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Pakistan’s financial crisis puts Belt and Road on the spot

Dr. James M. Dorsey

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Increased Pakistani dependence on China to help it avert resorting to the International Monetary Fund (IMF) to avoid a financial and economic crisis spotlights fears that the terms of Chinese investment in massive Belt and Road-related projects would not pass international muster.

Concerns that China’s US$ 50 billion plus investment in Pakistani infrastructure and energy, the Belt and Road’s crown jewel dubbed the China Pakistan Economic Corridor (CPEC), potentially amounts to a debt trap, compound suggestions that Pakistan increasingly will have no choice but to toe Beijing’s line.

The concerns are reinforced by the vision spelled out in a draft plan for CPEC. The plan envisioned a dominant Chinese role In Pakistan’s economy as well as the creation of a Chinese style surveillance state and significant Chinese influence in Pakistani influence.

Pakistani officials, concerned that Chinese loans offer a band-aid rather than a structural solution, have cautioned China, in a bid to keep the People’s Republic committed to bailing them out, that CPEC projects would be at risk if their country was forced to seek help from the IMF.

The officials said that they would have to disclose the terms of CPEC projects if they are forced to revert to the IMF and that this could lead to projects being cancelled.

“Once the IMF looks at CPEC, they are certain to ask if Pakistan can afford such a large expenditure given our present economic outlook,” the Financial Times quoted a Pakistani official as saying.

China has so far been willing to bail Pakistan out with Chinese state-owned bank giving the South Asian country some $5 billion in loans in the last 12 months in addition to a US$1.5 billion trade facility.

Pakistan’s foreign currency reserves plunged to US$9.66 billion last month from US$16.4 billion in May 2017.

Pakistani efforts to avert a crisis could not come at a more sensitive moment with elections scheduled for July 25. Political tension in the country were heightened this week by the sentencing to prison on corruption charges of ousted prime minister Nawaz Sharif and his daughter, Maryam, as well as the likely participation of a large number of Islamic militants in the polls.

To make things worse, China last month did not try to shield Pakistan from being grey-listed by the Financial Action Task Force (FATF), an international anti-money laundering and terrorism watchdog. that threatens to impair the country’s access to international financial markets.

Pakistan is struggling to avoid being blacklisted by the group.

Pakistani concern about disclosing terms of CPEC projects, even if it may involve a degree of opportunistic hyperbole, reinforces widespread worries in the country itself as well as in the international community that Chinese-funded Belt and Road projects put recipients at risk of walking into a debt trap and losing control of some of their key assets.

Malaysia this week suspended China-backed projects worth more than US$20 billion on the grounds that many made no financial sense. The projects included a railway and two pipelines.

China has written off an undisclosed amount of Tajik debt in exchange for ceding control of some 1,158 square kilometres of disputed territory close to the Central Asian nation’s border with the troubled north-western Chinese province of Xinjiang. Sri Lanka, despite public protests, was forced to give China a major stake in its port of Hambantota.

Pakistan and Nepal withdrew last November from two dam-building deals. The withdrawal coincided with mounting questions in Pakistan about what some saw as a neo-colonial effort to extract the country’s resources.

A report published in March by the Washington-based Center for Global Development warned that 23 of the 68 countries benefitting from Belt and Road investments were “significantly or highly vulnerable to debt distress.”

The centre said eight of the 23 countries – Pakistan, Tajikistan, Djibouti, Kyrgyzstan, Laos. the Maldives, Mongolia, and Montenegro, Pakistan, and Tajikistan – were particularly at risk.

Djibouti already owes 82 percent of its foreign debt to China while China is expected to account for 71% of Kyrgyz debt as Belt and Road-related projects are implemented.

“There is…concern that debt problems will create an unfavourable degree of dependency on China as a creditor. Increasing debt, and China’s role in managing bilateral debt problems, has already exacerbated internal and bilateral tensions in some BRI (Belt and Road initiative) countries,” the report said.

With analysts predicting that China will ultimately be unable to stabilize Pakistan financially, Pakistan is ultimately likely to have to revert to the IMF in a move that could seriously impact the Belt and Road initiative, widely perceived as an infrastructure driven effort to cement Chinese economic and geopolitical influence across a swath of land that stretches from South-eastern Europe and the Atlantic coast of Africa to the People’s Republic.

Analysts estimate that Pakistan this year needs US$ 25-28 billion to service its debt and ensure investor confidence in its ability to put its financial house in order. An IMF technical assistance team this week concluded a week-long visit to Pakistan.

