The package consists of a short-term $3 billion deposit as loan to stabilize the country’s diminishing forex reserve and a $3 billion yearly revolving line of credit (deferred payment) good for 3 years to purchase oil from the kingdom without the need to make cash outlay for a year.

The package gives more than a breathing space and could ease the situation on immediate basis, but experts say more would be needed in months ahead and until the next year–a package from the IMF and additional loans from friendly countries would do the trick, they said. The premier’s short trip to Malaysia in days ahead could add further traction to his government’s outreach mission.

Not having to put all eggs in the IMF basket is a tactical step PM Khan’s team is said to be taking while following the overall strategy of austerity and debt-reduction through zero tolerance for corruption — a common ground Khan Sahib will find with China’s President Xi Jinping when the two meet.

Both leaders share the ambition and zeal to develop a corruption-free governance and society in their country — PM Khan has earlier said he looks forward to learning from China how they are developing good governance and succeeding in their anti-corruption (Xi’s signature) campaign. It would be a learning curve for the first-time cricketer-turned premier.

The premier’s first official visit to Beijing will extend for three days –until the 5th — the Chinese envoy calls his visit historical and says his government looks forward to partnering with the new government’s ‘Naya Pakistan’ vision.

Khan Sahib will hold meetings with the Chinese President and Premier Li Keqiang besides reviewing the CPEC framework through his ‘Naya Pakistan’ lens for re-calibration without rocking the applecart.

“We are looking forward to going to China next week and hope to strengthen our trade and business ties…we look forward to CPEC becoming a base to build our future relationship,” he said, while speaking at a ceremony in capital Islamabad to mark the first joint venture partnership between Chinese and Pakistani private sector under ‘Make in Pakistan’ banner.

The premier also said he’s alooking forward to securing transfer of technology under CPEC, and investments from China’s private sector with local joint venture partnerships in Special Economic Zones (SEZs) –two subjects of Pakistan’s interest that were somewhat on the backburner under CPEC’s first phase during the previous government’s tenure (2013-2018).

Ease of doing business in Pakistan is his government’s top priority policy initiative, PM Khan said, adding that it is most crucial as it would lead to enabling foreign direct investments (FDI) from international investors also, which would then spur employment for the youth –Pakistan has a youth bulge he said, which must be facilitated — more than 57 percent of the country’s population is below the age of 25 and unemployment hovers in double digit figures.

PM Khan said Pakistan has a young population who are in search for jobs. “With investment, unemployment will come down.”

“Ultimately, we’ll attract those countrymen who opt for going overseas for employment and encourage them to come back and seek employment or invest in the country,” he added.

Speaking on the sidelines of the Thursday event, Finance Minister Asad Umar clarified that there was no direct Saudi involvement in the CPEC, which he emphasized, remains a bilateral venture between China and Pakistan.

“One month ago when the Chinese finance minister came to Pakistan, we spoke to him about CPEC projects,” he said. “The entire CPEC program is a bilateral project. Underneath the CPEC, there are many more plans, in which we had discussed whether we can invite a third country to invest — to which China agreed.”

Clarifying on the financial package agreed with Saudi Arabia, the minister said $3 billion will be placed with the State Bank of Pakistan (SBP). In addition, he said, the facility of buying oil from Saudi Arabia worth $3 billion on one year deferred payment cycle has been agreed. He said this facility is for three years and would translate into $9 billion line of credit in total –Saudi oil on deferred payment was not made available to Pakistan during the last two governments .

He said the government was exploring various avenues for its financing needs and the IMF is one of these. But the Saudi package and possibly another one from China matters.

Asad Umar dismissed critics’ concerns that Pakistan may have had to agree to meet some Saudi demands in return for securing a bailout package. “The Saudis did not make any demands that we refused to meet,” he said. “They made no demands. And this is the Pak-Saudi relation; it’s a people-to-people connection. They will stand by Pakistan’s side during our time of need.” So does China.

For the two all-weather friends’ of Pakistan, friendship and sense precede dollars and cents –other things (such as geopolitics) being equal.

(The writer is a business & construction consultant, analyst, and Editor-in-Chief of PKonweb, DesPardes and BE2C2 Report)

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