Pakistan’s Road to China

ISLAMABAD – Large events sometimes have unintended strategic consequences. This is turning out to be the case following the killing of Osama bin Laden in a compound in Abbottabad, a military-dominated town near Islamabad, Pakistan’s capital. The fact that the world’s most wanted man lived for a half-dozen years in a large house within spitting distance of Pakistan Military Academy, where the country trains its officers, has provoked a reaction that Pakistanis should have expected, but did not. The country’s civilian and military establishment has been surprised and troubled by the level of suspicion aroused by the events leading to Bin Laden’s death – many Pakistanis call it “martyrdom” – and there is growing popular demand for a major reorientation of Pakistan’s relations with the world. Unless the West acts quickly, Bin Laden’s death is likely to result in a major realignment of world politics, driven in part by Pakistan’s shift from America’s strategic orbit to that of China. I have personal experience of how quickly China can move when it sees its “all-weather friend” (Pakistani Prime Minister Yousaf Gilani’s phrase) in extreme distress. In 1996, when Pakistan was near bankruptcy and contemplating default, I went to Beijing as the country’s finance minister to ask for help. My years of service overseeing the World Bank’s operations in China had put me in close contact with some of the country’s senior leaders, including then-Prime Minister Zhu Rongji. At a meeting in Beijing, after telling me that China would not allow Pakistan to go bankrupt under my watch, Zhu ordered $500 million to be placed immediately in Pakistan’s account with the Federal Reserve Bank in New York. That infusion of money enabled Pakistan to pay its bills while I was in charge of its economy. China seems to have adopted the same approach to Pakistan today, as the United States Congress threatens to cut off all aid. Gilani recently took a quick trip over the mountains to Beijing, and returned with an offer of immediate delivery of 50 fighter planes to Pakistan. Much more has been promised. Given China’s record as a provider of aid to Pakistan, these promises will quickly be realized. In the meantime, Pakistan continues to pay the price for Bin Laden’s death, with his supporters striking a town not far from Islamabad just days later, killing more than 80 people. That was followed by a brazen attack on a naval base in Karachi, in which some very expensive equipment, including aircraft, was destroyed. The terrorists struck for a third time two days later, killing a dozen people in a town near Abbottabad. The human toll continues to rise, as does the cost to the economy. On May 23, the government issued an estimate of the economic cost of the “war on terror” that put the total at $60 billion, compared to the $20 billon the Americans have supposedly paid in compensation. In fact, a substantial share of the promised US aid has yet to arrive, particularly the part that is meant to rescue the economy from a deep downturn. While Gilani was in Beijing, Finance Minister Abdul Hafeez Shaikh returned from Washington with empty hands. He had gone there to persuade the International Monetary Fund to release the roughly $4 billion that it was withholding from the $11 billion that Pakistan had been promised in late 2008 to save the country from defaulting on its foreign debt. The IMF’s decision was in response to the Pakistani government’s failure to take promised steps to increase its abysmal tax-to-GDP ratio, which stands at less that 10%, one of the lowest levels in the emerging world. The Fund was right to insist that Pakistan stand on its own feet economically, but, in early June, Shaikh will present his 2011-2012 budget, in which he wants to ease the burden on ordinary Pakistanis. This has put Gilani’s two-year-old government in a real bind. Whether Shaikh can balance the IMF’s demands with ordinary people’s needs will not only determine the Pakistani economy’s direction, but will also have an enormous impact on how Pakistan and its citizens view the world. The only comfort that Pakistan has received from the West came in the form of assurances given by US President Barack Obama and British Prime Minister David Cameron following Obama’s state visit to London. In a joint press conference, both promised that their countries would stand with Pakistan’s government and people. Pakistan, they said, was as deeply engaged as their countries in the war against terrorism. Pakistan will continue to receive American and British help. But the US and Britain find it difficult to move quickly, and strong voices in their capitals want Pakistan to be punished, not helped, for its wayward ways. In the meantime, China waits with open arms. Shahid Javed Burki, former Finance Minister of Pakistan and Vice President of the World Bank, is currently Chairman of the Institute of Public Policy, Lahore. Ends