Game-Changer or Game-Over for Pakistan?
An Analysis of the China-Pakistan Economic Corridor
By : Ali Alam Qamar
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Abstract
This research paper conducts an analysis of the China-Pakistan Economic
Corridor, scheduled to cost an estimated US$60 Billion. In particular, the paper
examines Chinese motivations for investment in Pakistan, the benefits of the
corridor to Pakistan, the specific impact on the economy of Pakistan of projects
under this scheme; and the global and domestic threats that may hamper its
realisation. The paper begins by introducing the essential themes of the CPEC,
before undertaking an overview of the relevant research literature. The methodical
approach adopted in the course of the study is examined, and the paper’s findings
are presented and discussed. Finally, the research paper develops a set of
conclusions and recommendations, which will be crucial to the successful
development of the projects and to maximising the socio-economic possibilities and
potential of the corridor.
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Table of Contents
Table of Contents
3
1. Introduction
6
2. Literature Review
9
2.1 Introduction
9
2.2 Background
10
2.3 China and Pakistan: National Interests
11
2.4 Challenges
13
2.5 Further Research
15
3. Research Methodology
16
3.1 Type of Research Methodology
16
3.2 Methodological Limitations
17
4. Findings and Analysis
18
4.1 Outlook for China
18
4.1.(1) The One Belt One Road (OBOR) Initiative
18
4.1.(2) The ‘Distance Saved’ Factor
20
4.1.(3) The ‘Gwadar’ Route
21
4.1.(4) Gwadar as an alternative to The Strait of Malacca & Hormuz route
23
4.2. CPEC: The Outlook for Pakistan
25
4.2.(1) Current Situation in Pakistan
25
4.2.(2) Resolving the Energy Crisis in Pakistan
27
4.2.(2.1) Before CPEC
27
4.2.(2.2) After CPEC
27
4.2.(3) Infrastructure Development and Poverty
29
4.2.(3.1) Before CPEC
29
4.2.(3.2) After CPEC
31
4.2.(4) Economic Development through Transformation of Gwadar
34
4.3 Internal and External Threats to CPEC
35
4.3.(1) The QUAD (Quadrilateral Security Dialogue) Alliance
35
4.3.(2) Terrorism in Pakistan
37
4.3.(2.1) Threat of Security Concerns in Balochistan
37
4.3.(2.2) What gave rise to insurgents in Balochistan?
39
4.3.(2.3) “Zarb-e-Azab”
42
4.3.(2.4) Inter-Province Conflict in Pakistan
44
4.3.(2.5) Political Instability in Pakistan
45
5. Conclusion and Recommendations
46
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5.1 Wiping Out Terrorism in Pakistan
46
5.2 Call for Cross-Border Mediation
47
5.3 Uniting the people of Balochistan and ending conflict amongst Pakistani provinces 48
5.4 Political Consensus and Policy Making
49
6. Bibliography
51
7. Appendices
56
Appendix A : CPEC Agreement Declaration
56
Appendix B : Guidelines and Basic Principles; CPEC
57
Appendix C : Investment and Financing Mechanism
58
Appendix D : CPEC Vision and Goals
59
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Glossary of key terms:
• BOP: Balance of Payments.
• CPEC: The China-Pakistan Economic Corridor.
• GDP: Gross Domestic Product.
• Gwadar : Area in Balochistan, Pakistan.
• KPK : Khyber-Pakhtunkhwa; Province in Pakistan.
• OBOR: “One Belt One Road”.
• PML-N : “Pakistan Muslim League Nawaz” - Political Party in Pakistan.
• PPP : “Pakistan People’s Party” - Political Party in Pakistan.
• PTI : “Pakistan Tehreek-e-Insaaf” - Political Party in Pakistan.
• Rad-ul-Fassad : Counter-Terrorism operation launched by Pakistan army in 2016.
• Silk Road: Another term for “One Belt One Road”.
• Zarb-e-Azb : Counter-Terrorism operation launched by Pakistan army in 2014.
List of Figures:
Figure 1: Framework for answering research questions
Figure 2: ‘One Belt One Road’ Route
Figure 3: Six Corridors forming the Silk Road
Figure 4: Number of Incidents: Strait of Malacca
Figure 5: Population Mortality (%)
Figure 6: Pakistan Financial Budget (2015-16)
Figure 7: Terrorist Attacks in Balochistan (1st January 2007 - 1st August 2014)
Figure 8: Per Capita Income in Balochistan, Pakistan
Figure 9: Unemployment (%) in Pakistan
List of Tables:
Table 1: Pakistan v China Demographics
Table 2: Distance Saved by China (Shanghai Port vs Gwadar Port)
Table 3: CPEC Energy Projects
Table 4: Pakistan’s worldwide ranking in infrastructure
Table 5: CPEC Infrastructure Projects across Pakistan
Table 6: Infrastructure Projects in Gwadar
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1. Introduction
Over the past two decades, Pakistan has been going through a volatile time, both politically and
economically. Poverty, unemployment, a growing Balance of Payments (BOP) deficit, an
alarmingly high infant mortality rate (notably due to illnesses such as malaria, dengue etc.) have all
been long-running issues in the country. Further, Pakistan has been mired in a war against
terrorism for years, one that has claimed over 37,000 innocent civilians and inflicted irrecoverable
damage — estimated at over $120 bn — on the economy. Compounding the predicament, the
United States, Pakistan’s biggest foreign investor, cancelled aid programmes worth $2 billion and
further assistance, leading some analysts to declare that relations between the two nations are at
their worst since 9/11. (Janjua and Borger, 2018)
In this precarious climate, China has offered Pakistan a helping hand, investing over $60 billion in
a major development drive across infrastructure, energy, transportation and special economic
zones — a project known collectively as the China-Pakistan Economic Corridor (CPEC). Part of
China’s “One Belt One Road” or “Silk Road” project, the CPEC is set to play a dominant role in
the economic building of the nation. It will bolster regional connectivity across all of Pakistan’s
four provinces (Punjab, Sindh, KPK and Balochistan), through the development of highways,
railways, airports and a special economic zone (in Gwadar Port). The CPEC is expected to help
address the energy crisis in Pakistan through the installation of power plants with a combined
capacity in excess of 10,000 Megawatts (Ministry of Planning, 2018). The project is anticipated to
increase Pakistan’s GDP by an estimated 7%, as well as alleviating the country’s extreme poverty
and unemployment rates (FPCCI, 2015). The project is also expected to play a national security
role as a strategic transport route in the war against terrorism. (Pakistan Defence, 2018)
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According to Mian Nawazsharif, Pakistan’s former Prime Minister, “CPEC is the light at the end of
the tunnel, which would not only serve as a “game-changer” for Pakistan, but also as a “fatechanger” for the entire region by helping it rid economic deprivation and attain peace and
prosperity.” Nawazsharif has also referred to CPEC as “the most important initiative of the 21st
century in the region, and crucial for Pakistan’s vision for 2025.” (Pakistan Today, 2015)
Some critics, however, have suggested that the CPEC might not live up to such overly optimistic
and ambitious expectations, and might instead end up representing “game-over” rather than a
“game-changer” for Pakistan. Opponents of the project fear the CPEC might end up being
another “East India Company”, and result in China colonising Pakistan, dominating its economy
and influencing its politics (Bhattacharya, 2016). Moreover, the project faces a number of
obstacles, from the challenge posed by the US-Indian alliance to Pakistan’s own internal security
and political issues.
In light of this, the aim of this research work is to evaluate the chances of success of the CPEC
project in the context of the national interests of both countries (China and Pakistan), as well as
the potential internal and external threats facing the project.
In order to achieve the research aim, the following research questions have been formulated:
•
What are China’s motivations for investment in Pakistan?
