Pakistan

Documenting a Country’s Real Estate Economy

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For too long, Pakistan’s economy has remained largely undocumented and informal. This has caused a lot of trepidation both within the country and internationally. Locally, everyone knows that the country’s real estate sector has been used to park a significant amount of black money as well as launder money. 

When we say ‘black money’, we do not necessarily refer to the money earned from illegal sources but (as far as real estate is concerned) also that which has not been documented thanks to loopholes in the registering mechanism – caused, of course, by the negligence of the authorities. The people themselves are certainly to blame, too; it suited them to pay much lower taxes than they would have had to after registering their properties at their proper prices. Also, there was nothing actually stopping them from recording their properties at their actual market values. 

Internationally, Pakistan has often been accused of not doing enough to curb terror-financing from within its borders. Regardless of the government’s willingness to effect some change in the prevalent situation – one overarching issue is that the economy isn’t documented enough to effectively restrain finances from being funneled towards any organization with potential terror links. Again the significant importance of taking account of the undocumented black money and the funds parked in real estate sector becomes evident. 

All of this has eventually led the government to finally take action on the matter before the current decade sees its closure. 

The issues caused by a minimally regulated, informal economy

Img source: vancourier.com

In general, for the economy overall, the issues caused by the undocumented economy can be understood this way:

  • The informal economy encompasses the entire economy, as well as that particular sector which is resistant to its advances. Any reforms introduced can be easily bypassed by its instigations, and when 30-40% of the economy is estimated to be undocumented (as is the case in Pakistan), this means that, at the end of the day, the reforms will not really take root. 
  • As mentioned above, the informal economy can serve well to hide illicit and downright criminal activities; even more so when the sector is as large as Pakistani real estate, which, according to some estimates, has a volume running in billions of totally unaccounted-for-dollars. 
  • Locally, an oft-discussed issue regarding the undocumented economy in general and real estate, in particular, goes along these lines: the authorities have been unable to tax the sector effectively because of its non-rationalized nature. 
  • The unregulated nature of the sector has also meant that it is highly uncompetitive and random. The prices have been raised on the basis of mere speculation; hence the preponderance of the frequent ‘bubbles’ that deflate the prices significantly ‘all of a sudden’ after every few years. 
  • Two issues attendant to and stemming from the ones mentioned above lead to the market not contributing anything, relatively speaking, to the national economy – when analyzed for its actual size and volume. 
  • And, despite such a large amount of investment being poured into the sector, it doesn’t contribute as much to construction (developmental) activity. Most of the money is allocated towards buying and selling land, which, at the end of the day, serves no purpose at all. It is not, then, surprising that Pakistan has a housing shortfall running into millions of rupees. 

How the situation has stacked in this decade

Img source: southpace.com

Both the current and previous governments initiated efforts towards documenting the sector. The former made inroads; but whenever they faced internal political pressures, they capitulated. They did, however, set grounds for the current government to push through with what it is attempting right now. 

The current government, led by Prime Minister Imran Khan, has been spending political capital left, right and center (literally) to change the very nature of the economy and bring in reforms where it sees fit. 

Now the previous government, while it did capitulate on a number of matters, it did continue making efforts to generate revenue through real estate – even while it ignored the glaring regulatory loopholes exploited by citizens for not filing their income taxes or wealth statements. 

The current government seems to have doubled down on those efforts and its stated goal in the current budget has been to document the economy. It has, of course, taking measures to increase its revenue generation capacity as well. 

From a real estate perspective, these measures have included the following: 

Img source: startupcityindia.com
  • The previous government had created the loophole of a ‘non-filer’ — a person who didn’t file taxes and who, as a result, was charged with exceedingly high tax rates. This government has not only imposed higher taxes on such people but has also stripped away any modicum of legal cover over the term; making the practice a prosecutable offense. 
  • Another loophole of the difference in valuations between the market and the ones announced by the government, which causes the black money in the market to accumulate, is also being remedied by raising the government’s valuation charts. This will help both in documenting the property sector and taxing it. 
  • Lastly, an overarching amnesty scheme was announced earlier this year. It is ironic that Prime Minister Khan, when he was in the parliamentary opposition only last year, basically sabotaged a similar amnesty scheme announced by the then Nawaz Sharif-led government. At the time, Khan had announced that after coming into power, he would be taking action against anyone found to have availed the amnesty scheme.

