The China-Pakistan Economic Corridor is altering the political landscape for the United States, India, China, and Pakistan.
On Nov. 20, Pakistani Foreign Minister Shah Mehmood Qureshi boldly declared that the China-Pakistan Economic Corridor (CPEC) – the Pakistani component of China’s broader Belt and Road Initiative – was the country’s “top priority.”
Qureshi’s proclamation came just weeks after Yao Jing, China’s ambassador to Pakistan, announced that the first phase of CPEC – an infrastructure and connectivity project valued at $62 billion – was coming to a close, and that a second phase would soon begin.
What is the China-Pakistan Economic Corridor ?
The China-Pakistan Economic Corridor (CPEC) is the comprehensive planning of different types of infrastructure, transportation, energy production, and free economic zones in Pakistan . Pakistan and China are good friends and support each other at both the national and international levels.
They have shared geographic boundary lines and are connected through the Karakorum Highway (KKH) from Kashghar to Islamabad. Further, the highway is known as the Pakistan-China Friendship Highway and is continuously extending for transportation between both countries .
After the completion of the CPEC, Pakistan, and China relations will be stronger in both military and economic terms, which will further change the South Asia geopolitics .
The development of Gwadar Port, which allows China access to the Indian Ocean, is also the part of the CPEC project and is under the control of China. The presence of a Chinese naval facility at Gwadar Port will shift into a permanent presence in the Indian Ocean at some stage in the future.
The China-Pakistan Economic Corridor (CPEC) is a part of the One Belt One Road Initiative development project for the enhancement of Pakistan’s socio-economic development.
Moreover, this project not only speeds up the co-operation between Pakistan and China but also plays an essential role in the development of the whole region. Further, the CPEC will provide another energy route to Uzbekistan, Kazakhstan, Azerbaijan, and Turkmenistan.
China-Pakistan Economic Corridor includes:
- Integrated Transport & IT systems including Road, Rail, Port, Air and Data Communication Channels
- Energy Cooperation
- Spatial Layout, Functional Zones, Industries and Industrial Parks
- Agricultural Development
- Socio-Economic Development (Poverty Alleviation, Medical Treatment, Education, Water Supply, Vocational Training)
- Tourism Cooperation & People to People Communication
- Cooperation in Livelihood Areas
- Financial Cooperation
- Human Resource Development
Sustainable development goals have become the primary objective in the development process.
In the development process, transportation and infrastructure play a vital role in the socio-economic development of an area.
Transportation and infrastructure contribute to trade and economic support, which further leads towards sustainable development, stability, and peace.
Moreover, excellent infrastructure and trade cooperation provide a secure environment for foreign investors.
Infrastructure, transportation, and economic zones are the main strategies for the development of the remote deprived areas of any country.
A railway system and road networks enhance the ways of shipping, which further improves the social and economic conditions of the region.
A network of roads also provides easy access to the basic amenities of life, such as economic opportunity, health, education, and employment.
CPEC projects will be executed in short term, mid-term and long-term phases by 2017, 2025, and 2030. The main focus of the CPEC projects is to fulfill the increasing demand for energy in Pakistan and China.
According to the planning of the projects, 21,000 megawatts of energy will be produced, and in this context, power projects are to be implemented on an immediate basis in Pakistan .
China is going to the most significant foreign investment of 46 billion dollars in Pakistan under the CPEC projects, which will be about the 20% GDP of the economy of Pakistan . Table 1 below, shows the division of projects under the CPEC in Pakistan.
Table 1. Projects Division .
|Projects||Cost (Million USD)|
|Infrastructure and transportation Development||11,636|
|Gwadar Port Development||792.6|
|Others (Optical Fiber)||44|
The CPEC is not a single road construction project. It is a large project which includes regional interconnectivity, energy production, infrastructure construction, the establishment of industry, the improvement of agriculture, and poverty alleviation through the improvement of livelihood, education, and providing public health facilities. Moreover, the CPEC has three alignments that will pass in all provinces of Pakistan
Belt and Road Initiative (BRI)
The Chinese Government’s Belt and Road Initiative (BRI) is based upon a historical paradigm. In 1800, a German traveler devised the term “Silk Road” to describe a trade route from China to Europe and camels used for the transportation of different goods.
In this initiative, camels will be replaced with high-speed rails for the transportation of the goods.
The BRI project opens a new paradigm of global diplomacy and economic connectivity with neighboring countries.