Said one analyst: “Ultimately, the IMF is Pakistan’s only option. If an IMF-imposed regime has consequences for BRI (Belt and Road Initiative) projects, it could impact perceptions of the terms China imposes.”

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and three forthcoming books, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africaas well as Creating Frankenstein: The Saudi Export of Ultra-conservatism and China and the Middle East: Venturing into the Maelstrom.

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South Asia

Sri Lanka Appoints New Minister for Foreign Relations

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Sri Lankan President, Gotabaya Rajapaksa appointed Dinesh Gunawardena as the Minister of Foreign Relations (Picture source news .cn)

The newly-elected Sri Lankan President, Gotabaya Rajapaksa appointed Dinesh Gunawardena as  the Minister of Foreign Relations after his  Presidential election in 2019.  In addition to Foreign Affairs, Dinesh Gunawardena was also appointed as the Minister of Skills Development, Employment and Labour Relations. The new foreign minister  Gunawardena  hails from a well known political family in Sri Lanka .His father Philip Gunawardena   is a famous national hero known as ‘the Father of Socialism’. Gunawardena  a  graduate  from the University  of Oregon in the US, entered politics in 1972. In 1983 as  the general-secretary of Mahajana Eksath Peramuna’s (MEP)  he entered Parliament in a  by-election held in Maharagma.  He  is well-known as a  long-standing parliamentarian and has served as a minister several times since the mid 90s.

The new  Minister of Foreign Relations Gunawardena  is  supposed  to  implement a friendly and Non-aligned Foreign Policy.   In a recent newspaper interview he stated  “Sri Lanka will have a strict neutral foreign policy where it will strive to have only friends and not foes among the global community”(Sunday Observer,2019).In this context there  is a history to this non-aligned policy.     At the outset, Sri Lanka was a founder member of the Non Aligned Movement (NAM).  As part of this approach, the new  Sri Lankan government had outlined in the  manifesto how the  presidency would implement the Foreign Policy over the next five years. The   manifesto mentions a key phrase “Friendly and Non-aligned Foreign Policy .We will not fall on our knees before any country in maintaining foreign and trade relations. We will always be mindful of our national sovereignty and maintain friendly relations with other countries from a standpoint of equality. Our government will restore Sri Lanka’s national pride and dignity”. (Gotabaya Rajapaksa manifesto, 2019)

Minister of Foreign Relations Dinesh Gunawardena assumed duties at the Foreign Ministry on Monday 25 November 2019. While meeting staff members of Ministry of Foreign Affairs the Minister    mentioned that the “Foreign Service is highly regarded and the entire country is looking towards the Foreign Ministry to find solutions for external pressures and challenges”. Sri Lanka being an Indian Ocean island nation strategically located at the international maritime crossroads has significant diplomatic influence with the international community. Therefore Sri Lanka needs a far-sighted foreign policy vision along with well-aligned and sound domestic policies. It is, therefore, vital that the new Foreign minister sets out the country’s position towards Asian, African  nations and the West to ensure that Sri Lanka is able to achieve its foreign policy goals  over the next five years.

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Kartarpur may be the first drop of rain

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On November 09th, 2019, Pakistan and India opened the first-ever visa-free corridor between the two countries to facilitate the pilgrimage of Sikhs – a minority community in both India and Pakistan but with major chunk of its populace settled in India – to their second holiest site located in Katarpur, a border village in Pakistan’s Punjab province.

Inaugurated on the respective sides by the Prime Ministers of India and Pakistan, the4.1 km long corridorconnecting­ Dera Baba Nanak Shrine in India with Gurudwara Kartarpur Sahib in Pakistan – will enable more than5,000 devotees to visit the holy shrine everyday and is widely being regarded as the first drop of rain in the decade’s long history of the desiccated and conflictual relationship between the two neighbours.

An occurrence such momentous that it effectively exalted Prime Minister of Pakistan Imran Khan as the most beloved figurefor Sikhs, besides actuating Prime Minister Narendra Modi to issue a rare and extraordinary message of gratitude towards his Pakistani counterpart, despite the contextual reality that later has been drawing parallels between the Indian PM and Nazi leader Hitler after the Indian government’s draconian venture in the disputed region of Jammu and Kashmir (J&K) steeped the relations between the two countries to an unprecedented low.

The trudge to this landmark breakthrough was as arduous and bumpy as it could have been between the two nations that share a 07 decades-long history of the antagonism. Although, the demand of Sikhs to be granted access to the revered shrine – located just a few kilometers away from the Redcliff Line – is as old as the two antagonist nations, interminable strains in the relationship between the two countries proved to be an impediment in the way of this few kilometers of journey across the border.