An easy way to keep the money and real estate sector undocumented has been to avoid formal banking channels. The current government has made efforts to make cash flows through this route either a mandatory or a recommended practice. In its recent budget, it imposed penalties on the avoidance of banking channels. 

Data from the country’s top real estate portal, Zameen.com suggests that Pakistan’s real estate market has slowed down incredibly in the past couple of years; however, if one were to supplement this finding with anecdotal evidence, it would become evident that this is primarily just a bubble of ‘fake price appreciation’ created by the shady sections the sector which has now collapsed. 

United Arab Emirates and Oman – should you make them your next vacation destination?

There has been a lot of talk lately about the recent events that took place in the Gulf of Oman. UAE and Oman are quite popular vacation destinations, but there have been some concerns among tourists about the safety of traveling to these countries. That is why we decided to update you on the latest events, their consequences, and what that might mean for anyone who wants to visit one of these two countries in the near future.

The latest attack

source: internationaltraveller.com

Earlier this month, two tankers were attacked in the Gulf of Oman that connects the Arabian Sea with the Strait of Hormuz and it borders Oman on the south, United Arab Emirates on the west, and Iran and Pakistan on the north. It is extremely important as it represents the route through which 20 percent of global oil consumption passes coming from the Middle East. What is worrying the Turkish Foreign Ministry the most is the fact that this is the second time that commercial ships in the Gulf region have been targeted in the last month. The tankers were sent from Qatar and Saudi Arabia to Taiwan and Singapore. Last month, the UAE reported that two other oil tankers were hit. Luckily, in the latest event, all crew members were evacuated and safe. Based on the damage on the vessels, the International Association of Independent Tanker Owners has concluded that the attacks were well-planned and coordinated. However, the cause of the attack still remains under investigation. It is suspected that the attack was carried out with “significant operational capacity,” as the UAE, Saudi Arabia, and Norway told the UN Security Council.

Is it safe for you to visit?

source: nttoman.com

It is reasonable that you worry about your safety and researching the country before visiting is commendable. UAE and Oman have been popular destinations for many years now. Usually, people would get confused once you tell them you’re visiting Oman as the questions you get are typical “Why?” and “What is Oman?” I feel like all that is starting to change.

The popularity of UAE and Oman among tourists is growing despite the unfortunate events that occurred recently. After contacting the UK travel agency, Value Added Travel, to inquire about the potential drop in interest in these countries among tourists, we got a rather unexpected answer. It seems that the popularity of the two countries continues to rise steadily. Many people are still choosing the UAE and Oman as their next vacation destinations.

Oman is often seen as one of the hidden gems. Stunning scenery and friendly locals are there to make your stay unforgettable. The country is working towards becoming the next huge destination not only for Europeans and Gulf States residents but for Americans as well. You can choose between pristine beaches and a stunning ride to the depths of a desert.

As far as the UAE is concerned, it still remains a very popular choice among tourists that are looking for a completely new and intriguing experience. Abu Dhabi is still full of tourists and it seems that is not going to change any time soon. The country is recognizable for its golden dunes and stunning modern buildings, but it has so much more to offer. Abu Dhabi was even voted as the world’s safest by online crime index Number. From amazing shopping malls to incredible adventures in nature, this country has it all.

How Infrastructural Development Dictates Real Estate Trends in Islamabad

Infrastructure developments across the globe dictate real estate buying trends. The practice to benefit from such developments is particularly common among veteran real estate investors. In this regard, access to correct information and the status of on-ground development work is crucial. This is often why only a select few people end up benefiting from these projects.

The Infrastructural Transformation Promised for Pakistan

source: pinterest.com

The situation is no different in Pakistan. Despite being a country that familiarises itself with mega development projects launched under the China-Pakistan Economic Corridor (CPEC), real estate investors are already queued in to get their share from the expected growth in the real estate value.

The sentiments are justified as the CPEC-related developments are planned all over the country. In fact, according to a report shared by The Diplomat, the economic corridor is all set to help Pakistan become the next Asian Tiger.

At the same time, the infrastructure projects planned in the backdrop of CPEC to assist the original projects or to help the city blend with these developments are also leaving their mark. This is particularly true for the capital city where rapid change in the real estate buying trends has been witnessed over the past few years. The launch of new infrastructural development projects catalyses this shift.