•
What is the current economic situation in Pakistan
•
How will CPEC benefit Pakistan (i.e. what is the likely outlook)?
•
What are the internal and external threats facing the CPEC project?
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Figure 1, below, illustrates how the paper seeks to address the research questions.
Figure 1 : Framework for answering research questions
The research outcome adopted for this study is the development of a framework of
recommendations for determining the success of the CPEC project, which could be crucial both
for policy makers and analysts pursuing future research into the topic.
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2. Literature Review
2.1 Introduction
In 2014, the Chinese Premier, Xi Jinping, launched the “Silk Road Economic Belt” project,
also known as the “One Belt One Road” (OBOR), an ambitious project intended to
connect China with more than 60 countries, manifesting Xi’s mission of increased
globalisation and trade. Figure 2, which maps out the OBOR project route, highlights the
crucial significance for the OBOR project of Pakistan’s geo-strategic location, as the silk
route would have to travel through Pakistan. The China-Pakistan Economic Corridor
(CPEC) is one of OBOR’s key segments of OBOR (Irshad, 2015), one without whom the
OBOR would be unachievable according to some analysts (Yu, 2016; Overholt, 2015; Li,
2015).
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A report published by Business Insider suggests Pakistan will be the World’s 20th biggest
economy by 2030 (Brinded, 2017). Accordingly, some analysts believe the CPEC is critical
for Pakistan too, as it will bolster the country’s economic development and help it achieve
its 2030 vision (Ijaz, 2015; Irshad, 2015; Abid & Ashfaq, 2015).
In order to secure the research outcome of this study, a review of the literature will be
conducted, which will examine the potential benefits of the CPEC for Pakistan, China’s
interests in the project and the challenges it is likely to encounter.
2.2 Background
Located in an area of great economic, political and strategic significance, Pakistan has
been the subject of interventions by world superpowers, like Great Britain, Russia and
USA, for decades. According to a report published by Pakistan Defence (2013), “US
enthusiasm in the area was particularly to contain the developing China, atomic Iran,
terrorist Afghanistan and gain through the lucrative market of India.” But since the end of
the war in Afghanistan, the significance of Pakistan to US interests declined, resulting in
large cuts to military and other forms of US aid to Pakistan. The deterioration of USPakistan relations, however, presented a perfect opportunity for China to expand its
power and influence in the region. (Ermito, 2018; West & Markey, 2016)
According to Stephen Cohn, an expert analyst on South-Asian security, “history has been
unkind with Pakistan, its geography has been its greatest benefit.” (Pakistan Defence,
2013) Located in the heart of South Asia, Pakistan has been at the intersection of great
forces, like China, India and Russia. Pakistan also neighbours the Gulf States — which
possess approximately 65% of the World's oil reserves — as well as Iran and
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Afghanistan, which hold abundant energy sources. For countries like China and India,
Pakistan represents a gateway for access to these resources. Countries like Afghanistan,
currently in the process or rebuilding, also desperately need access to Pakistan’s routes
to achieve their own national goals. (Khan, 2017)
To help illustrate the scale of economic match-up between China and Pakistan, Table 1,
above, offers a comparative list of key demographic and economic indicators.
2.3 China and Pakistan: National Interests
According to the Chinese Premier, Xi Jinping, “In the global prospect, the Chinese Dream
will change the global landscape, which was shaped by Western countries over the past
two centuries during industrialization. The new global landscape will be established
through international rules and experiences of both developed and emerging
countries.” (Resource Portal, 2016)
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For Bhattacharya, a professor at the University of New Delhi, although this statement
reflects the collective ambitions of China’s neighbouring nations, and their overwhelming
motivations to join the OBOR, there is no assurance that the project will actually stimulate
their economies. Further, the Chinese goal of establishing a “community of common
destiny” itself carries its own hegemonic motivations, and echoes imperialistic views
previously witnessed in Japan’s pre-War age. Similarly to its own imperial past, where
China made use of the tributary system to extend its power and influence, it is now
adopting the OBOR initiative to pursue the same goals. Seen in this light, CPEC is a bold
Chinese foreign policy plan to accomplish its dreams of global power. (Bhattacharya,
2016)
Other analysts, however, believe the CPEC is likely to offer a win-win outcome for both
countries, as it will bolster connectivity amongst all provinces in Pakistan, while
increasing employment, GDP-per-capita and living standards in the country. (Aslam,
2016; Hussain, 2016) For instance, a survey by Haq and Farooq (2016) predicts a 5.2%
growth in social welfare by 2020 nationally — including 6.2% in Balochistan, 6.4% in
Sindh, 5.1% in KPK and 3.4% in Punjab. The national increase will mainly consist of 3.4%
growth in the education sector, 4.75% growth in the health sector and 8.5% growth in the
real estate sector. Poverty is also predicted to decline, while the quality of life is forecast
to increase nationally for the majority of the population. In other words, CPEC is expected
to bring about an unprecedented boom across all economic sectors in Pakistan.
(Hussain, 2016)
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2.4 Challenges
Some analysts, however, have highlighted key challenges presented by CPEC. For
instance, some warn that the Gwadar port in Pakistan, which China is currently
transforming into a special economic zone (primarily for its oil imports from the Middle
East) might become a “debt trap” for Pakistan, as happened to the Chinese-funded
Hambantota port in Sri Lanka (Raman, 2012; Hindu Business Line, 2017). Critics are of
the view that Sri Lanka has been betrayed by China, by being thrown into a “debt trap”
over the Hambantota port project. Chinese investments in Sri Lanka failed to produce the
ambitious results that had been anticipated, and the same might happen for CPEC.
Moreover, similar to the Hambantota case, the Gwadar port project has arguably been
embarked upon more out of political considerations than economic ones. Indeed, many
have noted that the Pakistan Muslim League-N (PML-N), the political party in power in
Pakistan, has been enthusiastically promoting the advantages of the CPEC ahead of the
upcoming elections in 2018, naming CPEC “a milestone achieved through the party’s
vision.” (Chaudhury, 2017; Hussain, 2016)
Meanwhile, Sri Lanka has suffered massive financial losses, due to the high interest rates
associated with its Chinese-financed debt. Reports suggest China lent Sri Lanka $301
million for developing the Hambantota port at an interest rate of approximately 6.4%,
compared to the 0.25-3% rate offered by the World Bank and the Asian Development
Bank. As a result, Sri Lanka and China have now agreed to transform the debt into equity,
leading to Chinese ownership of the ventures. (Chaudhury, 2017) The same scenario
might be happening with Pakistan, with China lending the country billions of dollars at
comparatively high interest rates, which has the potential to drive Pakistan too towards a
debt crisis, especially given its already high current levels of debt. Some experts argue
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that by feeding $46 billion into the CPEC, payable by Pakistan over a 40-year period,
China has played a masterstroke, pushing Pakistan into mortgaging its current and future
economic prosperity (Chaudhury, 2017 ; Bhattacharjee, 2015 ; Sial, 2015). According to
this perspective, China, under the veil of its commitment to the economic development of
Pakistan, is in fact pursuing a strategic plan to colonise Pakistan, financially and
politically, in perpetuity. (Chaudhury, 2017; Markey & West, 2016)
Some analysts argue that the CPEC project faces a number of challenges that may cause
delays or, possibly, the failure of the project. Indeed, Pakistan’s history suggests a record
of failures in pursuing economic opportunities due to lack of internal political consensus.
