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Essay on (CPEC) China Pakistan Economic Corridor for CSS & PMS

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  • July 25, 2021
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This is an essay on (CPEC) China Pakistan Economic Corridor for CSS & PMS. China and Pakistan have agreed to build the One Belt One Road project more commonly known as China-Pakistan Economic Corridor is expected to bring about both peace and prosperity in South Asia. Find below the complete Essay on CPEC.

Introduction Development of Gwadar Previous project: Silk Road Projects Under CPEC The Concept of One Belt and One Road Different Routes in CPEC Geostrategic location of Gwadar Challenges for Pakistan Internal Challenges External Challenges Counter Indian influence Economic Gains from this Project Removal of Social Problems due to CPEC Effects of the CPEC Projects Conclusion

Essay on China Pakistan Economic Corridor (CPEC)

Introduction.

The CPEC is a 3,000-kilometre network of roads, railways, and pipelines to transport oil and gas from Gwadar Port to Kashgar city, northwestern China’s Xinjiang Uygur autonomous region, China Daily reports. China and Pakistan have agreed to build the One Belt One Road project more commonly known as China-Pakistan Economic Corridor is expected to bring about both peace and prosperity in South Asia. This corridor will link Kashgar in north-western China to Pakistan’s Gwadar port on the Arabian Sea near the border with Iran via roads, railways, and pipelines.

There are many internal and external challenges for the Pakistan government to implement this multi-dollars project. However, it is a game-changer project which will transforn1 the fate of Pakistan and will help Pakistan modernize. It will improve the economy and trade, enhance regional connectivity, overcome energy crises , develop infrastructure and establish people-to-people contacts in both countries.

Proposed by Chinese Premier Li Keqiang during his visit to Pakistan in May 2013, the CPEC  will act as a bridge for the new Maritime Silk Route that envisages linking three billion people in Asia, Africa, and Europe.

Development of Gwadar

The project links China’s strategy to develop its western region with Pakistan’s focus on boosting its economy, including the infrastructure construction of Gwadar Port, together with some energy cooperation and investment programs. It also involves road and railway construction including an upgrade of the 1300-km Karakoram Highway, the highest paved international road in the world which connects China and Pakistan across the Karakoram mountains.

The CPEC will reduce China’s routes of oil and gas imports from Africa and the Middle East by thousands of kilometers, making Gwadar a potentially vital link in China’s supply chain.

Previous project: Silk Road

With the support of China, Pakistan has gained significant importance not only in the region but the entire world. In recent years, both China and Pakistan have been making concerted efforts to revive the historic Silk Road which is one of the oldest known trade routes in the world and will provide a route for trade from Kashgar (China) to Gwadar (Pakistan). China-Pakistan Economic Corridor plan will help Pakistan to become one of the most strategically important countries in the region.

It will also provide an opportunity for China to build a naval base on Gwadar port that will increase the influence of China in the region and also counter US influence in the Asia-Pacific region. CBS News quoted some Western diplomats on the Pakistan-China partnership. According to  them, China’s increasing economic engagement with Pakistan should be seen in the context of Beijing’s “efforts to counter the US efforts to deepen alliances around the Asia-Pacific region.”

Projects Under CPEC

The “One Belt One Road” concept has international strategic importance. The One Belt One Road initiative covers countries and regions with a total population of 4.4 billion and a total economic the volume of US$ 21 trillion, 63 % and 29 %, respectively of the World.

According to the assessment of the Corridor, the plan is involved in laying the foundation for regional cooperation, improving economic growth, offering trade diversifications, investing in transportation, mining, and energy sectors, and creating political flexibility . It is a vision with world-changing implications, an unfolding plan that would weave much of Asia, Europe, Africa,  Oceania, and the Middle East much more closely together through a patchwork of diplomacy, new infi\structure, and free trade zones.

The “One Belt One Road” Project consists of three routes, southern, central, and northern route. The southern corridor begins from Guangzhou, which is the third-largest city of China in South Central China. This route moves towards western parts of China and connects Kashgar with Pakistan at Kunjarab – a point from where China wants to link to Gwadar port in the Arabian Sea. It is the shortest and the most feasible option for China.

The second Chinese option is the Central Corridor that starts from Shanghai and links the country to Tashkent, Tehran, and onwards to Bandar Imam Khomeini Port of Iran on the Persian Gulf. One of its branches goes up towards Europe. This is the longer route but could be an option if Pakistan does not deliver on the timelines of completing its road network to become a beneficiary of the New Silk Road Economic Belt. The third Chinese option is the Northern Corridor that starts from Beijing, passes through Russia, and links it to European cities.

The Concept of One Belt and One Road

Recognizing the fact that regional integration is an inevitable measure to meet the demands of the economically globalized world, the notion of the Silk Road was reformulated and rephrased by China in 2013 under ‘one road, one belt’ initiative, i.e., economic belt along the Silk Road and the Maritime Silk Road.

Pakistan is a significant partner for China as it links China to Central Asia, the Southern Asian region, and the Middle East, and its major deep-sea port Gwadar offers direct access to the Indian Ocean and beyond. Both countries have been working on enhancing their coordination and strategic communication to safeguard common interests. China-Pakistan Economic Corridor (CPEC) represents a new model of Pakistan and China cooperation which will serve against the backdrop of complex and changing regional and international situations.

China and Pakistan have developed strong bilateral trade and economic ties and cooperation over the years. China has gradually emerged as Pakistan’s major trading partner both in terms of exports and imports. Bilateral trade and commercial links between the two countries were established in January 1963 when both signed the first bilateral long-term trade agreement. Both countries signed Free Trade Agreement (FTA) on November 24, 2006, and implemented it from July 1, 2007. Later on, both signed the FTA on Trade in Services on February 21, 2009, which became active from October 10 that year.

CPEC is an under-construction mega-project that will achieve the political and economic objectives through trade and development and will also strengthen the economic and trade cooperation between the two countries. This corridor will also be helpful in creating regional stability in South Asia.

Different Routes in CPEC

After completion of the corridor, it will function as a primary gateway for trade between China and Africa, and the Middle East. It is expected that this corridor will help cut the 12,000-kilometre the route which Middle East oil supplies must now take to reach the Chinese ports. This project will run through most of Pakistan starting from Gwadar in Balochistan and ending in Kashgar in western China while passing through parts of Punjab, Sindh, Balochistan, Khyber Pakhtunkhwa provinces, and Gilgit-Baltistan in northern Pakistan to reach the Khunjrab Pass and beyond to China.

Pakistan has prepared a plan to construct three corridors after active consultation with the Chinese authorities; these are the eastern alignment, the central alignn1ent, and the western alignment.

Geostrategic location of Gwadar

The eastern alignment of the corridor originates from Gwadar, travels parallel to the Makran Coastal Highway eastwards (towards Karachi), and then after passing through parts of interior Sindh, and southern, central, and northern regions of Punjab, it reaches Islamabad. From Islamabad, it extends to Haripur, Abbottabad, and Mansehra districts of the relatively peaceful Hazara Division in KP this part of the corridor will also run through Muzaffarabad, the capital of Azad Jammu and Kashmir – and reaches Khunjrab after passing through Diamer and Gilgit areas in northern Pakistan.

The corridor will also run through the Pamir Plateau and Karakoram mountains. A link from Taxila through Peshawar and Torkhum will connect the eastern alignment of the corridor to Jalalabad in Afghanistan. Regional connectivity with India through the eastern alignment is designed to be provided through the Hyderabad-Mirpurkhas-Khokhrapar-Zero Point link and the Wagha border, Lahore.

Western alignment was the original alignment which the government says has been deferred until the eastern alignment of the corridor is completed. According to the western alignment plan, the economic corridor (highway and railway) starts from Gwadar and runs through some southern and eastern districts of Balochistan (Khuzdar and Dera Bugti, respectively), and some districts in south Punjab to reach D. I. Khan in KP.

From D. I. Khan, it further extends to Islamabad and Abbottabad, and from there onwards, the route is the same as in the eastern alignment. The western alignment will have an additional regional connectivity link to Afghanistan through Chaman and will connect with Iran through the Quetta-Kho-e-Taftan link.

Following are the challenges for Pakistan in fulfillment of CPEC.

Challenges for Pakistan

Pakistan faces several challenges in the implementation of the China-Pakistan Economic Corridor (CPEC) project. These challenges can be identified as external and internal. The Vice Director General of Policy Research Office at the International Department of the Central Committee Communist Party of China, Dr. Luan Jianzhang is of the view that political unrest, the security situation, and administrative issues are some of the greatest challenges in the way of successful completion of the corridor.

The construction of the corridor has been defined by many as a strategic moment such that Pakistan has assumed the position of economic pivot for the whole region. This paradigm shift in circumstances is a cause of great worry for the enemies of Pakistan both within and outside. India, Israel, and the US are unhappy. For India, CPEC is a thorn in its paw. They have put their heads together to work out new strategies to block the project forward march. RAW has opened a special office in Delhi and has been allotted $300 million to disrupt CPEC. Already one can notice a sudden upsurge in the acts of terror in the three restive regions and activation of certain NGOs and think tanks all trying to air misgivings and create a fear psychosis.

Internal Challenges for Pakistan

In Pakistan, some political parties like ANP, Baloch nationalists, PkMAP raised serious objections to the CPEC project. Even PT! and JUI (F) showed inclinations to climb the bandwagon of anti-CPEC forces. Objections were being raised despite assurances by the government that this project will provide equal opportunities to all the provinces.

Security concerns have been the most critical challenge to the CPEC and both Pakistan and China have been trying to meet these. An arc of militancy stretches from Xinjiang to Gwadar consisting of groups like the East Turkestan Islamic Movement (ETIM), Tehreek-e-Taliban Pakistan (TTP), Lashkar-e-Jhangvi (LeJ), Daesh (ISIS), Balochistan Liberation Army (BLA), Balochistan Liberation Front (BLF) and the militant wings of some political parties. Most of these groups may not have an enn1ity with China itself but rather intend to attack the Chinese interests like the  CPEC as a means to deal with the Pakistani state.

Gwadar is the tail of the Silk belt, which will connect at Kashgar through different communication networks. The security of the whole corridor and Gwadar is a real concern for China. After the military operation in different parts of Pakistan, the terrorist infrastructure still exists inside and outside of the borders which will continue to pose a threat.

The support of the American CIA, Israeli Mossad, and Indian RAW has continuously been assisting the militant groups and sub-nationalists in all the provinces to conduct subversive acts – and using terrorist elements in the whole country to threaten the Pak-Chinese plans of developing the CPEC. In the past few years, they kidnapped and killed many Chinese nationals in Pakistan despite Pakistan’s efforts to provide the best possible security.

The army has announced the creation of a 10,000 men special force for protecting the development projects. The new force, named the Special Security Division, will comprise nine army battalions and six wings of paramilitary forces, the Rangers and the Frontier Corps.

External Challenges for Pakistan

As an economic enterprise, for the CPEC, the greatest challenge comes from competitors. The most significant is the Iranian port of Chabahar. India intends to invest significantly ($85 million) in the development of Chabahar, which lies a few miles away from Gwadar and is part of its efforts for access to land-locked Afghanistan and Central Asia while bypassing rival Pakistan. Chabahar will effectively be a way station for energy imports coming from the Gulf region and destined for Afghanistan and Central Asia.

It will also be a gateway to the Middle East, and possibly Europe, for exports originating from Afghanistan and Central Asia. While the Chabahar project has not yet been started due to the ongoing talks on the Iranian nuclear issue, the Gwadar port has already become functional. However, there is no need for contention between these two ports. Iran has a stake in the CPEC through the proposal to link the Iran-Pakistan gas pipeline with China, which has been described as a “common interest” between the three countries.

Counter Indian Influence

Indian involvement in Chabahar is linked to Pakistan’s refusal to allow India access to transit to and from Afghanistan, so India sees Iran as the next-best option. If Pakistan extends transit facilities to India, and then India may not be interested in building up Chabahar.

