Accountability lessons from China

The writer is an analyst and commentator.

One of the things this PML-N government has done well is line up both public and private actors behind a national commitment to deepening and widening an already strong relationship with China. This is a win-win for Pakistan, on at least three fronts.

First, a stronger relationship with China is good for Pakistan’s economy. This is the underpinning of the China-Pakistan Economic Corridor. Any deal in which a low-performance economy can get over $40 billion in infrastructure is a good deal. If all goes even marginally well, Pakistan will see a significant boost in its GDP numbers within a decade – which owes itself directly to the CPEC infrastructure.

Second, being closer to China means that Pakistan has to pay more attention to China’s advice on a whole host of issues. One of the key issues China has regularly (but quietly) advised Pakistan on is to manage its relationships with its neighbours better. China’s advice to Pakistan to be a more likeable neighbour is motivated by two factors: one, China’s geostrategic interests, and two, China’s genuine affection for the people and state of Pakistan.

China’s economic and trade routes through Pakistan are adversely affected by turmoil within and around Pakistan, and so better Afghan-Pakistan relations, better Persia-Pakistan relations, and better Hindutva-Pakistan relations are an important factor in how China thinks about Pakistan and its value to the Chinese future. Equally importantly, as a well-wisher of Pakistan, China sees the economic value to Pakistan of improved bilateral relations between Pakistan and its three non-China neighbours in Afghanistan, Iran and India.

The one complaint all of Pakistan’s neighbours (including China) have had with Pakistan is the comfort-levels that violent extremists enjoy within Pakistani territory, within Pakistani society, and with, at least in the recent past, elements of the state. A more intimate bond with China during this Nawaz Sharif administration has come at the exact same time as a growing distance between the Pakistani state and violent extremists. This is not a coincidence.

Finally, a greater depth in relations with China may also serve to motivate the governance culture of Pakistan to adopt some of the better qualities that China’s leadership exhibits. This final point is, of course, a double-edged sword. As a robust democracy, notwithstanding its limitations, Pakistani governance is informed by noise and dissonance and chaos. Too many Pakistanis would love to see a more ‘managed’ governance culture that is intolerant of dissent, of the peripheries and of the freedom of Pakistanis to express themselves expression.

The social and political character of the Main Street in Pakistan is that there is no one, single Pakistani Main Street. Pakistani main streets are varied, and diverse, and so the chaos and frustrations of democratic governance is a non-negotiable element of a bright Pakistani future. However, where China can and does offer immense value is that despite its constraints in terms of democracy, China has a strong culture of accountability, and is committed to being governed as a meritocracy.

I was struck by how much this is true upon hearing that Xiao Gang was finally fired on Saturday, after several months of speculation about his future as the chairman of the China Securities Regulatory Commission (CSRC). If Prime Minister Nawaz Sharif is genuinely committed to Pakistan’s long-term partnership with China, he needs to examine the sacking of Xiao Gang as a textbook example of how modern economies deal with crisis. If the friendship with China is to have real meaning, it is these examples that Pakistani leaders will have to heed, instead of continually self-congratulating themselves on the cutting of ribbons made in, and bought from China.

First a little context. For almost a year and a half, the pace of China’s economic growth has shown signs of slowing down, not just temporarily but permanently. This has been accompanied by the emergence of President Xi Jinping’s emphasis on structural reform, over and above pure play GDP growth. This emphasis comes from the strategic decision by Chinese leaders to reorient the economy away from being exports-driven (the foundational platform upon which China has grown since the early 1990s) to being much more domestic consumption-driven, thus securing growth from the volatility of its principal exports’ markets. China thinks big and thinks long.

When President Xi took over in 2013, his biggest challenge was going to be to manage expectations of China, which had grown to become legend. For too many of us outside China, the country is supposed to grow at double digits every year. Yet as China has grown at that pace for almost three decades it is easy to forget the law of diminishing returns.

By early 2015 it was clear that China would not have a great year, and both the Chinese government as well as global financial institutions had to downgrade their GDP growth estimates to seven percent which, although it is almost double the rate at which Pakistan grew last year, is the lowest rate of GDP growth in over twenty years.

Appointed chairman of the securities regulator immediately after President Xi took office, Xiao Gang oversaw a loosening of policies that allowed for a major expansion of the Chinese equities markets. However, last summer, Chinese equities went humpty dumpty, and all the world’s stocks followed suit. The collapse of the price of stocks in China wiped out almost five trillion dollars in equity, and it came at the worst possible time (and possibly in part because of these times). Combined with the overall slowdown in the economy, the stock market collapse was an unmitigated embarrassment for China.

For over six months, President Xi and the Chinese leadership allowed Xiao Gang to clean up the mess he oversaw. Then, on Saturday, after having explored all other avenues they fired him.

Ordinary Pakistanis are all too familiar with what seems so alien to the prime minister and the merry hangers-on that occupy his real-world timeline. Just like in China (and around the world), when people make epic mistakes, they get fired. But in the world of Nawaz Sharif, people are immune from accountability and merit. You can essentially be incompetent once, twice, and three times, indeed ad infinitum, and yet there are no consequences.

When you are a peripheral political party with thirty-ish National Assembly seats and slim hopes of taking power, as Imran Khan and his party are, such lack of accountability is fine. The PTI and the Clean Tareen Brigades are accountable only to Imran Khan, and are not playing with Pakistani taxpayers’ money. They can essentially keep doing whatever they want. It doesn’t hurt Pakistan, and only scratches the PTI marginally.

When you are the dominant political force of the era and look like a lock to win the next election, as Prime Minister Sharif and his PML-N are convinced that they are, such lack of accountability is toxic and unacceptable. It is bad for PM Sharif, bad for the PML-N, and worst of all, bad for Pakistan.

Wave after wave of failure on the economic front has gone unchallenged, unnoticed and unheeded under PM Sharif since his third ascent to the highest office. From ensuring the regular supply of petroleum, to meeting revenue targets, to achieving projected GDP growth, to keeping the national grid up and running, to fulfilling exports forecasts, PM Sharif’s economic team has consistently failed to deliver the quality governance that it can, and should be, delivering.

The tragedy here is that these failures are a stain on an otherwise solid record of building international confidence and growing the country’s foreign exchange reserves. Moreover, these failures come during an era of sustained low oil prices – a huge opportunity missed?

In China’s governance culture, when you make a mistake, it potentially affects over one billion people. This has consequences. In the case of Xiao Gang, the consequence, delayed as it was, was getting fired. If the China-Pakistan relationship really is about more than just dollars and cents, the prime minister needs to consider carefully exactly what level of mistake it will take for him to begin to institute some accountability within his cabinet, among his senior advisers and within the party infrastructure that he presides over. Are there, or will there be, any consequences for failure in Pakistan?