For instance, the two political parties that have been ruling Pakistan since its birth, the
Pakistan Muslim League (PML), and the Pakistan People’s Party (PPP), have been so
busy competing with each other over who deserves credit for initiating the CPEC project
that they have lost focus on the development of the project itself. Moreover, two of
Pakistan’s neighbours, India and Iran, have used Pakistan’s internal strife as evidence the
county cannot handle such large scale projects. (Fazil, 2016, Wolf, 2016) Furthermore, the
rise of the Pakistan Tehreek-e-Insaaf (PTI) party, which calls for a mass revolution against
Pakistan’s corrupt rulers, has contributed to a destabilisation of the government, notably
leading to the disqualification of the Prime Minister, Mian Nawazsharif, in 2017. As a
result, Pakistan is experiencing a period of major political uncertainty, which can be
damaging for the development of CPEC. (Wolf, 2016)
Meanwhile, the Pakistani military has been fighting an ongoing war against terrorism.
Critics have suggested that the Balochistan province, which is home to the CPEC project,
is a safe haven for terrorists. For their part, many of Balochistan’s citizens have long felt
betrayed by the Federal government, even calling for independence. Chinese nationals
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working in Balochistan thus potentially face threats to their safety, which can hamper the
project’s progress. (The Economist, 2015; Wolf, 2016) Indeed, China is seeking a solid
commitment from the Pakistani government and its military, supported by prominent
long-term measures, to guarantee the safety of its nationals on Pakistani territory. (Wolf,
2016)
2.5 Further Research
The literature review has suggested several theories with regards to both the advantages
presented by the CPEC project for Chinese and Pakistani interests, and potential
obstacles it might face. However, while some perspectives have offered a pro-Pakistan
outlook, hailing the CPEC’s prospects for success, others, particularly espoused by
analysts based in India and Bangladesh, predict the failure of the project. There is thus a
need for further analysis from a neutral perspective.
To that end, the present study paper will aim to conduct in-depth research on Chinese
motivations for investing in the CPEC; details of the projects included in this investment;
how this investment will affect Pakistan politically, economically and socially; and the
various challenges facing the project. This will be with a view to produce a set of
recommendations for securing the development and success of the CPEC project.
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3. Research Methodology
3.1 Type of Research Methodology
This section will introduce the research methodology which will be used to answer the
research questions formulated in the first chapter. As mentioned at the outset, the present
paper aims to develop a robust assessment of the prospects for success of the CPEC
project, based on an analysis of the national interests of both countries and the internal
and external threats potentially facing the project.
The research methodology used for this research paper is an examination of
secondary data and a critical analysis of the relevant literature.
In addition to the current literature (reviewed in the previous chapter), Secondary data
will be used to answer the research questions:
-
What are the Chinese motivations for CPEC?
-
What is the current Economic situation and Outlook for Pakistan?
-
What is a detailed list of projects under CPEC?
-
What are the potential threats facing CPEC?
Secondary data sources include governmental and corporate websites; the Pakistani
Finance Ministry (for economic statistics); the World Bank and International Monetary
Fund (IMF), the Pakistan Bureau of Statistics (for economic and security statistics); the
World Health Organisation (for country-specific social statistics); Worldometeres (for
economic statistics); the Asian Development Bank; Moody’s Analytics (financial health of
economy); the Pakistani Ministry of Planning and Development (for CPEC project status
and updates); and the Pakistani Defence Ministry (for security statistics and analysis).
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References consulted also include a wide range of journals and newspapers, notably The
Economist (for economic, security and social statistics); The News Pakistan (for security
and social analysis); The Dawn News and Pakistan Business Review (for financial analysis
of CPEC); the Express Tribune and Hindu Business Line (for Indian perspectives on
CPEC); Pakistan Today (for analysis of CPEC), China Daily (for Chinese perspective on
CPEC); Forbes, Bloomberg and the Financial Times (for global perspectives on CPEC);
the Pakistan Business Review, Pakistan Defence Journal, and The Express tribune (for
security perspectives on CPEC).
3.2 Methodological Limitations
Although efforts were made to select the most reliable and accurate sources for data
collection, there were still some limitations associated with the data collection
methodology. These limitations include the degree of variance and questionable accuracy
inherently associated with any data collected from secondary sources, as well as the
degree of bias associated with scholarly and journalistic sources, particularly the personal
and institutional biases of authors.
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4. Findings and Analysis
4.1 Outlook for China
4.1.(1) The One Belt One Road (OBOR) Initiative
China’s CPEC investment is an integral part of ‘One Belt, One Road’ (OBOR), the massive
project for regional economic connectivity inaugurated in March 2015 by China’s National
Development and Reform Committee (NDRC). The project will direct state investments
towards building roads, railways, ports, pipelines, and information networks so as to
strengthen economic integration and China’s networks across Asia, Africa and Europe.
(Markey & West 2016)
Over the next five years, China is set to invest an estimated US$350 Billion on
development ventures across over 70 countries. As illustrated in Figure 3, below, the
OBOR initiative involves the development of six corridors globally: The Pakistan-China
Corridor, the China-Indochina Corridor, the China-Mongolia-Russia Corridor, the ChinaCentral Asia-Western Asia Corridor, the China-Myanmar-Bangladesh-India Corridor and
the New Eurasian Land Bridge. (Ng, 2017)
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The OBOR comprises a mainland Eurasian “Silk Road Economic Belt” and a Southeast
Asian “Oceanic Silk Road.” As such, Beijing depicts the CPEC, which will serve as a
nexus for the two courses, as a “flagship project” (Makey and West 2016). Indeed, CPEC
will link China with the Caspian waters and Europe on the one hand, and with South Asia
and Middle East on the other. China plans to create three routes: Central, Southern and
Northern, which will travel through its Xinjiang province, connecting China with Russia
and former Soviet territories, Europe, and Pakistan. As such, Pakistan enjoys a powerful
geo-strategic location as the gateway for Chinese access to various markets. Indeed, it is
an irreplaceable component of China's OBOR masterplan, without which China’s
‘Silkroad’ vision simply cannot be realised. (Aslam, 2016)
Along with developments in Pakistan, China has been vigorously pursuing its OBOR
efforts with other countries. Recently, Indonesia declared a Global Maritime Axis plan,
which perfectly maps onto China’s OBOR, indicating the two governments are wellaligned in their globalisation plans.
China is also conducting “Two Corridors and One Ring” talks with Vietnam over the
latter’s participation in OBOR initiative. Further, China and Singapore are jointly working
on consolidating their cooperation on construction projects in developing nations. In
South Asia, a union involving Bangladesh, China, India and Myanmar has been formed,
with the larger aim of globalisation. As a response to CPEC, India has introduced its own
'Cotton Route' for joining OBOR. The development of a China-Nepal-India route is also
gaining momentum.
Moreover, China and Russia have joined hands in developing both OBOR and the
Eurasian Economic Union (EEU) venture. Relatedly, China, Mongolia and Russia are
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working together to build a China-Mongolia-Russia passageway, a medium-term plan for
trilateral co-operation. China and Mongolia have agreed to link OBOR with the
'Grasslands Route'. China has also secured Kazakhstan consent for connecting OBOR to
the latter’s 'Bright Path' new financial development plan.