Even as Pakistan extended the olive branch and Indian politician Navjot Singh Sihdu – who attended PM Khan’s oath-taking ceremony in August last year – was apprised by Pakistani COAS about his country’s readiness to open the “corridor of peace”, cynicism and suspicion from Indian side were axiomatic. Sidhu was barraged with denunciation back home for embracing Pakistan’s top military official, while the sciolists in Indian political and strategic community tried to conjecture about the “covert designs” behind Pakistan’s apparently benevolent move. Indisputably, India was not left with any other choice except for accepting the Pakistani offer as responding otherwise could have infuriated its 22 million-strong Sikh minority. Though the Modi government hesitatingly expressed its consent for the construction of the corridor, it didn’t respond positively to the successive dialogue offers made by PM Khan.

To add to the complexity was the hyper-nationalistic and anti-Pakistan narrative adopted by PM Modi during his recent election campaign after he had fallen short of delivering on his previous election promises as regards transforming the Indian economy and improving people’s lives. As if Pakistan bashing was not enough to garner votes, Modi went as far as to push the two countries almost to the brink of a nuclear exchange in February 2019 when in response to an attack– purported to be a false-flag – at Indian security forces in restive Kashmir, he ordered Indian Air Force (IAF) to bomb targets inside mainland Pakistan, provoking a daring response from Pakistan Air Force (PAF) the next day resulting in the downing of an IAF jet and arrest of an Indian pilot by Pakistani forces, who was returned few days later.

Nevertheless, the perilous brinkmanship worked spectacularly for Modi and his right-wing BJP secured an overwhelming majority in the lower house of parliament, full credit to the shrewd manipulation of mainstream and social media– which abetted the regime’s efforts to cunningly overshadow the embarrassment of aircraft downing and capture of pilot with the celebrations of “punishing Pakistan”.

After winning elections, Modi further upped the ante in the disputed J&K and after imposing an all-out communication clampdown and enacting a security blanket over the valley of Kashmir – the state’s only Muslim majority region – unilaterally repealed the region’s decades-old semi-autonomous status.

Predictably, it evoked a strong response from Pakistan which downgraded diplomatic ties with India, cut-off trade and expelled the Indian High Commissioner while refusing to send his own to New Delhi. Then followed a long diplomatic scrimmage between the two countries with Pakistan trying to rally the support of international community against the tyrannical Indian moves in the occupied valley and India responding with counter moves aimed at hurting Pakistan diplomatically and economically, besides propagating the deceitful mantra of “all is well” for Kashmir.

Notwithstanding the reignited tensions, when Pakistan decided to move ahead with the opening of the corridor as per schedule, it was regarded as a bold diplomatic move. Though it would have earn the country appreciation abroad, a severe backlash from the opposition at home was very much on the cards and at a time when leader of a right-wing political party Maulana Fazal-ur-Rehman was holding a sit-in in Islamabad with his thousands of zealot supporters demanding Khan’s resignation, the risk of domestic backlash had increased manifold.

Nevertheless, Khan’s government with the undisguised support of country’s powerful military moved ahead with the decision despite criticism from opposition politicians like Maulana Fazal-ur-Rehman and Bilawal Bhutto Zardari – whose left-wing Pakistan People’s Party (PPP) frequently champions religious freedom and interfaith harmony but didn’t miss the opportune moment to ensure the “obligatory” political point-scoring.

Although, Pakistan has made a landmark move despite soaring regional tensions and domestic pressure and opening of the border corridor can be rightfully considered as the first drop of rain after decades of desiccation, the chances that a rainstorm may follow which can convert the roads into the river, remain ever more slim and the major impediment is the simmering volcano; the dispute of Jammu & Kashmir (J&K) – a sticking point mentioned by Khan in his speech on the day of the inauguration of corridor.  

For more than seven decades the outstanding issue of J&K has been instigating hostilities between the two now nuclear-armed neighbors and recent unilateral actions by India – which violate numerous United Nations Security Council (UNSC) Resolutions and various bilateral accords with Pakistan – have just added to the fire and fury. Essentially, Modi’s regime’s recent actions in J&K has taken the matters to a point of no-return and the chances of Pakistan making any further peace overtures towards India or responding to any – though highly unlikely – Indian peace initiative, are slightest.

The pessimism around talks has already been echoed by Khan when he made it abundantly clear that until Indian government ends its oppressive clampdown in the valley of Kashmir and restores pre-August 5th, 2019 status of disputed J&K – an even distant possibility – negotiations remains out of question.

