Prospects and challenges of CPEC in Pakistan

China–Pakistan Economic Corridor (CPEC), a key artery of China’s Belt and Road Initiative (BRI), has attracted the attention of researchers and policymakers within and outside Pakistan. A blend of investment-loan-grant model of over US$ 46 billion, CPEC contains projects aimed at building energy and communication infrastructure and industrial zones. Based on the analysis of primary and secondary data, this study aims to answer two questions: first, what are the main socio-economic or geostrategic prospects of CPEC for Pakistan and China? Second, are there any constraints and challenges in the implementation of CPEC projects and how are these going to be addressed? The paper examines CPEC’s potential in bringing about socio-economic development in Pakistan and its financial and geostrategic significance for China. It also explores key constraints related to the fragile security situation and the potential of CPEC to further exacerbate the geopolitical situation in the region, particularly in South Asia, where it could intensify tension between Pakistan and India as the latter perceives CPEC as a Chinese geopolitical and security project. In addition, the long-term financial implications of CPEC are assessed, with particular focus on its potential to become a debt trap for Pakistan in the long run.

China-Pakistan Economic Corridor – Challenges And Prospects

China-Pakistan Economic Corridor (CPEC) has the 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 a safe and the shortest route to the fastest growing Chinese economy. It will also stimulate the economy of our country. However, the new emerging power dynamics pose serious challenges to the CPEC. If these challenges can be effectively tackled then it may result in economic interdependence which could be a milestone for peace and economic development in the region.

Pakistan has a strategic importance in the region. On the eastern side, the arch-rival India is situated. India is the largest democracy and the biggest emerging market in the world. On the western side of the border is Afghanistan, which is one of the most troubled zones in the world, with an ongoing war since 9/11. China, the second largest economy and the most dominant over all the global markets, is on the 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, the 21st century is being referred to as the Asian century. This continent has become pivotal to global politics. Besides that, the Strait of Hormuz from where one-third of the world’s oil passes, 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 the “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, being the second largest economy and an emerging superpower, took this initiative to access markets. The “One Belt, One Road” policy mainly consists of two parts. One is the “New Silk Road” and the other is the “Maritime Silk Road”. This strategy is inspired from the ancient “Silk Route”. In the past, Chinese silk was transported to European markets from one country to another. So the China-Pakistan Economic Corridor is part of the “One Belt, One Road” policy.

Due to Gwadar’s strategic importance, the CPEC was under consideration for a long time. Ex-president Pervez Musharraf proposed this project during his tenure, though it could not be materialized owing to the deteriorating law and order situation in the country. During Pakistan Peoples Party’s 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 this cancellation, the contract was signed with China. In 2013 the Chinese premier Li Keqiang visited Pakistan. Both countries signed a Memorandum of Understanding (MoU) and Gawdar port’s development and operations were handed over to China.

2015 was a landmark year 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) worth 46 billion dollars. It has been the largest foreign direct investment (FDI) in the country. It encompasses huge infrastructure development, roads, restructuring of railways and energy projects, etc. CPEC will begin from Gwadar’s deep sea port to Kashgar, the Chinese Xinjiang province.

Since the very beginning, the idea of CPEC has faced multiple challenges. Domestically, the 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 a routine. The situation went from bad to worse. Fear gripped the entire country. Hardly any city was immune from this menace. Sensitive installations like the Karachi Airport, Mehran Base, Army Headquarters (GHQ), etc. were attacked. Attack on the Army Public School (APS) Peshawar was the extreme of brutality where 146 innocent school children were martyred. Moreover, many notable personalities like Benazir Bhutto, Khyber Pakhtunkhwa’s senior Minister Bashir Bilour and Interior Minister of Punjab Shuja Khanzada became victims of this scourge. Security is much better now than in the past, though managing it remains a challenge. Mainstream media has reported that there has been a “70% decrease in terrorism related incidents as compared to pre-2014 situation”. Unfortunately, on October 24, 2016, terrorists carried out an attack on the Police Training School in Quetta in which more than 60 people were killed. This indicates that despite military operations and relative peace, security challenges persist.