In the South Pacific, Australia has expressed interest in building-up its northern regions,
with a longer-term goal of joining the OBOR. Meanwhile, China and the EU have agreed
to coordinate OBOR with the Juncker Investment Plan, which revolves around
infrastructural development. China secured Germany’s agreement to associate 'Made in
China 2025' with Germany’s 'Industry 4.0'. For its part, the United Kingdom is currently
discussing participation opportunities in OBOR and North of England Economic Centre
programme. Finally, China has already secured Memorandums of Understanding (MoU)
with a majority of nations in Central and Eastern Europe. (Mengzi, 2016)
4.1.(2) The ‘Distance Saved’ Factor
A significant driver behind China’s interest in CPEC is the ‘distance saved’ factor. China
currently trades with markets in the Middle East, Europe and Africa via Shanghai Port,
located on the country’s north eastern coast. However, China plans to shift its trade route
for entering these markets to the Gwadar Port in Pakistan. In doing so, China is expected
to cut transport distances by 50 to 85% for more than a third of its container shipments
to the Middle East, Africa and Europe. (Masood, Farooq & Hussain 2016)
Table 2, below, indicates the distances (miles) travelled when trading through the
Shanghai and Gwadar Ports, respectively. It shows the latter option results in a total
distance of 7,580 miles being saved from the Central China to the Middle East route, and
a distance of 6,873 miles saved from the Central China to Europe route. (see Table 2)
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4.1.(3) The ‘Gwadar’ Route
The Gwadar Port is a primary reason for why China is pouring billions of dollars into a
Pakistani segment of OBOR. Indeed, developing the port is crucial to China’s OBOR
masterplan, which involves transforming Gwadar into a special economic zone that will
serve as a hub for Chinese trade. As stated above, China currently trades with the rest of
the world mainly through its Shanghai Port, which is proving ineffectively costly (Aslam,
2016). As Table 2 shows, trading through Gwadar rather than Shanghai would save China
approximately 68% of the distance currently expended in trading with the Middle East,
and 39% of the distance when trading with Europe. This is why China is determined to
shift a major chunk of its Shanghai trade to Gwadar. In this context, CPEC will put
‘Gwadar on the grid of extreme geo-strategic rivalry’. (Aslam, 2016)
According to Pentagon Report, approximately 52% of China’s oil imports arrive from the
Arabian Gulf by ships covering more than 10,000 miles, over 2 to 3 months, before
reaching Shanghai Port (Bender and Rosen, 2015). Trading through Gwadar port would
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reduce this distance by approximately 7,580 miles (see Table 2) thus driving up oil
imports. (Yousafzai, 2016)
Nevertheless, some critics point out the limited advantages of the Gwadar Port option to
the Chinese economy, primarily due to the modest size and capacity of Gwadar Port and
its current cargo turnout. According to Wu Minghua, a Chinese shipping industry analyst,
Gwadar Port is a “medium-sized port” that is not capacious enough to sustain China’s oil
imports demand, as it offers an expected storage handling capacity of a mere 1 million
tonnes in 2017, compared to an expected inflow of 1.5 million tonnes oil at one time.
(Yan, 2016) It is worth noting that China’s oil demand in 2017 was 590 million tonnes and,
based on GDP growth forecasts of 6.7% in 2018, is expected to grow by 4.6% to over
600 million tonnes. (CNPC, 2018)
Moreover, Gwadar Port only has a water depth of approximately 11.5 meters. This is
much lower than those of Shanghai and other international ports, where the average
water depth is of approximately 14-15 meters. This makes them suitable for very large
ships bringing in millions of tons of goods, whereas ships harboured at Gwadar can only
sustain 100,000 tons of weight at a one time. (Yan, 2016) Thus, according to Wu, rather
than becoming China’s primary trade hub, Gwadar port should only serve as an
alternative to the Strait of Malacca route (Yan, 2016).
Furthermore, CPEC involves developing an entire infrastructure network of roads, energy
projects, railway lines and oil pipelines to connect Kashgar (China) to Gwadar (Pakistan).
This resulting 3000 kilometres route of highways, railways, and pipelines will provide
china with a shorter and more economically-efficient route to access European, Middle
Eastern and African markets. The Gwadar-Kashgar pipeline is expected to carry around
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17% of the share of total Chinese imports. (Yousafzai, 2016) China is also developing an
immense industrial Park at Gwadar, which will house an ‘oil city’ and a petroleum refining
zone, along with several technical facilities, which will enable China to meet its growing
energy requirements. (Yousafzai, 2016)
In addition to granting China easy access to the Arabian Sea through Pakistan, CPEC
also represents an opportunity for landlocked nations in Central Asia, especially those
that border Pakistan (like Afghanistan) to benefit from the corridor. However, the focal
point of CPEC remains Gwadar as a shorter, more efficient pathway for trade with the
Middle East and Africa.Indeed, without Gwadar, it would be difficult to envision China
investing in Pakistan on such a large scale. (Aslam, 2016)
4.1.(4) Gwadar as an alternative to The Strait of Malacca & Hormuz route
The sea route currently used by China travels through the unsafe South China Sea, the
Pacific Rim, the Strait of Malacca and Sri Lanka. Chinese ships must cross approximately
10,000 kilometres before reaching their final destination (Yousafzai, 2016). Based on the
Pentagon Report, an estimated 43% of oil flowing into China travels through the Strait of
Hormuz, while 82% of all Chinese maritime oil imports must traverse the Strait of
Malacca. Both of these chokepoints are pivotal to worldwide maritime traffic yet
constantly subject to uncertainty. During the Iran-Iraq War in the 1980s, Iran blocked off
the Strait of Hormuz to all maritime traffic it deemed suspicious, resulting in a US military
engagement with Tehran in the Persian Gulf. More recently, the Iranian navy attacked two
foreign-flagged ships in the Strait in April 2015, together with a US-flagged ship. (Bender
& Rosen, 2015)
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For its part, the Strait of Malacca is vulnerable to piracy as well as to geo-political
tensions. It has become the ‘world’s new piracy hotspot,’ as shown in Figure 4, below,
which indicates the number of incidents reported in the Strait. With approximately a third
of all shipping trade traveling through this 800-km-long, congested route, any piracyrelated incident could prove hugely costly for China’s economic interests (Ramachandran,
2015). On the geo-political front, any economic embargo imposed on the Strait of
Malacca would potentially have a devastating economic impact on the Chinese energy
sector. In light of this, trading through Gwadar Port may address many of China’s
concerns, providing a safer and more reliable route for its trade.
The Gwadar Port route is expected to shorten China’s sea route to 2,500 kilometres and
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its land route to Kashgar — China’s Western province, situated 4,550 kilometres away
from Shanghai Port — to 2,850 kilometres. Through its more efficient route, CPEC is
projected to save China not only distance and time, but billions of dollars. (Yousafzai,
2016)
4.2. CPEC: The Outlook for Pakistan
After analysing the significant advantages CPEC offers China, it is crucial to consider
whether the project will benefit Pakistan too, and how it will do so.
4.2.(1) Current Situation in Pakistan
On the economic and social development front, Pakistan still faces enormous challenges.
More than 29.5% of the population live below the poverty line. The average per-capita
income is $1,513 annually, compared with $10,679 in China (Trending Economics, 2018).
More than 8.6% of the employed population have a purchasing power parity of less than
just $1.5 daily (Asian Development Bank, 2017). Pakistan’s positioning in the Maternal
Mortality Ratio Index declined further from 147 in 2014, to 149 in 2015, an astonishing
276 deaths per 100,000 births. Pakistan also has the third highest infant mortality rate
globally (DAWN (a), 2016). As shown in Figure 5 below, communicable, perinatal and
nutritional conditions account for an estimated 30% of infant deaths. This is primarily a
result of poor medical facilities, deteriorating standards of living, high levels of poverty
and inferior food quality.
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Nevertheless, the de facto Pakistani President Mamnoon Hussain has expressed optimism
about the future of Pakistan. During his meeting with the Chinese President, Xi Jinping,
Hussain declared that “the China-Pakistan economic Corridor would prove to be a gamechanger in the whole region by generating massive trade and economic activity and
opening new vistas of progress and prosperity for the people of the two countries and
about three billion people of the region.” (Syed & Sajjid 2013) As such, the CPEC project is
anticipated to bolster economic, technological, commercial, medical and environmental
development in Pakistan. It will also help Pakistan address its rising rates of poverty,
inflation, unemployment and regional development inequalities. (Abid & Ashfaq, 2015)
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4.2.(2) Resolving the Energy Crisis in Pakistan
4.2.(2.1) Before CPEC
Concerning the energy crisis in Pakistan, the shortfall in the national power grid is around
7,000 Megawatts, or 32% of total electricity demand. This cost the Pakistani economy an
estimated $130 million (7% of the GDP) in 2015, and results in 8-to-12-hour daily
electricity blackouts in the majority of cities in Pakistan. At the same time, energy demand
for households is increasing by 10% annually. Between 2010 and 2015, Pakistan’s
economy was adversely affected by an estimated $1.3 billion of annual system losses by
the grid, due to inefficient transmission and distribution. Due to this energy crisis,
businesses have been forced to shut down and lay off workers, which has contributed to
unemployment rising to affect more than 500,000 households. Pakistani households
spend $300 million annually on alternative sources of energy, such as fuel-powered
generators and Uninterrupted Power Supplies (UPS). Electricity remains a luxury in
Pakistan, with over 40% of Pakistani households owning no backup power sources.