Real Estate Buying Trends in Islamabad

Real estate buyers from Pakistan and overseas find certain areas more attractive for investment than others depending on the active infrastructural development projects. The decision is based on various other factors as well. These include real estate market price, development status of a project or housing scheme and how soon can it serve the end users. Nonetheless, the shift in focus for infrastructural developments tops these reasons.

source: wikipedia.org

Being a much younger city in comparison with other metropolises of the country, Islamabad is still expanding. While this offers long-term real estate potential in some areas, many have successfully managed to score handsome short-term gains.

Assessing at the investment shift seen in the recent past, buying trends observed right now and the neighbourhoods that could emerge as the new playfield in the future should help you see how infrastructural developments dictate real estate trends in Islamabad.

The Past

High real estate demand was recorded in projects surrounding the Islamabad International Airport. Please note that despite being located on the city’s western edge in Zone II, this mega development triggered investment activity during the mid-2010s. Quite interestingly, developers of many real estate projects here didn’t really need to spend a fortune on marketing campaigns to attract investment. Most of these projects benefited from the advertisements done by a few developers.

Investment activity in Zone II last for a three years before the situation become less favourable post the introduction of new taxation system in July 2016. In the meanwhile, construction work at the airport also completed. This marked the time for investors to make an exit. But where would they head next? To an area where rates were comparatively low and the planned infrastructural development promised real estate in the future.

The Present

source: dailytimes.com.pk

Neighbourhood of the planned signal-free Islamabad Expressway was always a huge attraction for real estate investors. When compared with housing projects surrounding Islamabad International Airport in Zone II, societies located on Islamabad Expressway are closer to the central parts of the city. In addition, the expressway is also home to many reliable and popular housing projects. All of this was bound to draw investors’ attention.

Islamabad Expressway and its vicinity is currently the most active part of Islamabad in terms of real estate investment. Fortunately, property rates in many of these societies is undervalued due to lack of investment activity and the consequent slow development work.

Furthermore, many of these societies are also popular among the end users looking to buy houses in Islamabad. To buy houses in Islamabad, users are visiting prop.pk.  This is also a prominent reasons why investors find these societies safe for investment under circumstances when many are laying low while the Government of Pakistan tries to track and document the black money.

The Future

The investors next stop could be area marked for the construction of Rawalpindi Ring Road, which is a major road project planned for Islamabad’s twin city of Rawalpindi.

The 55-kilometere long and several-lane wide road starts near Rawat on Main GT Road and ends at Islamabad Thalian Interchange on Lahore-Islamabad Motorway M-2. This project was conceived years ago and reportedly, many real estate developers have their projects planned, which will be announced when the time appears ripe to gain maximum gains.

source: solutionplanthire.com.au

The planned route for this ring road is also home to prominent housing schemes. This is in addition to the mega projects the government has planned to set up around this road avenue. Before construction work on this infrastructural development formally kicks off, the neighbourhood will remain dormant in terms of investment activity. At the same time, veteran investors continue with purchasing land in this area.

We might be able to see a huge number of investors with smaller budget get active as soon as the government announces to start development work. In the meanwhile, prices will continue to inch up. Those willing to increase their investment duration a bit for scoring much more impressive returns on investment should get active now.

The real estate buying trends in the next 10 or more years will be dominated by the projects initiated under the CPEC. In the meanwhile, the new master plan 2040, which is currently in the making, might confine the city from seeing further expansion. This could also limit opportunities for investors who by then might be more interested in high-rise developments, mega commercial projects and industrial land. Who knows!

Will Pakistan be successful in reforming its real estate taxation regime?

Pakistan’s real estate sector is known within the country not only for its (unnecessary) complexity but also for its resistance to any form of structure, regulation or organization. Nothing surprising about that, however. The state of affairs suits both the professionals and businesses engaged in real estate activity. It may not exactly suit the government or the public in general, but the governments and public representatives have had other priorities. Mainly the arduous task of updating the century-old British laws that have been barely amended since the independence more than seventy years ago was on no one’s priority list until recently.

Ultimately, it was modernization that caught up with real estate itself. The rise of online real estate in the early 2010s, particularly that of Zameen.com and its collection of publicly available data made the real estate more accessible. Incidentally, this was a couple with the beginning of the government’s efforts to regulate real estate.