India is also not happy with the handing over of Gwadar Port development and its operations to China. There have long been reports that Delhi is fuelling insurgency in Balochistan, which is rich in oil and gas resources, but poor law and order conditions have halted work on exploration activities there. Experts believe the India-UAE nexus will try to fail the Gwadar Port development project and create hurdles in the way of exploration activities in Balochistan.

In recent years, India has been particularly active in engaging Central Asian states for the sake of pursuing energy deals. India can be easily accommodated via the CPEC itself through the eastern interface in Punjab and Sindh and transformed into a stakeholder in the success of both Gwadar and the CPEC.

The dice of connectivity loaded by China has left India confused and bewildered. India is also concerned about China’s huge investment in Pakistan, particularly its recent decision to fund for China-Pakistan Economic Corridor. China is also helping Pakistan in producing plutonium at the Chinese-built Kyushu reactor and will also sell eight submarines worth $5 billion, which will give a quantum jump to Pak Navy’s sea capability.

Economic Gains from this Project

After the completion of CPEC, Pakistan may become a trade hub in the region after Gwadar Port starts functioning fully and duty-free economic zones are set up. Many Central Asian states have also expressed interest in becoming part of the corridor. This strategic partnership between Pakistan and China has upset India that openly voiced its opposition and even premier Narendra Modi pressed the president of China during his visit to Beijing to drop the plan of developing the corridor. However, China did not cave into the pressure and vowed to push ahead with work on the project.

With Chinese clout growing and Russia flexing muscles to regain control over Central Asia, India is struggling to make some headway and spread its sphere of influence in the region. Delhi has bet on Iran and Afghanistan to reach the Central Asian states via land route as Pakistan and China have control over many land links that provide access to the resource-rich region.

India hopes it will be able to reach Central Asia through the Iranian port of Chabahar and build a north-south corridor that will run to Afghanistan and eventually stretch to Central Asia.

Pakistan has been playing a significant role in South Asia. After the completion of the ChinaPakistan Economic Corridor economic, commercial as well as geostrategic environment will improve in Pakistan. It will help Pakistan in dealing with the problems of poverty, unemployment, and inequities of undeveloped provinces.

During his meeting with President Xi Jinping, President Mamnoon  Hussain said, “the China-Pakistan Economic Corridor would prove to be a game-changer 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” .

CPEC from all counts will prove a game-changer and will make China a real stakeholder in Pakistan’s stability and security. It is a win-win situation for both. It will greatly expand the scope for the sustainable and stable development of China’s economic development. Investments by China will boost Pakistan’s $274 billion GDP by over 15 %.

Corresponding progress and prosperity in Pakistan and China’s patronage will help Pakistan in getting rid of the decade-old labels of ‘epicenter of terrorism’, ‘most dangerous country, and a ‘failing state’.

Pakistan enjoys a more favorable financial situation compared to India by reducing its budget deficit to 4.7% of GDP in 2014 (as against India’s 7%) and Pakistan is both competitive and cheaper as an emerging market. China’s economic and military assistance will help Pakistan a great deal in narrowing its ever-widening gap in economic military-nuclear fields with India and in bettering its defense potential.

Ambassador of China to Pakistan Sun Weidong while talking about the corridor said that the setting up of energy, transport, infrastructure, and industrial projects under the China-Pakistan Economic Corridor (CPEC) would benefit all the provinces of Pakistan. He said that the CPEC was not limited to just a road but it will connect the country with a number of motorways and infrastructure projects.

He explained that infrastructure projects included Gwadar port, the second phase of the upgrading project of Karakoram Highway, motorway project between Karachi and Lahore, Thakot-Havelian motorway, Gwadar port expressway, Gwadar international airport, and Karachi-Sukkur motorway, adding further that the project will increase collaboration in areas of energy, finance,  commerce, banking, industry, and education.

Removal of Social Problem due to CPEC

China-Pakistan Economic Corridor will help build a robust and stable economy in Pakistan and will create a significant opportunity for Pakistan to revive its industry and advance its economic interests. It will also help in overcoming the psychological barriers to flows of foreign investment from other sources. Despite its restrictive economic regime, over 150 private equity funds, foreign and domestic, are active in India.

Only three or four such funds are dedicated to investing government, with the participation of the private sector, to encourage foreign direct investment in Pakistan is indispensable. Finance Minister Ishaq Dar said war phobia can also be defeated through economic development. Peace and prosperity can be achieved with economic advancement.

This project will go beyond regional ambits to bring about enormous changes not only to the national economies of the benefiting states but also to the economics of the people at the grassroots level.

Effects of CPEC Projects

CPEC is the crown jewel in the new Pakistan economic paradigm because Pakistan has the opportunity to act independently of the western influence especially the US influence as it has proved of late, an irritant factor. CPEC project will also bring an opportunity to Pakistan for normalization of ties with India, Iran, and Afghanistan which will keep balance, strengthen prospects of peace and improve the socio-economic status of the people of the region.

CPEC is a game-changer project which will lift millions of Pakistanis out of poverty and misery. The project embraces the construction of the textile garments, industrial park projects, construction of dams, the installation of nuclear reactors, and creating networks of road, railway lines that will generate employment, and people will also take ownership of these projects. Fully equipped hospitals, technical and vocational training institutes, water supply, and distribution in undeveloped areas will also improve the quality of life of people.

CPEC is not only the name of road, port, and railway system but a multi-dollars mega project which will bring peace and prosperity in all the provinces of Pakistan. The chairman of the Gwadar port, Dostain Khan Jamaldini said that the CPEC would not only benefit Balochistan but also prove beneficial for the country’s three other provinces.

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The China-Pakistan Economic Corridor at Five

 Photo: FAROOQ NAEEM/AFP via Getty Images

Photo: FAROOQ NAEEM/AFP via Getty Images

Table of Contents

Brief by Jonathan E. Hillman and Maesea McCalpin

Published April 2, 2020

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CSIS Briefs

The China-Pakistan Economic Corridor (CPEC), a flagship of China’s Belt and Road Initiative (BRI) that was off icially launched in April 2015, promised transformational gains. Five years later, a quarter of announced projects have been completed, energy projects dominate, and industrialization efforts are lagging, according to data collected by the CSIS Reconnecting Asia Project and made available to the public here .

KEY FINDINGS

  • Scaled-back Ambitions: Of 122 announced projects, a quarter (32 projects) have been completed, or roughly $20 billion of the estimated $87 billion in funding. While this is a significant amount of activity, particularly in the transport and energy sectors, it also highlights a gap between projects announced and completed.
  • Energy Focus Carries Environmental Costs: Energy projects account for nearly two-thirds of CPEC funding, and nearly 40 percent of the planned generation capacity uses coal, despite ongoing concerns about the high public health costs of pollution in Pakistan.
  • Stuck on the Value Chain: Despite promises to turn Pakistan into a higher-value manufacturing hub , the vast majority of special economic zones (SEZs) remain empty, and information and communication technology (ICT) projects have been limited.

SCALED-BACK AMBITIONS

Since the CPEC’s official announcement in 2015, Chinese and Pakistani officials have declared it a success. “Good progress has been made in building the China-Pakistan Economic Corridor,” Xi Jinping told Pakistan’s parliament during his visit in April 2015. (While the CPEC has a much longer history, and includes projects started earlier, Xi’s visit marked its formal announcement.) Three years later, a joint statement declared : “As a signature project of BRI, the fast development of the CPEC has played a significant role in the Belt and Road cooperation.” At last year’s Belt and Road Forum, Pakistani Prime Minister Imran Khan said: “The China-Pakistan Economic Corridor, one of the BRI’s major components—and one of its earliest manifestations—has made substantial progress.”

Using official targets, however, the CPEC has underperformed. “By 2020 . . . major bottlenecks to Pakistan’s economic and social development shall be basically addressed, and the CPEC shall start to boost the economic growth along it for both countries,” a joint planning document promised in 2017. By 2018, Pakistan was again facing unsustainable debt levels and sought assistance from China, Saudi Arabia, and the United Arab Emirates. In 2019, Pakistan received a bailout from the International Monetary Fund, and its economy mostly appeared to be moving in reverse : growth slowed to 3.3 percent, inflation hit a five-year high, and deficits soared. The CPEC is not responsible for all Pakistan’s troubles, of course, but it has exacerbated long-standing challenges.

Progress on the ground provides some clues, revealing where projects have succeeded and failed and illustrating how the CPEC’s grand ambitions have been scaled back. Of 122 announced projects, only a quarter (32 projects) have been completed, or roughly $20 billion of the estimated $87 billion in funding. Less than half (54 out of 122 projects) are completed or under construction. These activities reflect a broad definition that counts projects announced by either side as well as media reports associating them with the CPEC. Dropping large projects that have been shelved, such as the Diamer-Bhasha Dam, the Pakistan-Iran gas line, and the Muzaffargarh Coal Power Project, brings the overall total to $67 billion.

essay on china pakistan economic corridor

Announced project funding (excluding national and cross-border projects) is distributed roughly evenly across Pakistan’s provinces, with the exception of the most developed (AJK) and two least-developed provinces (Balochistan and FATA). This has played out in project completion rates as well, with the most and least developed provinces having no completed projects so far, and the moderately developed provinces of Punjab and Sindh approaching completion rates of 50 percent. Two of the three provinces with no completed projects (excluding cross-border links), AJK and Gilgit Baltistan, are located in Pakistan-administered parts of the Kashmir region in dispute by India and do not have representation in Pakistan’s national parliament.

essay on china pakistan economic corridor

*Source: “Subnational Human Development Index (4.0),” Radboud University Global Data Lab, https://globaldatalab.org/shdi/shdi/?interpolation=0&extrapolation=0&nearest_ real=0. HDI scores are calculated based on the UN Human Development Index using a scale from 0 to 1, with 1 being the highest level of development.

While still lagging behind Punjab and Sindh, Balochistan has fared slightly better than other provinces, with 24 percent of announced projects complete to date and announced funding levels above the national per capita average (although per capita comparison’s across provinces are difficult due to incomplete population statistics ). Balochistan is home to Gwadar port, the CPEC’s “anchor” and the site of more than half of the province’s projects, as well as some of the CPEC’s strongest opposition .

ENERGY FOCUS CARRIES ENVIRONMENTAL COSTS

essay on china pakistan economic corridor

Pakistan currently faces an energy deficit of 3,000 MW during peak demand—an issue that successive governments have made a top priority for the CPEC since 2013. Although energy projects, including power plants, pipelines, and transmission projects, account for nearly two-thirds of announced funding, much of that is concentrated in large projects that have since been delayed or shelved.

  • Shelving of Large Energy Projects: Energy projects account for 14 of the 20 most expensive CPEC projects, but several have since been shelved. While this is beneficial in cases where project risks could outweigh their benefits, it has resulted in major funding losses for some provinces, and only 34 percent of energy projects have been completed overall. This is particularly true in Balochistan and Punjab, where energy projects account for around 60 percent of announced CPEC funding, but in each province two projects that make up nearly half of that spending have been shelved. In Gilgit Baltistan, the shelving of a single $14 billion hydropower plant meant the loss of 98 percent of CPEC funds to the province.
  • Prolonging Fossil-fuel Dependency: 38 percent of the generation capacity from active CPEC projects comes from coal, despite criticism from locals and environmental groups and assurances from the government that it would work with China to address environmental concerns “at all costs.” Wind and solar account for only 8 percent of generation capacity under the CPEC, while hydro projects account for 54 percent. Reaching Pakistan’s goal of sourcing 30 percent of energy from wind and solar by 203 0 would require a significant shift in CPEC’s energy mix. This remains the case despite concerns about the public health impacts of pollution in the country, to which coal generation is a major contributor. Three of the world’s most polluted cities are located in Pakistan, and air pollution results in the death of an estimated 128,000 annually .

