The China-Pakistan Economic Corridor (CPEC) is a part of China’s ambitious One Belt One Road (OBOR) Initiative to link China with Europe. Started in 2013, the CPEC is a developmental project between Pakistan and its all-weather friend China.
China-Pakistan Economic Corridor (CPEC): 46 billion dollar project
China-Pakistan Economic Corridor is a whopping 46 billion dollar project which will connect Kashgar in Xinjiang province of China, with Gwadar port in Baluchistan which is the largest province in Pakistan. It is connected through a vast and complex network of roads as well as other infrastructure projects such as dams, hydropower projects, railways, and pipelines.
What is Pakistan’s interest in CPEC?
Under the ‘1+4’ cooperation framework of CPEC, ‘1’ represents ‘CPEC’ and the 4 includes Energy, Gwadar Port, Transport Infrastructure and Industrial cooperation. The Chinese investments are supposed to boost Pakistan’s 274 billion dollar GDP by over 15 percent.
- Energy needs of Pakistan: The large scale energy production has been termed as the biggest breakthrough of the project. Energy projects such as Karot Hydropower project, Karachi Nuclear power plant and World’s largest solar power plant in Pakistan’s Punjab Province etc are part of this initiative that can double Pakistan’s energy capacity.
- Infrastructure development: Like any other developing country Pakistan is also suffering due to lack of basic infrastructure facilities. With CPEC, Pakistan expects infrastructural enhancement which includes construction of a 2,000 km of road and rail network worth 10.63 billion dollars.
- Employment Opportunities: This corridor promises huge employment opportunities to all sections of the society.
- Away from Western Influence: CPEC provides Pakistan with an opportunity to work closely with a more reliable friend China independent of Western influence especially the US.
What is China’s interest in CPEC?
- Access to the Middle East and Europe: By materialising the CPEC project, China can save millions of dollars every year by shortening its route by about 12,000 km which is critical for energy imports.
- Gwadar Port: A fully operational Gwadar port in Pakistan provides the following benefits.
- It provides a link between Maritime Silk Road and the Arabian Sea.
- The port at the mouth of the Persian Gulf provides China with the shortest route to the oil-rich Middle East, Africa, and most of the Western hemisphere. Gwadar will have the estimated capacity to handle 19 million tonnes of crude oil per year, which will be sent to China after being refined at the port. At present, China transports 80% of its oil through the Strait of Malacca.
- Apart from these lucrative commercial benefits, China also has huge strategic and geopolitical advantages in the Indian Ocean region.
What are the major concerns for Pakistan?
Despite the fact that CPEC provides Pakistan huge economic potential, there are apprehensions regarding the success of this project.
The presence of Chinese army in Pakistan
The Pakistani Army had set up a special division to provide security for Chinese workers in Pakistan involved in CPEC-related projects. In addition to this, thousands of Chinese security personnel are deployed in Pakistan to provide security to Chinese workers in Pakistan. This can create a threat to the sovereignty of Pakistan.
The insurgent groups in Baluchistan are opposing CPEC as it disturbs the ethnic distribution of the region. This poses a threat to CPEC as Gwadar port which is situated in Baluchistan holds the key to the success of the corridor. Any further unrest in the area could completely destabilise Pakistan and its geopolitical interests.
The banned terrorist organisations in Pakistan poses a serious threat to the project. It may also hamper the relations with China in the long run.
The role of India
Pakistan believes that India is keen on sabotaging CPEC by funding and training insurgency elements in Baluchistan.
Hambantota Project Experience
The SriLankan Govt has taken billions of Dollars in loans from China for Hambantota projects which are also part of OBOR initiative. Now as we see, Sri Lanka is left at the mercy of IMF to pay back China’s hefty loans. In the same way, lack of transparency regarding the interest rates and other terms may leave Pakistan in the same situation.
