CPEC in Pakistan
CPEC in Pakistan
CPEC IN PAKISTAN
(China Pakistan economic corridor in Pakistan)
Background Relationship.
The relationship of Pakistan and China can be noted 1963 onwards from two policy
documents. One of the early notes initiated for a new policy direction of seeking close
expanded relations with China was moved in mid-1963 by Agha Shahi, then additional
secretary in the Pakistan Foreign Office, on which, before its submission to the president,
the then foreign minister, Zulfikar Ali Bhutto added a prescient comment that 'in the
vastness of Asia, buffeted by currents of history', Pakistan and China appeared to be poised
to forge a bond like that between India and the Soviet Union. The other is the exchange of
notes in early 1962 when Pakistan formally proposed to China negotiations for a boundary
agreement. After several days, the Chinese responded asking the parameters of such a
negotiation. The Pakistani response that drew a prompt affirmative Chinese reply identified
three elements: the ground situation, customary law and practices, and mutual
accommodation.
Negotiations for a provisional boundary agreement began in October and the agreement
ended up getting signed within six months in March 1963 which signified close, friendly
bilateral relations between the two. Despite the political situation around that time, reports
mention, “But 'friendship with China' roots in the popular ethos in Pakistan when China
stood unambiguously by Pakistan during and after the 1965 Indo- Pakistan conflict. The
events of 1971 were a test for Chinese diplomacy and its relations with what was left of
Pakistan. From a longer term perspective, it clarified and set the political parameters of the
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relationship and, at the same time, underscored realism rather than emotionalism in
China's approach to its foreign relations under Premier Zhou Enlai that continues to prevail
in post-Mao Zedong China.”
Introduction to CPEC.
Massive bilateral project to improve infrastructure within Pakistan for better trade with
China and to further integrate the countries of the region. The project was launched on
April 20, 2015 when Chinese President Xi Jinping and Pakistani Prime Minister Mian
Muhammad Nawaz Sharif signed 51 agreements and Memorandums of Understanding
valued at $46 billion. The goal of CPEC is both to transform Pakistan’s economy by
modernizing its road, rail, air, and energy transportation systems and to connect the
deep-sea Pakistani ports of Gwadar and Karachi to China and beyond by overland routes.
This would reduce the time and cost of transporting goods and energy such as natural gas
to China by circumventing the Straits of Malacca and the South China Sea. The
announcement of joint space and satellite initiatives between Pakistan and China, spurred
by CPEC, followed in 2016. CPEC is part of the larger Belt and Road Initiative to improve
connectivity, trade, communication, and cooperation between the countries of Eurasia
announced by China in 2013. CPEC has been compared to the Marshall Plan for the
rebuilding of post-World War II Europe in its potential impact on the region, and numerous
countries have shown interest in participating in the initiative.
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orders were called off and the clients went away from Pakistan. The number of exports
declined, producing a balance of payments emergency. As new hydel, renewables,
coal-based projects emerge on the scene, there would be a consistent reduction of imports
of Furnace oil and Diesel.
Another field that might be beneficial for “Pakistan” is the development of highways and
railway lines connecting Gwadar with Kashgar and the “Mass Transit systems” inside big
metropolises. “Inner-city Mass Transit systems in Lahore, Peshawar, Karachi, and Quetta”
would give secure and economical public transportation to the inhabitants who confront
plenty of troublesomeness and consume a high amount of money and time in traveling to
work. The shortened commuting duration and saving in transport expenditures would
enhance their work output and also increase the buying ability of middle and lower-
income groups.
The Western road would make accessible the undeveloped areas of “Balochistan and
Southern KP” and incorporate these areas with the nationwide markets. The inhabitants
residing alongside the track will become capable to manufacture and trade their “mining,
livestock, poultry, horticulture, and fisheries” production to a very bigger portion of
customers. Their shipping charges would be reduced significantly, the number of
perishable items and trash would go downward, cool chains and storage places will be
made accessible and manufacturing would become feasible in the adjacent Industrial
parks. Approach to the big trucking flotilla and containers with superior recurrence and
minimized reversal duration may possibly assist in the mounting up of processes. Fiber
optic network would let the inhabitants of these underprivileged territories approach
state-of-the-art 3G and 4G broadband internet.
