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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

Solving the Challenges of Infrastructure in Pakistan

Solving the Challenges of Infrastructure in PakistanThe state of any country’s economic growth and development generally heavily relies on the strength of its infrastructure, whether that is in its energy, telecommunications, water and sanitation, transport or education sector.

After the 1947 partition of British India, the development of infrastructure in Pakistan grew and has made steady progress in the last five decades. According to the World Bank Group, however, this rate of improvement has also been “among the slowest for the majority of public infrastructure sectors.” Further, this rate of improvement has failed to ameliorate infrastructure conditions for Pakistani citizens and disproportionately hurt the poor in the country.

In the mid-1950s, investments in infrastructure and heavy industry were accompanied by an agricultural revolution in a fertile Pakistan that even a richer India could not surpass. Despite being a nascent state, Pakistan successfully created its state institutions and industries from scratch. This was done against the specter of a well-off India with a greater share of urban population and established infrastructure. For a variety of social reasons combined with political turmoil, the economic tides soon took a turn for the worse as income contracted, inequality rose and inflation swallowed the most vulnerable – the poor – in Pakistan.

Today, Pakistan is a low-middle-income country with about 188 million people that not only places abysmally in the human development index (ranking 147th out of 188 in one U.N. report) but also faces both rural and urban disparities in poverty, income and development infrastructure.

Moreover, the government of Pakistan has faced international criticism for a surplus of development projects when existing infrastructure in Pakistan is fully capable of meeting the transportation demands of the country, leading to the envisioning or establishment of so-called white elephant projects costing billions of dollars that have been accused of largely benefiting the rich minority able to afford cars. One of these was the toll-spotted M2 Motorway connecting the capital city of Islamabad to Lahore, dubbed a “motorway for the privileged.”

By 2030, more than half of Pakistan’s projected 250 million citizens are expected to live in cities, making it crucial for the country’s economic and infrastructure growth to keep pace with its urban development. The pressure for urbanization, spawned largely by high birth rates and increasing rural migration, has caused Pakistan’s fast-growing cities to struggle in delivering basic public services and provide jobs for residents. The situation is so dire that, according to the World Bank, one in eight urban dwellers live below the national poverty line. When impoverished people from the country’s rural areas migrated to cities in hopes of a better life or were forced out due to climate change, this is not something they imagined facing.

The $56 billion China-Pakistan Economic Corridor (CPEC) project has spurred Chinese investments in Pakistan’s energy and transport infrastructure. Observers in Pakistan have urged the government to observe caution and not saddle itself with debt that may trigger a financial crisis in the future. An infrastructure boom accompanied by lucrative megaprojects increase both public and foreign debt and may not necessarily be offset by the anticipated revenues of CPEC upon completion.

The CPEC partnership is not only paving the way for Pakistan to establish itself as Beijing’s closest strategic partner against India but also to link China directly to the Arabian Sea in order to protect China’s economic interests.

Pakistan’s own economic development, however, is still predicted to be just as fragile due to increasing debt, falling exports and dwindling remittance flow from overseas Pakistanis. Due to stagnant growth at home, which translates to not enough jobs for young Pakistanis, an entire generation faces an uncertain and perhaps unstable future, despite the entrepreneurial spirit pervading big cities like Lahore and Karachi and even some expanding provincial towns.

The government of Pakistan has gradually stressed the importance of public-private partnerships (PPP) over purely debt-based financial projects in order to fill the investment gap for infrastructure development. PPP arrangements have the added benefit of spurring the country’s economic growth by producing more jobs and minimizing the burden of government subsidies. To make life better for Pakistani citizens, the private sector in Pakistan will need further empowerment and involvement in sustaining the country’s infrastructure and helping Pakistanis take control over their country’s internal development.

Integrated water resource management, a transition from the present fossil fuel-based energy system to more cleaner and permanent options such as solar-hydrogen energy systems, the provision of quality education to all children of any gender within the framework of a nuanced policy in the education sector, and improving utilization of basic public healthcare facilities for both rural and urban populations (including immunizations) are all ways Pakistan can resurrect the gains it steadily made after its creation 70 years ago.

With the pressures of a rising population, stability and sustainability in Pakistan remain an integral part of the country’s overall development. Pakistanis have withstood the many tests, trials and crises in their country with resilience and hope. Solving the many problems in Pakistan and rebuilding the country’s infrastructure requires a robust marriage of democratically-aligned civil society organizations with the private sector in ensuring equitable access to markets and jobs for all Pakistanis.

– Mohammed Khalid

Photo: Flickr