STUCK ON THE VALUE CHAIN

The CPEC’s supporters claimed it would help industrialize Pakistan, turning it into a manufacturing hub . “CPEC will greatly speed up the industrialization and urbanization process in Pakistan and help it grow into a highly inclusive, globally competitive and prosperous country capable of providing high-quality life to its citizens,” promises a joint planning document. While energy and transportation projects are critical for this transition, spending on other important areas, such as manufacturing and ICT projects, has lagged.

essay on china pakistan economic corridor

  • Empty Special Economic and Industrial Zones: Prime Minister Imran Khan has emphasized the importance of SEZs and industrial zones to the CPEC since he was elected in 2018, but little progress has been made. Although 11 SEZs and other types of industrial zones are currently planned as part of CPEC, only one (in Gwadar) has actually been completed, with another in Punjab under construction. Gwadar is also the only SEZ in which China has legal authority, suggesting that the government of Pakistan bears responsibility for the lack of progress in the other SEZs.
  • Significant ICT Needs, Mixed Implementation: As of 2017, only 15.5 percent of households had access to the internet , but only eight CPEC projects are ICT-related. While projects such as the Kashgar to Islamabad fiber-optic line and expansion of 3G and 4G service along the Karakoram Highway directly address these needs, reporting on safe city projects, such as the system in Islamabad, suggests that some ICT projects that have been completed have not lived up to expectations.

These areas are expected to receive more attention in the years ahead. The second phase of CPEC, which began in late 2019, promises to stimulate economic growth, with a focus on industrialization, agriculture, and socio- economic development. Facing a harsher economic environment, however, China and Pakistan may be forced to make additional tradeoffs between completing energy and transportation projects that were started during the first phase and focusing on these areas. Canceling more big-ticket projects could be financially wise but politically challenging given the CPEC’s symbolic importance to Xi’s signature foreign policy vision. But if Pakistan does not carefully steer the Belt and Road’s flagship during the next five years, it could find itself scrambling for the lifeboats.

SOURCES AND METHODOLOGY

This brief is based on data collected by the CSIS Reconnecting Asia Project using publicly available information from Pakistan’s government CPEC portal and annual budgets, the website of the Chinese embassy in Pakistan, the U.S. Institute of Peace , the Asian Development Bank, the World Bank, and relevant local, national, and international news articles published through January 2020. Additional information about the methodology and the full dataset is available here .

Jonathan E. Hillman is director of the Reconnecting Asia Project at CSIS and author of the forthcoming book The Emperor’s New Road. Maesea McCalpin is the associate director of the CSIS Reconnecting Asia Project. Kendra Brock is a research intern with the Reconnecting Asia Project.

This report is made possible by general support to CSIS. No direct sponsorship contributed to this report.

CSIS Briefs are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2020 by the Center for Strategic and International Studies. All rights reserved

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The China-Pakistan Economic Corridor (CPEC): Underway and Under Threat

John Calabrese

essay on china pakistan economic corridor

This essay is part of the series “All About China”—a journey into the history and diverse culture of China through essays that shed light on the lasting imprint of China’s past encounters with the Islamic world as well as an exploration of the increasingly vibrant and complex dynamics of contemporary Sino-Middle Eastern relations.  Read more  ...  

A convoy of 150 Chinese trucks, carrying goods to be shipped abroad arrived at the newly-renovated port of Gwadar in Pakistan on November 12, after having travelled more than 2,000 kilometers from Kashgar in Xinjiang province. [1] At the completion of the run, the first consignment of cargo to traverse the China-Pakistan Economic Corridor (CPEC) was loaded onto Chinese vessels bound for the Middle East and Africa. Three weeks later, a second CPEC route was inaugurated, when a freight train carrying 500 tonnes of commodities left Kunming, capital of Yunnan, for Karachi. [2]

China is already Pakistan’s largest trade and defense partner. But the coming into operation of the CPEC lends a new meaning to, and could transform the relationship between these two “all-weather allies,” including insofar as their ties to the Middle East are concerned — provided that the territorial and maritime security challenges associated with the completion and use of this corridor can be satisfactorily addressed.

The China-Pakistan Economic Corridor (CPEC)

On April 20, 2015, China and Pakistan formalized plans for the China-Pakistan Economic Corridor (CPEC) agreement, laying the groundwork for one of the six main corridors comprising President Xi Jinping’s ambitious Belt and Road Initiative. [3] The CPEC, a bundle of projects — some agreed, several currently being implemented, and others still in the process of negotiation — consists of a 3,000 km network of roads, railway lines, energy pipelines and fibre optic cables.

Pakistan Prime Minister Nawaz Sharif and the country’s media have called the CPEC a “game changer.” [4] Chinese officials have described it as the “flagship project” of a broader policy aimed at enhancing “regional economic connectivity.” [5] The CPEC offers several potential benefits for China. The corridor not only affords the possibility of faster transport of energy supplies from the Persian Gulf, but also provides another access route to the Indian Ocean, thereby allowing supplies to bypass the Malacca Straits that could be blocked in times of tension. [6] Second, the corridor could help spur economic development in the landlocked western interior of China. Third, having a physical “footprint” in Gilgit-Baltistan could enable China to disrupt the movement of Uighur militants. Finally, the Gwadar Port could become a new regional service point for Chinese warships, along the lines of its base in Djibouti.

For Pakistan, the CPEC is more than simply a “route” or a “corridor.” Indeed, Pakistan is counting on the CPEC to drive future growth. Nearly three times more than the estimated $12 billion cost of building the road and railway network will be required to develop the energy infrastructure envisioned under CPEC for the purpose of alleviating Pakistan’s chronic energy shortages. [7] In November, China announced an additional $8.5 billion investment in Pakistan to upgrade the country’s main railway line from Karachi to Peshawar and to support construction of a liquified natural gas (L.N.G.) terminal and transmission lines. [8]

Yet, notwithstanding the progress made on the ground, the CPEC has fuelled political controversy and infighting in Pakistan, with provincial leaders wrangling over the allocation of routes as well as the pace at which projects are being implemented. Furthermore, there remain many unanswered questions and apprehensions, including those related to the economic viability of many of the projects associated with the CPEC. [9] The International Monetary Fund’s (I.M.F.) June 2016 report on Pakistan noted that while the CPEC would likely succeed in boosting investment and growth in the short run, it would entail risks of repayment obligations and profit repatriation in the medium to long term. [10]

Arguably the most important issues regarding the CPEC are those related to security. For China, the CPEC is viewed not simply as a trade-enhancing vehicle but as “an international effort to deliver security through economic development.” [11] Paradoxically, however, local terrorism and other nagging asymmetrical security threats — the very problems that this ambitious initiative seeks to ameliorate — pose serious risks for Chinese workers and companies engaged in project implementation and to the CPEC itself.

Security Challenges and Responses

Building the corridor of roads, railways and pipelines from northwest China to Pakistan’s Arabian Sea coast is, and likely will remain exceedingly difficult in light of the attendant security risks. Pakistan’s security situation continues to be precarious despite the success of anti-terrorism operations. The CPEC passes through the restive province of Balochistan as well as through Gilgit-Baltistan and Pakistan-occupied Kashmir (PoK).

Balochistan occupies a central place in the CPEC project. Priority was given to construction of the western route through the province in an effort to persuade residents that they would not be excluded. Nevertheless, Baloch nationalists still consider the corridor as “an occupation of Baloch territory.” [12] Balochistan Liberation Front (BLF) spokesperson Jeehand Baloch referred to the CPEC as “the China-Pakistan nexus to loot Baloch resources.” [13] Likewise, BLF leader Allah Nazar Baloch called the CPEC an “imperialist scheme,” and vowed to target the corridor. [14] Similar threats have been issued in Sindh, where China has been portrayed by some as accomplices of the “Punjabi establishment.” [15]

In recent months, violence in Balochistan has surged. [16] The Frontier Works Organization, which is engaged in road-building projects, has suffered several dozen casualties. [17] Two Chinese engineers were killed in September. [18] On the very day that the truck convoy carrying Chinese cargo en route to Gwadar approached the Baloch capital of Quetta, a powerful bomb blast struck the Sufi Shah Noorani shrine in Khudzar district [19] — an attack that though not aimed at the CPEC is nonetheless a stark reminder of its vulnerability.

There is some evidence that the spike in violence in Balochistan has caused heightened concern in China. The official Chinese daily Global Times reported that, “the increasing cost of security is becoming a big problem in efficiently pushing forward the project.” [20] Pakistani officials have gone to extraordinary lengths to assuage their Chinese counterparts’ concerns. During the November inaugural Kashgar-Gwadar cargo run and subsequent transfer of the containers to the vessels awaiting them at the port, the Pakistan Navy deployed its ships and aircraft to provide security cover to ensure safe and secure transit.

To date, Pakistan has deployed nearly 15,000 security personnel to safeguard roughly 7,000 Chinese nationals working on the CPEC, most of whom are located in Punjab. [21] Hussain Sayed, who chairs the parliamentary committee on the CPEC, has recently stated that Pakistan plans to double the size of the Special Security Division (SSD) by the end of March 2017. [22] Chinese officials have publicly lauded the precautions that Pakistan has taken. [23] But deploying the SSD has been somewhat controversial in Pakistan, as civilian leaders have had strong reservations about the terms under which the army advises, guides, and ‘indirectly’ controls local law enforcement agencies. [24]

The success of the CPEC and the Gwadar Port project also depends on the safe and secure maritime environment in the Indian Ocean region in general, and in the Arabian Sea in particular. [25] Within the maritime domain, the challenges include piracy, human trafficking, and smuggling. These varied sources pose two types of threat. The first is the possibility that militant groups or insurgents might attack seaports and vessels. The second is through container shipments, which insurgents could use to smuggle weapons, drugs and conduct human trafficking operations to finance their activities.

Nearly all of Pakistan’s trade is through sea lines of communication (SLOC). It is therefore not surprising that Pakistani authorities regard the seaward security of the port and associated sea lanes a major vulnerability and, consequently, have have made maritime security a top priority. [26] Nor is it surprising that the role of Pakistan’s maritime forces has increased since Gwadar became operational. The Pakistan Navy has been assigned special responsibility to protect Gwadar seaport project from offshore threats and the more than 500 Chinese working there. In January 2016, the Navy decided to deploy two additional Marine Battalions to provide around the clock security at Gwadar. [27]

Pakistan’s efforts to bolster its maritime security capabilities are wide-ranging. They include the stepping up of security patrols and coastal exercises, which has been facilitated by the creation of Coastal Watch Stations and the Joint Maritime Information Coordination Centre (JMICC); the establishment of the Force Protection Battalion (FPBn) of the Pakistan Marines; and the enhancement of maritime domain awareness. [28] Additionally, Pakistan has sought to engage in more robust collaborative maritime security activities. Here, the relationship with China is noteworthy. The two allies appear fully committed to full-spectrum maritime security cooperation (i.e., the protection of ports, vessels, and seal lanes). The fourth joint naval exercise that took place in November, this time in the open sea, is illustrative of the widening ambit of China-Pakistan maritime collaboration. [29]

In fact, Chinese support for Pakistan’s efforts to bolster its maritime capabilities has greatly expanded from equipment, logistics and training support to technology transfer. Motivated partly by Pakistan’s difficulty procuring certain platforms from Western sources, China-Pakistan cooperation extends to joint in-country construction of the F-22P frigate; and production of Azmat and Jalalat class fast attack craft and corvettes for the Pakistan Maritime Security Agency. In June 2015, Pakistan’s Ministry of Defence Production signed a contract with M/s China Ship Trading Company (M/s CSTC) for construction of seven Maritime Patrol Ships, four of which are being built in China and the others at the Karachi Shipyard and Engineering Works. [30] The confirmation by the China Shipbuilding Industry Corporation (CSIC) of its involvement in a project to provide the Pakistan Navy with eight attack submarines marks yet another milestone in this cooperation. [31] During the recent visit of the People’s Liberation Army Navy (PLAN) chief to Pakistan, both navies agreed to widen the scope of existing maritime exercises in order to improve interoperability. [32]

Limits and Liabilities

The China-Pakistan Economic Corridor (CPEC) represents a new and exceedingly ambitious model of cooperation for these two all-weather partners. The realization of the many developmental and prospective benefits for each of the two countries depends upon the successful completion of the myriad projects designed to lay the infrastructural latticework for multifaceted bilateral economic cooperation and regional connectivity. The persistence of non-traditional security threats makes the progress that has already been achieved in developing this infrastructure within the relatively short span of time since its conceptualization all the more remarkable. Yet, given the extent to which terrorist and militant outfits have entrenched themselves in Pakistan, inoculating the CPEC against them seems unlikely.  

