Pakistan’s economic crises continue unabated and in this midst it is important to question the believe some years ago that Pakistan’s friendship with Iron Brother China would be a panacea and solve all Pakistan’s problems.
However, as columnist, author, and nuclear physicist Dr Pervez Hoodbhoy recently wrote “China is probably guilty of short-selling us — most IPP deals are considered a scam. So are tax exemptions to Chinese companies. Duty-free imports from China have driven many local manufacturers to bankruptcy. But it was our trumpet blowers who sold to us the nonsense of CPEC as a Marshall Plan for Pakistan. Europe was ruined by war, but Pakistan fell on its knees because of its own doing.”
Hoodbhoy writes that there was a mistaken belief that CPEC would be a game changer and that “New industries will sprout, existing ones will hum away, exports will shoot through the roof, Gwadar will become the next Dubai, all debts will be paid off, jobs will be galore, and the sun shall shine forever.” Those dreams “lie punctured as Pakistan gallops towards debt default. CPEC started in 2013, with $62 billion spent to date. But now debt-ridden Pakistan is casting around for loans to pay older loans.”
As per IMF data, China holds roughly $30bn of Pakistan’s $126bn total external foreign debt — that is thrice its IMF debt ($7.8bn) and exceeds its borrowings from the World Bank and Asian Development Bank combined. But why isn’t Iron Brother China simply waiving these loans of dear brother Pakistan. As Hoodbhoy points out, “these are naïve hopes. Chinese capitalism — like any other capitalism — is about profit, not philanthropy. In Marketing-101, a budding businessman learns how to sell water to a drowning man. Banking-101 tells you how to identify desperate debtors. Law-101 is about dealing with defaulters. Chinese companies, state or private, are like other companies. Being under their government’s instructions to view Pakistan as a strategic ally, they understand Gwadar gives entry to the warm waters of the Persian Gulf — those which allegedly attracted USSR into invading Afghanistan. But they tread cautiously; Pakistan is not the world’s best place to park your capital.
CPEC, Hoodbhoy argues “was built around a fatally flawed premise. It presumed that infrastructure — roads, bridges and electricity — alone will create growth and jobs. This is like assuming abundant water, soil, and fertiliser will yield a rich harvest. But the crucial input is seed — human capital. And here’s where things went awry. Pakistan certainly has people as bright and talented as anywhere. But because of an education system gone berserk, it offers only low-grade human capital to industry. Because indoctrination was promoted over knowledge and skills, we are stuck with an ocean of unemployable youth. Sending 30,000 Pakistani students to China for higher studies has failed to generate human capital. From former students who have returned with a degree in hand, I hear shocking stories. Most Pakistani students in China opt to game the system and cut corners, not learn or achieve. In engineering and hard sciences, few are properly equipped for any but the shoddiest of Chinese universities. Of course, there are always honourable exceptions.”
Hoodbhoy cautions that while anxiety and anger are growing the country needs to ensure it does not repeat another folly.