The CPEC Front

Since its launch by Chinese President Xi Jinping in 2013, the Belt and Road Initiative has been playing a dominant role in social and economic development of the BRI- and non-BRI countries. Colossal investments backed by China’s highest authority, President Xi himself, continue to play a pivotal role in various areas. Enhanced regional connectivity, and the cooperation and prosperity the BRI promises have offered huge diplomatic space to China to impact the international security and economy. It has been estimated that BRI-stipulated GDP growth, trade facilitation, socioeconomic development, foreign direct investment and human capital improvement will help BRI-countries boost trade by as much as 9.7%, provided that projects are executed in time and as per their potential. Apart from helping countries in strengthening their faltering economies, BRI is also set to complement UN-launched Sustainable Development Goals (SDGs). Alleviation of poverty is the most promising dividend of BRI. Almost 40 million people will be lifted out of extreme ($1.90) and moderate ($3.20) poverty. By all accounts, over $7 trillion worth investment under the portfolio of BRI in 71 countries is going to have tremendous impacts over global economy, finance and trade, and by extension, over international security and global governance.

 

The China-Pakistan Economic Corridor (CPEC), a flagship project under BRI, has been touted by both Pakistan and China as an example that would remove all misgivings and misperceptions about BRI-led investment. CPEC was envisioned by President Xi as a model to convince the reluctant countries that West-propagated apprehensions including debt trap, non-transparency and cartelization of Chinese firms and companies had nothing to do with reality. Hence, CPEC was accorded highest possible support by China out of strategic and economic factors. It was declared a ‘game-changer’ by previous government, and various official documents of both countries predicted a 6.43% increase in Pakistan’s GDP by 2030, creation of 4 million jobs, a strong impetus to rationalization of tariff structure, significant improvement in ease of doing business, trade facilitation on sustained basis, and most importantly, lifting of 1.1 million people out of extreme poverty. Now that the project has seen a couple years of sustained political and military support, it is pertinent here to discuss the latest development on various energy, transportation and communication projects that were launched under CPEC.

As per a report published by Chinese Embassy, Pakistan has benefited tremendously from CPEC-linked projects. CPEC has created 75000 jobs in Pakistan, helped significantly reduce load shedding, thereby saving $4 to $5 billion to national exchequer, and laid down extensive networks of motorways and highways criss-crossing the whole country. CPEC-led transport projects have helped Pakistan improve its road quality from 3.82 in 2014 to 4 in 2019 (World Economic Forum). Chairman CPEC Authority, Gen (R) Asim Saleem Bajwa revealed on September 27, 2020, that in energy infrastructure alone, China has invested $8 billion in commissioned projects and $9.5 billion worth investment is being made in ongoing projects. As far as communication infrastructure is concerned, CPEC has resulted into $4 billion worth direct investment in commissioned projects and $3 billion more will be invested in the upcoming projects.

Development of Gwadar seaport was another important pillar of the first phase of CPEC. Eight development projects were included in Gwadar Seaport Development pillar of CPEC. Almost $0.7 billion worth investment was promised to make to operationalize the seaport and enhance its capacity to handle both trade and transhipment. As per the update available at official CPEC website, all projects have entered an advanced level of development and some are almost at finish line.

Upgradation of Main Line 1 (ML-1) was the most critical component of first phase of CPEC. But, unfortunately, change of government and disagreement over mode of investment kept the project in limbo for three years. The incumbent government initially insisted on the BOT (Build, Operate and Transfer) mode of investment, but withdrew the demand later, and agreed to carry out the ML-1 project by financing through concessional loans by the Chinese government. Now the project is experiencing rapid progress. ECNEC (Executive Committee on National Economic Council) approved this $6.8 billion project on August 5, 2020. As per details available, it will be completed within next 8 years and is expected to have multi-dimensional impacts over transport and business ecosystem of Pakistan. Fencing and dualization of 1872-km-long railway track, reconstruction of railway bridges and underpasses, complete overhauling of track, installation of optical fibre for reliable and instant communication, replacement of current 665 level crossings with underpasses, establishment of Havelian Dry Port, capacity building of Walton Railway Academy and Railway Workshops Mughalpura, Lahore, are some salient characteristics of the ML-1 project. With successful execution of the project, it is expected that Pakistan Railway will be able to increase its percentage share of Pakistan’s freight business from 4% to 20%, thereby saving $500m foreign exchange reserves. PR is also eyeing the extension of railway track from Peshawar to Central Asia through Afghanistan and establishing rail links with China through Khunjerab Pass, besides the current KKH-provided connectivity which remains out of operation during winters. The ML-1 will help Pakistan Railways increase the speed of passenger and freight trains up to 160km/h and 120km/h, respectively. Pakistan Railway is now at the cusp of deep transformation; it is now upon its management to seize upon this historic opportunity and design profitable business and operational plans in order to become a profit-earning enterprise, instead of being a constant liability for the state.