To be sure, Pakistan has taken significant steps to develop and deploy — both on land and sea — the military assets deemed necessary to mitigate the risks associated with asymmetrical security threats to the CPEC. Indeed, China has supported these, and broader efforts by Pakistan to enhance its overall conventional military capabilities. However, increased China-Pakistan military cooperation is occurring against the backdrop of intensifying competition amongst the various regional states, including rising India-Pakistan tension and growing irritation between China and India. Thus, the very measures ostensibly aimed at tackling non-traditional security challenges could inadvertently heighten threat perceptions and fuel interstate rivalry, thereby accentuating the risks to the CPEC rather than ameliorating them.

[1] “Pakistan, China Jointly Open New International Trade Route,” Voice of America News, November 16, 2016, accessed November 26, 2016, http://www.voanews.com/a/pakistan-china-jointly-open-new-international-… .

[2] “CPEC on track with first train from China to Pakistan,” Samaa.TV (Islamabad), December 1, 2016, accessed December 2, 2016, https://www.samaa.tv/economy/2016/12/cpec-on-track-with-first-train-fro… .

[3] Currently, there are two main land-to-sea arteries under construction: one going south from Kunming, in China’s Yunnan province, through Myanmar to the coast, and the other (CPEC) cutting south from Xinjiang through Pakistan to Gwadar port on the Indian Ocean. For details on the One Belt, One Road (OBOR) initiative, see People’s Republic of China National Development and Reform Commission (NDRC), “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road,” March 28, 2015, accessed November 28, 2016, http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html .

[4] See remarks by Prime Minister Nawaz Sharif, quoted in “CPEC ‘game-changer’ for Pakistan, ‘fate-changer’ for region: PM,” Associated Press of Pakista (APP), August 29, 2016, accessed December 1, 2016, https://www.app.com.pk/cpec-game-changer-for-pakistan-entire-region-pm/ . See also Syed Hamza and Saleem Gilani, “CPEC: The game changer,” The Nation , July 12, 2016, http://nation.com.pk/columns/12-Jul-2016/cpec-the-game-changer .

[5] Jeremy Page, “China Readies $46 Billion for Pakistan Trade Route, Wall Street Journal , April 15, 2015, accessed December 1, 2016 (Available at Lexis/Nexis.)

[6] See, for example, Ian Storey, “China’s ‘Malacca Dilemma,’” China Brief 6,8 (2006), accessed December 1, 2016, https://jamestown.org/program/chinas-malacca-dilemma/#.VsleY5MrJE4 .

[7] Michael Kugelman, “Pakistan’s Other National Struggle: Its Energy Crisis,” The Wall Street Journal , July 9, 2015, accessed December 1, 2016, http://blogs.wsj.com/washwire/2015/07/09/pakistans-other-national-strug… .

[8] Karen Strohecker, “Pakistan says China to make extra $8.5 billion investments in rail, energy,” Reuters, November 23, 2016, accessed December 2, 2016, http://uk.reuters.com/article/uk-pakistan-economy-cpec-idUKKBN13I1Y2?il… .

[9] See, for example, Andrew Small, “CPEC: Road to the Future?” Herald , November 15, 2016, accessed December 1, 2016, http://herald.dawn.com/news/1153559 ; Rafaello Pantucci, “China–Pakistan: With Great Investment Comes Some Responsibility,” RUSI Newsbrief, July 5, 2016, accessed December 1, 2016,  https://rusi.org/sites/default/files/2016_newsbrief_july_pantucci.pdf ; and Hanan Zaffar, “CPEC: Boon or Bane for Pakistan?” The Diplomat , November 16, 2016, accessed December 1, 2016, http://thediplomat.com/2016/11/cpec-boon-or-bane-for-pakistan/ ; and D. Suba Chandran, “Pakistan’s corridor of uncertainty,” The Hindu , November 29, 2016, accessed December 1, 2016, http://www.thehindubusinessline.com/opinion/pakistan-cpec-china-and-ind… .

[10] International Monetary Fund (IMF), Pakistan Country Report, No. 16/207 (June 2016) 87, accessed December 16, 2016, https://www.imf.org/external/pubs/ft/scr/2016/cr16207.pdf .

[11] Daniel Markey and James West, “Behind China’s Gambit in Pakistan,” Council on Foreign Relations Expert Brief, May 12, 2016, accessed December 1, 2016, http://www.cfr.org/pakistan/behind-chinas-gambit-pakistan/p37855 .

[12] Syed Raza Hassan, “To protect Chinese investment, Pakistan military leaves little to chance,” Reuters, February 8, 2016, accessed December 1, 2016, http://uk.reuters.com/article/pakistan-china-security-gwadar-idUKKCN0VH… .

[13] Quoted in Mayank Pratap Singh, “Baloch rebels attack Dudher project site, 2 Chinese engineers killed, many hurt,” India Today , September 28, 2016, accessed November 29, 2016, http://indiatoday.intoday.in/story/baloch-rebels-attack-kills-two-engin… .

[14] Asad Hashim, “Pakistan: BLF chief Baloch says Indian help ‘welcome,’” Aljazeera, September 29, 2016, accessed December 1, 2016, http://www.aljazeera.com/news/2016/09/pakistan-blf-chief-baloch-indian-…

[15] Imtiaz Ali, “Chinese citizen targeted in Karachi blast,” Dawn , May 30, 2016, accessed November 29, 2016, http://www.dawn.com/news/1261600 .

[16] Sudha Ramachandran, “CPEC takes a step forward as violence surges in Balochistan,” Asia Times , November 16, 2016, access November 29, 2016, http://www.atimes.com/cpec-takes-step-forward-violence-surges-balochist… .

[17] Baqir Sajjad Syed, “Civil-military differences hold up CPEC security plan,” Dawn , September 19, 2016, accessed November 29, 2016, http://www.dawn.com/news/1284724 .

[18] “Baloch rebels attack Dudher project site, 2 Chinese engineers killed, many hurt,” Terrorism Watch, October 2016, accessed November 29, 2016, http://www.terrorismwatch.org/2016/10/baloch-rebels-attack-dudher-proje… .

[19] Syed Ali Shah, Imtiaz Ali, and Ismail Sasoli, “At least 52 killed, 102 injured in blast at Khuzdar shrine,” Dawn , November 13, 2016, accessed December 3, 2016, http://www.dawn.com/news/1295928 .

[20] Hu Weijia, “Increased ties with Southeast Asia don’t detract from China’s goals in the CPEC,” Global Times , September 13, 2016, accessed December 1, 2016, http://www.globaltimes.cn/content/1006157.shtml .

[21] Rajeev Deshpande, “15K Pakistanis guarding 7K Chinese working on China-Pakistan Economic Corridor,” The Times of India , September 12, 2016, accessed November 29, 2016, http://timesofindia.indiatimes.com/world/pakistan/15K-Pakistanis-guardi… .

[22] Yuji Kurunuma, “Uighurs wary as China's vast aid influences Pakistan,” Nikkei Asian Review , November 16, 2016, accessed December 1, 2016, http://asia.nikkei.com/Politics-Economy/International-Relations/Uighurs… .

[23] See, for example, China Foreign Ministry Spokesperson press conference remarks, quoted in “China commends Pakistan for security and smooth implementation of CPEC,” The Nation , September 30, 2016, accessed November 29, 2016, http://nation.com.pk/national/30-Sep-2016/china-commends-pakistan-for-s… .

[24] Baqir Sajjad Syed, “Civil-military differences hold up CPEC security plan,” Dawn , September 19, 2016, accessed November 29, 2016, http://www.dawn.com/news/1284724 .

[25] “Pakistan Navy Launches 3rd Fast Attack Craft Missile For Protection Of CPEC,” PakChinaNews.Pak, September 18, 2016, accessed September 29, 2016, http://pakchinanews.pk/pakistan-navy-launches-3rd-fast-attack-craft-mis… .

[26] “Pakistan Navy accords high priority to maritime security of CPEC,” Pakistan Today , November 16, 2016, accessed November 29, 2016, http://www.cpecinfo.com/cpec-news-detail.php?id=NzU2 .

[27] S.C. Kohli, “Pakistan Navy's distinctive plans to protect Gwadar seaport and Chinese there,” Merinews, February 24, 2016, accessed December 4, 2016, http://www.merinews.com/article/pakistan-navys-distinctive-plans-to-pro… .

[28] Kaleem Kaushat, “CPEC -- Expanding Role of Pak Navy,” Pakistan Today , November 20, 2016, accessed November 26, 2016, http://www.pakistantoday.com.pk/2016/11/20/comment/cpec-expanding-role-of-pak-navy/ ; Rashid Mehmood Sheikh, “The Joint Maritime Information and Coordination Center,” in Andrew Forbes and Rowena Gaffney, Eds., Ionsphere , Edition V (Canberra: Sea Power Centre, 2015) 120-125, http://www.navy.gov.au/sites/default/files/documents/IONSPHERE_Edition_V_December_2015.pdf ; CPEC ships being guarded by navy vessels,” Dawn, November 16, 2016, accessed November 26, 2016, http://www.dawn.com/news/1296678/cpec-ships-being-guarded-by-navy-vessels ; and “Maritime security of CPEC top priority: Pakistan Navy,” Daily Times , November 16, 2016, accessed November 26, 2016, http://dailytimes.com.pk/pakistan/16-Nov-16/maritime-security-of-cpec-t… ; Mateen Haider, “Pakistan-China Sign Agreement for MSA Patrol Vessel,” Dawn , June 10, 2015, accessed November 26, 2016, www.dawn.com/news/1187352 ; and Anwar Saeed, “The Evolving China-Pakistan Maritime Economic Relationship in the Indian Ocean,” Soundings 13 (2016), accessed November 26, 2016, http://www.navy.gov.au/sites/default/files/documents/Soundings_Paper_No… .

[29] Quoted in Shazia Hasan, “Navies of Pakistan, China begin their fourth joint exercise,” Dawn , November 18, 2016, accessed November 29, 2016, http://www.dawn.com/news/1297067/navies-of-pakistan-china-begin-their-f… .

[30] Mateen Haidar, “Pakistan China sign agreement for MSA patrol vessels,” Pakistan Defence , June 10, 2015, accessed Novemer 29, 2016,   http://defence.pk/threads/pakistan-china-sign-agreement-for-msa-patrol-vessels.380243/#ixzz4RRutteov ; and “PN, PMSA to provide foolproof security to Gwadar port, CPEC sea routes,” Daily Times , August 2, 2016, accessed November 26, 2016, http://dailytimes.com.pk/sindh/02-Aug-16/pn-pmsa-to-provide-foolproof-s… .

[31] “China to export eight submarines to Pakistan,” NavalToday.com, October 17, 2016, accessed December 4, 2016, http://navaltoday.com/2016/10/17/china-to-export-eight-submarines-to-pa… .

[32]   See, for example, Koh Swee Lean Collin, “China and Pakistan Join Forces Under the Sea,” The National Interest , January 7, 2016, accessed December 4, 2016, http://nationalinterest.org/feature/china-pakistan-join-forces-under-the-sea-14829?page=3 ; “Pak-China naval collaboration gains more importance due to CPEC,” Dawn , November 21, 2016, accessed December 4, 2016, http://www.dawn.com/news/1297739 ; and “China hails Pakistan Navy’s role in maritime security,” Dawn , May 19, 2016, accessed November 26, 2016, www.dawn.com/news/1259271 .