(Dawn, 2016)
4.2.(2.2) After CPEC
As previously discussed, the energy crisis is one of the greatest issues facing Pakistan,
and is a major obstacle to the growth and development of the Pakistani economy. To
address this crisis, a major segment — totalling $35 billion and rising — of Chinese
investment in Pakistan is in the energy sector. This seeks to add 10,400 megawatts to the
national power grid by March 2018, and 16,400 megawatts upon the project’s completion
in late 2021. (Aslam, 2016) One of the biggest advantages for Pakistan is that $34 billion
worth of investments will be funded by the Chinese private sector, thus making it debtfree for Pakistan. Meanwhile, an estimated $12 billion will be government-to-government
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loans, in which Pakistan’s share of the equity would amount to 15%. Thus, the Pakistani
government will not be over-burdened with large loans. (Bhattacharjee, 2015) In Table 3,
below, key information on the fourteen planned energy projects is presented, including
their costs, size and dates of completion/operation.
Considering Pakistan’s energy shortfall is estimated to be 7,000 megawatts, CPEC’s
energy projects would not only fill the current shortfall but will produce excess supply of
9,400 megawatts in the national power grid. (DAWN (b), 2016)
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4.2.(3) Infrastructure Development and Poverty
4.2.(3.1) Before CPEC
The poor state of infrastructure in Pakistan’s rural and urban areas is evident; including
the dilapidation of public spaces, the lack of provision of civic and utility services, the
deteriorating conditions of Pakistan National Railways and Pakistan National Airline (PIA)
facilities, the underdeveloped shipping ports (Port Qasim and Port Gwadar) and decadesold ill-maintained motorways (Grand Trunk Motorway, Karachi-Lahore highway) and road
networks (Mehar, 2017; Dawn; 2016). Although Pakistan experienced a significant
increase in GDP in the post-independence era, the past two decades have seen a plunge
in macroeconomic indicators and foreign direct investments (FDI) into the country.
According to a 2017 World Bank survey, Pakistan was ranked 100 (out of 139) in terms of
infrastructure development (see table 4).
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Despite such poor infrastructure conditions, Pakistani government spending on
infrastructure development remains low. The slow pace of infrastructure development is
due largely to lower public revenues, leading the government to sacrifice expenditure on
infrastructure development. At the same time, defence spending — notably to support the
military’s “Zarb-e-Azab” and Rad-ul-Fasaad” counter-terrorism missions — still accounts
for a big proportion of the Pakistani state budget. This leaves little room for other
spending, such as on infrastructure development. The Pakistani budget in 2015-2016 was
estimated at Rs.4.451 Trillion (approx. US$40 billion), of which Rs.780 billion (approx.
US$7.5 billion), or almost 20%, was allocated to the defence budget (The Express
Tribune, 2015). Meanwhile, less than 15% of the state budget goes towards infrastructure
development, as shown in Figure 6 below.
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4.2.(3.2) After CPEC
The scarcity of adequate infrastructure; the deeply-centralised nature of the economy
and the fall in economic productivity and growth have all been leading Pakistan towards
an economic precipice. At this critical juncture, CPEC represents a move towards a
sustainable infrastructure and economic development which can drive Pakistan out of its
predicament. Established norms on public governance and economic policy-making
strongly emphasise the importance of infrastructure development for economic
development. Infrastructure development has been linked to a positive impact on Gross
Domestic Product (GDP), employment and Purchasing Power Parity (PPP) ratios in an
economy. In this regard, a study carried out by the World Bank concluded that
infrastructure development in Pakistan can positively influence the per-capita income at
purchasing power parity (PPP) by more than $2 daily, with PPP currently at approximately
$1.5 daily (Mehar, 2017). A cross-country analysis by the World Bank found that
countries’ global GDP rankings were significantly correlated with their levels of
infrastructure development, confirming the significance of the latter for national economic
success. (World Bank, 2018)
A report by the Federation of Pakistan Chambers of Commerce & Industry (FPCCI)
suggests that a GDP growth rate of at least 7% would be required to drive Pakistan out of
its currently economic imbroglio, and that infrastructure development would be key to
achieving this goal (FPCCI, 2015). Moreover, a World Bank survey found that the impact
of investing one billion rupees (approx. US$9.5mn) in developing road networks in
Pakistan can increase the country’s per-capita income by Rs.371 (approx. US$3.6). Thus,
investment in infrastructure development is an effective and sustainable method to
counter poverty, which remains one of the biggest issues facing Pakistan today,
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especially when compared against alternative approaches, such as subsidies and transfer
payments, which are not considered sustainable. (Mehar, 2017)
The investment inflow injected by CPEC is estimated to reach $14 Billion in infrastructure
projects, including Motorways, Railroads, Airports, Metro Line Trains and Oil Pipelines. As
such, it offers a major breakthrough for Pakistan’s Punjab, Balochistan, Sindh, KPK and
Gilgit-Baltistan provinces. A list of announced infrastructure projects with their costs and
completion dates is provided in Table 5 below.
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The motorway being built will cover a distance of approximately 2653 kilometres,
connecting Gwadar to Khunjrab, and passing through D.I Khan, Lahore, Multan, Sukkur
and Islamabad. The current Karakoram Motorway (1300km) will also be upgraded. The
railway track being constructed from Gwadar to Khunjrab will run parallel to the motorway
and its expected completion date is 2030. The $1.7 billion underground orange line train,
running from Jain Mandir-Laxmi Chowk, will have the capacity to seat 250,000
passengers, thus significantly reducing road traffic. Furthermore, mineral processing
zones and labs are being set up across Balochistan to utilise the region’s abundant
resources. While roughly $5 billion will be spent on developing roads, hotels and power
plants to urbanise the city of Gwadar (Hussain, 2015), another $2.5 billion will be invested
in developing a 711-km-long natural gas pipeline from Gwadar to Nawabshah, which will
extend the existing Iran-Pakistan natural gas pipeline, currently 2,275 kilometres long.
(Rafi Group, 2018)
The development of these networks of railways, highways and ports will bolster
productivity and efficiency in various sectors, notably the construction, steel, cement,
chemical, mining, food, tourism, transportation and banking sectors. It will also create
employment opportunities and, as a result, contribute to alleviating and solving the
poverty crisis. Moody’s Investors Service describes CPEC as a “credit positive” for
Pakistan. (Mehar, 2017)
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4.2.(4) Economic Development through Transformation of Gwadar
The significance of Gwadar for China under its OBOR plan, and the importance of its
geo-strategic location, was discussed in earlier sections. One of the biggest factors that
have hampered Gwadar’s transformation into a global economic hub, apart from security
concerns, has been the shortage of funding and investment by the Pakistani government.