CPEC and its Significance to India
From the time when it was initiated India opposed CPEC route and development of Gwadar port. The reasons are listed below:
- The planned CPEC route passes through POK and Gilgit-Baltistan, which India claims to be its own integral and indispensable territory, illegally held by CPEC also somewhat legitimises Pakistan’s ownership over disputed PoK and it may lead to the internationalisation of Kashmir Issue which India doesn’t want. Apart from this India feels that the high economic stakes in the project will push China to ally with Pakistan on the Kashmir dispute.
- With the complete realisation of CPEC, China will get a free corridor to move its armour and mechanised weapons which are a threat to India in the plains of Punjab and Rajasthan. In the guise of securing CPEC, China can permanently position troops on Pakistan soil not too far from the Indian
- Despite clarifications from China and Pakistan that the port at Gwadar will be used only for economic purposes, India fears that China may establish a naval base at Gwadar to ensure Chinese maritime hegemony in the Indian Ocean. India considers Gwadar Port as part of China’s String of Pearls” bases, that extends from its eastern coast to the Arabian Sea.
What can India do?
- In order to counter Chinese dominance in Gwadar Port, India has invested in Iran’s Chabahar port which is very near to Gwadar. Also, India, Iran, and Afghanistan signed a trade corridor deal giving India the land access to Central Asia from Chabahar, bypassing Pakistan.
- India can work on improving the relationship with Pakistan as it can provide the shortest land route for us to access Central Asia. Therefore a good relationship with Pakistan can give a boost to our trade relations with central Asian countries.
- India should keep in mind that realisation of CPEC is important as a stable and economically strong Pakistan is necessary for the peace and prosperity in the region.
- China-Pakistan Economic Corridor (CPEC) can act as a catalyst for economic connectivity and integration in Central Asia, South Asia, and West Asia.
- However, it should not jeopardise the India’s sovereignty through any channel. India should highlight its concerns via diplomatic initiatives to address it fears.
- India should be cautious while explicitly opposing the project as it would strain the relationship with China.
- Last but not the least a prosperous South Asia is possible only if India and Pakistan leave their political clout and work closely with each other to find an amicable solution to the bilateral Issues.
Article by: Sreeresmi S.
China-Pakistan Economic Corridor -Challenges and Prospects
Strategic importance of Pakistan in general and Gwadar in particular
One Belt, One Road Strategy
3. Project initiation in 2015
Domestic: 1. Security situation
2. Political Instability
3. Civil-military relations
4. Inter-provincial grievances
International: 1. India
2. Afghanistan and their Nexus
3. Gulf states
4. Iran (Chabhar port vs Gwadar)
5. American strategy to Contain China
Pakistan: 1. Economic Boost
China: 1. Shortest route
2. Safe passage (South China Sea)
Region: 1. Regional Economic integration
2. Transit trade facility to CARs
6. Suggestion: 1. Security measures
2. Border management
3. Political Stability
4. Regional Cooperation
China Pakistan Economic Corridor (CPEC) has a potential to bring regional economic integration and cooperation. It is a win-win situation for both China and Pakistan as they are the primary beneficiaries of the project. It has a capacity to cater to the needs of the landlocked Central Asian States. Moreover, it will provide safe and shortest route to the fastest growing Chinese economy. It will also stimulate the economy of our country. The new emerging power dynamics pose serious challenges to the CPEC. If these challenges are effectively tackled, it may lead to economic interdependence which could be a milestone for peace and economic development for the region.
Pakistan has a key strategic importance in the region. From Eastern side, arch-rival India is situated. India is the largest democracy and the biggest emerging market in the world. From western side of the border is Afghanistan that is one of the most troubled zones in the world. War is ongoing there since 9/11. China, the second largest economy and the most dominant all over the global markets, is from northern side. Iran is also in the global spotlight due to its nuclear program and its bitter rivalry with the US, Israel and the Gulf Arab states. Moreover, 21st century is called the Asian century. This continent has become a pivotal to global politics. Besides, Strait of Hormuz from where worlds one-third oil passes through lies near the Gwadar port. Therefore, Pakistan is situated at the crossroads of oil and gas-rich countries and the largest economies.
