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Examining the Belt and Road Initiative in Pakistan

The Belt and Road Initiative
Approximately 26.5 million out of 221.8 million Pakistani citizens live below the national poverty line, determined based on one’s ability to afford to consume 2,350 calories a day. Indigence is particularly widespread in rural areas, which houses almost two-thirds of the national population. Due to persistent fiscal deficits, Pakistan has failed to implement appropriate anti-poverty and welfare measures. Currently, Pakistan lacks an umbrella social protection institution, while state loan schemes exclude many rural inhabitants, whose economic activity is largely informal and temporary. However, the Belt and Road Initiative may provide support to Pakistan’s poor.

The Situation

Farming and animal husbandry remains indispensable to the country’s agrarian regions. However, while almost 40% of Pakistan’s labor force relies on other sources of income, rural development may not occur without industrialization and infrastructural advancements, which is essential to connect the locals with the neighboring urban areas. Luckily, the Belt and Road Initiative, launched in 2013 by the Chinese and the Pakistani authorities, has endeavored to facilitate these positive changes. The BRI or the China-Pakistan Economic Corridor is the collective name for a plethora of Sino-Pakistani projects that primarily concentrate on infrastructure and energy, with an estimated budget of more than $62 billion.

Although the BRI is not the only major investment scheme operating in Pakistan, with the Asian Development Bank similarly funding road construction and having spent circa $14 billion on developing the country’s energy sector and rural communities, the former’s scale is unprecedented. Whether one could say the same about its impact on the Pakistani poor is equally important to establish, and now that the Belt and Road Initiative’s initial projects have come to fruition, it is possible to discern that.

Energy Sector Benefits

Within the first seven years of its existence, the Belt and Road Initiative resulted in the completion of 24 energy projects, which are worth $25.5 billion altogether. These include the erection of non-renewable power plants, namely coal stations in the Pakistani towns of Port Qasim and Sahiwal, as well as of solar and wind facilities. Thanks to this, where Pakistan’s annual GDP growth has been traditionally undermined by at least 2% owing to energy shortages, and where only half of the rural population had permanent access to electricity in 2018, the projects successfully replenished its national grid with 3,240 MW.

This was an 11% increase in its overall power capacity, and it helped stabilize the electricity supply to the indefeasible benefit of rural communities due to its diversification of the national energy resources. Furthermore, rural communities are expected to benefit from the construction of natural gas pipelines from Iran to the Pakistani provinces of Baluchistan and Sindh, whose rural poverty rates remain the highest in the country.

Infrastructure Benefits

Besides helping Pakistan attain energy self-sufficiency, the Belt and Road Initiative has invested $12 billion in constructing new roads and modernizing the local railway system. For example, Pakistan is currently building a 680-mile-long motorway linking its two major economic powerhouses, Karachi and Lahore. Moreover, the equally ambitious Karakorum Highway is connecting those cities to other Pakistani towns.

With faster, higher-quality roads accelerating cargo movement across Pakistan, the government determines farmers will face fewer hardships when transporting their produce to urban markets and city-based purveyors of important amenities will be able to improve their presence in rural areas. Additionally, the former will increase earnings, whereas the latter might encourage competition and bring down prices for basic goods, thereby making them more accessible to the rural public.

Other Economic Benefits

In 2019, China gave Pakistan $1 billion to cover the costs of 27 projects in education, agriculture and poverty alleviation. Most of these projects are concentrated in Southern Punjab and Baluchistan, which scored few points on the Human Development Index and correspondingly have many impoverished villages.

Analyzing the Belt and Road Initiative

Although Sino-Pakistani cooperation under the BRI has created more than 70,000 jobs in Pakistan and the World Bank believes that it could lift as many as 1.1 million Pakistanis out of poverty, it constitutes no silver bullet to the problem of domestic rural poverty.

On many occasions, the dire state of the country’s economy stifled project implementation, which suffered yet another balance of payments crisis in 2018, as well as by government bureaucracy. Thus, the construction of a power plant in Gwadar, a Pakistani port located in the province of Baluchistan and leased to Chinese companies, experienced a three-year delay, awaiting local government authorization.

Some have also questioned the Belt and Road Initiative’s socioeconomic inclusivity. According to the Sino-Pakistani agreement concerning the lease of Gwadar, the Pakistani economy will only receive 9% of the port’s revenues. An even smaller proportion of these funds will go to poverty alleviation programs. Moreover, the nation’s skilled wages have not registered significant growth, which suggests that many professionals still receive meager pay and struggle to cover their daily expenses.

The Belt and Road Initiative in Pakistan is hardly a finished enterprise. Although the majority of the so-called “early harvest” projects have reached fruition, many more are undergoing planning and construction. For this reason, we cannot conclude our evaluation of the BRI’s contribution to fighting rural poverty in Pakistan. Yet, since impoverished populations have benefited from the energy sector and job creation initiatives, this project may indeed prove helpful in alleviating poverty in Pakistan.

– Dan Mikhaylov
Photo: Flickr

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Poverty Decline in Pakistan Is a Positive Step Forward

Poverty Decline in PakistanIt was recently revealed in the 2017-2018 Economic Survey of Pakistan that the percentage of the Pakistani population living below the poverty line (on $1.90 per day or less) has dropped to 24.3 percent. This indicates that the poverty rate has been effectively cut in half over just the past ten years, a remarkable feat for the developing nation. These numbers are not just the result of a few years of good luck. The International Monetary Fund says that Pakistan’s fiscal outlook is “broadly favorable” and that economic growth is likely to continue into the coming years.