Components of Belt and Road Initiative
The Belt and Road initiative (BRI) is a worldwide project of the Chinese government to connect China with other countries of the world through the Silk Road Economic Belt (SREB), the Maritime Silk Road (MSR), and the Digital Silk Road (DSR). See Figure 1, which shows the components of The Belt and Road initiative (BRI).
Figure 1. The components of The Belt and Road initiative (BRI).
Silk Road Economic Belt (SREB): The SREB is based upon six economic corridors; the China-Mongolia-Russia Economic Corridor (CMREC), the New Eurasia Land Bridge Economic Corridor (NELBEC), China-Central Asia-West Asia Economic Corridor (CCWAEC), the China-Pakistan Economic Corridor (CPEC), the Bangladesh-China-India-Myanmar Economic Corridor, and the China–Indochina Peninsula Economic Corridor (CICPEC).
Maritime Silk Road (MSR): The concept of the MSR emerged in the first visit of Chinese president Xi Jinping to Southeast Asia. The MSR is a comprehensive plan for the development of maritime infrastructure in different BRI participant countries. The Chinese Government is developing different ports and further connecting these ports with China under the MSR .
Digital Silk Road (DSR): The 13th five-year plan of “National Information” was published in 2016 by the State Council. The aim of the “National Information” was to build an “online Silk Road” to encourage domestic information technology companies to participate in the global digital world .
One Belt One Road (OBOR)
The land route of the BRI Silk Road Economic Belt (SREB) and the Maritime Silk Road (MSR) are together called One Belt, One Road. The SREB is based upon six land route economic corridors, as mentioned above, and the MSR based upon the sea route, which connects China with different seaports.
The MSR is based upon the concept of the “String of Pearls,” which is derived from the geopolitical theory and strategic culture. The OBOR will connect China with 60 countries, and about 70% population of the world will be covered. China has started the construction of OBOR. It has three routes; the southern, the central and the northern.
The CPEC is in the north route . The One Belt One Road initiative (OBOR) is a global project of the Chinese government to connect China with other countries of the world through the Silk Road Economic Belt (SREB) and the Maritime Silk Road (MSR) .
Furthermore, 65 countries have agreed to become part of the OBOR initiative. Moreover, the OBOR initiative’s main objective is to connect China with the Middle East, East Asia, Central Asia, South Asia, and different European countries through the SREB and the MSR .
Under OBOR, 65 countries of the world and many organizations have shown their interests in participating in this mega project. The importance of OBOR is increasing day by day, and 34 countries have a contract with China in this developmental project. Socio-economic development through OBOR is the priority of the participating countries in this initiative.
Economic Corridors under OBOR
The term “Economic Corridor” (EC) was first used in 1998 by the Asian Development Bank (ADB) was defined as a connection or network between two agents within a geographical territory that leads towards the market supply and demand sectors .
The SREB is based upon six economic corridors the China-Mongolia-Russia Economic Corridor (CMREC), the New Eurasia Land Bridge Economic Corridor (NELBEC), the China-Central Asia-West Asia Economic Corridor (CCWAEC), the China-Pakistan Economic Corridor (CPEC), the Bangladesh-China-India-Myanmar Economic Corridor and the China-Indochina Peninsula Economic Corridor (CICPEC).
China’s National Development and Reform Committee (NDRC) announced the CPEC in March 2015 under the One Belt One Road initiative. The CPEC, which only passes through Pakistan, is considered the smartest component of OBOR . Figure 2 presents the Economic Corridors under the One Belt One Road initiative.
Figure 2. Economic Corridors under the One Belt One Road initiative .
In the whole world, different kinds of economic corridors strategies have been implemented for the achievement of economic development and strategic growth . According to economic experts, economic corridors play a vital role in the improvement of economic growth and stability . Pakistan is a developing country, and its economy is also considered an emerging economy in the world. It is expected that in the upcoming era, it will become an economic hub of the world.
China-Pakistan Economic Corridor (CPEC)
China and Pakistan built good relations soon after the emergence of China in 1949. Pakistan was the first Muslim country that accepted China. Pakistan and China have all-season good friendships and relations.
Pakistan and China have historically had good ties from the military perspective, but now a new economic paradigm relationship is going to be established that concentrates more on economic, trade, energy, infrastructure, and investment cooperation .