Chinese president Xi Jinping announced One Belt, One Road policy in 2013. It is a long term transnational strategy to connect Asia, Africa and Europe through a network of highways, railways and ports. China took this initiative to access markets as china is the second largest economy and the emerging superpower. One Belt, One Road policy consists of mainly two parts. One is New Silk Road and the other is Maritime Silk Road. This strategy is inspired from the ancient Silk Route. In past, Chinese Silk was transported to European Markets from one country to another. So, the China-Pakistan Economic Corridor is part of One Belt, One Road policy.
Due to Gwadars strategic importance, the CPEC was under consideration since long. Ex-president Pervaz Musharaf proposed this project during his tenure, though it could not be materialized owing to the deteriorating law and order situation of the country. During PPPs government, Singapore was handling the Gwadar port. The then President Asif Zardari took the initiative and cancelled the contract with Singapore that was dealing with the development of the port.
After cancellation of contract, it was signed with China. In 2013 Chinese Premier Li Keqiang visited Pakistan. Both the countries signed Memorandum of understanding (MoU) and Gawdar ports development and operations were handed over to china.
2015 was a landmark period for the history of the two countries. Chinese President Xi Jinping made a historic visit to Pakistan in April of the same year. During his visit, Pakistan and China signed 51 Memoranda of understanding (MoUs) of 46 billion dollars. It is the largest ever Foreign Direct investment (FDI) in the country. It encompasses building of huge infrastructure development, roads, restructuring of railways, energy projects, etc. CPEC will begin from Gwadars deep sea port to Kashgar, Chinese Xinjiang province.
Since the beginning of the idea of CPEC, it faced multiple challenges. Domestically, poor security situation is one of the biggest challenges of the country. Terrorism engulfed the region after 9/11. Suicide bombings and targeted killings were routine. Situation went from bad to worse. Fear gripped the entire country. Hardly, a city was immune from this menace. The sensitive installations like Karachi Airport, Mehran Base, Army Headquarters (GHQ), etc. were attacked. Attack on Army Public School (APS), Peshawar was the extreme of brutality where 146 innocent school children were martyred. Moreover, many notable personalities like Benazir Bhutto, KPKs senior minister Bashir Bilour, Interior Minister of Punjab Shuja Khanzada became victim of this scourge. Security is much better now than the past. However, still managing security remains a challenge. Mainstream media reported that there is 70% decrease in terrorism related incidents as compared to pre-2014 situation. Unfortunately, on October 24, 2016, terrorist carried out attack on Police Training School in Queeta in which more than 60 people were killed. It indicates, despite military operations and relative peace, security challenges persist.
Political instability is another important challenge which our country is facing. Since its inception, instability continued in a new born country due to the absence of the constitution. First constitution was promulgated after 9 years. The constitutions of 1956 and 1962 were abrogated by military dictators soon after the promulgation. After the death of Liaquat Ali Khan, in a short span of time from 1951 to 1958, six prime ministers were dismissed and installed one after the other. Benazir Bhuttos and Nawaz Sharifs first and second tenure met the same fate. Thus, the frequent change of governments without completing the tenure of five years weakened the country politically. But, last PPP government completed its five years. It paved the way for successful democratic transition.
Frequent martial laws weakened the political setup. Martial laws started soon after the independence. Iskander Mirza imposed first martial law on October 7, 1958 and Ayub Khan, Yahya Khan, Zia-ul-Haq and Musharaf followed suit. Pakistan is ruled almost half of its 69 years by these military dictators who ruled the country according to their own whims.
Civil-military relations heavily influence the domestic politics. Because of the repeated martial laws, there exists a civil-military imbalance unlike in other popular democracies. The government enjoys nominal power in the domains of foreign and defense policies with reference to India, Afghanistan and America. Former Foreign Minister Hina Rabbani Khar admitted in Al-Jazeerahs program Head to Head, military has a larger role in the country. Military occupied that space partly due to the inability of the politicians to manage the political affairs effectively. Ayub Khan while serving army chief of the country was appointed defense minister as well. It is a rare possibility in successful democracies. Besides, in the decades of 1950s and 1980s, ruling party and the opposition indulged in the politics of leg pulling. It weakened the institutions and paved the way for military interference. Imbalanced civil-military relations created a mistrust between the two important pillars of the state. In spite of that gulf, situation is better than it was in the past.
