Whither CPEC?

Ever since its launch in 2013, the critics and supporters have viewed China Pakistan Economic Corridor (CPEC), as a project that has enormous potential to contribute to Pakistan’s economic growth. However, after almost a decade, CPEC has not lived up to the expectations attached to it.

Between 1970 and 2001, a paltry sum of $7 billion of FDI was poured into Pakistan. With the advent of CPEC, this negative perception changed as Islamabad became the destination for more than $60 billion in roads, railways, energy, industrial parks and other projects.

China promised that its investment in CPEC would not be driven by IMF-style conditionalities and that CPEC will be tailored to meeting Pakistan’s domestic political and economic goals. Additionally, China’s developmental experience spanning over four decades of industrial and export-led growth, supported by massive investment in infrastructure, seemed to be a quick fix if it could be replicated in CPEC.

The CPEC launch was a “part of a wider story, that of the end of the US-led world order and the creation of a new Eurasian supercontinent headed by China.” As perceptively noted by one scholar, some CPEC supporters have “daydreamed that the CPEC can help spur Pakistan into emulating the rapid economic growth of the Tiger or Dragon economies of the 1960s and 1970s and becoming, perhaps, a ‘Falcon Economy’.”

But the detractors are equally adamant. They variously claim that the CPEC is an “economic fig leaf to cover the real geopolitical intentions of China, to access oil directly from the Middle East and to gain control of the deep-sea port at Gwadar in southwest Pakistan and near to the Gulf.” Some have labelled the CPEC as ‘predatory lending’, intended to push Pakistan into a debt trap to increase Chinese leverage over Pakistan’s domestic and foreign policy.

Drawing the analogy between the construction of the Suez Canal in 1861 and CPEC, the detractors point out, the Suez Canal that tipped Egypt into a nineteenth-century debt crisis, and eventual colonisation by Britain, may well happen to Pakistan.

Critics of CPEC have tended to present the economy of Pakistan as a disaster that needs to be rescued by the Chinese and CPEC.

Supporters have looked at it as an economy of great potential that will be liberated by the opportunities of the CPEC. Between these two contrasting poles of opinion, the jury is still out.

The Government of China promises that the CPEC will be a “win–win” partnership. The Government of Pakistan promises that the CPEC will help integrate even the most backward areas of Pakistan into economic growth and development.

Massive infrastructure always generates both winners and losers. Whether the losers can be compensated or whether they can migrate to areas of new CPEC-induced opportunities will have a critical bearing on the long-term political viability of the CPEC.

One of the promises of the CPEC is the nine industrial parks or special economic zones (SEZs) planned as part of the project and spread over the entire length and breadth of the country.

The CPEC entails a massive package of investment that has been promised to Pakistan. The investments are inspired by a bigger Eurasia-wide Chinese vision, that of the New Silk Road. This vision has subsequently become known as the Belt and Road Initiative (BRI).

China has promised to provide much of the funding to Pakistan upfront, though controversy remains about whether, how and on what terms that funding will be repaid. The investments are concentrated in energy, transport infrastructure and the construction of SEZs to promote industry. CPEC projects includes oil and gas pipelines, railways, highways, SEZs and fiber-optic networks.

Whether Pakistan is able to move in step with China’s vision of BRI would crucially depend on the will of PTI’s government to speedily implement the ongoing CPEC projects. Prime Minister Imran Khan has recently taken note of the slow progress of the implementation of CPEC projects during its second phase.

Another issue is the joint American and Indian opposition to CPEC, because both Washington and New Delhi feel that given economic vulnerabilities of Pakistan, it can be subjected to economic coercion. It is not a coincidence that India and the US are the only two countries that have publicly opposed the CPEC.

China presents India with a twofold problem: material and ideational.

With a GDP of approximately 11 trillion dollars, which is growing at about 8 percent per year, the Chinese economy is bigger and generating fears that as a result of its superior and sustained economic growth, China would amass an overwhelming preponderance of power and would be able to play the role of regional hegemony in South Asia.

At the ideational level, growth as a result of which over 600 million Chinese people have been lifted out of poverty, presents a challenge to India, where 56 percent of its population remains mired in abject poverty.

Several American officials including a former Assistant Secretary of State as well as World Bank officials have publicly warned Pakistan of falling deep into the so-called Chinese debt trap which will compromise Pakistan’s sovereignty and autonomy.

Such dire concerns are over-blown and Washington and New Delhi both seem interested to subvert the development of CPEC.

Pakistan looks at CPEC as a game changer for its economy, its standing in the international community, and as a vehicle for promoting regional peace and development. There is a virtual consensus amongst the civilian and military leadership and the people that CPEC, as a flagship project of the OBOR, is in the vital interest of Pakistan and the country’s economic survival depends on its early and uninterrupted completion.

There is no doubt that the CPEC investment will stimulate GDP growth and lead to employment generation in Pakistan. Once CPEC succeeds, it is very likely that it would signal Pakistan as a viable and attractive investment destination and could help attract further investments from other countries.

The timely completion of the second phase of CPEC will create thousands of jobs in Pakistan to keep its youth employed. Islamabad would be well advised to view CPEC as a “work in progress” whose timely completion is in the mutual interest of both the partners.

The writer is a political scientist and defence analyst.