The Other Side of the CPEC

By: Muhammad Ahmad

Materialization of Chinese dream or a game-changer for Pakistan?

The China-Pakistan Economic Corridor has been called a game-changer or even a fate-changer by its overly enthusiastic proponents. CPEC is a well-thought-out and well-crafted concept to unleash the process of meaningful cooperation between the two neighbouring countries – Pakistan and China – with a greater aim of bolstering socioeconomic conditions of the region. It has four basic perspectives: historical, economic, cultural and geo-political. The very concept of the corridor is based on building a network of roads, highways, railways, power-generation plants and industrial parks, all the way from Khunjerab to Gwadar. 

The China-Pakistan Economic Corridor (CPEC) is simply the revival of the ancient Silk Road that had played a key role in the promotion of economic ties and cultural linkages all across the globe. Now, Pakistan and China have made bold efforts to revive this ancient route. It will reduce the distance between China and big markets of its goods in the Middle East, Africa and Europe. Pakistan also stands to prosper from this gigantic plan.

CPEC and Pakistan’s Expected Gains

The CPEC is a $62 billion multi-purpose project with shares reserved for infrastructure development, power–generation, industrial zones and mass transit schemes. No doubt, CPEC will effect an economic breakthrough in Pakistan, and if it works out as planned, it would generate three to four times the initial $62 billion investment. The corridor will help alleviate poverty by creating new business and job opportunities. Moreover, Chinese stakes here will ease Pakistan’s security concerns with neighbours and further enhance its strategic importance. Establishment of solar and nuclear power plants, as well as alternative sources of energy will solve Pakistan’s chronic energy crisis besides cutting down its carbon emissions by one and a half billion tonnes per annum. Tourism industry will also get a much-needed boost. With peace and stability, especially in country’s northern areas, tourists from around the globe will flock in these areas blessed with picturesque beauty. Moreover, it will raise Pakistan’s $274 billion GDP by over 15 percent. China’s economic and military assistance will also help Pakistan a great deal in narrowing its ever-widening gap in economic, military and nuclear fields with India. It is also mentioned in the policy paper that CPEC will help bring another green revolution in agriculture with the aim of shifting to modern techniques that will help increase the net output. Human resource development, educational linkages and improving healthcare are some of the additional benefits.

The Dark Corridor?

As discussed earlier, the game-changer project of CPEC is a huge Chinese investment that will make Pakistan an Asian tiger, possibly in next decade and a half. Some commentators have raised a question amidst the euphoric din still ringing through Pakistan: will this investment only safeguard and benefit Chinese interests or will it offer some benefit to Pakistan in the end? It is to be noted that Pakistan has a casino economy with people investing in real estate, stocks, etc., in anticipation of high returns; thus manufacturing is on decline, imports are increasing and balance of payment is lopsided. What the CPEC will do is actually shrouded in mystery. There is little public information, disclosure of how it will be built, how it will be financed and will it be a grant or a loan and who will implement it in various parts of the plan e.g. railways, roads, pipelines or industrial zones. Other projects such as Metro Bus and Orange Line Train, being part of the corridor, are also creating much controversy and consternation. The next economic crisis could be at the doorstep as Pakistan’s economy, unable to pay such huge loans back after 2020, may go into recession. Furthermore, Chinese are bringing their own coal dumping into Pakistan, though the country is already rich in coal mines. This coal will produce electricity at much higher cost and more shocking is that it will be compulsory for Pakistan to buy that electricity, and this will again worsen the situation regarding the taunting circular debt. In addition, Chinese companies are bringing their own manpower. Hence, the multiplier effect of infrastructure will benefit Chinese more than the locals. This will escalate poverty, exploitation and unemployment in Pakistan. Furthermore, expenses on the security of the route will also be borne by Pakistan. The environmental concerns are also very alarming with Chinese using emissions-belching technologies, clearing and destroying agrarian lands. The use of coal, a 19th century technology to produce electricity with high carbon emissions and heavy consumption of water as its prerequisite, will be dreadful for Pakistan’s environment. Over-construction of dams on the Indus will affect agriculture in downstream areas and thousands of people will be displaced and flow of silt will be halted as well. Lastly, the introduction of Chinese language as well as the Chinese culture in the curriculum as a compulsory subject will burden the already struggling students and will also create certain socio-religious issues as Chinese language and culture directly contradicts our religion, traditions and social fabric.

Materializing the Chinese Dream?

Despite the abovementioned apprehensions, CPEC wields immense importance for China and is an ambitious effort to beef up its economic muscle. China considers CPEC a flagship project of a broader ‘One Belt, One Road’ policy because China will, through this project, get direct access to huge consumer markets in the Middle East, Africa and Europe. CPEC will link China to nearly half the world’s population. Through CPEC, China aims to counter US dominance in the region, and get access to deep sea port Gwadar and use it as a naval base in case of tensions with India. China’s dilemma of Malacca Strait will be easily overcome because the Strait is not too deep for large vessels to pass through. Secondly, since some pro-US nations in Southeast Asia like Malaysia and Singapore control the Strait and they can impose blockade on Chinese vessels – to the detriment of the Chinese economy – the CPEC is an ever-reliable substitute. With CPEC, China can dent the US’s Pivot to Asia Policy and make an economic bloc of emerging economies in Central and South Asia and manipulate the markets in the respective countries. CPEC also gives a useful alternate to utilization of Chinese labour to their own benefit. Chinese companies have bought 40 percent shares Pakistan Stock Exchange, enabling themselves to reshape the Pakistan’s economy to their utmost benefit. Moreover, China will also become an important stakeholder in Afghanistan and will try to diminish US existence in this part of the world. Similarly, China could threaten Indian claims of Tibet region by exploiting the Kashmir issue. It’s a win-win situation for China in any case.

The Reality Check

Chinese companies always play smart and try to get excellent outcomes on their investments, without counting geopolitical and geostrategic returns. They are keen to invest in a volatile economy like Pakistan. There are meager chances to extract anything from them. It is a general misconception that money is coming from China because, in reality, Pakistan has been spending a lot from its own sources. Other than security expenditures, infrastructure costs are also borne by Pakistan and now NEPRA has diverted security cost of CPEC to taxes on the locals. After a couple of years when Pakistan will have to return the loan, there will be outflow of money and profit remittances to Chinese companies. This might endanger Pakistan’s already depleting forex reserves. Pakistan has done no planning how revenue will be generated for these payments and that may compel the country to return to the IMF.

Conclusion

It is the need of the hour for Pakistan to play a smart game and not put all its eggs in one basket. If we have to benefit from this project, political consensus and improved law and order are prerequisites. Decisions must be made on the basis of economic gains and multiplier impacts on the economy, and Pakistan’s strategic importance shouldn’t be hindered in the long or short run. Transparency must be ensured for smooth functioning and equal distribution of benefits.

In a nutshell, there are a lot of unanswered concerns. We cannot afford to let US imperialism be replaced with a Chinese variety or let the Chinese take the role of new East India Company because it will paralyze our nation forever or make Pakistan a dummy state in the hands of China that is always able to pull out money and knock Pakistan into economic depression. We do not want development at the expense of sovereignty as no Chinese naval base in Gwadar will be acceptable in the long run. Most importantly, we will have to devise an indigenous economic policy so as to guarantee Pakistan’s stability and economic growth.