After 1950, China and Pakistan built a friendly relationship. These cooperative relationships became stronger after 1960 because of the China-India war and the Pakistan–India war . Moreover, Pakistan helped China to become a permanent member of the UN Security Council, which further boosted China’s relationship all over the world. Additionally, Pakistan opened its air space for Chinese Airlines to make travelling easy for Chinese people.
Pakistan and China have always had a good relationship, but in 1970, both countries extended their involvement in every sector, and China even supported Pakistan when the US imposed restrictions on Pakistan.
Sustainable Development through Infrastructure Led Development
Pakistan has a border with the biggest economy of the world; China. The Exclusive Economic Zones (EEZ) construction idea is similar to the notion of an economic corridor .
The construction of infrastructure and the installation of energy production unites the development of Gwadar Port, and the establishment of special economic zones are the significant components of the CPEC.
After the completion of energy projects under the CPEC, Pakistan will be sufficient in the energy sector and have no more energy shortage problems. The CPEC will also create millions of jobs for the unemployed Pakistani youth.
The areas of Khyber Pakhtunkhwa and Gilgit Baltistan are naturally stunning. It is expecting that with the completion of the CPEC, tourism will increase in these areas. Furthermore, the Chinese investment in the CPEC will also be a source to attract tourists from other countries of the world [.
According to Sun Weidong, the ambassador of China in Pakistan, the construction of infrastructure, transportation, industrial and energy projects under the CPEC will be beneficial for socio-economic development across Pakistan in all provinces. The CPEC plan is not only to build a road but also a systematic plan to develop a network of roads, railways, and industries. Multidimensional infrastructure-led development leads towards sustainable development in Pakistan, as mentioned below in Figure 3
Figure 4 shows the node cities and situated on the CPEC route in northern and southern Pakistan.
Concerns abound about CPEC
They include a lack of transparency, high costs, a heavy dependence on Chinese labor, and major debt risks for Pakistan. These worries—frequently highlighted in research studies and even acknowledged in conversations with CPEC backers in Pakistan – formed the crux of a recent rare U.S. government rebuke of the project, issued by Ambassador Alice Wells, the top South Asia official at the State Department, in a speech at the Wilson Center on Nov. 21—coincidentally the very day after Qureshi declared CPEC to be Pakistan’s top priority.
Within the constellation of CPEC concerns, debt risk looms largest. To be sure, many CPEC loan repayment deadlines aren’t due for at least another decade, and a Chinese official recently stated that CPEC debt now amounts to less than a 10th of Pakistan’s total debt. Still, Islamabad risks a future fiscal train wreck by taking on so many Chinese loans at a moment when it’s already so deeply debt-ridden. Beijing has been trying hard to alleviate worries about Belt and Road-linked debt—but cases such as the seizure of a Sri Lankan port have unnerved many.
In Pakistan, public debt has already reached alarming levels. In mid-2019, it stood at a whopping a 86.5 percent of GDP—a 13.5 percentage point increase from the previous year. This problem can be attributed in part to the domestic debt of Pakistan’s floundering public companies – including the national airline and railway – which increased by nearly 250 percent between 2013 and 2018. These companies continued to borrow heavily in 2019, and Islamabad has made little headway in pursuing their privatization.
More broadly, Pakistan—which saw GDP growth fall to 3.3 percent in fiscal year 2019, a drop of 2.2 percentage points from the previous year – is in full-on austerity mode. Current and fiscal account deficits coupled with a new International Monetary Fund bailout package are obliging Islamabad to make major cost-cutting moves.
Against this backdrop of debt, slowing growth, and austerity, pushing ahead with CPEC spending risks further strains for an already-struggling economy.
The ruling Pakistan Tehreek-e-Insaf party has telegraphed some unease about CPEC. Soon after taking office in August 2018, it announced a review of all CPEC agreements, in an effort to address allegations about special perks for Chinese companies and other corruption-related concerns.
The next month, in an interview with the Financial Times, Commerce Minister Abdul Razak Dawood even suggested that Pakistan would suspend CPEC while Islamabad undertook its review: “I think we should put everything on hold for a year so we can get our act together. … Perhaps we can stretch CPEC out over another five years or so.”
Dawood later said his comments were taken out of context, but the message was clear: Islamabad had very real worries about CPEC.
Subsequent months brought more indications of Islamabad’s desire to be cautious with CPEC. In March, the government reallocated about $170 million in funds meant for joint infrastructure projects with China to other types of construction projects. And in June, its new federal budget revealed a $645 million reduction in Belt and Road-related projects from the previous year.