Inter-provincial grievances are one of the serious challenges which CPEC is facing. It is alleged that the ruling party at the centre is trying to maximize benefits for Punjab province at the cost of other provinces. It created rifts between the federal government and the provinces. Major bone of contention was the route change. KPK government protested that the federal government wants to work on the eastern route which passes through Central Punjab. It is a longer than the western route. However, the proposed route is the wester route which passes through KPK. It added further to the inter-provincial mistrust. According to the daily Dawn, Chinese government urged the Pakistani leaders to sort out the differences. Chinese ambassador to Pakistan Sun Weidong met the leaders of the main stream parties in this regard. Thus, Prime Ministers Nawaz Sharif convened an APC (All Parties Conference) where inter-provincial grievances were addressed. Provinces were assured that there is no change in the proposed routes. Moreover, provinces would enjoy the equal fruits of CPEC. However, Skepticism is not entirely eliminated.
Apart from domestic, international challenges are also hindering the progress of CPEC. Since partition, India left no stone unturned to hurt Pakistan. Both the countries fought wars in 1965, 1971 and 1999. In 1971, India supported Mukhti Bahini and fought alongside the rebels. Resultantly, Pakistan was dismembered. It was confessed by Indian Prime Minister Modi during his visit to Bangladesh that it was Indian support which helped the creation of Bangladesh. In the same fashion, India is trying to subvert CPEC. Army Chief General Raheel Sharif during his visit to the victims of the Civil hospital Queeta blast said, attacks in Baluchistan are the activities to undermine CPEC. Indian illegitimate demand is Gilgit-Baltistan is a disputed territory. Therefore, CPECs route passing through it is illegal. Prime Minister Modi authenticated the doubts in his address at Lal Qila, Delhi, Baloch leaders thanked him for his support. It was a reference to rebel leaders who are in self-exile. Moreover, Print Media reported, Modi expressed his concerns about CPEC with China that were disregarded by Chinese leadership. India is apparently not happy with that development. Arrest of Indian agent Kulbushan Jhadev testified to the fact of Indian involvement in Balochistan in particular and in Pakistan in general.
Afghanistan, our western neighbor, remains a problem due to its internal instability. Besides, Afghanistan claims sovereignty over the region of the Durand line region. However, that claim has no credence. That is an integral part of Pakistan. Even though, the people of that region are as happy as ever with Pakistan. Afghanistan always tacitly supported anti-Pakistan activities. The roots of almost all terrorism related activities are traced to Afghanistan.
For CPEC, Indo-Afghan nexus remains an arduous challenge. India in collusion with Afghanistan is creating security problems for Pakistan. India has made a base in Afghanistan from where it carries out terrorist activities. Former American Defense Secretary Chuck Hegel admitted in a leaked video that India has financed to create problems for Pakistan. Furthermore, the then Commander of the ISAF forces in Afghanistan General Stanley McCrystal also advised his government to refrain India from interfering in Pakistan that afflicted American interests in Afghanistan resultantly. This Indo-Afghanistan nexus is particularly troublesome because of the porous border. Infiltration becomes easier since Pakistan shares the longest border with Afghanistan.
In addition to that, Gulf States are also creating problems for CPEC. Oman and Arab Emirates are particularly anxious about CPEC. Because once the Gwadar port starts operations, it will minimize the importance of their ports. UAEs port which is the busiest port and it is mostly used for transit trade. Due to the strategic significance of Gwadar port in the region, it will impact the ports of Gulf States. Development of friendly ties between India and Gulf States are owing to these converging interests. Prime Minister Modi recently visited to these states in this regard. It was a rare occurrence. After many decades, an Indian Prime Minister visited the gulf monarchies.
