Future of Neighbourhood

12th October, 2018

The Pakistan At Hundred initiative hosted a panel discussion on the future of Pakistan’s neighborhood on October 12, 2018. The session was moderated by Mr. Ejaz Haider, Journalist and Defense Analyst, and featured a panel consisting of Hina Rabbani Khar, MNA and Ex-Foreign Minister, Lt. General (R) Waheed Arshad, Ex-Chief of General Staff, and Mustafa Hyder Sayed, Executive Director of Pak-China Institute. This panel selection ensured a pluralistic discussion with differing viewpoints on the direction Pakistan’s foreign policy should take.

Miss Hina Rabbani provided a succinct description of the challenges Pakistan is facing- a disrupted political cycle, an economy dependent on IMF, weakening rupee, and a lack of freedom of press, among other concerns. She outlined two main changes required, firstly the state retaking a monopoly on violence. She described this as the basis of a country’s sovereignty and stated that giving any non-state actors of any form this power will have grave consequences for the state. The second change was taking ownership of the country’s geographic location, which is how countries generally develop.

There was a discussion on the role of the military in state politics and the boundaries which must be set. Ejaz Haider expounded on the general sense that the military, while very deft, has never really understood that military strategies lie under the overall umbrella of the national security strategies, for example through the use of non-state actors. While there can be diverging views between the country’s institutions, ultimately the writ of civilian principles has to prevail. To this, Lt. General (R) Waheed Arshad responded that as Pakistan has evolved, so has its army. During Musharraf’s rule, the country operated as a ‘quasi-military’ state. Following that, the military learned a lot of lessons and from 2009 onwards operations have been conducted under the civilian government. Ejaz Haider rebutted this by commenting upon the military’s strategy of using the indirect approach of influencing state decisions while not taking any of the responsibility.

Mr. Ejaz Haider also raised the question of the impact of India’s recent deal with Russia to acquire the S-400 long range air defense missile system on Pak-India relations. This move has created a major threat to Pakistan given India’s ability to knock out our air crafts and ballistic missiles. Given this, it is important to know how to react especially considering that in terms of kinetic acquisitions Pakistan does not have the resources to match this investment. Lt. General (R) Waheed Arshad presented a military viewpoint in asserting that the military takes into account the enemy’s capabilities, not intentions- especially for a country like India, whose economic clout is about ten times ours. However, it is not feasible to enter into an arms race and hence Pakistan should focus on developing negotiations with India.

A topic which was discussed in great detail was the China Pakistan Economic Corridor, and its potential for growth. Mustafa Hyder placed the project in context by talking about the Belt and Road Initiative, which encompasses 70 countries and of which CPEC is the flagship project, and he described it as the most comprehensive economic and diplomatic development agenda of the world. He asserted that it has significantly reduced the energy shortage in Pakistan by bringing in 10,000 megawatts on the national grid, and has also improved road connectivity, citing the example that it is now possible to drive down from Karachi to Gwadar in 8 hours. He explained that in the case of Gwadar, it was initially given to Singapore to develop but there was a long stalemate of a decade or so by the Singapore Port Authority. It was then that China’s BRI came along. Since Gwadar happened to be the converging point of the 21st century maritime silk road, and the silk road economic belt, it hence became the converging point for BRI. The energy investment is done under a build, operate and transfer agreement, through which the ownership will eventually pass on to the Pakistani government which will meanwhile buy the energy produced, albeit at a high initial tariff rate.

The other two panelists voiced some reservations regarding CPEC. Lt. General (R) Waheed Arshad commented on the lack of transparency in the project, especially concerning the export zones and provision of labour, and the heavy reliance on loans. He also stated that the internal security of the country should be put right in order for investment to thrive. Hina Rabbani Khar talked about prioritization through the example that in case of a 40 billion dollars investment, do you, as a state, have the ability to absorb that or will you become an overly leveraged state and not be able to benefit from improved infrastructure because you are now a debt ridden state that is not able to pay its bills. She also raised the issue of affordability in that the high rates at which the increased electricity production is being supplied means that we are not necessarily more competitive in the region. To the assertion of heavy loans, Mustafa Hyder responded that 35 billion dollars out of the initial 46 billion dollars were energy investment- about 13 of those were Early Harvest. These are on BOT operations, meaning 20-25% equity by Chinese companies and the remaining debt financing is also brought by the Chinese. The Chinese bank provides debt to the state-owned companies. The role of the Pakistani government is to buy the electricity produced so there is no loan.
The discussion was concluded by outlining the way forward, which is ideally for Pakistan to first develop a strong internal system and execute its responsibility to the citizens of the country. This should be the main priority especially considering the country’s poor performance on social indicators compared to both the world and our region. China’s model of internal development and growth practiced in the last few decades can be used as an example to work towards. Once the internal structure of the country is strong, Pakistan should then focus on expanding investments through foreign policy in an environment in which they are likely to thrive.