“D. I. Khan (Yarik)-Zhob N-50 Phase-I” to Phase-V “between Peshawar and Baluchistan” –
total employment generated under these projects is 6,700. All the workers are entirely
from Pakistan.
E-35 expressway, the total jobs created by this project are 1,020. Out of which 1,000 (98%)
were employed from Pakistan and only 20 (2%) were employed from China.
M-4 between Faisalabad and Multan – the total jobs created under this project are 3,640.
Hiring 3,543 workers from Pakistan and only 97 workers from China.
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Agriculture.
For agriculture, the plan outlines an engagement that runs from one end of the supply
chain all the way to the other. From provision of seeds and other inputs, like fertiliser,
credit and pesticides, Chinese enterprises will also operate their own farms, processing
facilities for fruits and vegetables and grain. Logistics companies will operate a large
storage and transportation system for agrarian produce.
Enterprises entering agriculture will be offered extraordinary levels of assistance from the
Chinese government. With the aid of free capital and loans from various Chinese ministries
and the China Development Bank, the agricultural plan is concentrated towards the
opportunities for the Kashgar Prefecture and Xinjiang Production Corps, coupled with the
opportunities for profitable engagement in the domestic market.
The plan proposes to harness the work of the Xinjiang Production and Construction Corps
to bring mechanization as well as scientific technique in livestock breeding, development of
hybrid varieties and precision irrigation to Pakistan. It sees its main opportunity as helping
the Kashgar Prefecture, a territory within the larger Xinjiang Autonomous Zone, which
suffers from a poverty incidence of 50 per cent, and large distances that make it difficult to
connect to larger markets in order to promote development. The prefecture’s total output
in agriculture, forestry, animal husbandry and fishery amounted to just over $5 billion in
2012, and its population was less than 4 million in 2010, hardly a market with windfall gains
for Pakistan.
Ten key areas for engagement are identified along with seventeen specific projects. They
include the construction of one NPK fertilizer plant as a starting point “with an annual
output of 800,000 tons”. Enterprises will be inducted to lease farm implements, like
tractors, “efficient plant protection machinery, efficient energy saving pump equipment,
precision fertilization drip irrigation equipment” and planting and harvesting machinery.
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Industry.
For industry, the plan trifurcates the country into three zones: western and northwestern,
central and southern. The western and northwestern zone, covering most of Balochistan
and KP province, is marked for mineral extraction, with potential in chrome ore and
diamonds. One big mineral product that the plan discusses is marble. The central zone is
marked for textiles, household appliances and cement. Four separate locations are pointed
out for future cement clusters: Daudkhel, Khushab, Esakhel and Mianwali.
In the southern zone, the plan highlights Pakistan’s development in petrochemicals, iron
and steel, harbor industry, engineering machinery and auto parts assembly. As Gwadar is
also a part of the southern zone, it is imminent to act as a base of heavy chemical
industries. Evidently, some Chinese investors have already started investing in the
development of Gwadar due to the cheap shipping costs to import crude oil from the
Middle East and iron ore and coking coal resources from South Africa and New Zealand.
Tourism.
To promote Tourism under the CPEC project, the plan speaks of a long belt of coastal
enjoyment industry that includes yacht wharfs, cruise homeports, nightlife, city parks,
public squares, theaters, golf courses and spas, hot spring hotels and water sports. The belt
will run from Keti Bunder to Jiwani, the last habitation before the Iranian border.
For Gwadar, international cruise clubs are highlighted to develop coastal vacationing and to
develop various cultures in the region. Recreational activities are also planned to be
developed in Ormara while Keti Bunder concentrates on botanical gardens, wildlife
exposure and aquariums.
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Internal Challenges.
There are certain internal challenges which should be faced by Pakistan regarding internal
security point of view.
The first challenge is the most progressive Talibanisation of Pakistan, especially in the FATA
and western parts of the country. Pakistan confronts prospective security threats from
Tehreek-e-Taliban Pakistan (TTP) and different other militant groups in the tribal areas and
Khyber Pakhtunkhwa, although separatist insurgency in Baluchistan, religious and ethnic
violence in Punjab and Karachi (Sindh). The militancy groups and insecurity will become
serious threats for the construction of China-Pakistan Economic Corridor (CPEC).
