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