Source:houseofpakistan.com

All of this may not have been accidental, however. Urban real estate sector had been developing into a good avenue of investment during the previous decade. Bahria Town’s model of selling immovable property in the form of files (a document guaranteeing a plot of land within a particular project – essentially making it a movable property) proved really successful. Bahria Town’s practice of artificially tinkering with the prices—sometimes on a daily basis—also helped set a trend for profiteering that would benefit the real estate dealers and, perhaps, even the savvy ‘short-term investors’.

Also affecting the real estate was the fact that post-9/11 a lot of Pakistanis abroad had reasons to look back to Pakistan or have back up there just in case they found themselves forced to return. They found real estate was the best option since it served as a lucrative investment – and, if needed, a backup home to which one could return.

In early years of this decade, real estate in Pakistan had developed a reputation for generating high returns unmatched in real estate anywhere else in the world—even while it may not have made much sense to an outsider.

Efforts at reform

Source:hamariweb.com

The abovementioned reputation was what drove the former government under Prime Minister Nawaz Sharif to push through a series of reforms over the years. Generally, these efforts have been geared towards documentation of the black money that forms a large section of the real estate economy, and towards the generation of revenue.

Since the real estate has never been much documented and the taxes are generally collected at the time of transfer of property, the authorities have introduced a number of property valuation rates over the years for revenue purposes. This has been done to curb the practice of undervaluing the property since no authoritative source exists for the value of a property, the two parties to the transfer of property could write whatever amount suited them and pay taxes on that amount. The Deputy Commissioner (DC) Valuations were introduced for this purpose.

The deputy commissioners were given the authority to announce minimum rates for areas within their jurisdiction. Any property could not be registered at values lower than DC valuations.

However, these DC valuations were not updated as frequently (and/or as accurately) as was needed, particularly in the past two decades when the property prices in the major urban centers shot up due to the reasons explained above.

This meant that while people could casually (and without any legal repercussions) buy or sell the property at prices as high as PKR 20 million and register it for as low as PKR 5 million. The remaining 15 million will go undocumented and untaxed–hence the large portion of ‘black money’.

When a conversation on the matter began, the government came up with a tax amnesty scheme (for the documentation of that money) and new valuations for the urban centers around the country – the FBR valuation. The FBR valuation is higher, and the amnesty (that lasted for almost three years between 2016 and 2019) allowed people to register their property at FBR valuation and pay minimal tax for the difference between DC valuation and FBR valuation. The amnesty saw mild to moderate success over the years and while large numbers got chucked around, large sections of real estate and the money invested in it remained undocumented.

The story of the current government

source: againstthecompass.com

The previous government in a last-ditch attempt to win support just before the elections last year introduced a number of much-needed measures to document and tax real estate. The non-filers of income tax could no longer buy a property worth more than PKR 5 million. The property was to be registered at its market value while the FBR and DC valuations were to be abolished. The authorities could also buy off any undervalued immovable property by paying double its registered/declared value.

Another tax amnesty was introduced to go with those measures as well. However, it also ended with only a mild success. At the same time, the above measures choked the real estate activity almost completely – and with it, the remittances from the overseas Pakistan which were previously directed towards real estate for investments.

The current government, as soon as it took stock of the economic conditions—particularly of its balance of payment issues, which was further stressed by lack of remittances—was quick to fold on some of these matters.

Will the current be able to reform the real estate taxation regime?

The requirement of being a filer of income tax for buying a property valued higher than PKR 5 million is set to be removed. Meanwhile, the part about buying an undervalued property or abolishing FBR rate was conveniently forgotten.

With that said, the current government under Prime Minister Imran Khan has still doubled down on the remaining measures introduced by the former government. FBR valuations were raised earlier this year, while the recent announcements suggest that both DC and FBR valuations around the country will soon be raised to current market levels.

source: thehindu.com

This government introduced its own amnesty scheme as well—this time exclusive targeting the documentation of economy and not generation of revenue. Whether the government will be able to incentivize (or pressure) enough realtors to document their assets is yet to be seen.

However, according to all indications, the government will have to continue the process of trying to reform and document the real estate – particularly since it has the international pressures (to document economy, for terrorist-funding fears), and the pressures from IMF to set its accounts straight.

To the government’s favor, they still have a fair amount of political capital and about four years to achieve that – as long as it can continue making the effort and not fold to the pressure from real estate lobby.

Are CPEC-linked Property Rate Hikes in Pakistan Short-lived?