How Politics Help the Poverty Decline in Paksitan

The report suggests a variety of reasons for the poverty decline in Pakistan, but one of the primary factors is a more stable political environment. Beginning in 1999, Pakistan was under the rule of Pervez Musharraf. Musharraf assumed the roles of both president and head of the army and imposed harsh military rule over the country. Pakistan fell into political turmoil as Musharraf continued to grant himself more power over the years, repeatedly suspending the constitution and dissolving parliament in order to get his way.

In 2008 the Pakistani People’s Party (PPP) finally forced Musharraf out of power and replaced him with Asif Ali Zardari, a civilian president who put an end military rule. It was at this point that Freedom House changed Pakistan’s ranking from “Not Free” to “Partly Free.” In 2013, there was a peaceful transition of power between two democratic governments for the first time in Pakistani history and the country has maintained its “Partly Free” status to this day.

The power shift in the government has contributed to the poverty decline in Pakistan because when a country is politically stable, investors are more likely to make deals there because there is a decreased risk of the laws changing and of their contracts being altered or nullified. With this in mind, it is easy to see how Pakistan’s democratic process has led to a higher level of confidence in the private sector.

Government Programs for Economic Improvement

Another contributor to the poverty decline in Pakistan has been the implementation of the Social Safety Net Programme (SSNP). This is an umbrella program which encompasses many different welfare initiatives in Pakistan, all of which have the aim of providing financial assistance to those living in poverty and helping them out of the crisis. The largest of these is the Benazir Income Support Programme (BISP). The BISP serves 5.29 million beneficiaries and has reduced the poverty rate by seven percent on its own.

An additional reason for the poverty decline in Pakistan is the government’s shift in attitude toward the agriculture sector. Agriculture is crucial to the Pakistani economy as it makes up for 18.9 percent of the GDP and 42.3 percent of the workforce. In recent years, the government has implemented policies that focus more on supporting smaller farms, such as increasing agricultural credit disbursements and providing crop insurance to farmers. The government is also investing in new technologies to help modernize the industry, like new irrigation systems and drought-resistant seeds.

Looking Toward the Future

Clearly, the poverty decline in Pakistan is no accident. It took years of hard work and policy reformation by the Pakistani government to improve the welfare of its people. But Pakistan’s incredible achievement over the past decade is a sign of great optimism for developing countries around the world, a sign that real change is possible in even the direst of situations.

– Maddi Roy
Photo: Google

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Addressing Food Security in Pakistan Through Policy Change

Last month, a new and improved version of the Pakistani National Food Security Policy was approved by the federal cabinet after years of development by the Ministry of National Food Security and Research. This is welcome news, as 60 percent of the population lacks food security in Pakistan. The new policy is already in the beginning stages of implementation throughout the country, and its goals are ambitious.

The ultimate objective of the new Pakistani National Food Security Policy is to raise the agriculture growth rate to 4 percent per year. Though 4 percent may seem like a minuscule number, it will be no small feat for the Pakistani government to accomplish. The agriculture growth rate has been relatively low over the past decade, averaging about 2.5 percent since 2008. Increasing that number will require a lot of changes to be made.

One issue brought up in the Pakistani National Food Security Policy is the lack of modern technology in the agriculture sector. According to the report, Pakistani farmers do not have access to machinery such as rice transplanters, vegetable planters, fruit pickers and other useful tools that would allow them to run their farms more efficiently and turn larger profits. To mitigate this problem, the new policy will reduce taxes on imports of farm machinery and create incentives for farmers willing to adopt newer technologies.

Another obstacle farmers are having to face is the increasing effects of climate change. Factors like drought and extreme weather fluctuations can have devastating impacts on crops and livestock and leave farmers with nothing to produce. One of the ways the Pakistani National Food Security Policy will attempt to alleviate the effects of this crisis is by investing in biotechnology and the genetic alteration of seeds to better resist drought and temperature changes. The policy will also promote crop insurance schemes and educate the public on which crops are more likely to survive in certain areas.

In addition, the new policy recognizes that many of the resources in Pakistan are not being utilized to their fullest potential. The country’s biggest crop is wheat, which is grown on 40 percent of Pakistan’s land and makes up more than 2 percent of the GDP by itself. However, there has been a global decline in wheat prices over the last few years and the government is thinking twice about having its entire economy rely on the success of one crop. Consequently, the Pakistani National Food Security Policy aims to focus more on cultivating fruits, vegetables, livestock, poultry and fisheries in the future.

Lastly, the policy addresses how unaffordable it has become for Pakistanis to purchase nutritious food. In response to this problem, the government hopes to devote more energy to continuing and creating programs dedicated to reducing poverty and hunger on the local level. Along with the strategies mentioned above to increase profits for farmers, this should be a great help with increasing food security in Pakistan.

It goes without saying that the Pakistani National Food Security Policy is an incredibly bold vision for the country, and it will require a lot of effort on the part of both farmers and the government. However, the fact that Pakistan is actively taking steps to eradicate food insecurity is a sign of hope for its millions of hungry citizens, and such a high goal may be exactly what the country needs.

– Maddi Roy

Photo: Flickr