After filling the void in the transport and energy infrastructure of Pakistan, CPEC has now entered the second phase which is more to do with private sector than with government. In the first phase, government played a key role in steering the direction and execution of the various CPEC-linked projects, whereas the second phase will hinge on active and productive participation of industrialists and businessmen, with limited government role in facilitation of trade through provision of basic infrastructure. Industrialization through development of Special Economic Zones (SEZs), capacity building of socioeconomic sector (poverty-alleviation, skill development, science & technology, water & sanitation, etc.), cooperation in agriculture and allied agro-industries will be targeted through execution of second phase of CPEC.

Industrialization is the central pillar of the second phase. Both sides realize that trickle-down effects of CPEC can only be secured if there is rapid industrialization and generation of employment opportunities. In order to materialize industrial cooperation under CPEC, both sides have decided to establish and operationalize SEZs. Throughout the world, SEZs are considered the most reliable and well-tested path to accelerate industrialization. UN Conference on Trade and Development’s report for 2019 shows that there are 5400 SEZs all over the world, boosting production and export of the home countries. These zones add an impetus to industry, export and FDI, help generate massive employment opportunities, and incentivize structural reforms to ensure business-friendly legal, regulatory, and administrative atmosphere. Under CPEC, Pakistan is to develop nine SEZs across the country (two each in Khyber Pakhtunkhwa and Sindh, and one each in Gilgit-Baltistan, Azad Jammu and Kashmir, Punjab, Balochistan and Islamabad). As per progress update available on official CPEC website, only Allama Iqbal Industrial City, Faisalabad and Rashakai SEZ have seen groundbreaking and other Special Economic Zones are in different stages of planned construction (Dhabeji SEZ in last quarter of 2020), notification (Bostan SEZ), land finalization (ICT Model Industrial Zones), feasibility assessment (Industrial Park, Port Qasim; Mirpur Industrial Zone; Mohamad Marble City) and post feasibility assessment (Moqpondas SEZ). Through these SEZs, Pakistan is aiming at transforming its manufacturing-centred industry to internationally competitive high-tech industry. Creation of at least 575,000 jobs, technology transfer, enhanced productivity, diversified production, relocation of Chinese industries to Pakistan as import substitution to meet demand of growing middle-class urban consumer base and strengthened business-to-business relations are being targeted by the government under the industrial cooperation component of CPEC.

As much as 19.8% contribution to GDP, provision of employment to 44.5% of Pakistan’s labour force, significant role in providing exportable surplus to the country, decisive part in ensuring food and nutritional security to the 220 million people and huge agro-industries  have made agriculture the most important sector of our economy. Health of agriculture directly determines the health of our national economy, thereby earning the status of the backbone of Pakistan’s economy. A host of socioeconomic and agronomical constraints, coupled with policy-cum-investment neglect, have created impediments in the growth of the agriculture. Given the fact that China has emerged as the world leader in agriculture and is able to feed 1.4 billion plus population through domestic production and agri-trade, the incumbent government has decided to expand the scope of CPEC and add agriculture sector as one of the possible area of bilateral collaboration and cooperation. Prime Minister Imran Khan, in his maiden visit to China in 2018, asked for close cooperation in agriculture. Resultantly, an MOU was signed which was aimed at adding agriculture to the scope of CPEC. As a follow-up, a comprehensive framework agreement for agriculture was signed in May 2019. President Arif Alvi’s visit to China in March 2020 also strengthened agricultural cooperation as it resulted in the creation of a full-fledged joint working group on agriculture, thereby increasing the total number of JWGs under CPEC to 10. The China Food Additives & Ingredients Association (CFAA) has come up with comprehensive package. Pakistan is aiming at cooperation in extension services, precision agriculture (remote sensing, geographical information services), exchange of genetic resources for strengthening crop, livestock and poultry breeding programmes, research and development for development of high-yielding varieties (HYVs); capacity building for certification and inspection for agriculture and livestock products to meet internationally-demanded sanitary and phytosanitary requirements to boost agri-exports, supply chain management with improving the storage and transport infrastructure, remediation of disruption in the agri-trade both at the level of domestic and international trade, import substitution and export earnings from value-added farm products; improvement in water management through strengthening the adaption process of the precision irrigation techniques, development of pastoral and wastelands, expansion in the production quality of the farm inputs including fertilizers, pesticides and machinery and instruments, and seed and plant protection. It is worth noting here that Chinese are particularly interested in areas of cotton productivity, development of efficient irrigation techniques and strengthening the post-harvest infrastructure along the CPEC routes.

