Challenges Confronting the CPEC, Analysing External and Internal Factors

Challenges Confronting the CPEC

China-Pakistan Economic Corridor (CPEC), the strategic, game-changer project that involves an investment of $46 billion—roughly 20% of Pakistan annual GDP— is poised to change the future of not only both China and Pakistan but also of the entire region. Gwadar port promises to offer huge dividends not just to Pakistan and China but has the potential to bring about benefits beyond the immediate region. As expressed by President Xi Jinping, “The China-Pakistan Economic Corridor is so precisely situated that it magically connects Silk Road Economic Belt and the 21st Century Maritime Silk Road.” Another vital aspect is that Gwadar Port will eventually create a link between China, Pakistan and the Central Asian Republics (CARs) with prospective revenues more than billions of dollars every year for all the countries.

Finally, a pleasant development surfaced in turbulent environment when on November 13, Prime Minister Nawaz Sharif kicked off the shipment of trade goods from Gwadar Port to international markets. The inauguration ceremony for this historic event exuded a strong sense of harmonious civil-military approach on sensitive national issues. Expeditious completion and successful operationalization of the China-Pakistan Economic Corridor (CPEC) is a big slap on the faces of those global and regional players who have left no stone unturned to sabotage it. However, the CPEC project has not yet entered the final phase as a lot of development work is still to be undertaken. Therefore, the challenges or threats both on external and internal fronts have not died away yet. Intermittent incidents of terrorism in Balochistan, rising Indian hostilities and attacks on the Line of Control (LoC) and Ashraf Ghani’s unending, scathing criticism against Pakistan speak volumes about international intrigues and conspiracies against the CPEC. If, on the external front, extreme military pressure is being built on eastern and western borders, then, on the internal front, the enemies of the project have all designs to ignite unrest in Balochistan, destabilize Karachi, stir up militancy in FATA and some areas of Punjab.

Three major powers, the US, Japan and India, appear to be excessively uneasy with the fruition of the venture. The US is taking an uneasy gander as the CPEC is as an early indication of the imminent end of its worldwide hegemonic rule at the monetary front. Japan is stressed that with the consummation of CPEC, any modest edge that it had over China in world markets, would essentially vanish because the physical distance amongst China and its trading countries would be reduced by as much as 9,000 km. Hence, Japan’s cost of creating exportable surpluses as an outcome will be deeply impacted.

India is worried about the safety and security of its oil supplies that pass through the Strait of Hormuz at the mouth of which Gwadar is located. New Delhi fears that China may set up a naval base here. India seems also concerned about the future of Chabahar Port that it is helping build in Iran; along the Strait of Hormuz about 72km from Gwadar for which it is contributing as much as $20 billion. It had perhaps wanted to deny Pakistan the Afghan and Central Asian markets through Chabahar.

While the US and Japan still seem to be engaged in getting China to bog down in the South China imbroglio, India appears to have already finalized a stratagem to counter the self-perceived threats to its sovereignty and integrity emanating from CPEC. Indian Prime Minister Narendra Modi set the ball rolling from Lal Qila on August 15, 2016 by openly declaring his country’s intentions to foment trouble in Balochistan believing perhaps that once an insurgency in the province heats up, uncertainty that would engulf the region as a result would make it impossible for the CPEC project to take off. It is also objecting to the Corridor’s passing through Gilgit-Baltistan which in its opinion is a disputed territory and claims that the region cannot be used for any purpose without prior permission from New Delhi. India fears that China would set up its military base in GB in collaboration with Pakistan making it doubly-dangerous for India’s occupation of  Kashmir.

India also fears that once CPEC takes a final shape, it would render the Chabahar seaport redundant, its supplies of oil from Iraq, Iran and Saudi Arabia would become totally dependent on the goodwill of Pakistan and China and its plans to capture the Central Asian market would be nipped in the bud as China would be able to access in the shortest possible time the CA states through CPEC while India would be left with its round-about route going through Afghanistan which is still in the grip of a wasteful war.

However, some politically influential quarters in India believe that with the completion of CPEC Pakistan would be focusing its attention more on the economy which they think would create conditions conducive for those currently indulging in militancy to adjust themselves in gainful employment which, in turn, would vastly lessen the threat of cross-border terrorism. These quarters also believe that India too could take advantage of the CPEC by linking itself with the project which would neutralise the threat it believes it would face with the Chinese Navy stationed in Gwadar and its army amassing troops in GB. Perhaps Pakistan could take the initiative in this regard by offering Afghanistan and India transit trade route through Pakistan which the two countries have been longing for decades. This move would perhaps neutralize India’s plans to foment trouble in Balochistan and its objections to GB becoming a part of the CPEC.

Meanwhile, it is advisable to do away with our respective domestic objections and complaints that we have all succeeded in discovering in the fine print of the project documents from turning into Kalabagh type of controversies. There are immense benefits for the entire country in the CPEC. Some regions of Pakistan would benefit immediately and some would within a couple of years but in the final analysis, Pakistan would be the gainer.