Political instability is another important challenge which our country is facing. Since its inception, Pakistan faced instability due to the absence of a Constitution. The first Constitution was promulgated 9 years after independence. The Constitutions of 1956 and 1962 were abrogated by military dictators soon after their promulgation. After the death of Liaquat Ali Khan, six Prime Ministers were dismissed in a short span of time between 1951 and 1958. Benazir Bhutto and Nawaz  Sharif’s first and second tenures met the same fate. Thus, the frequent changes of government without completing the tenure of five years have weakened the country politically. But, the last PPP government did complete its tenure and paved way for successful democratic transition.

Frequent martial laws have weakened the political setup of Pakistan. Martial laws started soon after independence. Iskander Mirza imposed the first martial law on October 7, 1958 and Ayub Khan, Yahya Khan, Zia-ul-Haq and Musharraf followed suit. Pakistan has been ruled for almost half of its 69 years by these military dictators who ruled the country according to their own whims.

Civil-military relations heavily influence 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 defence policies with reference to India, Afghanistan and the United States. Former Foreign Minister Hina Rabbani Khar admitted in Al-Jazeera’s program Head to Head that, “the military has a larger role in the country.” The military occupied that space partly due to the inability of the politicians to manage political affairs effectively. Ayub Khan was appointed as the Defence Minister of the country while he was the Army Chief. It is a rare possibility in successful democracies. Moreover, in the 1950s and 1980s, the ruling party and the opposition indulged in the politics of leg pulling. It weakened the institutions and paved way for military interference. Imbalanced civil-military relations created mistrust between the two important pillars of the state. In spite of that gulf, the situation is better today than it has been in the past.

Inter-provincial grievances are also serious challenges which the CPEC is facing. It is alleged that the ruling party in the centre is trying to maximize benefits for the Punjab province at the cost of other provinces. This has created rifts between the federal government and the provinces. The major bone of contention has been “the route change”. The Khyber Pakhtunkhwa government protested that the federal government wanted “to work on the eastern route” which passes through central Punjab an was longer than “the western route”. However, the proposed route was “the western route” which passes through Khyber Pakhtunkhwa. This has further added to the inter-provincial mistrust. According to Dawn newspaper, “The Chinese government urged Pakistani leaders to sort out the differences.” The Chinese Ambassador to Pakistan, Sun Weidong met the leaders of the mainstream parties in this regard. Thus, Prime Minister Nawaz Sharif convened an all parties conference (APC) where inter-provincial grievances were addressed. Provinces were assured that there was no change in the proposed routes. Moreover, provinces would enjoy equal fruits of CPEC. However, skepticism has not been eliminated entirely.

Apart from domestic issues, international challenges are also hindering the progress of CPEC. Since partition, India has left no stone unturned to hurt Pakistan. Both 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 a confession on part of India recently when the Indian Prime Minister Modi, during his visit to Bangladesh said, “It was Indian support which helped the creation of Bangladesh.” In the same fashion, India is trying to subvert CPEC. The then Army Chief, General Raheel Sharif during his visit to the victims of Quetta Civil Hospital blast said that, “Attacks in Balochistan are the activities to undermine CPEC.” The illegitimate stance of India is that Gilgit-Baltistan is a disputed territory, therefore CPEC’s route passing through it is illegal. Prime Minister Modi authenticated the doubts in his address at Lal Qila, Delhi by saying that Baloch leaders “thanked him for his support”. It was in reference to the rebel leaders who were in self-exile. Moreover, print media reported that, “Modi expressed his concerns about CPEC with China that were disregarded by Chinese leadership.” India is apparently not happy with this development. Arrest of the Indian agent Kulbushan Jhadev attested to India’s involvement in Balochistan in particular and Pakistan in general.