Fortunately enough for Pakistan, China’s helping hand is set to maximise the potential of
Gwadar, providing it with the investment it demands and needs. (Aslam, 2016)
China’s bonafide dedication to socio-economic development in Gwadar will carve a
pathway for stability in the province of Balochistan. The development of a $100 million
hospital, a $230 million international airport large enough to land a Boeing A380 aircraft,
the provision of electricity, gas and water sanitation, and networks of railways, highways
and ports connecting Gwadar to other landlocked cities in Pakistan, will be a game
changer for Gwadar. In fact it is projected that Gwadar alone will contribute more than
15% to Pakistan’s GDP, creating more than 150,000 jobs and raising the standard of living
of the population (Aslam, 2016). At the same time, it is rapidly increasing the inflow of
foreign direct investment into Pakistan. It is also projected to redress the Balance of
Payment (BOP), currently suffering under the weight of large imports, and to make the
Pakistani currency — currently trading at (US)$1=(PAK) Rs.113.5 — more robust and
stable (Forex, 2018). Further, with the establishment of solar parks and regulatory policies,
Gwadar will not only adhere to global environmental standards but participate in the
global effort to combat climate change. The latter has been a serious concern in Pakistan,
especially since the September 2010 flood in Sindh, which killed over 1,750 people and
destroyed over 100,000 homes, leaving millions homeless. (Nazar, 2016) The breakdown
of China’s planned investment in the city of Gwadar, estimated to reach $793 million, is
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shown in Table 6 below.
4.3 Internal and External Threats to CPEC
4.3.(1) The QUAD (Quadrilateral Security Dialogue) Alliance
The QUAD alliance, initiated by the US and comprising Australia and Japan, recently
joined hands with India in a move towards shaping and shifting Asia Pacific Policy. The
burgeoning alliance is bluntly directed towards containing China’s influence in the region
and forming strong relations with its neighbours to detach them from Chinese influence.
This involves, for instance, Australia and Japan audaciously vowing to patrol the South
and East China seas. Meanwhile, India is striving to achieve greater influence on the
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Indian Ocean. New Delhi has directed its military’s attention towards China as tensions
rise along the border separating the two nations. (Gunnar, 2018)
In China’s Xinjiang province, which borders Pakistan, the US has been accused of
spreading socio-economic disparity to fuel separatist uprisings and even terrorism, in an
aim to destabilise Beijing. Similarly, US-aligned India has been accused of making
countless efforts to destabilise Pakistan’s Balochistan province, and funding the
Balochistan Liberation Party and other extremist groups. (Gunnar, 2018)
Under the auspices of the US National Endowment for Democracy, the US has injected
billions of dollars to fund the formation of networks of groups in Xinjiang and Balochistan
to not only cause unrest for their respective governments and military but also hamper
economic progress in both of these regions and, ultimately, block CPEC itself. According
to a Reuters report, “Disrupting this ambitious project has become the primary objective
of US and European policymakers focused on Asia” (Gunnar, 2018). Insurgent groups in
Balochistan, for instance, have targeted Chinese infrastructure development projects in
an attempt to bl;ock the region’s development and damage the Chinese-Pakistani
alliance. In 2017, insurgents stormed a labourers’ camp at the port of Gwadar, injuring 26.
(Gunnar, 2018)
As for India, in 2016 an Indian spy by the name of Kul Yadav Bhoshan, working for Indian
intelligence agency RAW, was arrested in Balochistan. Yadav revealed that RAW backs
and funds the separatist uprisings in Balochistan, which had led to instability in the region
and the groups demanding an autonomous state (Aslam, 2016). In a speech after Yadav’s
arrest, the Home Minister of Balochistan, Sarfaraz Bugti, declared that: Yadav “was a
commander-ranked officer in the Indian Navy [who] was working for RAW and was in
contact with Baloch separatists and terrorists fuelling sectarian violence in Pakistan and
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Balochistan” (Express Tribune, 2016). On Indian Independence Day in 2016, the Indian
Prime Minister, Narendra Modi, stated that he had received phone calls from Baloch
separatist leaders expressing gratitude to India, thus confirming the role of Indian
intelligence (RAW) in the province. (Aslam, 2016)
Lately, the Indian government has shown increased interest in Afghanistan, providing the
country with military equipment and assistance. The Economist stated that this signalled
the “beginning of a proxy war” in the region (Tiefer, 2016). This is confirmed by Pakistan
analysts on South-East Asia who are of the view that “India’s growing diplomatic
initiatives in Afghanistan serve a purpose to destabilise the Balochistan province by
training and recruiting Afghani insurgents to spread terror in the Pakistani region” (Aslam,
2016). In 2016, a suicide bomb attack took place at a hospital in Quetta, the provincial
capital of Balochistan, taking the lives of more than 70 people. (DAWN, 2016) The
government of Balochistan and the ISPR (Inter-Service Public Relations) blamed the RAW
for the bloodbath, though the Islamic State (ISIS) and a faction of the Taliban (TTP) soon
claimed responsibility for the act. It is believed that if the Taliban’s responsibility is
established then it is highly likely that it was backed and funded by RAW. (Davies, 2016)
4.3.(2) Terrorism in Pakistan
4.3.(2.1) Threat of Security Concerns in Balochistan
A survey of terrorist assaults in Balochistan between 2007 and 2014 shows that Kech and
Khuzdar are the most targeted regions (see Figure 7). Approximately 1,040 terrorist
assaults, accounting for 23% of all terrorist activities in the country during that period,
occurred in the six areas of Balochistan, namely Gwadar, Kech, Awaran, Panjgur, Lasbela
and Khuzdar, as shown in Figure 7 (Sial, 2014). As such, the fact that Gwadar neighbours
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Kech, a region where the control of Baloch radicals has expanded in recent years, is a
reason for serious concern.
Baloch insurgents serve as a threat to security and stability of Gwadar and eventually
CPEC. Reports suggests, attempted attacks carried out by these groups on CPEC
workers and developments, in the six areas mentioned which are host to mega CPEC
projects. (Hussain, 2016) Balochistan is populated by Baloch nationalists and other
minorities. The nationalists seek independence for Balochistan, primarily in reaction to the
federal government of Pakistan’s failures in addressing the local population basic needs.
Indeed, it is certainly the case that Islamabad has continuously ignored legitimate
demands for infrastructure development and failed to provide basic health, employment
and education facilities to the local population (Hussain, 2016). To give a potent example,
the literacy rate in the province is of only 28%. (Balochistan MICS, n.d)
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4.3.(2.2) What gave rise to insurgents in Balochistan?
The Pakistani government’s presence in Balochistan can be best understood through
David Harvey’s (2003) framework, according to which this is a case of capitalist
imperialism by a state. Harvey describes the big mid-twentieth century shift when states
started accumulating territory in which spatio-temporal fixes can be embraced.
Balochistan contains an immense land area with a strategically pivotal coastline, where
Gwadar is located. It enjoys vast natural resources and, accordingly, is a viable target for
Pakistan. A look at the Pakistani military presence in Balochistan confirms the province is
not being dealt with as an integral part of the federation by the Pakistani state. Rather, the
government is noted for treating Balochistan as a domain of its neoliberal colonialism
(Ahmed & Baloch, 2017).
Figure 8: Per Capita Income in Balochistan, Pakistan
-, (Source: World Bank, World Development Indicators.)
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The Balochistan region is one of the poorest areas, and its residents amongst the most
underprivileged, on the planet. As shown in Figure 8, above, the average inhabitant of
Balochistan lives on not more than $2.5 daily, while more than 90% of residents lack
access to clean drinking water, medical facilities. Rural illiteracy surpasses 90%. When
contrasted with other provinces, Balochistan's per-capita income is less than half the
national average (Institute of Public Policy, 2011). It is deplorable yet evident that even in
Baluchistan itself, an ethnic Baloch resident is, on average, twice as poor as their Punjabi,
Pashtun, or Hazara neighbour. Indeed, even in the capital city of Balochistan, Quetta, only
33% of households have access to governmental water supply, only receiving 1-2 hours
of water a day, while being subject to 12-hour load shedding of electricity daily. The
educational statistics in Balochistan demonstrate inferior literacy rates when contrasted
with other provinces, to the point that parents who can afford it invariably send their
children to study outside the region, to Karachi (capital of the Sindh region), Islamabad
(the national capital), Lahore (capital of the Punjab region), or Peshawar (capital of KPK).