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Opportunities and risks – the China-Pakistan trade corridor

A general view of the port before the inauguration of the China Pakistan Economic Corridor port in Gwadar, Pakistan November 13,  2016. REUTERS/Caren Firouz - S1BEUMPXVNAE

The China-Pakisatan economic corridor has been described as a 'game changer' for Pakistan's economy Image:  REUTERS/Caren Firouz

essay on china pakistan economic corridor

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This article is part of the World Economic Forum's Geostrategy platform

Pakistani leaders say the China-Pakistan Economic Corridor (CPEC), launched in 2015, is a “game changer” for the country’s ailing economy. But opaque plans for the corridor, the upheaval likely to affect locals along its route, and profits flowing mostly to outsiders could stir unrest. The government has repressed CPEC critics.

CPEC could help revive Pakistan’s economy. But if it moves ahead without more thorough debate in parliament and provincial legislatures and consultation with locals, it will deepen friction between the federal centre and periphery, roil provinces already long neglected, widen social divides and potentially create new sources of conflict.

What should be done?

The government that assumes power after the July 2018 elections should encourage debate about CPEC; consult with business leaders, civil society and locals affected; ensure landowners receive fair compensation; encourage hiring local labour; and allow space for dissent. Beijing and Chinese companies involved should support such measures.

Envisaged in mid-2013 and launched in April 2015, the China-Pakistan Economic Corridor (CPEC), a set of projects under China’s Belt and Road Initiative, marks a new era of economic ties in a bilateral relationship historically defined by security cooperation.

Pakistan’s economy clearly needs reform to better serve its people, and many officials say CPEC will help in this regard. But as currently rolled out, the corridor risks aggravating political tension, widening social divides and generating new sources of conflict in Pakistan.

The government that assumes power after Pakistan’s July elections should mitigate these risks by being more transparent about CPEC plans, consulting all stakeholders, including smaller provinces, the business community and civil society, and addressing concerns that the corridor subordinates Pakistan’s interests to those of China.

For its part, Beijing also should consult stakeholders in regions that will host CPEC projects it agrees upon with Islamabad. It should encourage Chinese companies to display sensitivity to residents of those areas, including by hiring local labour.

CPEC, which comprises loans, investments and grants that could grow to around $60 billion, travels a 2,700km route. It starts on the Pakistani Arabian Sea port of Gwadar, in Balochistan province, climbs along the Karakoram highway through the Khunjerab pass in Gilgit-Baltistan, before crossing into the Kashgar prefecture in China’s Xinjiang region.

Within Pakistan’s territory, the economic and development project prioritises transport infrastructure, industrial development, energy and Balochistan’s strategically located Gwadar port. Agricultural modernisation and production form another critical component.

The Pakistan Muslim League-Nawaz (PML-N) government, which came to power after elections in 2013 and stepped down on 31 May 2018, depicted CPEC as a leap forward both in relations with China and for the country’s economic development.

Protecting local interests

Contenders to national office from across the political spectrum have broadly endorsed this view. Yet some high-level officials and prominent voices in Pakistani business are concerned about the failure to protect local economic interests, high guaranteed returns on equity to Chinese investors and unaffordable national debt.

While it is too early to assess if CPEC can deliver the economic gains Islamabad promises, the project risks inflaming longstanding tensions between the centre and smaller federal units and within provinces over inequitable economic development and resource distribution.

Less-developed federal units such as Balochistan and Sindh contend that the corridor’s route, infrastructure and industrial projects will mostly benefit Punjab, already the country’s wealthiest and politically powerful province. Yet, even in Punjab, locals could forcibly resist the state’s acquisition of land for CPEC’s agricultural projects.

In Balochistan, CPEC is exacerbating existing grievances among a population whose perceptions of exploitation and neglect by the centre, together with authorities’ suppression of dissent, have long fuelled an insurgency.

The province will receive no direct financial benefits from Gwadar port, a key CPEC project, which means local anger at Islamabad is likely to intensify. Instead of developing a sleepy fishing village into a bustling commercial hub as pledged by Islamabad and Beijing, the project is producing a heavily militarised zone, displacing locals and depriving them of economic lifelines.

In Sindh’s Tharparkar district, coal-based CPEC power projects are not only damaging the environment, but are also displacing locals from their homes and could destroy livelihoods.

Many of these problems stem from opaque policy formulation, and the failure to heed regional and local concerns.

CPEC’s Long-Term Plan (2017-2030) was formulated by the centre with little input from local leaders, business or civil society actors. It was not disclosed until December 2017 – and then only in broad strokes – after the rollout of some major elements had already begun.

Security presence

From the project’s entry point, Gwadar, to its exit point, in Gilgit-Baltistan, the state’s response to local dissent and alienation has been an overbearing security presence, marked by army checkpoints, intimidation and harassment of local residents, and crackdowns on anti-CPEC protest.

Perceived geopolitical gains could also take precedence over economic ones.

Pakistan’s military establishment views a deeper economic relationship with China, even if tilted in Beijing’s favour, as a counterpoint to rising US diplomatic and economic pressure to end support to Afghanistan - and India - oriented militant proxies. But as it expands its economic footprint in the country, Beijing, too, seems increasingly concerned about the threats posed by such proxies to its national and regional security interests.

Moreover, unequal gains, combined with perceptions that CPEC projects undermine the economic, social and political interests of key stakeholders, could aggravate anti-Chinese sentiment within Pakistan. There already have been several attacks on Pakistanis employed in CPEC projects.

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Islamabad should ensure that CPEC’s directions and priorities address the country’s economic and political interests, including by taking the following steps:

  • Build political consensus on the project’s direction, including by fostering debates in the national and provincial legislatures, to ensure that there are equitable gains for all provinces; and stop arrests, harassment and other coercion of critics.
  • Consult economists, chambers of commerce, the Pakistan Business Council, trade associations and other business community stakeholders, and incorporate measures to address their concerns in a new framework for CPEC special economic zones and development projects.
  • Hire local labour and ensure that CPEC projects apply labour protections and practices.
  • Consult extensively with local communities about the potential costs and benefits of major development projects and devise an appropriate compensation and resettlement plan for all those displaced, including not just formal landowners but also those with the informal land ownership common across Pakistan. If needed, parliament should consider relevant reforms to the 1894 Land Acquisition Act.

Beijing and Chinese firms should:

  • Consult and engage the full spectrum of Pakistani stakeholders, from competing elites to the grassroots, as CPEC projects are identified and/or implemented, and prioritise job creation for locals.
  • Conduct comprehensive risk and political analysis of CPEC projects to ensure that benefits are shared equitably between competing interests.
  • Complement such efforts with effective and extensive communication with Pakistani stakeholders at the local, regional and national levels, so as to illustrate common interests.

For all the risks and challenges, CPEC offers an opportunity to upgrade Pakistan’s aging and dysfunctional infrastructure, and revive a flagging economy.

But to deliver on these promises, both Islamabad and Beijing need to implement it with considerably more sensitivity and consultation than they have displayed thus far, with provinces and the communities most affected given a greater voice in shaping CPEC projects.

Locals need to see dividends; benefits that overwhelmingly flow to outsiders would aggravate social and political divides, fuelling tension and potentially conflict. As Pakistan’s democratic transition approaches another milestone, with a second consecutive elected government completing a full term, its successor should seize the opportunities of a fresh mandate, shape public debate on CPEC and adopt related policies that put the well-being of Pakistani citizens at their core.

China-Pakistan Economic Corridor: Opportunities and Risks, International Crisis Group

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Pakistan’s Growing Problem with its China Economic Corridor

Pakistan’s inability to undertake long-overdue economic reforms is creating challenges for the China-Pakistan Economic Corridor.

By: Uzair Younus

Publication Type: Analysis

The China-Pakistan Economic Corridor (CPEC) has deepened the decades-long strategic relationship between the two Asian nations. But it has also sparked criticism , including that it burdens Pakistan with mountains of debt, allowing China to use “debt-trap diplomacy” to gain access to strategic assets. While some of this criticism is valid, a closer look indicates that concerns around debt sustainability, tepid economic growth and overall economic and social instability in Pakistan predate CPEC. Moreover, it is the lack of long-term structural reforms that has stymied equitable socioeconomic progress in Pakistan.

Traffic at the Gwadar Port in Pakistan, where CPEC first became operational when the first overland convoy from China arrived on Nov. 13, 2016. (CC License 4.0/Sadiqrizwan)

The foundations of CPEC, part of China’s Belt and Road Initiative, were laid during Chinese Premier Li Keqiang’s visit to Islamabad in May 2013. At the time, Pakistan was reeling from regular bomb blasts, chronic power shortages and weak economic growth. China made a commitment to play an integral role in Pakistan’s economy, with Li exhorting both countries to “focus on carrying out priority projects in connectivity, energy development and power generation and promoting the building of a China-Pakistan economic corridor.”

Nawaz Sharif, Pakistan’s prime minister-elect at the time, leaned into CPEC, leveraging Chinese financing and technical assistance in an attempt to end power shortages that had paralyzed his country’s economy. Eight years later, China’s influence in Pakistan has only increased.

China Is Pakistan’s Largest Bilateral Creditor

China’s ability to exert influence on Pakistan’s economy has grown substantially in recent years, mainly due to the fact that Beijing is now Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry, Pakistan’s total public and publicly guaranteed external debt stood at $44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 percent —$24.7 billion — of its total external debt to China, according to the International Monetary Fund (IMF).

Nevertheless, China has, to date, refrained from directly influencing Pakistan’s economic policies. In fact, as the ongoing IMF loan program has indicated, the IMF, World Bank and Asian Development Bank (ADB) continue to be the key players when it comes to determining the fiscal policies that are adopted in Islamabad.

Contextualizing China’s Economic Role in Pakistan

Pakistan and China have a strategic relationship that goes back decades. It was then only natural that Pakistan would turn to China at a time when it needed a rapid increase in external financing to meet critical investments in hard infrastructure, particularly power plants and highways. CPEC’s early harvest projects met this need, leading to a dramatic increase in Pakistan’s power generation capacity, bringing an end to supply-side constraints that had made rolling blackouts a regular occurrence across the country.

Additionally, China provided financial and technical expertise to help Pakistan build its road infrastructure, expanding north-south connectivity to improve the efficiency of moving goods from Karachi all the way to Gilgit-Baltistan. These investments were critical in better integrating the country’s ports, especially Karachi, with urban centers in Punjab and Khyber-Pakhtunkhwa provinces.

Chinese investments have not been narrowly focused on bilateral governmental investments. In 2016, 40 percent of Pakistan Stock Exchange’s shares were sold to a Chinese consortium , and in 2018, Ant Financial, an affiliate of the Chinese Alibaba Group, invested $184.5 million to buy a 45 percent stake in Pakistan’s Telenor Microfinance Bank. The momentum has picked up in recent months: In November 2020 , two Chinese companies reached an agreement to set up a cellphone manufacturing plant in Faisalabad; Challenge, a Chinese textile manufacturer, is investing $150 million to build a manufacturing facility in Lahore to export sportswear to Western markets; and Chinese investments are also changing conservative Pakistan, with Hui Coastal Brewery and Distillery Limited initiating operations to produce beer in Balochistan. All of this has created employment and economic opportunities across Pakistan.

Pakistan’s Own Shortcomings Are Exacerbating the Debt Crisis

A recent USIP report argued CPEC projects “can exacerbate underlying weaknesses in governance and contribute to an already unsustainable debt load.” In order to fully maximize the potential of current Chinese investments, and to build capacity to pay back the dollar-denominated debts taken on to finance these projects, Pakistan’s policymakers need to pursue much-needed structural reforms that address these underlying weaknesses.