Afghanistan, our western neighbor, remains problematic due to its internal instability. Moreover, Afghanistan claims sovereignty over the region of the Durand line. However, that claim has no credence. That is an integral part of Pakistan. Even though the people of that region are happy as ever with Pakistan, Afghanistan always tacitly supports anti-Pakistan activities there. The roots of almost all terrorism related activities can be traced back to Afghanistan.

For CPEC, the 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 Defence 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 stop 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 it, because once the Gwadar port starts operations, it will minimize the importance of their ports. UAE’s port is the busiest port and it is mostly used for transit trade. Due to the strategic significance of Gwadar port in the region, the ports of the Gulf states will be affected. The development of friendly ties between India and Gulf states is also due to these converging interests. Prime Minister Modi recently visited these states in this regard. It was a rare occurrence. It was after many decades that 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 its development. It is in Seestan province of Iran, at a distance of 72 kilometers from Gwadar. India is investing in this port so as to neutralize the potential of Gwadar port. In fact, it is in competition with Gwadar. The Indian objective is to connect Chabhar with the landlocked Afghanistan and Central Asia. Furthermore, Indian agent Kulbhushan admitted to having entered in Pakistan from Iran. Pakistan requested the 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 that, “Chabhar is not in competition with Gwadar, rather both will complement each other.”

In addition to that, the US is aggressively pursuing the policy of “containment” against China. China has become the second largest economy and an emerging superpower. US considers a rising China as a threat to its global dominance. Gwadar port is part of the “new Silk Route”. US is also creating hurdles for the Gwadar port as it perceives that this port could be used for military purposes in future. As part of its containment policy, the US signed “strategic and economic partnership” with India and has also established “India Rapid Response Cell” (IRRC) in the Pentagon. That is a rare status enjoyed by any country. American support to India for the Nuclear Suppliers Group (NSG) is also a part of that partnership. Their cooperation poses a serious challenge to not only China but also to Pakistan.

If CPEC is properly managed, it will be a game changer for Pakistan. It has brought the largest ever foreign direct investment in the country. During President Xi’s visit to Pakistan, both countries signed agreements of 46 billion dollars. This would provide a boost to Pakistan’s ailing economy as Pakistan is under heavy debt. According to Finance Minister Ishaq Dar, the current debt is 73 billion dollars. Each year, a huge chunk of the budget goes to debt servicing. In the fiscal year 2016-17, debt servicing was around 25% of the budget. Therefore, CPEC would help Pakistan in becoming economically self-sufficient. According to rough estimates, CPEC will create 700,000 jobs. Besides that, millions of people will benefit from it.

CPEC includes a range of development projects. Out of 46 billion dollars, around 35 billion dollars are for energy projects. The government is hopeful that through this investment they will be able to add the required electricity to the national grid which will end the shortfall of electricity in Pakistan. Prime Minister Nawaz Sharif in a public address assured that by the end of 2018, not only would load shedding be ended but surplus would also be available. Furthermore, CPEC includes restructuring of the decades old railways network keeping in view modern standards. It also includes motorways, highways, industrial zones, economic zones and airports, etc. throughout the country.

CPEC provides the shortest route to China. The distance from the traditional Chinese route which passes through the Indian Ocean, Strait of Malacca and South China Sea is around 13,000 km. On the other side, the distance between Gwadar to Kashgar, Xinjiang province is around 3,000 km. Therefore, CPEC provides easy access to China and cuts down travelling time from 45 days to 10 days. Freight charges would also be lower than those in the traditional route.

CPEC is also a safe option for China. Shanghai port is not only far away but that route can also hinder the smooth supply of fuel. Because of the ongoing dispute in South China Sea between China and South Korea, Japan, Malaysia, Vietnam and Brunei, clashes might occur in future and the route could be disturbed. Other than that, there is constant presence of US ships in South China Sea. The US in cooperation with the rivals of China may trouble China. Trans-Pacific Partnership (TTP) with these countries is a pact of the strategy to counter growing Chinese dominance, particularly economic. Therefore, CPEC is a cheaper and secure option for China for its long term goals.