Gwadar port has total traffic of 0.5 million tonnes of cargo today. But, by 2017, it is expected to handle 1.0 million tonnes of cargo. When completed and fully functional, it will handle 300-400 million tonnes of cargo per annum as against India’s total port capacity of 500 million tonnes. The Long Beach Port of the United States is the largest port of the US. It handles 80 million tonnes of cargo each year which is just 20% of Gwadar’s future capacity.

The CPEC consists of “one belt, three passages, two axes and five functional zones” in terms of its spatial layout. “One Belt” refers to the belt which consists of zone area of the CPEC and the economic cluster area of industries, population and cities. It runs from Kashgar to Karachi and Gwadar on the Arabian Sea. “Three Passages” refers to the eastern, central and western routes. Eastern Route consists of railway-highway network from Islamabad to Karachi via Lahore, Faisalabad, Multan, Sukkur and Hyderabad and will be the main traffic artery of the corridor. Central Route starts from Islamabad to Karachi via Daria Khan, Jacobabad and Khuzdar through N25 or to Gwadar through M8. Western Route is from Islamabad to Gwadar via D.I.Khan, Quetta, Basima and Hoshab. “Two Axes” refers to two east-west development axes in the corridor: Lahore-Islamabad-Peshawar” and “Karachi-Gwadar” development axes.
According to a recent presentation (CPEC: Its impact on Pakistan’s economy) by Ashfaque H. Khan, the CPEC has the potential to transform Pakistan into a regional hub for trade and investment and provide a unique opportunity for Pakistan to boost its strategic and economic position.

The CPEC, once implemented, has the potential of transforming Pakistan’s economy from a low growth mode (3%-4%) to a higher and sustainable growth economy with low inflation, removing key infrastructural bottlenecks (energy, roads, highways, railways etc.), promoting balanced regional growth and development, shaping new industry clusters, improving living standards and social stability and promoting regional connectivity.

The Corridor is expected to fuel economic growth of Pakistan by adding 2.0 percentage point to its growth between 2016 and 2020; another 1.5 percentage point between 2020 and 2030. It is likely to create 800,000 to 1.0 million new jobs. The length of newly-built or upgraded roads and railways should reach 3871km and 1529km, respectively. Power generated by newly-built sources will reach 19.785 million KW, and length of optical fiber Cable will reach 2084km.

Under the CPEC, various Pakistani industries will benefit. These include:

Textile Industry: The garment and textile industry will be developed in Kashgar Economic Development Zone through importing raw materials from Pakistan. Textile and Garment Centers or EPZs will be built in Lahore and Karachi. To enrich cotton textile varieties, investment would focus in producing top grade cotton yarn, printing and dyeing fabrics, jean fabric and knitted fabric. Household appliances industry appears to have a bright future. Living conditions of Pakistani people will be improving gradually. Some Chinese enterprises have already established plants in Pakistan. A household appliance industrial park will be established near Lahore through joint ventures. They will move from assembling imported parts to producing them locally.

Cement: The demand for cement will continue to rise because of the rising construction activity. More investment can be made in cement industry to meet the growing demand for the CPEC-related construction projects.

Mineral exploration is another area where Chinese enterprises will have interest. Industrial Parks’ construction along the corridor should be considered by Pakistani and Chinese investors.

For food security, agricultural modernisation would be promoted along the corridor. Key target is to increase per acre yield of rice, wheat, cotton and sugarcane and the output of livestock and dairy sectors including fish and shrimp. Organic and chemical fertiliser production should be developed around Lahore and Karachi. A modern agricultural demonstration zone would be built in the Quetta and Gwadar regions to lead local agricultural development. To increase farm employment along the corridor, efforts will be made to focus on developing agricultural product processing. By introducing modern processing equipment and facilities, an agricultural industry cluster could be built around Islamabad, Lahore and Karachi. To reduce losses of fresh agricultural produce and increase local farm income, agricultural produce warehousing and logistics facilities be built in Peshawar, Islamabad, Lahore and Gwadar.

Gwadar Port infrastructure will be improved for fishery production. Epidemic disease prevention and control related to agricultural produce would be developed in Faisalabad and Lahore. Coastal tourism development has enormous potential under CPEC. Coastal tour line is Keti Bundar-Karachi-Somiani-Ormara-Gwadar-Jiwani. Landmark hotels, golf courses, high-end nursing homes, race courses and a hot air balloon facility along coastal city tourism zone are mostly likely to be built.

Financial cooperation will play an important role in economic corridor construction and operation. Multi-level cooperation include: Central bank cooperation for establishing bilateral payment and settlement to ease pressure on foreign exchange reserves. Business Organisation Cooperation will take place where Chinese financial institutions can lead the syndicated loans of international financial institutions. And cooperation in financial markets is likely where the two countries can open their bond market.

Today we must act. Act locally, but think globally.

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