The need for reform has been articulated in successive IMF programs, numerous World Bank and ADB reports, and by a broad segment of Pakistan’s economic analysts. Reforms are badly needed in the power sector, for example, where increased power generation has aggravated the sector’s debt crisis — as of June 2020, more than $13 billion had been accumulated in what is known as circular debt.

Pakistan’s policymakers need to look inward and do the hard work of restructuring and reforming the economy. Doing so is also in the interest of the United States and China — both countries would like to see an economically and socially stable Pakistan that is able to pay back its debts and create economic opportunities for tens of millions of citizens, the majority of whom are under the age of 30.

But Pakistan lacks the political will to break the grip of powerful vested interest groups. A recent United Nations report estimated that these elite groups receive about $17.4 billion in economic privileges — including tax breaks and preferential access to capital — which amounts to almost 6 percent of Pakistan’s GDP.

Pakistan’s debt crisis could be eased by boosting exports. According to a World Bank estimate , Pakistan’s total export potential stands at more than $88 billion, almost four times its current export earnings. Much of this potential can be realized by growing exports to existing markets, including the United States and China. A large share of these additional earnings will be generated from non-textile sectors, leading to the expansion of value chains and ecosystems in emerging sectors.

It’s Not About ‘Debt-Trap Diplomacy’

In recent months, China has started to realize the limitations of its influence in Pakistan. After Imran Khan was elected prime minister in 2018, new CPEC projects slowed down, in part due to the incoming administration’s concerns . Bureaucratic challenges also created headwinds, prompting the Pakistani government to develop a new CPEC Authority to act as a focal point for expediting projects.

While Beijing has played a central role in helping Pakistan build its power sector, it has failed to push Pakistan to resolve issues that have stalled the sale of K-Electric to Shanghai Electric Power. Additionally, Pakistan has engaged Chinese investors to renegotiate obligations for power projects as it seeks to rein in the ever-increasing cost of power.

It is important to view the China-Pakistan relationship not just through the lens of “debt-trap diplomacy,” something that the Trump administration was singularly focused on. By painting China’s role in Pakistan with a broad brush, the United States will force Pakistan’s political and economic elites into a corner, including those who would like to pursue structural reforms, improve governance and ensure transparency for large-scale infrastructure projects.

This singular focus ignored the fact that like China, U.S. influence also has its limitations: despite decades of economic and strategic influence asserted by Paris Club countries, including a debt reprofiling at the onset of the war in Afghanistan, the United States and its allies have failed to convince Pakistan to change course on numerous issues.

Despite power asymmetries between China and Pakistan, the latter still has tremendous agency in determining its own policies, even if such policies come at the expense of the long-term socioeconomic welfare of Pakistani citizens.

A Need to Properly Assess China’s Role

As the United States withdraws from Afghanistan and continues to take a more assertive approach in its geostrategic competition with China, it is important that China’s role and influence in countries like Pakistan be assessed with nuance.

First, it would be helpful for the strategic community in Washington to study the limitations of the United States’ own influence on Pakistan in order to better understand where and how China may be able to use its leverage to influence Islamabad’s choices.

Second, Washington must recognize that when it comes to Pakistan, its interests overlap with those of Beijing. Key among these interests is the fact that a socially and economically unstable Pakistan will not only be unable to repay Chinese debt, it will also become an increasingly disruptive force in the region, creating national security risks for both China and the United States.

For Islamabad, it is important to recognize that succeeding in its geo-economic pivot requires pursuing meaningful reforms that improve Pakistan’s overall economic outlook. It is only by making tough choices that Pakistan can attract additional flows of capital that its economy needs in order to modernize and achieve higher rates of growth. Absent reform, the country will quickly find that even China is unwilling to continue bailing out a strategic ally.

Uzair Younus is a visiting senior policy analyst for the South Asia program at the U.S. Institute of Peace.

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The China–Pakistan Economic Corridor

Beyond the rule of capital.

Inside a Haier Pakistan factory

Inside a Haier Pakistan factory. Credit: Arif Ali, White Star .

In August 2017, seven months into the most reactionary U.S. presidency of modern times, Donald Trump ventured into the political minefield that Washington has named the “AfPak” region, accusing Pakistan of hindering efforts to establish a lasting peace in Afghanistan and the region at large. Trump then reaffirmed his predecessor’s commitment to deepening ties with South Asia’s preeminent power, India. The Pakistani government, media, and intelligentsia reacted sharply, incensed both at Washington’s “do more” mantra and the continuing U.S. tilt toward their archrivals in New Delhi.

A little over a month later, U.S. Defense Secretary James Mattis upped the ante further by questioning the legality of China’s much-hyped One Belt One Road (OBOR) project, warning that the planned infrastructure-building initiative would pass through what India considers the “disputed territories” of Kashmir and Gilgit-Balistan, where the borders of China, India, and Pakistan meet. This time the retort came from Beijing, which called on other countries to join their regional cooperation agreements instead of perceiving them as a threat.

Three hundred years after what became known in the nineteenth century as the Great Game—a struggle for regional hegemony between the British and Russian Empires—Southwest Asia remains an imperial staging ground. By the middle of the twentieth century, with the collapse of European colonial empires, the United States and the Soviet Union had taken over the mantle of the world’s Great Powers, and Southwest Asia emerged as one of the major theatres of the Cold War. The collapse of the USSR ushered in a period of virtually unchallenged U.S. hegemony in the region, with China still cast as a “developing country” harboring only modest geopolitical aspirations.

The U.S. invasion of Afghanistan in September 2001 signaled Washington’s desire to cement its hegemonic position, but seventeen years later it is mired in an unwinnable war, even as the U.S. economy—and that of much of the Western world—endures the “endless crisis” of contemporary capitalism. 1 At the same time, China’s economic power and political influence have grown steadily, and over the next decade the country is widely predicted to overtake the United States as the world’s largest economy. Today the globalized world order born after the demise of twentieth-century Communism is in the throes of profound change. In much of the Western political mainstream, neoliberal doctrines of globalization have been overtaken by parties and programs demanding a turn inward. The clamor barely masks the protracted decline of Western hegemony, and attendant shifts in the global balance of power.

Meanwhile, the Chinese Communist Party (CCP), which has long been known to understate its ambitions, has in recent years begun to acknowledge its global designs far more openly. This was made clear in the grandest of ways in May 2017, at a high-level summit in Beijing to mark the formal launch of OBOR, which will see a wave of Chinese-funded infrastructure projects initiated in many parts of Asia and Africa. While Trump and his neofascist counterparts fearmonger about the perils of “openness” and “globalism,” Chinese premier Xi Jinping has announced his country’s intention to lead the world into a new “golden age” of globalization. 2

There has been much controversy on the left over the extent to which China’s remarkable transformation from an insular backwater to the center of the world-system represents a counterweight to capitalist imperialism. I do not engage here with the question of China’s own development trajectory per se , which has become a subject of debate even within China itself, most recently at the CCP’s Nineteenth Congress. 3 Samir Amin has in any case argued that a full understanding of China’s “sovereign” path requires a rejection of a simple “capitalism vs. socialism” binary and of the prevailing trend toward “China bashing.” 4

The most notable international impact of China’s growth has been its stunning emergence since the 1990s as the workshop of the global economy. For thirty years, Chinese manufactures have flooded world markets, a success made possible by its seemingly inexhaustible supplies of cheap labor. However, rising labor costs (and worker unrest), along with falling aggregate demand in Western economies, have confirmed to the CCP that the country is entering a new phase of accumulation, one that will facilitate the transition to a service-oriented economy and focus developmental efforts on western China. Among other initiatives, excess capacity will be channeled into massive communication thoroughfares linking both the western regions and the rest of mainland China to Southwest and Central Asia.

Arguably the most significant single element in Beijing’s calculus for the region—and certainly OBOR’s biggest component—is the China-Pakistan Economic Corridor (CPEC). In this essay, I will interrogate what China’s flagship globalization project means for Pakistan, and how to evaluate China’s growing footprint in the country, given Pakistan’s central place in U.S. imperial strategy in Southwest Asia for much of the postwar period. By distinguishing official CPEC rhetoric from reality, we can better evaluate the degree to which China’s role as an emergent global superpower challenges not only U.S. hegemony, but capitalist imperialism itself.

The debate over China’s emergence as a world power often ignores specific national and regional contexts, particularly those where Western imperialist nations have long-established interests. In recent years, OBOR-funded developments in Africa have become the subject of critical study on the left. 5 Here I will consider whether CPEC is likely to reinforce class and state power within Pakistan, and what kind of larger developmental and ecological vision the project advances. Only by studying such on-the-ground effects—rather than abstractly hypothesizing whether China’s will be an “anti-imperialist” intervention by virtue of its displacing the United States—can we gain real insights into the trajectory of the world order in the coming decades, and specifically the future of working people and fragile ecosystems in the historically imperialized zones of the global South.

Trump’s announcement last August that Pakistan would be held to account for its alleged duplicity in the war against the Taliban in Afghanistan was followed by even more incendiary finger-pointing in subsequent months. 6 In contrast, China has generally appeared to stand by Pakistan, thus reinforcing the belief that the country should move further away from a bullying Washington, into Beijing’s ever-expanding orbit. Even before Trump’s latest outburst, the CPEC project was widely hailed as a “game-changer” in Pakistani intellectual and political circles, notwithstanding the exceedingly limited public discussion of the plan itself. 7

Outside the mainstream, however, Beijing’s growing power is a far more contested matter. CPEC has sparked considerable conflict within the small Pakistani left, with discernible pro-China and anti-China positions emerging. As I suggest below, both perspectives shed light on imperialism in Pakistan, as well as on the state, class, ethnicity, and other social fault lines. By mapping this history, it becomes possible to envision a meaningful anti-imperialist politics in Pakistan in the years to come.

Pakistan: Frontline of Imperialism

Since the events of 9/11 and the subsequent “war on terror,” Pakistan has arguably been the single most important country in U.S. foreign policy calculus. The U.S. military adventure in Afghanistan against the Taliban has been facilitated by successive Pakistani regimes, starting with the military rule of General Pervez Musharraf (1999–2008). Yet since shortly after the opening of the Afghan theatre, Washington has accused Pakistan of playing a “double game” by providing covert support to some Taliban factions, most notably the Haqqani Network.

The current love-hate U.S.-Pakistan relationship is to a significant extent a microcosm of the two countries’ ties through much of the postwar era. Pakistan remained central to U.S. imperial designs for most of the Cold War, despite their starkly different motivations for investing in bilateral relations. Washington saw Pakistan as a key member of its anticommunist alliances in Southwest Asia, namely the Southeast Asia Treaty Organization and the Central Treaty Organization, or Baghdad Pact. Bilateral aid began with the so-called Mutual Assistance Program in 1954, through which the United States provided resources and training to the Pakistani army, seeking to modernize it as a fighting force, and more generally to shape the new nation into a pliant third-world state along Huntingtonian lines. 8 For its part, Pakistan, which after a military coup in 1958 had embraced its colonial inheritance as a garrison of Western imperialism, saw the alliance as a means of offsetting its relative weakness vis-à-vis a much bigger and better endowed India.

The contradictions of this uneasy alignment were exposed after the Sino-Indian border conflict erupted in 1962. Routed by the more professional and modern Red Army, New Delhi looked to Washington for help, and its request was promptly heeded by the Kennedy administration. Feeling betrayed by Washington’s overtures to Jawaharlal Nehru’s left-leaning Congress Party, the military regime in Islamabad headed by General Ayub Khan turned its attention to Beijing, laying the foundations of a Sino-Pakistani nexus and confirming the complex geopolitical calculus of the Cold War in South Asia.

However, China’s “all-weather friendship,” as it came to be known in Islamabad, could not offset fallout from the Pakistani military establishment’s India-centric strategic policy. When New Delhi decisively intervened in east Pakistan’s civil war in late 1971, neither Beijing nor Washington was willing to directly support the Pakistani army’s floundering Operation Searchlight against Bengali insurgents. The country’s eastern wing seceded to form the state of Bangladesh, and Pakistan’s strategic defeat reached its humiliating conclusion.

