CPEC, IMF and Ukraine war: An interview with Dr. Huma Baqai

Prof. Dr. Huma Baqai is the Rector of the Millennium Institute of Technology and Entrepreneurship, Karachi. She has previously served as an Associate Professor of Social Sciences & Liberal Arts and was also a former Associate Dean, Faculty of Business Administration, at IBA Karachi. She has been working with both national and international media as an international relations expert and political analyst since 1999. She is a scholar, reviewer, author, and co-editor of two books titled Pakistan-Afghanistan Relations: Pitfalls and Way Forward in 2021 and Making Sense of Post-COVID-19 Politics in 2020. She has authored twenty-nine national and international research articles published in renowned journals. She is also a content developer and a certified Corporate Trainer. In the interview, Dr. Huma focused on CPEC, IMF and Ukraine war. Q1. What do you see as the reason behind slow working progress over CPEC Projects? Is there any factor(s) to stall CPEC and put it on the back burner? Do you think concerns about the expensive nature of power IPPs are genuine? Information: When CPEC started there were quite a lot of discussions and beating of drums over its contributions towards our economic growth. It had been told that CPEC will bring fortunes to our country. Major objectives of CPEC included: • 17,045 MW Electricity Generation Plants • Modernization of Roads and Railway lines • New Optic Fiber Connections • Gwadar/ Ports Development • Four Urban Mass Transit Projects These projects were seen to be completed by 2030. Out of 90 projects, 27 projects worth $19b are completed but 63 projects worth more than $36b are still underway. The public perception of the 11 power projects under CPEC is that they produce expensive electricity and cost burden by increasing our IPP/ circular debt. Pakistan must pay more than Rs 50b to CPEC-IPPs. Response: Well, the concerns are genuine, but I do not think that it is just the China-Pakistan corridor that has slowed down, the entire Pakistan has slowed down. The economic activity in Pakistan has come to a standstill as a lot of people have. The industrial units are shutting down. There is mass unemployment. Overall, we often talk about misgovernance in Pakistan/ bad governance in Pakistan, but now it is coming back to bite us. It has outplayed the economic field, and it is a huge toll and Pakistan is paying for it. Whether it is public sector entities, or any sector like health, education, industries, etc. It’s about decades of listening to export-led growth and nothing really has been done about it. Yes, there are serious issues with China-Pakistan Economic Corridor. Some of them are of the doing how China treated us because if you look at the larger construct when it was government to government, it was working well, but when it became business to business or government to business that is where problems started to happen. Regulations in Pakistan are weak while regulations in China are extremely strict and of course, they are working for their own benefit. On Pakistan’s side, there is both a lack of knowledge and understanding. Also perhaps, the whole way of taking this bilateral relationship in a way that will benefit Pakistan. Of course, political polarization, lack of continuity in government policies, and the complete disarray of the finance ministry in Pakistan are there. I think it was Prime Minister Imran Khan’s time when we had three to four finance ministers. Then we have a finance minister who is blamed for a lot of problems by the person who comes on board. Recently, the Dar Disaster impacted everything. And the one last thing, I perhaps want to mention, is what we should not, or cannot discount is the global geopolitical environment. The rising confrontation between US and China has had a direct impact on Pakistan. It is very difficult for Pakistan to do the tightrope walking so to say/ or balance the relationship between Beijing and Washington especially when our financial dependence on Washington is critically high and the bailouts that came from China had limits to them and how the US is also now perhaps telling us/ they might not be telling us who/ how to choose, but they are definitely telling us that this is not the right path to go to. And the whole construct of the debt trap has become rare. Pakistan is in a state of the debt trap. Q2. Global powers like Russia and China seem to challenge USD supremacy. How do you think global geopolitics going to play its role in the coming years? Information: More than $1 tr is in circulation outside the US. Nearly 90% of forex and 40% of debt issuance is done in dollars. The Bretton woods agreement has given supreme power to the USD. Many believe that one of the big leverages to the US is its currency through which it yields massive power over the world order. It can push any state to pariah as it did to Russia quite many times. The most recent example is of the US freezing $ 600b of Russian assets in US banks. Response: Several initiatives have come to counter the power of the dollar. It came from Mahathir Mohamad. It diluted and could not fly. It came from Iran. More recently, it is China and Russia. But I think that China and Russia's nexus coming together is an actual real challenge to the status quo of the dollar. Overall, I would again link it to the geopolitical environment. You know when we had the Bretton wood/ Washington Consensus? In response, you had the Beijing Consensus, and Beijing