Iran is also a challenging factor. Iran in cooperation with India is developing Chabhar port. India is investing around 20 billion dollars for the development of this port. It is in Seestan province of Iran at a distance of 72 Kms from Gwadar. India is investing in this port so as to neutralize the potential of Gwadar port. In fact, it is in competition to Gwadar. Indian objective is to connect Chabhar with the landlocked Afghanistan and Central Asia. Furthermore, Indian agent Kulbhushan admitted to have entered in Pakistan from Iran. Pakistan requested to Iranian President Hassan Ruhani to keep a check on Indian conspiracies hatched in Iran against Pakistan. India is investing in Chabhar to rival it to Gwadar. But, President Ruhani disregarded that Indian perception and said, Chabhar is not in competition to Gwadar rather both will complement each other.
In addition to that, America is aggressively pursuing the policy of Containment against China. China has become the second largest economy and an emerging superpower. America considers a rising China a threat to its global dominance. Gwadar port is part of New Silk route, America is creating hurdles for the Gwadar port. Besides, America perceives Gwadar port could be used for military purposes in future. As part of containment policy, America signed Strategic and Economic partnership with Indian. America has also established India Rapid Response Cell (IRRC) in Pentagon. That is a rare status enjoyed by any country. American support to India for the Nuclear Suppliers Group (NSG) is also part of that partnership. Their cooperation poses serious challenge not only for China but also for Pakistan.
If CPEC is properly managed, it will be a game changer for Pakistan. It is a largest ever foreign direct investment in Pakistan. During President Xis visit to Pakistan, both the countries signed agreements of 46 billion dollars. It will provide boost to Pakistans ailing economy. Pakistan is under heavy debt. According to Finance Minister Ishaq Dar, current debt is 73 billion dollars. Each year, a huge chunk of budget goes to debt servicing. In fiscal year 2016-17, debt servicing was around 25% of the budget. Therefore, CPEC will help Pakistan to become economically self-sufficient. According to rough estimates, CPEC will create 700, 000 direct jobs. Besides that, millions of people will be benefiting from it.
It includes a range of development projects. Out of 46 billion dollars, around 35 billion dollars are for the energy projects. The government is hopeful through that investment, they will be able to add the required electricity to the national grid which will end the shortfall. Prime Minister Nawaz Sharif in a public address assured, by the end of 2018, not only the load shedding will be ended but also surplus will be available. Furthermore, CPEC includes restructuring of decades old railways network keeping in view the modern standards. It also includes motorways, highways, industrial zones, economic zones, airports, etc. throughout the country.
CPEC provides a shortest route to china. The distance from the traditional Chinese route which passes through Indian Ocean, Strait of Malacca and South China Sea is around 13,000 Kms. On the other side, distance between Gwadar to Kashgar, Xinjiang province is around 3,000 kms. Therefore, CPEC provides easy access to China. It cuts down the travelling time from 45 days to 10 days. Freight charges would also be less than the traditional route.
Furthermore, CPEC is also a safe option for China. Shanghai port is not only far away but also that route can hinder the smooth supply of fuel. Because of ongoing dispute in South China Sea between China and South Korea, Japan, Malaysia, Vietnam, Brunei. Therefore, clashes might occur in future and that route could be disturbed. Other than that, there is a constant presence of American ships in South China Sea. America in cooperation with the rivals of China may trouble China. TPP (Trans-Pacific Partnership) with these countries is pact of that strategy to counter the growing Chinese dominance particularly economically. Therefore, CPEC is cheaper and secure option for China for the long term goals.
It can also fulfill the needs of the regional states. It can provide transit trade facility to the landlocked Afghanistan and Central Asian States. Sea trade is comparatively inexpensive than the other modes of transportation. For that purpose, Gwadar port can facilitate to these landlocked states. Pakistan offered CPEC access to Turkmenistan, Uzbekistan, Kyrgyzstan, Tajikistan etc. They showed willingness to participate and benefit from the project. These states can access to CPEC through Afghanistan. It will be beneficial to these Central Asian Republics (CARs) and to Pakistan as well. CARs can get easy access while Pakistan will earn through transit fee. Landlocked Afghanistan would also be benefitting from CPEC. Afghanistan can access the port as well as earn transit charges from the goods moving to the Central Asian Republics. It can also change the fate of Afghanistan.