The same applies to the health sector in the area. People who can afford to prefer to get
medical treatment in capital cities of other provinces. (Ahmed & Baloch, 2017)
Democracy and accountability are essential requirements for economic growth and
development. Although the absence of democratic establishments and accountability are
issues that exist throughout Pakistan, Balochistan is an especially severe case. Residents
of Balochistan have never had the opportunity to freely exercise their right to a fair vote.
Rather they are threatened and manipulated to vote for certain political parties.
Additionally, the province’s Governor is selected by the federal government; usually from
outside the province to ensure they are more loyal to — and willing to serve the interests
of — the federal government than to the people of Balochistan. Of course, when a
Governor is brought to power by the federal government rather than through the vote of
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the general population, their accountability will be to the federal government rather than
to the people of Balochistan. (Ahmed & Baloch, 2017)
Figure 9: Unemployment Rate (%) in Pakistan
For example, the popularly-elected provincial governments in 1971 and 1997 of
Balochistan, were expelled on charges of corruption after showing insufficient loyalty to
the federal government (Ahmed, 2004). This state of affairs has fostered corruption by the
provincial rulers and deepened the deprivation and poverty of the general population of
the province. While, in terms of employment, Balochistan statistics significantly differ from
those in the rest of Pakistan. Unemployment in Balochistan is highest when compared
with other provinces, standing at 6.5%. (see Figure 9). Water shortages — which have
particularly hampered the agricultural sector in the province — are largely due to
Balochistan, unlike other provinces, not having access to the Indus River System. (Ahmed
& Baloch, 2017)
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4.3.(2.3) “Zarb-e-Azab”
In June 2014, the Pakistani army launched the “Zarb-e-Azb” counter-terrorism operation
against insurgent groups in North Waziristan Agency (NWA), namely Tehrik-I-Taliban
Pakistan (TTP), the East Turkestan Islamic Movement (ETIM), the Islamic Movement of
Uzbekistan (IMU), and Al-Qaeda. The Pakistani military, government and political powers
made a firm commitment to eradicate terrorism in all of its structures and appearances.
(Ijaz, 2015) According to ISPR, the operation proved effective in killing around 2,763
activists, destroying 837 terrorist bases and retrieving 18,087 weapons and 253 tons of
explosives. The operation impressively reduced the number of terrorist attacks in
Pakistan, helping to restore the country’s global image. (Ijaz, 2015)
China itself has faced severe threats from the East Turkistan Islamic Movement (ETIM), a
Uighur activist group based in its far-western Xinjiang area which has been held
responsible for several terror attacks in China, including the 2014 April assault at the
Urumqi railway station. The ETIM seeks to set-up an independent ‘East Turkestan’ state
along the Pakistan-Afghanistan border. The group's presence in Pakistan has been a
concern for China, as it can present a threat to CPEC. However, at the Conference on
Interaction and Confidence Building Measures in Asia (CICA) in 2014, Pakistani President
Mamnoon Hussain gave assurances over the security of Chinese nationals in Pakistan to
his Chinese counterpart, President Xi Jinping, labelling ETIM a “common enemy”. (Ijaz,
2015)
“Zarb-e-Azb” has reportedly led to the deaths of 100 ETIM activists in NWA. Around 66
activists have also been handed over to China. The Pakistani Intelligence Agencies have
likewise captured 10 ETIM activists in the United Arab Emirates (UAE). (Rehman, 2014)
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Presently, ETIM has been expelled from the Mirali, Miranshah, Boya and Degan areas.
However, the group continues to present a threat to the security of CPEC, with several of
its militants having fled to Afghanistan and are, according to reports, currently receiving
weapons, equipment, training and a safe haven from India. (Ijaz, 2015)
Beijing has been reacting emphatically to operation “Zarb-e-Azb”, expressing
appreciation for the Pakistani Army's endeavours in the war against terrorism. The Vice
Chairman of the Central Military Commission, Gen Fan Changlong, commended the
operation’s successes, which he declared "conclusive, striking and a hard blow for
militants." (Ijaz, 2015)
Consequently, Operation “Zarb-e-Azb” has reinforced the mutual ties between Pakistan
and China. Clearly Pakistan fully understands that the progress of the CPEC will proceed
much faster if China's security concerns are addressed. To that end, the Pakistani
government set up a special security division of 12,000 highly-trained troops to ensure
the safety of more than 8,000 Chinese specialists working on the CPEC venture in
Pakistan. In addition to their 2005 Memorandum of Understanding (MoU) on counterterrorism, both states are growing forward with increased intelligence-based knowledge
sharing and joint counter-terrorism activities. China has given $500 million to Pakistan’s
counter-insurgency efforts. It is clear that Pakistan and China share a mutual
understanding of the security issues regarding CPEC. Both have offered each other full
support and cooperation in their respective battles against terrorism. Indeed, Operation
“Zarb-e-Azb” has played an essential part in strengthening and consolidating ties
between Pakistan and China. (Ijaz, 2015)
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4.3.(2.4) Inter-Province Conflict in Pakistan
The CPEC route is planned to start from Gwadar, in Balochistan, and pass through all four
provinces in Pakistan; namely Balochistan, Punjab, Khyber Pakhtunkhwa (KPK) and
Sindh, and Gilgit-Baltistan in northern Pakistan, to reach the Khunjrab Pass and beyond to
China (Sial, 2014). The question of whether the CPEC should take the western or eastern
route through Pakistan has been the subject of much political debate. Initially, the
Government planned to use the Western route, but after increased tensions in Balochistan
and KPK, plans were drawn-up for an Eastern route, which would avoid the two provinces.
This shift in planning received much criticism from parliamentarians in these two
provinces, who felt betrayed as the Eastern route would deprive their regions of an
invaluable economic lifeline and significant employment and other growth opportunities
(The News, 2014).
(i) Eastern Route
The eastern route will pass through very limited areas of Balochistan and KP provinces,
where the security situation is relatively more stable. The route will start from Gwadar,
proceeding to the Makran Coastal Highway towards Karachi (Sindh) in the east, then after
travelling through parts of interior Sindh, and southern, central and northern regions of
Punjab, it will reach the capital, Islamabad. From Islamabad, the route then stretches out
to the Haripur, Abbottabad, and Mansehra districts in the relatively peaceful Hazara
Division in KP — also passing through Muzaffarabad, the capital of Azad Jammu and
Kashmir — finally reaching Khunjrab after passing through the Diamer and Gilgit areas in
northern Pakistan. (Sial, 2014)
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(ii) Western Route
For its part, the Western route would start from Gwadar, travelling through southern and
eastern parts of Balochistan (Khuzdar and Dera Bugti, respectively), touching a few areas
in South Punjab to reach D.I. Khan in the KPK province. From D.I. Khan, the route further
stretches out to Islamabad and Abbottabad. From there it will maintain the same route as
its Eastern counterpart. The Western route will have an extra territorial network link with
Afghanistan as being close to Chaman, and will link it with Iran through the Quetta-Kho-eTaftan interface. (Sial, 2014)
4.3.(2.5) Political Instability in Pakistan
Pakistan has undergone several periods of political instability and turmoil, which have
debilitated the nation’s development plans and affected the quality of national policymaking. It was a very promising development, particularly in terms of the nation’s political
security, when a democratically elected government completed its five-year term and was
followed by a peaceful transfer of power at the 2013 elections. However, the current
government has been mired in a political crisis soon after coming to power. This crisis
unfolded after the opposition parties, namely Pakistan Tehreek-e-Insaaf (PTI), led by
Imran Khan, and Pakistan Awami Tehreek (PAT), launched hunger strikes and sit-ins
outside the Supreme Court of Pakistan, in the capital city of Islamabad, on 14 August
2015. The main demand of both parties was the abdication of the Prime Minister. (Sial,
2014). Scheduled visits to the country by Chinese officials, notably Chinese President Xi
Jinping in 2015, as well as by IMF officials, were either postponed or moved to locations
abroad (Sial, 2014). Aside from diverting the political administration from other significant
duties, such as its administrative, financial, security and policymaking remits, this ongoing
political instability is likely to cause delays to the CPEC ventures.