Consensus was not something that Beijing said that we are doing. It was the western commentators who picked it up that this is how Beijing is working and that is how they have taken the best from both words. They still had economic growth. They allowed certain capitalist practices and freedoms/ free market economy paradigms too to seep into their systems. It is perhaps today one country and two systems because politically they are very state-controlled/one-party governments but on the economic front, they are opening. Now, there is so much tourism from China. The largest country that is sending out tourists outside and students is China in the world, and they all come back. They have had a choice not to. I think there is a lot of western propaganda they were pushing us to take off what they want us to think about China. China has evolved. It is asserting itself. It has arrived. More recently, the step taken by China to do a reconciliation between Riyadh and Tehran is a huge step forward. It can be a game changer. When I was making a comment on it, I said that this initiative is also going to take a while. You know when Jamal Khashoggi was murdered/ assassinated, it was even at that time there were talks about having a dialogue between Riyadh and Tehran. It got sabotaged by what Trump did. So, China has been able to do that. It is largely because it is an honest broker ship. The US plays the role of a bridge and a peacemaker but it has failed miserably in the middle east as in the case of Palestine and Israel because the element of fairness, objectivity, and equity is missing. Somehow, China has been able to convince the two nations/ or the two warring entities that it is an honest broker. So, I think it can take off because I am sure that there will be efforts to sabotage it. It’s going to dent the power of the dollar if not hit because of how we used to look at the black gold: the oil. Q3. Do you see the global trading economy system “changing”? Should Pakistan look towards trade in other currencies like barter systems/ trades in the rupee? How can Pakistan stave off its dollar reserve problem? Information: Russia is pushing its allies/ friendly states to alternate systems like BRICS (Brazil, Russia, India, China, and South Africa). These states hold 24% of the global economy and 40% of world resources. Brazil and Argentina are about to launch their combined currency. India and Sri Lanka are working towards trading in local currencies. Similar agreements are being reached between India and UAE. Russia and Iran are working on cryptocurrency backed by gold. Response: Pakistan can only be able to do it if there are other much stronger, bigger, and more effective middle powers that come out and agree to be a part of it. Pakistan is too small, too economically marginalized, and working with too many constraints and compulsions to make it fly but if India, Iran, Russia, and Turkey come on board it may materialize. There is a whole block and thrust towards it. Of course, the US will have a hard time controlling western economies. But it is yet to be seen. I see China is, in all honestly, watching very closely how Russia is being treated by the US. You know if you look at the financial arsenal of how they use sanctions, they had used them against the countries that were middle powers. They were never used against superpowers. Now, they are imposing sanctions against superpowers. They are imposing sanctions against China. These powers will give pushback to it and China has already given pushback to the US. The US had to take a step back from absolute decoupling. It went back to selective decoupling and the decoupling of economies in these days is not very easy. The world has worked in a crisscross of geopolitics and geoeconomics since the post-cold war. Now, suddenly it is said that decoupling will create a lot of tremors, not only in the US but largely in Europe. Europe will pay a high price for it. And look how Africa is shaping up. It is not on our radar, but the dragon is taking over the eagle there. I personally think that we are living in interesting times. Have they crystallized? No, they are in the making. Let’s see how the world sets. It is in a state of extreme flux right now. The positions are difficult, and I was at the World Economic Forum, there is a term that they have coined this time. This term is called Polycrises. They used to face crises. There are economic crises, political crises, wars, and conflicts, but right now all of them have come together. Terrorism which is not gone away and the climate is only growing. The climate threat and all this need collaboration and this type of confrontation we are used to will not happen. I think that the world for its own survival should find a way forward because they say that if we do not handle our climate, we will need another Earth. Jaw-Jaw is better than War-War. This is what Churchill said. But China will not go into an active confrontation. However, China has consistently built up its military. I think it is the second largest military in the world to give the right message. And I think in Ladakh, they taught India a lesson, but at the same time, if you see the trade volumes between China and India, they have actually gone up in 2022. I personally think that China likes to play on the economic pitch. It is winning over hearts and minds and over hardcore logic with economic thrust. And its economic thrust is so big that it may be able to be the number one country. And that is what creates