Even though, there is a remote possibility that Khan’s government – which has almost lost its initially built momentum against India over Kashmir and seems to be more concerned with other domestic and regional issues – will even subtly try to normalize the relationship with India, yet a slight nuance of any such move is likely to evoke strong backlash from country’s religious right as well as the political opposition. And given the virtual reality that supporting Kashmir cause is regarded as a symbol of nationalism in Pakistan, and country’s powerful military establishment and Khan are already facing accusations of striking a deal on Kashmir, it is even unlikely that Pakistan will venture on taking any further risk of making up with India, only to spark a general enragement.

India under Modi is undergoing a massive transformation and into the 6th consecutive year of BJP’s rule, the country’s fundamental secular outlook is under threat. In 1947, while Pakistan was being founded as a country for Muslims, India’s founding fathers envisioned a secular outlook for the culturally, religiously and ethnically diverse country. Seven decades below the line, Modi regime – despite publically pledging to safeguard India’s secular constitution – has embraced a fundamentally opposite course.

Rise of far-right may be a global phenomenon but India presents the most extreme and violent version of this imminent menace – a reality axiomatic by the rising religious intolerance, especially against Muslims; increased and generally overlooked incidents of mob-violence against minorities; cow vigilantes– which represent a militant brand of Hindu nationalism – patrolling the streets of India to impose their own version of “law” under state’s patronage; a sudden rise in the incidents of hate speech by the leaders of ruling party without facing any admonishment; the taming of Indian media to ally with government’s jingoistic policies and religiously incendiary rhetoric; various democratic and constitutional institutions conceding to the majoritarian impulse rather than adhering to constitution; ever reducing political space for dissent and opposition parties; and the recently introduced Citizenship Amendment Bill, which exclusively discriminates against Muslims.

These alarming trends clearly point out that Modi regime – in pursuance of Hindu supremacist Hindutva ideology – is steadfastly navigating the world’s largest democracy into the abyss of Fascism. Arguably, given the emerging trends in Indian society, Khan’s analogy between Modi and Hitler was not that erroneous and many Indian politicians and commentators have also expressed concerns that the early signs of Fascism are already obvious in Indian society.

Narendra Modi – who came to power with an alluring economic reform and development agenda – is now totally reliant on anti-Muslim divisive politics and to a tragic consorting, the democratic and constitutional institutions of the country – which were to place a hindrance in the way of this majoritarian brand of politics – seem to be accomplices. With no institutional and social hindrance to the Hindutva –a brand of politics kept at bay for many decades – this divisive menace is now finally engulfing India’s political and social landscape and ultimately threatens the internal cohesion of diverse Indian society.

Given the ideological and historical context, Kashmir presented a test-case for the protagonists of Hindutva. The state of J&K – a Muslim majority region that acceded to Hindu majority India –was cherished as asymbol of India’s secular identity. However, Modi’s government’s revocation of region’s special status – which is fundamentally aimed at paving the way for introducing massive demographic changes in the region converting Muslims into a minority, essentially following the Israeli model in the West Bank –will not only help the regime in crushing the self-determination sentiments in the valley but will also be a major milestone achievement en route to transforming India into a Hindu state.

Ironically, Muslims living in India are not the only prey of rising Hindu Fascism and expansionist Hindutva have regional and global implications. Being a homeland to the successors of those “outsiders” who ruled the Hindu majority India for more than 850 years, Pakistan becomes the major nuisance for the Hindu supremacists currently in-charge in India. February 2019 nuclear brinkmanship by Modi regime; uninterruptedPakistan bashing by Indian media; adaptation of a well-choreographed anti-Pakistan narrative during elections campaigns by Indian politicians; vigorous Indian attempts to get Pakistan blacklisted by FATF; and continuous fomentation of subversive activities by Indian intelligence inside Pakistan point out that Pakistan’s long-held apprehensions about India plotting to weaken the country’s federation to ultimately subsume its tumbling parts, were not misplaced.

In fact, weakening Pakistan internally, disintegrating it and ultimately subsume its parts will be a step forward in the way of realization of the “Greater India” dream of Rashtriya Swayamsevak Sangh (RSS),the organization regarded as the ideological patron of ruling BJP and the major proponent of Hindu supremacist, majoritarian and expansionist Hindutva ideology with current Indian PM and most of the leaders of BJP as its life-long members.