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5. Conclusion and Recommendations
The present paper undertook a detailed analysis of the current literature on the ChinaPakistan Economic Corridor (CPEC). The analysis yielded a good understanding of the
motivations for Chinese investment in the corridor and the implications of CPEC for
Pakistan’s economic and social development. The paper also conducted an empirical
assessment of the internal and external challenges potentially hindering the CPEC. Based
on the findings and analysis of the paper, the following set of recommendations has been
formulated, with a view to inform policy makers on how to maximise the CPEC’s
prospects for success. These findings and recommendations shall also be useful for
analysts pursuing further research in the field, as well as for Pakistani government officials
who want to take them into consideration in drawing-up related polices and frameworks.
5.1 Wiping Out Terrorism in Pakistan
Ensuring the security of the CPEC corridor is of crucial importance, both for Pakistan and
for China, for the continuous development of the project and to further strengthen trade
ties. However, it is feared that the threat of terrorism will hamper the advancement of
CPEC projects. As the findings suggest, the existence of local and foreign-based terrorist
groups, principally in the Balochistan region and other smaller parts of KPK, remains a
major threat to Chinese nationals in Pakistan, as well as a serious impediment to the
expansion of the country’s potentially lucrative tourism sector (Sial, 2014).
In 2017, the United Nations (UN) criticised Pakistan for serving as a “safe-haven” for
terrorists (The Economic Times, 2018). It is therefore a crucial challenge for Pakistan to
suppress any terrorist activities across its territory, in order to restore and repair its
reputation in the global arena, and to uphold the confidence and trust that China has
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placed in Pakistan and its government. Nonetheless, the Pakistani military’s efforts in
eradicating terrorism in the country have been laudable, with successful missions such as
“Zarb-e-Azab”, and the current, ongoing mission, “Rad-ul-Fassad”, initiated in 2016 by
the newly-appointed Chief of Army staff, General Qamar Bajwa. The success of mission
“Rad-ul-Fassad” is essential to the development of CPEC and, as such, there is a call for
the Pakistani military and government to join hands in a shared mission towards wiping
out terrorism from Pakistan.
At the same time, Pakistan should make the most of the ongoing support it receives from
China, which has replaced the US as a major arms supplier. In particular, the integrity and
security of Chinese and other foreign nationals working under CPEC in Pakistan should
not be compromised. The Pakistani army should make sure to provide complete
protection to all foreign nationals, as the issue of security remains sensitive. Indeed, any
little incident can cause a global loss of confidence in the project. Moreover, given
Pakistan’s political rivalry with neighbouring countries, any incident would likely escalate
fast.
5.2 Call for Cross-Border Mediation
As discussed in the findings, the contentious relationship between Pakistan and its
neighbour, India, has the potential to hinder the development of CPEC, and damage
Chinese-Pakistani relations. However, a war is not foreseeable, as both countries are
nuclear powers with large military forces. The rivalry between them has led to the
development of new regional alliances, notably between the US and India and, to an
extent, China and Pakistan (although China has maintained stable relations with India).
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Considering China’s billions of dollars in investment in India, and the positive relationship
between the two governments, China can play a mediating role in de-escalating tensions
between Pakistan and India. This role will benefit China, as it will not only be the ideal
response to America, which is using India as a weapon to contain Chinese influence in
the South-East Asian region, but would also mean stability for China’s “Silk-Road” project
— since the route travels through India before reaching Pakistan and connecting to
China’s western province of Xinjiang.
Such rapprochement would be beneficial for Pakistan too, in terms of facilitating the
development of CPEC. Easing the political and military tensions between both nations
would allow Pakistan to benefit from the development of CPEC, which is expected to
bring forth unprecedented growth to the country’s GDP, employment, balance of payment
and standard of living levels. At the same time, India and Pakistan can both benefit from
the “Silk Road” through lifting trade embargoes and tariffs against one another, since
commerce and trade levels are expected to rise in the south-east Asian region, as the
“Silk Road” will connect the Arabian Sea to the Indian Ocean. This is clearly a golden
opportunity for India and Pakistan to shake hands and capitalise together on the vast
opportunities brought forth by the “Silk Road”.
5.3 Uniting the people of Balochistan and ending conflict amongst Pakistani
provinces
Stability and unity amongst the people of Balochistan is of critical importance to the
success of the CPEC projects, since Balochistan is home to more than half of the CPEC
projects, and the strategically crucial Gwadar port is located in the province. As seen in
the findings, the Baloch people feel deprived of their constitutional rights and betrayed by
the federal government of Pakistan. As a result, they either demand independence from
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Pakistan, or join hands with insurgent groups in a drive to hamper and frustrate the
development of the CPEC. Therefore, the Federal government of Pakistan should
increase its set budget for Balochistan, allocating greater contributions towards the
provision of essential educational and medical facilities, promoting employment
opportunities, basic public health provisions (water sanitation etc.) and better
infrastructure.
Also required is a stronger role for the democratic and judiciary structures in the region,
through the provision of justice against the violation of constitutional rights and other
appropriate demands of the Balochi people. Efforts by the government needs to be also
directed towards ending the conflict amongst Pakistani provinces, creating a sense of
nationalism and unity amongst the Balochi people through making them feel a part of the
Pakistani dream, to become one of the fastest growing economies in the world, a dream
that can be enabled by the CPEC.
5.4 Political Consensus and Policy Making
After the disqualification of the ex-Prime Minister of Pakistan, Mian Nawazsharif, in 2017,
the country has been preparing for new general elections in July 2018. What will be
crucial in deciding the fate of the CPEC is the stance of the next Pakistani government,
and Prime Minister, towards the project if the Pakistan Muslim League-Nawaz (PML-N)
loses the elections. In order for CPEC to be prosperous, the next Pakistani government
must maintain a consistent line on Pakistan’s foreign policy relations with China, including
its policies on security, bilateral trade and financial engagement, as did the Pakistan
Muslim League Nawaz (PML-N) when it took over from the Pakistan's People Party (PPP)
in 2013. At the same time, both the Pakistani government and opposition need to learn
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from their historical mistakes. They must put their political differences aside and form a
consensus view that there should be no political impediment in the way of the CPEC
projects.
At the same time, as highlighted by the Sri Lankan “dept trap” case, it is essential that
policy making in this area is framed within the standards of financial sustainability and
prudence. This is essential to make sure projects like CPEC prove to be economic growth
drivers rather than national long-term, toxic debt burden.
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7. Appendices
Appendix A : CPEC Agreement Declaration
(Source : http://cpec.gov.pk/brain/public/uploads/documents/CPEC-LTP.pdf)
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Appendix B : Guidelines and Basic Principles; CPEC
(Source : http://cpec.gov.pk/brain/public/uploads/documents/CPEC-LTP.pdf)
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Appendix C : Investment and Financing Mechanism
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(Source : http://cpec.gov.pk/brain/public/uploads/documents/CPEC-LTP.pdf)
Appendix D : CPEC Vision and Goals
(Source : http://cpec.gov.pk/brain/public/uploads/documents/CPEC-LTP.pdf)
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