Both China and Pakistan have reiterated repeatedly that second phase of CPEC will be people-centric, thereby trickling down the dividends of early harvest projects to the lowest possible level. Though CPEC is set to have transformational impacts on the socioeconomic development of Pakistan, China has approved—on the insistence of PTI-led incumbent government—the expansion of CPEC scope with the addition of socioeconomic cooperation. The 8th Joint Cooperation Committee meeting, which was held in December 2019 in Beijing, broadened the scope of future cooperation around CPEC by establishing independent Joint Working Group on socioeconomic interventions. This JWG deals with six areas of cooperation: education, agriculture and industrial research to improve competitiveness of our industrial and agricultural exports, poverty alleviation, skill development, healthcare, water supply and sanitation and vocational training projects. Initially, China has decided to provide $1 billion worth grant in 20-23 projects that will be executed across the country. Less-developed parts of the country, particularly Balochistan, Gilgit-Baltistan, southern KP, northern Sindh and southern Punjab, will be targeted to improve their social and economic indicators. In addition to abovementioned areas of bilateral cooperation, both sides are engaged in deeper collaboration in provision of affordable housing and tourism promotion as a vehicle to alleviate poverty and improve human development status of Pakistan.

In view of the anticipated increase in the demand of uninterrupted and uninterruptible communication between China and Pakistan, cross-border optical fibre cable project was added to the CPEC with an aim to provide reliable internet connectivity. The first phase of the project, 820-km-long optical fibre has been laid down from Khunjerab to Rawalpindi. As per briefing by director general of Special Communication Organization, the activation of the connectivity has yielded positive result and Pakistan is now planning to extend the project down to Gwadar port. The successful execution of the project is set to create economic opportunities, communication security and protected strategic communication and it would further add an impetus to regional integration. Telecom and ICT industry of Pakistan is facing serious hurdles due to vulnerable, interruptible, geographically-limited, and slow internet connectivity. The project will reinforce internet penetration in northern areas, creating trading opportunities for isolated communities, promote tourism and build ICT infrastructure in far-flung areas. Communication security will be another low-hanging fruit. Pakistan, currently, has submarine cable landing station only at Karachi. The undersea cable is vulnerable to accident which can cause nationwide internet disruption—as happened in 2017. The establishment of another submarine cable landing station at Gwadar would help Pakistan access alternative route for securing international network connectivity, thereby avoiding another nationwide outage. Existing fibre optics network of Pakistan poses security threat to the strategic communication. Currently under-used network has been developed by consortium that has Indian companies as a partner or shareholder.

Apart from economic significance, CPEC has potential to act as an instrument of soft-power projection for Pakistan. The economic dividends that can potentially be harvested through CPEC would provide Pakistan geostrategic leverage in the regional affairs, thereby paving the way for sustained growth and development of the country. Recent political developments in the region particularly, the ongoing Pakistan-facilitated intra-Afghan dialogue, Azerbaijan’s public acknowledgement of Pakistan’s support and resultant bonhomie during large-scale clashes over disputed Nagorno-Karabakh territory and brighter prospects of politically-negotiated settlement of Afghan dispute offer Pakistan an unprecedented vista of opportunities to increase its influence in the region. For this to happen, Pakistan’s Foreign Office will have to play a leading role. Westward expansion of CPEC and offering cheaper railway, road, internet, and sea-based connectivity to Central Asian states should be the topmost strategic priority for Pakistan. In other words, realization of fullest potential of CPEC warrants sustained and comprehensive reforms and structural adjustments not only in domestic governance and security apparatus, but also in the management of foreign affairs.

 

The writer is a graduate of the

University of Agriculture, Faisalabad.

He writes on national and international affairs.