To put the things in a nutshell, the opening of the Kartarpur corridor may be a sanguine gesture by Pakistan but India doesn’t seem to be even interested in some reciprocity. The issue of J&K – which has become further complicated due to India’s overassertive and intransigent attitude – presents an immediate stumbling block in the way of this “first drop of rain” being followed by a “downpour”– which can turn the dry and desiccated road into a river.

In the long-run, as the Modi government pursues the Hindutva policies and continues on a path to hurt Pakistan internally, economically and globally, chances of any further optimistic gesture from either side become even remote. And given the aforementioned immediate and long-term hurdles and the virtual reality that relations between the two countries have gone such desiccated that only continuous down pouring turning the roads into the rivers can provide the required panacea, Kartarpur corridor is likely to be proved as yet another noteworthy but futile confidence-building measure (CBM), without any significant headway towards long-lasting peace in the region. 

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Lebanon and Sri Lanka: An Extraordinary Relationship and a Bright Future

Mohamad Zreik

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Since the Silk Road, Arabs turned to Asian countries, and this was the reason for the spread of Arab civilization in many Asian countries. The Arab merchants headed towards Sri Lanka because of its geographical position. This island was a point of rest and cultural interaction between Sri Lankans and Arabs, and this is an important reason for the presence of Muslims in Sri Lanka.

The Sri Lankan-Lebanese relationship is long established. In the common history of these two countries, there are many good events. It is important to note that Sri Lanka is a peaceful country that has always been friendly to Lebanon at all times. In 1990, the relations between Lebanon and Sri Lanka became official after the establishment of diplomatic exchange. Sri Lanka’s first ambassador to Lebanon was appointed in 1997 and the diplomatic mission began in 1998. Prior to that, the Sri Lankan ambassador was appointed to Saudi Arabia, Egypt and Lebanon.

Sri Lanka’s foreign policy is based on the principle of friendship with all and hostility to no one, which has made this country a special place for Lebanese diplomacy. Sri Lanka traditionally follows a non-aligned foreign policy and does not take sides with major powers. Sri Lanka also has good relations with ASEAN countries, South Asian countries and major powers such as China, the United States and Russia, which has strengthened its internal peace.

Political and economic interest requires any country with ties to Sri Lanka to engage peacefully and diplomatically, because power and superiority with this island will have a negative effect. Sri Lanka is an active member of the United Nations and founding member of the Non-Aligned Movement (NAM), member of the Commonwealth of Nations, South Asian Association for Regional Cooperation (SAARC), World Bank, International Monetary Fund (IMF), Asian Development Bank (ADB) and Colombo Plan.

The estimated number of Sri Lankan citizens in Lebanon is between 80,000 and 90,000, most of them workers. There is also a Sri Lankan battalion active in the peacekeeping force in Lebanon. The main task of the Sri Lankan battalion is to ensure security of Force Headquarters compound where all command elements, branches and all key personnel including the Force Commander / Head of the Mission are accompanied. These tasks also include; applying all FB measures in accordance with the alert status established by UNIFIL Force Commander, providing updated information and assesses the FP situation in their respective areas as requested by the Force Protection Working Group.

During the visit of the State Minister Mr.Vasantha Senanayake to Lebanon, he expressed his country’s desire to develop bilateral relations with Lebanon and joint support in international forums. During that visit, the State Minister considered that the Sri Lankan state is interested in direct flights between the two countries in order to encourage tourism and communication, and called on the Lebanese state to open an embassy in Colombo. He said that Sri Lanka’s participation in UNIFIL reflects the goodwill of the Sri Lankan state towards Lebanon for the security and safety of the people.

Trade relations between Lebanon and Sri Lanka are thriving and are developing considerably year after year. Lebanon can import a lot of goods from Sri Lanka especially since this country is rich in natural resources such as rubber products, garments, gem,jewelry, spices, fisheries products, fruits, pharmaceuticals, coconut charcoal, pearls and precious stones. Many Lebanese products can be exported to Sri Lanka such as Dairy products, marble tiles, cosmetics, construction machineries, agricultural and hospital equipment.

The bilateral relationship between Lebanon and Sri Lanka is a good example of active and peaceful diplomacy. The actual history of that relationship dates back to time and in 1990 it was formalized through diplomatic representation. Many generations of Sri Lankans have come to know a lot about Lebanese culture because they were brought up in Lebanon; those can be considered honorary citizens.

You will hear from every Lebanese who visited Sri Lanka amazing words about the beauty of this island and the goodness of its people. The Lebanese should welcome every Sri Lankan in Lebanon and treat them in a respectful and humane manner, whatever their job or social position.

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