In the immediate aftermath, Pakistan’s foreign policy briefly approximated non-alignment. A left-of-center regime headed by Zulfikar Ali Bhutto claimed to represent a third-world popular-nationalist project, and for a time threatened to overturn a history of unconditional allegiance to larger powers. In the event, Bhutto’s first significant initiative was to facilitate Washington’s reestablishment of formal diplomatic ties with China, thus bringing together both of Islamabad’s major allies and confirming that Pakistan would remain firmly on the anti-Soviet side of the Cold War divide. 9

Indeed, just a few years later, Pakistan became the staging ground for one of Washington’s most consequential anti-Soviet interventions, the “jihad” against the Moscow-backed People’s Democratic Party of Afghanistan. By then Bhutto had been overthrown—and later hanged—by General Zia ul Haq, thus ushering in yet another military dictatorship backed by the United States. Pakistan had once again become Washington’s blue-eyed boy, while jihadi militants were depicted as warriors serving the cause of freedom and democracy, helping defang the “evil empire.”

The blowback from this anti-Soviet jihad has since engulfed much of the world. Right-wing millenarian ideology has taken deep root both in sections of majority-Muslim societies as well as among some disaffected Muslims in Western countries. The growing influence of religious militancy amongst Muslim populations is nevertheless far from an unchanging cultural fact. While Trump’s sheer demagoguery confirms the growing power of the far right, it is worth recalling that it was neoconservatives under George W. Bush who initiated a new phase of U.S. militarism under the guise of fighting radical Islam, fueling the “clash of civilizations” narrative from which reactionary forces in Muslim contexts have also benefited.

The shift in U.S. foreign policy toward direct confrontation with its erstwhile jihadi protégés, with Afghanistan again a major theatre of bloody conflict, has tested relations between the United States and Pakistan’s military establishment. The latter has sought at one and the same time to maintain a relationship with its overlords in the Pentagon, and to continue patronizing those jihadi groups that serve its longstanding strategic objectives in India and Afghanistan.

Even accounting for the opportunism of Pakistan’s generals, Washington’s convenient insistence, both before and during the Trump presidency, that Pakistan is the “epicenter of global terrorism” betrays the utterly contradictory effects of unbridled U.S. militarism. Delusions of grandeur notwithstanding, a U.S.-dominated global economy is now a thing of the past, with American working and even middle-class populations devastated by deindustrialization and financialization—the “endless crisis” exploited in the xenophobic idiom of Trump and his ilk. Although the U.S. dollar for now remains the global reserve currency, U.S. imperial power is sustained primarily by its enormous military capacity and the attendant ideology of unending war peddled by its military-industrial complex and a compliant corporate media.

China as New Patron Saint?

Against this backdrop of bloated militarism, Washington’s increasingly strained relations with Islamabad contrast sharply with the cordiality of the Sino-Pakistani relationship. Effusive and mutual praise has flowed freely since the two countries became close allies more than fifty years ago—although only in recent times has China emerged as a genuine competitor to the United States as Pakistan’s major benefactor.

Beijing has unfailingly supplied weapons to Islamabad for the better part of five decades, and its support was critical to the development of Pakistan’s nuclear program in the 1980s and early 1990s. Yet even China’s steadfast support during periods of strain between Pakistan and the United States has not lured Pakistani generals away from higher-quality U.S. weapons as part of their long-term efforts to modernize the county’s military. In fact, the ebbs and flows in the relationship between Washington and Islamabad have never translated into a complete freeze in arms sales and technical support from the Pentagon to the Pakistan army’s General Headquarters (GHQ).

At the same time, U.S. aid to Pakistan has never included a substantial economic component—at least not consistently so—and it is on this front that China’s evolving role is likely to prove distinct. While economic cooperation between China and Pakistan has increased considerably since the turn of the millennium, Beijing’s stakes in the Pakistani economy are set to increase exponentially in the form of CPEC commitments: to date the Chinese government has pledged more than $54 billion.

The question, as ever, is whether CPEC will simply buttress Pakistan’s inegalitarian and authoritarian power structure, or if, instead, Chinese intervention will trigger incipient forces of change, even if unwittingly. So far the only detailed material available in the public domain about CPEC is the so-called Long-Term Plan (LTP), a Chinese government document finalized in December 2015 by the National Development and Reform Commission (NDRC) and the China Development Bank. The LTP in its original form is over 250 pages long; a greatly abridged version of only 36 pages was released to the public in December 2017, simply to stave off growing criticism about a lack of transparency – secrecy, even – in CPEC-related matters.

Public relations gimmicks notwithstanding, the original document confirms Beijing’s longer-term objectives in Pakistan, meticulously outlining plans for cooperation between both governments to attract increased investment by Chinese companies in Pakistani industry, agriculture, coastal tourism, communications infrastructure, and water resources. While the document makes boilerplate overtures to Pakistan’s economic and social development, it can on the whole be read as a not very subtle assertion of China’s regional interests—especially the drive to gain market access for Chinese firms and develop China’s vast western interior via the transportation routes to be built under the CPEC plan.

Of particular note is the document’s emphasis on modernizing Pakistan’s agricultural heartland in central Punjab, which contradicts the vague claims by Pakistani officialdom and intelligentsia that CPEC is primarily about stimulating the country’s manufacturing industries. As far as China is concerned, Pakistan’s comparative advantage is in agriculture, and improving infrastructure and technical expertise while reducing waste in the sector will directly complement the modernization of agriculture in Xinjiang and other parts of western China. In the context of the CCP’s relatively undisguised policy of promoting migration by Han Chinese to the underdeveloped and sparsely populated western provinces, some of which have become hotbeds of minority unrest, the utility of Pakistan’s agricultural sector becomes even clearer.

As conceived in the plan, Beijing’s chief reciprocal contribution to Pakistan’s development would come from Chinese companies operating in the telecommunications, energy, and household appliances sectors. The resulting boost to a burgeoning domestic market of ostensibly middle-class consumers has been touted time and again as a virtual panacea for Pakistan’s development needs, recalling the remedies all too often outlined in standard neoliberal policy prescriptions.

In fact, Chinese goods and services started to flood the Pakistani market long before the CPEC initiative was announced, especially after a free trade agreement between the two countries was signed in July 2007. The total value of bilateral trade surged from just over $1 billion in the early 2000s to more than $16 billion by 2016. Wholesalers and retailers handling the influx of Chinese goods have undoubtedly benefited, but local industry has been throttled. Some manufacturers have survived by moving production abroad, to the detriment of Pakistan’s already immiserated industrial working class; more than 20,000 jobs have been slashed in the shoe-manufacturing sector alone. 10

Pakistan’s Federal Chamber of Commerce has demanded that local businesses be given access to the Industrial Parks and Export Processing Zones conceived in the CPEC plan, but there is little evidence to suggest that Pakistani manufacturers will prove competitive enough to reverse established trends. The only “successful” local companies in recent years have partnered with Chinese manufacturers to shift at least part of the latter’s operations to Pakistan—but in doing so, they have helped push out other domestic firms that cannot offer cut-price production to Chinese businesses. In effect, the Pakistani bourgeoisie has become even more of a comprador class than when it operated exclusively as the middleman for the imported goods of Japanese zaibatsus and Western multinationals.

The business-friendly Pakistan Muslim League–Nawaz (PML–N) government, in power since 2013, has made much noise about fixing the country’s longstanding energy crisis, a major cause of stagnation in the manufacturing sector. The government has promised that chronic electricity shortfalls will be resolved once and for all by the numerous power plants envisaged under the CPEC plan. Yet there is no sign that power blackouts, popularly known as “load shedding” in Pakistan, will end anytime soon, and new power plants being built under the CPEC plan will likely only reinforce the competitive advantage that Chinese firms already wield over their local counterparts.

As for the prospect of Chinese investment generating employment for a rapidly increasing Pakistani population—now over 200 million, with more than 60 percent under the age of twenty-five—the evidence to date is clear. Chinese firms have acquired a reputation for bringing most of their employees with them, from highly skilled engineers to construction workers. In the Mansehra district of Khyber Pakhtunkhwa province, site of some of the most intensive road-building works initiated under the CPEC plan, thousands of Chinese engineers and laborers work and live in relative isolation from the local population, with only a specially designated Pakistani military unit allowed access to both the construction site and the nearby housing settlement.

While officials insist that CPEC has already generated an employment boom, the only concrete evidence of job creation is in the armed forces. A special security force of at least 15,000 operating under army command has been raised to protect CPEC instalments and Chinese personnel who, by keeping almost entirely to themselves, reinforce the perception that they are insular outsiders who want only access to the country’s resources, hardly endearing themselves to local populations. 11

A Divided Left

This special military force was conceived after the CCP made clear that CPEC would be initiated only if the Pakistani government could guarantee the safety of Chinese investments, engineers, and workers. High-profile kidnappings and even murders of Chinese citizens working in Pakistan have been reported for some years, particularly in the resource-rich but insurgency-wracked province of Balochistan in the southwest. The Chinese government has accordingly appeared to support the intensification of counter-insurgency operations by the Pakistani army against secular Baloch separatists.

Meanwhile, Beijing is concerned with militancy of a decidedly non-secular variety in Xinjiang, where Islamists have cultivated pockets of support among the Uyghurs, a Turkic minority group that has long harbored fears of cultural and economic subjugation by the Han Chinese majority. A similar perception exists within the Baloch ethnic group, which for decades has resisted the oppressive rule of a Punjabi-dominated Pakistani state. Not surprisingly, CPEC is viewed as yet another state-sponsored attempt to rob the Baloch people of their resources in the guise of “development.”

The crown jewel in the CPEC plan is a deep-sea port opened in November 2016 in the once-sleepy fishing village of Gwadar, on the westernmost tip of Balochistan. The construction of Gwadar Port has been viewed with great suspicion by at least a segment of Baloch nationalists, who consider the project an extension of Islamabad’s longstanding economic colonialism. Moreover, they believe that Gwadar—and CPEC in general—will accelerate incipient demographic trends in Balochistan that are fast turning ethnic Baloch into a minority in their own land.

For China, Gwadar is a warm-water port offering the isolated cities of its western provinces a window to the world. Kashgar, the largest town on China’s western border, is more than 1,200 miles from Gwadar, but more than 3,100 miles from Shanghai, on China’s eastern seaboard. The development of Gwadar thus clearly serves China’s medium-term objectives. Whether it suits the Baloch people, or Pakistan’s working masses more generally is a matter of much greater contention.

CPEC has intensified longstanding divisions within the embattled Pakistani left, which has struggled to come to terms with what CPEC signifies, especially in light of Pakistan’s status as a frontline state of U.S. imperialism. While such thorny debates among left activists and intellectuals are in part a hangover from Cold War factionalism, distinct perspectives on the growing Chinese footprint in Pakistan have emerged in recent years. A closer look at these arguments offers considerable insights into a complex country and region where the geopolitical stakes are extremely high.

On one side is the fairly straightforward hypothesis that China’s growing power represents a counterweight to Washington’s seventy-year influence in Pakistan. In this argument, Beijing—and other capitals, like Moscow, that are reasserting themselves in the region—appears as an ally of anti-imperialists in the country, and the CPEC plan as concrete evidence that Chinese aid can address Pakistan’s development needs, in contrast to the narrow strategic and military goals that Washington has always pursued. Extrapolated further, this argument takes on an anti-imperialist accent on a global scale, envisioning emergent political-economic blocs such as the Shanghai Cooperation Agreement and BRICS as new opportunities for countries like Pakistan to extricate themselves from the centuries-old hegemonic orbit of Western imperialist powers.