The second challenge is the religious extremism and terrorism that also become serious
threat China-Pakistan Economic Corridor (CPEC) as a society and the country as a whole.
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Meanwhile, after the 9/11 incident more than 30,000 citizens and also different security
workers have lost their lives in terror attacks. Likewise, Pakistan has been taking a serious
stance to control the threat of terrorism and its main uproot causes, i.e., religious
radicalism.
The third one challenge is faced by Pakistan like Indian involvement. Several countries
believe that CPEC has a strategic threat to their military and economic interests and a
penetrating effect on the state. India violently submitted to CPEC, specified the atmosphere
of a forceful geostrategic struggle that put into the hands of Pakistan an advantageously
favorable position along the Arabian Sea. Furthermore, reliable evidence exists that divulge
RAW run a special cell set up to sabotage CPEC in Pakistan.
On another level, for the UAE; in the meanwhile, Gwadar is also another perceived
challenge to its virtual monopoly over trade in the gulf countries. On the other hand, India
is also diligently promoting their own port with the name of "Chabahar Port" initiative as an
alternative to connect Central Asia and Europe, having more of an upshot on the UAE than
Gwadar.
The fifth one is that the Pashtun tribes of Afghanistan have provided nonstop support to
the insurgents and have backed the insurgency. It has a close connection with the Nurazais,
Ghilzai Alekozai, Durrani and Eshaqzais tribes. Moreover, Wazirs, Ahmadzai, and Mahsuds
in North and South Waziristan have also backed the insurgent cohort by organizing their
variant happenings in Afghanistan that can also upshoot on CPEC.
External challenges.
Since its genesis, Pakistan has encountered extreme threats to its integrity and security
from its west borders to Afghanistan. Along with NATO invasion of Afghanistan, India,
Russia and Iran have been trying their utter best to destabilize Pakistan. The rise of greater
interest of India in Afghanistan compelled them to establish an AF-PAK alliance to hinder
the challenges. Moreover, the Chinese investment and curved eye of Iranian and Russian
has further brought security implications.
In addition, to list the internal set of confrontations, strong external oppresses on CPEC is
obvious. Since after 9/11, cooperation between Pak-Iran has attained its height in naval
cooperation in the Indian Ocean. There existed the right level of strategic and economic
competition level with India and Iran because of the amendment of the China- Pakistan
economic corridor. Instability in politics and disturbed security state of Pakistan may carry
backlashes in the advancement of CPEC infrastructure near the Afghan border. The biggest
challenge is existing proxy war with neighbor India and its strong influence in Afghanistan
at the same time recently bettering hostile relations with its west.So far Caspian region
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Russian monopoly status quo standby decision on oil pipeline is concerned which
extending to Europe and beyond has a threat from the construction of new pipeline as per
CPEC. Chinese design in the Indian Ocean is yet another complication in India-China
geo-politics. Not only this to counter the corridor, ‘Chabahar Port’ is another grand design
of India with Iran and Afghanistan strategically.
Advantageous geographical and socio-cultural strategic location of Iran has created a
shortest link between Central Asia and the Indian Ocean at the same time Iran has several
projects with central Asian counterparties like Anzob Tunnel with Tajikistan and Amu Darya
Bridge. Heavily dependent on central Asian nations on Russian communication networking
infrastructure and Russian energy resources’ linkages with Kazakhstan has entangled
Pakistan corridor dream. However, Common wealth independent states (CIS) like
Azerbaijan plays a supportive role so far corridor success is concerned. The struggle for
power influence in Afghanistan by different regional actors in the wake of US withdrawal
has a grave threat on the sustainability of proposed CPEC. Most ignored factor is the cost of
production. Heavy demand from industrial clusters for raw materials brings price hike and
hurts the major motive of CPEC economic prosperity. At the same time result in resource
depletion, environmental pollution and changing climatic patterns.