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Investment security figures as a major concern for foreign investors who contemplate benefiting from Pakistan’s emerging role in the global economic and trade designs of its domineering Chinese neighbour up north. The two countries signed a USD 46 billion China-Pakistan Economic Corridor (CPEC) agreement back in 2015. And since then, the Pakistani state and its administered peoples have considered CPEC to be the long-awaited saviour for their nation’s seemingly never-ending economic crises.

In the absence of an apparent and business-conducive regional environment, a number of investors have recently been left wondering whether the current CPEC-related property hikes in Pakistan are – indeed – short-lived. And according to most economic experts who are familiar with the turbulent financial history of the country, their reservations regarding the sustainability of the said price increments are warranted. Especially when the developments planned under the CPEC initiative are looked into individually – and not in their political and media-aggrandized totality.

Here is a quick overview of what CPEC holds for Pakistan in terms of property (and other infrastructural) developments.

CPEC-related infrastructural developments planned in Pakistan

source: weforum.org

According to a 2017 report featured on CNN International, CPEC – being an integral part of China’s One Belt, One Road initiative – has come with a ‘mega opportunity’ for Pakistan to develop its economy. The said article briefly makes mention of the projects planned under this corridor; which include, broadly, the development of road networks, railway lines, fibre-optic cable connections, a deep-sea port, solar farms, and coalmines.

As per the Pakistani government’s official CPEC website, the more prominent of these predominantly Chinese-sponsored concerns include:

source: pcq.com
  1. The main CPEC route (a 3,000 kilometres-long road connecting Gwadar with the China’s Xinjiang province)
  2. An upgrading of the existing Pakistan Railways Main Line (ML-1)
  3. The New Gwadar International Airport
  4. The development of Special Economic Zones (SEZs)
  5. A Gwadar Eastbay Expressway
  6. Water treatment plants, and facilities for water supply and distribution
  7. A ‘Pak-China Friendship Hospital’ facility
  8. A Gwadar ‘Livelihood Project’
  9. The Bao Steel Park, and the establishment of stainless steel, petrochemical, and other local industries
  10. The Gwadar University
  11. A Gwadar ‘Smart Port City’ Master Plan
  12. Matiari-to-Lahore & Matiari-to-Faisalabad transmission line projects
  13. Power plants in Port Qasim
  14. The Hydro China Dawood Wind Farm
  15. The Suki Kinari Hydropower Station
  16. Engro Thar Blocks I & II
  17. Coal-based power projects in Gwadar
  18. The Quaid-e-Azam Solar Park
  19. The Jhimpir Wind Park
  20. The Sachal Wind Farm
  21. The Karot Hydropower Station
  22. The Hub Coal-fired power plant
  23. The Western Energy Wind Power Project
  24. The Kohala Hydel Project
source: pcq.com

An ambitious construction gig!

Some of these projects have been already completed, while a majority are slated for construction & operation in the next couple of years. But knowing the unrelenting pace of Chinese industry, these other developments may come around into fruition perhaps sooner than is expected.

The impact of CPEC on Pakistan’s property market (as a whole)

source: brandsynario.com

For any foreign analyst bent on critically examining this causality, undermining the positive impact of the above-mentioned development projects on Pakistan’s property market would be unfair.

If we consider the case of the 3,000 kilometres-long CPEC Route alone, as soon as its section near Karachi (the country’s traditional port city) was finalised, the real estate situated in the adjoining areas experienced major price hikes due to a sudden outpouring of demand among property investors and developers. The same trends were further reported from all the major towns located along the said route.

While the CPEC Route is further divided into its Central, Eastern and Western sections (and will be developed as such), many other highways and road networks will be constructed in Pakistan in conjunction.

As a general property price appreciation principle, the development of road infrastructure is one of the major factors that trigger price hikes in any area; no matter how remote it is. So these consistent real estate investment breakthroughs, spurned by this created proximity, are not surprising. And this rule applies to all kinds of property, be it barren land incapable of much crops cultivation, agricultural land, or land that may be reserved for special purposes.

Landowners who are lucky to have the main CPEC Route, or its connecting road networks, pass through their land are now looking at guaranteed long-term investment returns.

On an interesting side note, the heightened current and expected demand of property in Pakistan has given birth to many new online real estate portals, including the recently launched Prop.pk. At the same time, the existing market contenders are keenly preparing to attend to the people seeking quick information on picking the right property investment options in the country (in the backdrop of CPEC).