This project will integrate the region economically and create interdependence. It will make the region more connected and peaceful ultimately. In Europe, one country fought with another like in World War I and II. That continent was a theatre of war in past. However, after the application of theory of regional integration, European Coal and Steel Community was established which led to the creation of European Union. The idea behind that was once the warring countries became economically interdependent, it would compel the states to go for peace instead of war. Because, stakes would be involved. In the same way, CPEC would forge economic interdependence that will promote peace in the region.
For the smooth operationalization of CPEC, peace is imperative for the country. In spite of the improved security, it remains a challenge for the long term. Terrorists still manage to carry out attacks like the recent violence in Queeta. For achieving that objective, comprehensive National Action Plan (NAP) was formulated to wipe out extremism and terrorism. It helped to tackle the menace of terrorism. Today, there is a tremendous decrease in terrorism related incidents. However, except few points of NAP, others remain unimplemented. There has always been a gap between devising and implementation of strategy in our country. It is need of hour to review the NAP and implement all of its 20 points.
Porous border with Afghanistan has always been a trouble for Pakistan. Terrorists after training are launched through that border. Afghanistan does not recognize the Durand line region so the western border remains unsealed. People move across the border even without visa. Effective steps should be taken to manage border so that terrorists infiltration could be stopped inside the country. Now, Pakistan has raised 29 wings in paramilitary forces for border security. This is the first time border management has been considered seriously along with a workable plan.
In Pakistan, political stability remains an internal challenge. Political stability is important for the success of CPEC. Because it is political decision-making which impacts the behavior of institutions. For achieving political stability, the three pillars of state legislature, judiciary and executive should work in harmony. Media should also play its vital role. Furthermore, all the institutions should work within their domains. Political interference in institutional functioning should be discouraged for internal stability.
Regional cooperation should be promoted. Relations with neighboring countries in particular while with other countries like Russia in general should be improved keeping in view the changing international political dynamics. Their participation and investment in CPEC should be encouraged. That is also in the interests of the country. As maxim goes, we cannot choose neighbors, but we choose friends. The geography cannot be altered. Thus, there is only option that is the promotion of peaceful coexistence. Pakistan has to forge regional cooperation for CPECs long term success. In order to achieve that objective, it is important to resolve long standing issues particularly with India and Afghanistan. Comprehensive dialogue which started with India should be carried forward on the basis of equality. Moreover, during Prime Minister Nawaz Sharifs visit to Afghanistan in December 2015, he assured them, the respect for sovereignty and Afghanistans enemies are Pakistans enemies. There is no denying there exists mistrust between the two countries. However, Afghanistan should be apprised of economic benefits. It is in dire need for economic development. Afghanistan can earn transit fee which will improve its economy. Furthermore, as Iranian president Ruhani suggested, Chabhar is not in competition with Gwadar, but both will complement each other. Recently, President Hassan Ruhani while meeting with Prime Minister of Pakistan in New York showed willingness to participate in CPEC. Therefore, promotion of regional cooperation is particularly important for CPEC.
In the end, CPEC is an extraordinary project for Pakistan and China. It will uplift the economy of Pakistan and cut down the distance for China from 13,000 Kms to 3,000 Kms. Moreover, it will be a game changer for the entire region. The landlocked Afghanistan and Central Asian States will get easy access to Gwadar port for trade purposes. However, it is very challenging task to materialize the full potential of CPEC. Regional cooperation and connectivity will also help in removing misgivings and pave the way for economic integration and peace resultantly. Thus, CPEC is a testimony for China-Pakistan relations that are described as sweeter than honey, higher than Himalayas and deeper than oceans. It is also a hope for the troubled region.