It can also fulfill the needs of regional states and provide transit trade facility to the landlocked Afghanistan and Central Asian states. Sea trade is comparatively inexpensive than other modes of transportation. For these purposes, Gwadar port can facilitate transportation to these landlocked states. Pakistan has also offered CPEC access to Turkmenistan, Uzbekistan, Kyrgyzstan and Tajikistan, etc. They have showed willingness to participate and benefit from the project. These states can access CPEC through Afghanistan. It would not only be beneficial for these Central Asian Republics (CARs) but for Pakistan as well. CARs could get easy access while Pakistan would earn through transit fee. Landlocked Afghanistan would also benefit from the CPEC and be able to access the port as well as earn transit charges from the goods moving to 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 has been fighting another throughout history, even in World Wars I and II. That continent has been a theatre of war in the past. However, after the application of the theory of regional integration, European Coal and Steel Community was established which led to the creation of European Union. The idea behind this was that once the warring countries became economically interdependent, it would compel the states to maintain peace rather than to go to war. In the same way, CPEC would forge economic interdependence which would promote peace in the region.

For the smooth operationalization of CPEC, peace is imperative for the country. In spite of improvements, security remains a challenge in the long term. Terrorists have still managed to carry out attacks, like in Quetta recently. For achieving that objective, a comprehensive National Action Plan (NAP) was formulated to wipe out extremism and terrorism and it did help in tackling the menace of terrorism. Today, there has been a tremendous decrease in terrorism related incidents. However, except for a few points of NAP, other points remain unimplemented. There has always been a gap between devising and implementing strategy in our country. It is the need of the hour to review the NAP and implement all 20 of its points.

A porous border with Afghanistan has always been troublesome for Pakistan. Terrorists, after training, infiltrate that border. Afghanistan does not recognize the Durand line, so the western border remains unsealed. People move across the border even without a visa. Effective steps should be taken to manage the border so that the infiltration of terrorists 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 seriously considered along with a workable plan.

In Pakistan, political stability also remains an internal challenge. It is important for the success of CPEC. Political decision-making 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 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, and 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 as it is also in the interests of the country, as the maxim goes, “we cannot choose neighbors, but we can choose friends”. Geography cannot be altered. Thus, there is only one option and that is the promotion of peaceful coexistence. Pakistan has to forge regional cooperation for CPEC’s long term success. In order to achieve that objective, it is important to resolve long standing issues particularly with India and Afghanistan. The comprehensive dialogue started with India should be carried forward on the basis of equality. Moreover, during Prime Minister Nawaz Sharif’s visit to Afghanistan in December 2015, he assured them about “respect for sovereignty” and that “Afghanistan’s enemies were Pakistan’s enemies”. There is no denying that there exists mistrust between the two countries. However, Afghanistan should be apprised of economic benefits as it is in dire need of economic development. Afghanistan could earn a transit fee which would 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 the Prime Minister of Pakistan in New York showed willingness to participate in CPEC. Therefore, promotion of regional cooperation is particularly important for CPEC.

CPEC is an extraordinary project for Pakistan and China. It will uplift the economy of Pakistan and cut down the distance to China from 13,000 km to 3,000 km. Moreover, it will be a game changer for the entire region. The landlocked Afghanistan and Central Asian States will get easy access to the Gwadar port for trade purposes. However, it is a very challenging task to materialize the full potential of CPEC. Regional cooperation and connectivity will also help in removing misgivings and in paving way for economic integration and hence achieving peace as a result. Thus, CPEC is a testimony of China-Pakistan relations which have been described as “sweeter than honey, higher than the Himalayas and deeper than the oceans”. It is also a sign of hope for the troubled region.