How did Gwadar’s property market – specifically – respond to these developments?

source: dawn.com

Despite how vigorously the government’s infrastructure projects in Gwadar are being carried out at the moment, the real estate market in this port city remains active only a couple of times a year. Its performance flares up mostly when overseas Pakistanis return home for their annual holidays, or during the start and end of a given year. In other words, property demand here attains a noticeable boost when the city receives visitors.

Observing this trend, many hasty analysts tend to assume that the prices deflate during the remaining parts of the year. This conclusion, however, is not borne out by the ground reality.

A property investment gig in Gwadar is not a short-term affair, and most experienced investors are aware of this fact. For each property purchased for investment (non-residential) purposes here, the usual intention behind the decision to is to hold it for a medium to long-term duration – roughly spanning 3 to 5+ years. And since most of these investors normally come with good holding power, prices here don’t experience major drops in the absence of new stakeholders.

According to the stats maintained by Zameen.com, Pakistan’s leading real estate portal, property rates in Gwadar have gone up by 67.65% since July 2016. And if you’ve been following the country’s real estate market closely, you may recall that this was the same time when the former government introduced a new property tax collection regime that brought a considerable drop in aggregate real estate investment volume.

But even in these harsh investment conditions, Gwadar’s property market continued to battle on and retain much of its real estate value; a testament against the notion that the CPEC-related rates hike in Pakistan is short-lived.

How does the property market in Pakistan currently fare?

source: bohatala.com

Due to the introduction of the new property tax collection mechanism introduced in 2016, real estate investments in the country (as referenced) have taken a major hit. Major price drops have been recorded in projects and locations that were previously considered to be ‘investor favourites’. And this development has nothing to do with CPEC, since the projects in question hold no direct association with the economic corridor.

As some token of providence, this situation conversely spurned genuine buyers to take the lead in buying property for their genuine residential (and not sales-oriented) needs. The high real estate demand among these end-users, in fact, has kept the market from experiencing a complete crash-like situation. And nowadays, instead of experiencing sharp price hikes based on speculative investment trends (as was previously the case), the market tends to record a gradual yet consistent rise in property rates across the country.

This trend has also been reported by non-Pakistani sources. A 2018 article published by Khaleej Times further goes on to detail how property buying stats shifted when the current government imposed certain sanctions on non-filers looking to buy some local real estate.

Cautious, yet zealous, expectations…

source: scmp.com

The current pace of market activity indicates that Pakistanis, for the most part, are aware of the rising worth of real estate in their country.

Their optimism, if you ask any typical middle class worker going about his (or her) daily routine, largely rests on the country’s economic transformation which CPEC promises to catalyse and usher in. And while these feverishly anticipated developments may not offer them many desirable gains in the short-term, the returns on investments in the long-term, they reckon, will be totally worth the wait.

It is clear that they have affixed their future with weighty expectations.

Only time will tell what will become of them.

Xinjiang Issue and China’s Public Image in Pakistan

Xinjiang Issue and China’s Public Image in Pakistan by Dr. Khuram Iqbal

On November 2nd, 2018, Pakistani Prime Minister Imran Khan is heading to China for a meeting with the top Chinese leadership. Besides concessional loans for Pakistan, both sides are expected to take stock of issues ranging from “Make in Pakistan” to Naya Pakistan Housing Project and Islamabad’s space program that aims to dispatch its first astronaut into space by 2022. Imran Khan is also likely to request Chinese assistance for his ambitious poverty alleviation program.

There are few loose ends with regards to CPEC that both sides will work to tie up. The PTI government intends to convince the Chinese side to priorities hydropower projects instead of coal-fired energy projects, including the western route project (Dera Ismail Khan-Yarik-Zhob road) in CPEC and most significantly revise the financing model of the $9 billion ML1 project on Build-Operate-Transfer basis. Previously, the multi-billion project under CPEC was to build on the Engineering-Procurement-Construction (EPC) model that shifts the entire financing risks to the federal government.

