Undoubtedly, Pakistan is passing through hard economic situations. Newly elected Prime Minister is trying to sort out financial solutions to avoid 13th rescue package from International Monetary Fund which is conditional to disclose CPEC agreements. After his successful visit to Saudi Arabia with a US$6 billion financial package, he visited Beijing to seek a similar financial support. It may not be difficult for Beijing to provide such financial support but both countries should look towards long-term solutions.
There is a quotation, "if you give a man a fish he is hungry again in an hour. If you teach him to catch a fish, you do him a good turn." Imran Khan wants his nation to learn the trick to catch a fish instead of keeping eating fish that's what he mentioned in great hall speech. According to a Dawn report, "Khan wanted to inform the Chinese leadership that his government wanted to bring about a significant shift in the projects falling under the purview of CPEC." In past, Khan kept emphasizing that mass transit projects entailed with colossal debt which is unaffordable for a developing country like Pakistan. Although his intentions are pure, he still needs to realize that the CPEC was not originally initiated to benefit ex-Prime Minister Nawaz Sharif. His visit was focused on amending CPEC to be more job-oriented, investment-oriented than debt, and reviving agriculture sectors instead of merely focusing on infrastructure projects. Khan is keen to renegotiate Islamabad’s projects under the Belt and Road Initiative. For this, it would be more suitable for foreign lenders or investors to invest in social development projects during Khan's era.
Pakistan is suffering a huge current account and fiscal deficit. The country’s foreign exchange reserves have fallen to a near five-year low of US$7.8 billion, the State Bank of Pakistan said, while the net foreign reserves held by commercial banks have also dropped, to US$6.4 billion. Pakistan's foreign reserves have plunged 42 percent since the start of the year and now stand at about $8 billion, or less than two months of import cover. The Pakistani rupee has lost about a quarter of its value against the US dollar over the past year. On the other hand, its imports are increasing rapidly due to weak efficiency and costly domestic products. Besides short-term financial bailouts, China and Pakistan should look ahead for long-term and permanent economic solutions. In one way, Pakistan should find avenues to increase its exports to China and enhance its domestic production capacity by establishing new industrial zones. For this purpose, early start of industrial zones under the umbrella of CPEC would be of great importance for Pakistan. These zones would raise domestic production, help in reducing imports and expansion in exports. However, most Pakistani products may not be competitive to introduce in Chinese markets but agriculture and cultural products can find some space.
There is another serious concern in the Pakistani community that why China does not offer similar privileges to Pakistan that it offers to Bangladesh and Asean countries? China imports an equivalent to $2 trillion of goods from the world and Pakistan’s share in these imports is merely $1.74 billion. As most imported products from Bangladesh and Asean countries are duty-free in China while Pakistan has to pay 3-65% import duty which seems unfair with a strategic partner country. However, one percent share in China’s imports for Pakistan would mean a US$18-19 billion increase in its exports. For this, Pakistan needs to negotiate the Pakistan-China Free Trade Agreement, demanding for at least the privileges that China is offering to Asean countries.
Anbound Think Tank's Chief Researcher Chen Gong proposed the idea that China should develop a common market with partner countries like Pakistan and Bangladesh. This common market is a large-scale regional development plan that aims to lift the world's poorest regions out of poverty and help to realize the UN's goal of eradicating poverty. Countries like Pakistan and Bangladesh, which have large populations and corresponding large market spaces, are still grappling with poverty, but they also have a low baseline and great prospects for economic growth. For one, both of them are not only Commonwealth countries with large populations, but they also demand a certain standard of quality, and that's why there's a scarcity of both low-end and high-end consumer goods in their markets. Coincidentally, these circumstances complement China's market, which is facing serious problems such as an aging population, a shortage in the labor force, capital surplus, and pressure to reduce overcapacity. Both the private economy and the manufacturing industry are facing significant challenges as a result. The complementary relationship that can be forged between the Chinese and Bangladeshi and Pakistani market thus makes the development of a common market in the region very promising for both parties.
Further, Mr. Chen proposed another solution to assist Pakistan to get rid of the debt crisis that Pakistan can get funds through the issuance of bonds which could be guaranteed by the Chinese government. Likewise, Japan has agreed to issue yen-denominated bonds of up to $1.8 billion to relief the Southeast Asian country Malaysia tackle its large government debt. In this way, Pakistan can absorb more capital from private companies through the issuance of bonds rather than merely depending on government grants and SOEs. These types of resolutions will improve domestic market of Pakistan and assist China to achieve its goals with full support from Pakistani officials and the public. China also believes that the steady economic growth of partner economies are supportive of its expansion.
Conclusive Analysis:
The feasibility of developing the Common Market has already received the unanimous approval and agreement from Pakistani officials and research institutions. The development of the common market will enhance businesses and growth opportunities for participating countries. Pakistan should also take concrete steps to strengthen its domestic market through the issuance of bonds in the Chinese markets to avoid IMF’s bailout package which could be guaranteed by the Chinese government.