Long-term political stability in Pakistan is vital to smoothly implement projects like the
China-Pakistan Economic Corridor. In the past, Pakistan has gone through phases of
political instability and turmoil that weakened the country’s development roadmap and
also affected policy consistency. Similarly, if now or later, some prolonged political crisis
and economic meltdown grip the country, the yearly and periodic budget allocations for
the CPEC project could be disturbed causing delays to the project outcome beyond set
targets.
Although the prevailing environment of insecurity, militancy and violence in Pakistan can
pose serious threats to the construction of the China-Pakistan Economic Corridor, the level
and nature of this threat is not uniform across Pakistan. It is encouraging that the areas
through which the finalized eastern alignment of the corridor will run are relatively more
secure than those of the earlier planned western alignment, though with few exceptions.
The level of threat to the security of the CPEC project, including sites and personnel, is low
along most areas of eastern alignment with the exceptions of Gwadar, the Makran Coastal
Belt and Karachi, where threat level is assessed to be medium. At the same time, it is
imperative to ensure stringent security measures along the entire CPEC alignment.
Of all, four projects in the energy sector are operational, with Sahiwal coal-fired power
plant contributing 1,000 megawatts, Sachal wind farm in Jhimpir 50MW, UEP wind farm in
Jhimpir 100MW, and HydroChina Dawood wind farm in Gharo 50MW.
The remaining are at different stages of progress monitored closely, according to details
available on the dedicated government website.
China clearly appeared determined to push through investment in the agreed projects with
or without private companies. It was not ready to wait for private investors to digest the
initiative and neither did it seem to have an appetite for private sector tantrums.
For the Pakistani business community, therefore, it was a paradoxical situation. Cognisant
of the scale and value of the gigantic investment drive under CPEC, they
understand that they can’t afford to watch from the sidelines but the challenges of dealing
with Chinese investors look insoluble.
It is important to note here that China, though not explicitly hostile to private sector
participation in CPEC projects, implicitly prefers dealing with the government. Along with
this, Pakistani companies in joint ventures with Chinese reported a lack of warmth in
partners. It has been reported that the Chinese are just keen to complete the project on
hand. They don’t seem to care about capitalizing on subsequent business opportunities
unraveled over the course.
While considering a rigid economic system being developed due to CPEC and threat to
Private business from CPEC it is also important to understand there are also companies
which are benefiting greatly. Talking about joint ventures with the Chinese, companies like
Descon, Gatron and Al-Haj Group are leading the trend in power generation, engineering
and the chemical sector. Outside CPEC, the Al-Haj FAW Motors rolled out its first car from
their plant at Port Qasim in Karachi this year.
CEO of Engro Power-gen and Sindh Engro Coal Mining Company Shamsuddin Sheikh, who
is partnering with two Chinese companies, State Power International Mendong and China
Machinery Engineering Corporation, was perfectly satisfied with the progress and the
relationship.
Thus, one could say there are a variety of viewpoints within the Pakistani business
community regarding CPEC which is closely knit to the government's implementation of it.
(5) Even the conservative estimates show projected possible revenues of over 100 Billion
US Dollars on account of transit revenue per annum in the long term besides creating
employment opportunities in hundreds of thousands.
(6) With 95% of Pakistan’s trade through sea and economy heavily dependent on sea trade,
development of Gwadar Port and its connectivity is of extreme significance to reduce load
on Karachi and Bin Qasim ports for furtherance of Pakistan’s Sea borne trade.
Conclusion.
It is clear that CPEC brings in a great amount of benefit and return for Pakistan in both the
short and long term but the question Pakistan should ask itself is at what risk. There are a
number of things this committee has to consider starting from a complete economic and
social analysis of the costs and benefits the Chinese Partnership under the banner of the
Beijing Consensus brings and then move towards coming about a Private and Public
solution to future benefit and growth. In this regard the position of other international
partners, domestic entities and the concerns of the military will also have to be taken into
consideration if Pakistan is to establish a robust position in the competitive international
economic circle of the future. What has lacked so far in Pakistan in regards to CPEC is a
multidimensional dialogue on CPEC and this is what the following committee aims to
accomplish. The process of establishing a collective Pakistani position on CPEC from the
bottom up will be most beneficial for the organic development of Pakistan’s International
position on Trade, Commerce, Finance and ultimately Economics.
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