None of these issues is insurmountable. Beijing has already indicated that the new government’s demands are within the cooperation scope of the B&R initiative and China is willing to adjust the CPEC projects based on Pakistan’s needs. Laying to rest Malaysia-like speculations, Chinese Foreign Ministry spokesperson stated that China will make the PM’s visit a “complete success.” By assuaging Pakistan of her economic crises in a timely manner, and addressing her concerns on the mega-project, Beijing stands to strengthen its image of a “savior and an iron-friend” in Pakistani public opinion.

image source: ft.com

There will certainly be no shortage of ardor when the leaders from both sides meet. One can also expect the sort of romantic sloganeering such as “higher than mountains, deeper than oceans, sweeter than honey and stronger than steel” that has become the hallmark of the bilateral relations. Behind this enthusiasm, however, looms a growing threat, which many in Pakistani and Chinese policy-making circles continue to overlook. Reports on Beijing’s purported forced re-education programs for Muslims of Xinjiang are depriving China of her hard-earned public goodwill in the country, where there are frequent displays of solidarity with Muslims suffering elsewhere in the world. The government’s inaction on such issues is often manipulated by terrorist organizations to expand their recruitment base among a large pocket of the Pakistani population, which considers its religious obligation to respond to the sufferings of Muslims anywhere in the world.  Xinjiang could have a similar radicalizing impact on Pakistani population as other international issues such as Palestine, Kashmir, Afghanistan, Iraq, and Chechnya have always had.

Although mainstream Urdu media often avoids adverse reporting on China, some segments of the country’s English press have been vocally opposing Chinese counter-terrorism approach as “heavy-handed.” Moreover, with the advent of social media Pakistani public is also exposed to Western media campaign criticizing China for forcefully re-educating millions of Muslims in thousands of schools established during recent years across Uighur Autonomous Region. Such a systematic media campaign can potentially revive pan-Islamism in Pakistan and galvanize public support for the Muslim minority chafing under Chinese policies. There is also a genuine fear that militant groups may manipulate anti-China mantra to justify targeting CPEC-related projects in the future.

What needs to be done to avoid such a scenario. Firstly, Beijing needs to come openly about her counter-terrorism policies in Xinjiang. There are, no doubt, number of reasons to be fully on guard. Multiple factors had contributed to making the Uighur area a hotbed of extremism.  Beijing’s deliberate use of this region as a recruiting and training ground for anti-Soviet Jihad during the Cold War, Soviet Union’s attempts to use Uighurs to split China, Xinjiang’s close geographic proximity to Afghanistan, and years of neglect by the central government made Xinjiang as vulnerable to extremism as Pakistan’s tribal frontiers. To avert the minutest possibility of Xinjiang turning into “China’s Syria or Libya,” the Chinese authorities adopted a strategy that reflects a fine combination of hard and soft CT measures. As far the hard measures are concerned, Chen Quanguo, the party secretary of Xinjiang and the man known as the architect of Beijing’s Xinjiang Strategy, established thousands of centers to for “de-extremification” of the vulnerable population through education in law, Marxism and vocational training. His approach is often termed “heavy-handed” by the international observers. But the official narrative rebuts such claims by citing a sharp decline in acts of terrorism since he took charge in August 2016.

image source: economictimes.indiatimes.com

Initially, Chinese authorities refused to admit the existence of such facilities and defended their CT policies through a series of op-eds in a number of Chinese news outlets. However, a few weeks ago, Shohrat Zakir, chairman of the Government of Xinjiang Uygur Autonomous Region, acknowledged the “vocational education and training program” to fight “three evil forces of extremism, terrorism, and separatism.” Similarly, last week a group of reporters affiliated with “Global Times,” the mouthpiece of Communist Party of China was taken to these facilities. The tabloid reported that “trainees receive free vocational training to improve their command over the country’s common language, national laws and regulations, and vocational skills, among others.” The Western media saw these reports as Chinese cover-up and damage control attempts to avoid further embarrassment ahead of UN review on November 6, 2018.

As the West and China lock horns on the issue of Xinjiang, Pakistani government may come under increased pressure to adopt a stance that does not only appease the religiously inclined domestic constituency but also safeguards its relations with China. Shielding public from “anti-China narrative” is certainly not going to work.  With a growing chorus between policymakers, media houses, and academia of the two countries, there is a need for a frank exchange of views on the issue of Xinjiang, which according to Chinese narrative can serve as a case study on countering extremism through development and re-education.

As Pakistani public is increasingly exposed to diverse views on China, CPEC and Xinjiang through traditional and social media,  it’s going to take a lot more than good intentions to sustain a friendship that is “higher than mountains, deeper than oceans, sweeter than honey and stronger than steel.”

Article written by Dr. Khuram Iqbal.