The strategic game changer project,China Pakistan economic corridor (CPEC), is biggest ever investment for both China and Pakistan that is poised to change the future course of history for both countries. It aims to connect Gwadar port in the south western Pakistan to China’s northwestern autonomous region of Xinjiang, via a network of highways, railways and pipelines to transport oil, gas and other goods.
By and large, construction costs are estimated at $46 billion which is roughly 20% of Pakistan annual GDP. Besides transport, the corridor will provide Pakistan with telecommunications and energy infrastructure as well. The corridor will go a long way in making Pakistan a better-off and powerful entity than it ever was.
Both countries hope that this project will transform Pakistan into regional and economic hub as well as further boost the growing ties between Pakistan and China. Once built, the nearly 2,000-mile-long corridor will shorten China’s route to the Middle East by about 7,500 miles.
The CPEC is of enormous strategic and economic significance to China, Pakistan and other regional countries. For China the CPEC would reduce the travelling distance, for its huge volumes of trade with the Gulf countries, from existing 13000 kilometers to mere 2500 kilometers. It will cut down the travelling time from the existing 45 days to only 10 days, and it will also reduce the cost of freight by one third. Through CPEC, China will be able to trade with South Asia, West Asia, the Middle East and North Africa through a much shorter route.
No wonder China is now a major investor in foreign markets. China has become the leading country in terms of foreign direct investment in Pakistan during the last decade. Chinese national economy today is the strongest in the world with its highest foreign exchange reserves. China will make huge revenues because with the completion of CPEC, the Chinese shipments will be able to reach the same destination just within 10 days period.
The project has also elevated Islamabad’s strategic partnership with the regional superpower. CPEC is viewed as an economic lifeline for Pakistan. The government in Islamabad recognizes the CPEC as the only opportunity left for Pakistan to develop itself economically and, importantly, bring stability and progress in the country.
Another vital aspect is that Gwadar Port will eventually create a nexus between China, Pakistan and the Central Asian Republics (CARs) with prospective revenues more than billions of dollars every year for all the countries. Pakistan’s trade with Central Asian Republics would also increase using CPEC since they will be connected with CPEC based on the Quadrilateral Agreement for Traffic in Transit, which has already been signed by Pakistan, China, Kazakhstan and Kyrgyzstan.
After completion of CPEC, Pakistan’s national income will also increase since it will get royalties or transit fee on huge volumes of Chinese and CARs exports and imports to and from West Asia, South Asia, Middle East and North Africa through CPEC, being the shortest route.
Hence the importance of CPEC is such that it is being hailed as a “fate changer” by the Pakistan. With Chinese investment pouring in, Pakistan is desperately looking to guarantee stability and safety to ensure the timely completion of the project. But it is important to keep in mind that challenges confronted by CPEC are still unsettled. It is facing both internal and external obstructions which could derail this multifaceted project.
A lack of domestic consensus can hinder development in any part of the world, and CPEC is no exception. When CPEC was initially introduced, every mainstream political party supported it. However, the enthusiasm turned to deep concern when political parties from economically weak provinces (Khyber Pakhtunkhwa and Baluchistan) felt that their province’s reservations about CPEC were not being addressed.
The debate between political parties became so intense that China felt it necessary to put out a statement urging parties to overcome their differences. A spokesman from the Chinese embassy in Islamabad said, “Relevant parties should strengthen their communication and coordination on the matter.” So it is very essential that the plan ought to be kept above politics.
The security atmosphere inside Pakistan especially Baluchistan poses numerous difficulties for CPEC. Starting from Kashgar, the project will pass through Gilgit-Baltistan and KPK, followed by Baluchistan. For that matter, government has decided to install 10,000 army personnel under the command of a major-general, whose primary objective will be to safeguard Chinese engineers and guard the entire trade route. The deployment of army personnel has already begun. This shows that the civilian and military leaderships – despite differences over foreign policy – are on the same page when it comes to this strategically vital project.
Another major challenge is imposed by neighboring country India. While Pakistan is developing Gwadar to become a nerve centre for regional trade along with development of necessary infrastructure under China-Pakistan Economic Corridor (CPEC), India has openly stated on more than one occasion that it would go to any length to sabotage this project.
According to an editorial published in Pakistan observer, apart from setting up a special cell of RAW to plan and execute anti-CPEC activities, India is luring regional and world powers to join hands to develop Chabahar as a counter-weight to Gwadar besides construction of rail and road links through Iran to link India with Afghanistan and Central Asia bypassing Pakistan.
However, Iranian Ambassador to Pakistan Mehdi Honardoost, while speaking on Pakistan-Iran relations at the Institute of Strategic Studies in Islamabad (ISSI), said, “Chabahar would not turn out to be an enemy port to Gwadar but work as a ‘friend’ port.” He further said the recent trilateral agreement between India, Iran, and Afghanistan on Chabhar port was “not finished” and both China and Pakistan are welcome to join it.
Even though the Iranian Ambassador insists Chabahar would not become a rival port to Gwadar even when it tries to bypass Pakistan to create a link between Central Asian countries and India, Pakistan needs to stay vigilant to Indian plans to sabotage the CPEC project. The leadership of the country has to get together and remove all internal obstacles faced by this project.
One important obstacle that needs to be given close consideration is the status of Gilgit-Baltistan. It will pass through disputed region. Gilgit-Baltistan is the gateway to Pakistan from China, but China cannot afford to invest billions of dollars on a road that passes through a disputed territory claimed both by India and Pakistan. Gilgit-Baltistan is disputed, underdeveloped, lacks legal status, and is not getting its fair share of CPEC attention, all of which could lead to numerous problems.
To ensure that Pakistan does not suffer, the government must not only develop contingency plans, it must also be more transparent about the deal itself. Questions have already been raised about the proposed CPEC routes. Both Balochistan and KP’s political leadership have raised concerns about the proposed routes and their impact on their local economies.
To guarantee CPEC translucent macroeconomic stability, economic policymakers, both at the State Bank and outside, should be provided details about the expected inflows and outflows of foreign currency, and the debt and equity components of the deal.
In the words of the Federal Minister Ahsan Iqbal who is managing the CPEC project: “If Pakistan does not provide stability for CPEC, Chinese will not hesitate to find another route, practically leaving Pakistan out of this mega economic and trade route.” All in all, CPEC will face many hurdles, both domestically and from regional powers that may see it as a threat. However, with a multi-billion dollar Chinese stake in the project, and Pakistan looking at it as a lifeline for survival, optimism remains high in both countries.