a lot of anxiety in the US. Covid gave China a tailwind. Despite the fact that it originated there. So, I think all these factors will collectively take us toward the world, we are going to witness. Q4. Is Europe’s Paralysis win for Russia? Information: It can be easily said that Ukraine’s Conflict is killing Europe more dangerously than any other western country. Germany has announced an unprecedented mega subsidy of $ 250b to sustain its industry and provide relief to its people. This subsidy will force other European Nations to extend subsidies to their people to keep their incomes at par with Germans and their businesses to be in a competitive state with German businesses. Response: The bailouts Europe is giving, and the bailouts America will give to the three banks that have collapsed are not hardcore capitalist practices. This is blatant state intervention. So, you know I was at Bentley University, some five to six years ago, and that was the first time I was introduced to the term, ‘conscientious capitalism’. The capitalist paradigm has a conscience, which is inclusive, the fact that the trickledown effect is not happening, and we need to have more people on board, and how greed-driven capitalism in the west is now a huge challenge. China is emerging as a state which is saying that an alternative is possible and that it is an option so to protect freedoms and the whole concept of rule of law and everything that the western governments stood for, they also need to rethink capitalism. Q5. How should Pakistan manage this wheat crisis? Is this a snapshot of more climate change-induced crises for Pakistan? How can Pakistan work on its food security issues? Information: Ukraine War has also increased food insecurity across the world, particularly in wheat. Recent floods in Pakistan have destroyed one million acres of land out of three million acres of land. It will severely damage our agricultural output numbers. For wheat, more than $ 4b has been lost by Pakistan as 70% of land used to grow wheat is destroyed in Sindh. More than two million tons of stored wheat are destroyed in Sindh. Response: No, I do not think that Pakistan has any direction for its economy. Pakistan is on a ventilator. It is now looking at almost day-to-day survival. Pakistan is not in any position to help any state out. It should help itself. Pakistan had a wheat crisis, a sugar crisis, and many crises of all sorts so if anybody thinks that Pakistan can handle the climate crisis on its own, he is living in a fool’s paradise. Pakistan neither has the resources nor the technology nor the know-how. However, Pakistan is a country that has been impacted terribly by climate change i.e., floods, earthquakes, deforestation, etc. everything that comes with growth paradigms that are not sustainable. P Pakistan is a textbook case of unsustainable growth and now we talk about sustainability, but we are doing very little about it. The same is true for tech. I always say that the world tomorrow is much younger so the face of growth in tomorrow’s world is youth, its women, its technology, and its innovation. Tell me on one front out of these four where Pakistan is doing even enough. You know India produces IT graduates that have acceptance globally. They have put a ban on how many IT graduates can leave India now. They will not allow everybody to go. They tell the world how they are going to interact with the world. So, everybody here when says that look how India is doing. I say go and see what India is doing with its economy and then look at it how it is doing on the geopolitical front. Essentially, I think the way forward is and I also said this at the CEO Summit yesterday, to rope in our business community. To pressurize the government, not the people, not the civil society but the business community which is still here which has investments here which have stakes here because there has been a lot of brain drain but also a resource drain to literally act as a huge pressure group to force the government to fix their direction. Q6. A few days back, the finance minister called the trust deficit a major reason for IMF tranche delays. Pakistan is being seen as a serial beggar and a serial defaulter which has amped up our country’s credibility crisis. What are the ways to ameliorate the problems rather than exacerbating them? Response: We recycle blunders. There was never a serious effort to implement economic reforms and restructuring in our country. We are used to the silver bullet Afghan Jihad happened, 911 happened, and all of the laws happened. The same IMF accommodated our concerns, but this is the first time it is getting strict with us. This is by the way the 23rd time we have approached them to address our economic woes. It is itself a Guinness book of world records. It is indicative of how badly we managed our economy. Even today, I think there is a crisis of economic leadership. We change finance ministers more frequently than fashion. Q7. Can Pakistan achieve a sustainable path for development under the existing educational system? Response: Right now, Pakistan is in survival mode. It cannot do anything. You can do something when you are out of this mode. Talk about sustainability as a luxury to Pakistan. It is just staying above the waters. It is not thinking of either using a breaststroke or freestyle swimming. The public sector education has collapsed and private systems where the government is interfering will also collapse. The interviewer is a student at IBA Karachi.