The opposing view on the left emphasizes that even if changing geopolitical dynamics do reduce Islamabad’s historical dependency on the United States, China’s intervention is far from a win-win situation for Pakistan—and, in fact, is likely to exacerbate existing class, ethnic, and ecological conflicts. Like its pro-China counterpart, this left critique is relatively simple: it holds that the CPEC only reinforces the established neoliberal paradigm, with its emphasis on corporate control and endless expansion of markets for consumer goods, even as it intensifies ecological degradation and labor exploitation, all behind the veil of “development.” A rapidly expanding urban middle class in Pakistan—which by liberal estimates could number up to 60 million people—will certainly buttress demand by indulging a Rostowian fetish for mass consumption. But what of the dark side of development, ignored by the corporate media and Chinese and Pakistani authorities—namely, the masses of dispossessed working people whose livelihoods and cultures revolve around the land, water, mountains, forests, and other natural resources that predominantly Chinese corporations are being given free rein to pillage?

Such processes of dispossession were intensifying even before the launch of CPEC, with hitherto untapped mineral resource zones in peripheral regions like Balochistan, Sindh, and Gilgit-Balitstan most affected. Balochistan, for instance, is home to the Reko Diq and Saindak mines, with some of the largest untapped copper and gold reserves in the world. CPEC will no doubt signal intensified mining of such precious metals, along with other process of extraction and accumulation that are anything but beneficial for local communities. Coal-powered energy plants being set up in the Punjabi heartland, for example, will inevitably yield significant ecological fallouts across both central and peripheral regions. By 2020, thermal power production is expected to reach more than 13,000 megawatts annually, with all but about 500 megawatts coal-fired.

It is more than a little ironic that the CCP has in recent years begun cutting back on domestic coal and steel production in an effort to make the Chinese development model more efficient and ecologically sustainable. The NDRC reported in April 2017 that China has already reduced coal and steel production by 400 million metric tons, halfway toward its planned target of 800 million by 2020. By facilitating more intensive coal production in Pakistan, China appears to be following in the footsteps of “advanced” Western countries whose partial greening of their own economies has derived in large part from shifting environmentally destructive practices to the global South.

Under CPEC, coal production in Pakistan is expected to increase enormously, with the biggest initiative planned for the Thar coalfields in eastern Sindh, reportedly home to the world’s seventh-largest coal reserve, with around 175 billion metric tons. The extraction of Thar’s coal has been promoted within Pakistan as a homegrown cure for chronic underdevelopment, and China’s financial and technical support for the project has been met with much fanfare.

In practice, even in its initial phases—actual coal production is not projected to begin until 2019—the project has already begun to displace local communities and alter the regional ecosystem. More than 9,000 square miles of Thar’s total area of 22,000 square miles will be mined for coal, while the rest will be subject to substantial damming, projects that promise to transform the lives of the region’s 150,000 people. The Sindh Engro Coal Mining Company (SECMC), which is leading the development in partnership with China Power International, has launched a vigorous public relations campaign, claiming it will prioritize the hiring of local workers, compensate displaced communities, and preserve the local environment. Yet the reality in Thar is far less rosy: to take only one example, more than 70 percent of Thar’s people lack access to clean drinking water, and as coal mining intensifies, the already saline groundwater is growing contaminated and potentially poisonous.

Not surprisingly, authorities have not looked kindly on local activists’ demands for accountability. Several activists have been threatened by SECMC goons and local officials, and in August 2017 some were even forcibly disappeared by the military’s intelligence apparatus, a practice that has become almost endemic in Pakistan in recent years.

While intolerance for dissent in Pakistan is nothing new, CPEC has already acquired the status of a sacred cow. Despite serious conflicts between the PML–N government and the military establishment, there appears to be little elite disagreement over Chinese investment in the country. Pakistan’s rulers clearly do not want to antagonize their new patron-in-chief. For its part, the Chinese government has also stepped up its public relations efforts to silence the murmurs of dissent outside the mainstream. In short, to question CPEC in contemporary Pakistan, even if only to demand greater transparency around the project, is a dangerous endeavor.

The fear that Beijing will reinforce the Pakistani state’s authoritarian tendencies is not based only on circumstantial evidence or speculation. A significant section of the LTP focuses on how China will facilitate the surveillance capacities of local security agencies. The major infrastructural investment in this regard is the laying of a country-wide fiber-optic cable, which would both transform Pakistan’s communication network and give China extensive control over information flows in the country. China Mobile already accounts for 20 percent of domestic telecommunications traffic, and this share is projected to increase dramatically in the near future. Meanwhile, the Huawei group is likewise acquiring monopoly-like dominance over the digital technology and hardware markets.

The LTP also makes no secret of China’s plan to use communications networks, including digital television channels, to disseminate Chinese culture in Pakistan, while the explosion of Mandarin-teaching institutes across the country, alongside initiatives in the realm of arts and culture, reflects Beijing’s desire to project China’s power in new ways.

It is against this backdrop that left debates over China’s increasingly hegemonic role in Pakistan’s polity and economy must be understood. To a significant extent, these differences revolve around the question of the Pakistani state, and particularly the army. There is a palpable sense that China’s interventions will empower the coercive arm of the state and further constrict democratic space in the country, particularly in the historically oppressed peripheral regions outside the Punjab.

The debate also reflects a broader controversy over “development” itself. While some on the left have stayed true to a “stageist” Marxism which considers a certain level of capitalist industrialization a necessary evil in the protracted struggle for socialism, others see no progressive potential in the Chinese-supported incarnation of the Pakistani bourgeoisie, and view CPEC as hardly challenging the contemporary regime of global capital, with all its economic, ecological, and political crises.

To be sure, the displacement of local communities in Sindh due to the Thar coal project is only the latest example of forced migration in Pakistan, which has steadily increased over the past few years amid worsening ecological and political catastrophes. The “war on terror” has forced millions of Pakhtuns on the Pakistan-Afghanistan border to flee their homes for cities like Islamabad, Lahore, and Karachi, where they are condemned to poverty, squalor, and discrimination. Meanwhile the realities of climate change have come to the fore for numerous village communities in Siraiki and Sindhi regions in the heart of the Indus Basin which have been devastated by monsoon floods almost annually since 2010. The mass exodus that follows each episode has exacerbated the already explosive pressure on urban centers unable to meet the demand for either gainful employment or basic needs like housing and sanitation.

Of course, these longer-term trends cannot be attributed to the Chinese footprint in Pakistan per se . But there can be little doubt that CPEC will reinforce existing pressures on already vulnerable ecosystems while forcing ever more displaced communities into the ranks of the largely unseen and dispossessed masses, both in the rural hinterlands and major metropolitan areas. All this while the prevailing technocratic developmental imaginary—to which all contenders for political power in Pakistan subscribe—lavishes its attention solely on a mythical middle class, serviced by Chinese corporations.

Whether new political projects can confront this crisis of political imagination and organization in an era of near-total neoliberal hegemony is certainly not a challenge unique to the Pakistani left. Unfortunately, existing divisions in left circles have to date prevented this difficulty from even being acknowledged with any degree of coherence. Insofar as certain left factions view China’s growing role in Pakistan as unequivocally beneficial, based on a rather facile mapping of the shift from the unipolar post-1991 world order to an increasingly multipolar present, they draw a distinct line between themselves and those on the left working in peripheral zones among historically oppressed ethnic groups. If the left ignores these regions and communities where neoliberal development and war generates untold misery and ecological destruction, it risks delegitimizing the very essence of the socialist project.

U.S. imperialism has played an unambiguously destructive role in Pakistan for most of the country’s seventy-year history. Aside from decisively empowering the military establishment, its support of religious militancy in the 1980s precipitated a complete transformation of the body politic. The secular political traditions of other societies in the region were similarly undermined by the rise of millenarianism, with Afghanistan worst affected. Today Washington seeks to maintain its waning influence in the region through a zero-sum strategic game that has seen India, Pakistan, Iran, and Afghanistan pitted against one another, forcing their own people to bear the cost.

In this context, China’s claim to advance a development agenda that transcends the narrow geopolitical calculus that has long defined regional dynamics should be evaluated carefully. The biggest question mark in the OBOR strategy in South Asia remains Beijing’s frosty relations with New Delhi. Still, the volume of official trade between China and India totaled almost $71 billion in 2016—nearly six times that between China and Pakistan. Thus economic ties are expanding despite the Modi government’s nationalist posturing. In any case, China’s growing economic and political role in the region necessarily means that the era of Washington’s unrivalled hegemony, especially in its longtime frontline state of Pakistan, has ended.

Yet the discussion above confirms the danger that China’s emergent hegemony represents more of the same for Pakistan’s long-suffering people, especially those from historically underrepresented ethnic groups. There has also been little evidence so far that the ideal of building an “ecological civilization” that has gained credence in China in recent years is anything more than an afterthought when it comes to Chinese investments in Pakistan. 12

Even if one takes the rather blunt metric of CPEC financing, the rhetoric is far removed from reality. Of the $28 billion injected into Pakistan’s economy by late 2016 through CPEC’s “early harvest” projects, $19 billion was in the form of commercial loans. In the not-too-distant future, this portends yearly debt repayments of more than $3.5 billion. 13 It is not at all clear, then, that China offers a financial alternative to the International Monetary Fund/World Bank juggernaut that has already saddled Pakistan with a foreign debt burden approaching $80 billion.

Perhaps most importantly, China’s seemingly apolitical developmental intervention is consolidating the existing structure of power in Pakistan, and in particular the military establishment that Washington helped make into the country’s dominant force. Recent events suggest China is exerting some pressure on Pakistan’s GHQ to break with the religious militants long used as proxies against India and Afghanistan. 14 This would make sense, given China’s commitment to expanding market exchange through its infrastructural and other investments, and the attendant fear that these investments may be threatened by militant movements in Pakistan.

Even if peace were achieved overnight, however, the Chinese vision of “development” would not represent a genuine and sustainable alternative to neoliberal development practices as they have been institutionalized around the world. China’s intervention in Pakistan thus cannot be considered the progressive “other” to the destructive militarism—both state and non-state—that U.S. imperialism and domestic elites have imposed on Southwest Asia for decades.

China’s larger-than-life role and the real material consequences of its global expansion are in fact reinforcing anxieties about the extent to which the Chinese challenge to U.S. hegemony can move the planet and its people toward a post-capitalist future. If the rosy rhetoric about the CPEC project does not translate into an environmentally sustainable reality, one that makes Pakistan more egalitarian and just, little hope will remain that China can lead the world into a new era of peace, prosperity, and ecological harmony that transcends the rule of capital.

  • ↩ John Bellamy Foster and Robert W. McChesney , The Endless Crisis (New York: Monthly Review Press, 2012).
  • ↩ Tom Phillips, “ China’s Xi Lays Out $900bn Silk Road Vision amid Claims of Empire-Building ,” Guardian , May 14, 2017.
  • ↩ Two recent analyses by Chinese writers are Yuezhi Zao, “ The Struggle for Socialism in China: The Bo Xilai Saga and Beyond ,” Monthly Review 64, no. 12 (October 2012): 1–17; and Cheng Enfu and Ding Xiaoqin, “ A Theory of China’s ‘Miracle’: Eight Principles of Contemporary Chinese Political Economy ,” Monthly Review 68, No. 8 (January 2017): 46–57.
  • ↩ Samir Amin, “ China 2013 ,” Monthly Review 64, no. 10 (March 2013): 14–33.
  • ↩ Patrick Bond, “ ‘Africa Rising’ in Retreat: New Signs of Resistance ,” Monthly Review 69, no. 4 (September 2017): 24–42.
  • ↩ “ Trump Attacks Pakistan ‘Deceit’ in First Tweet of the Year ,” BBC News, January 1, 2018.
  • ↩ “ Complete Harmony on CPEC Project ,” Dawn , March 19, 2016.
  • ↩ At the height of the Cold War struggle for influence in newly independent countries, Samuel Huntington famously described the Ayub Khan regime in Pakistan as an island of order in a chaotic third-world sea: Huntington, Political Order in Changing Societies (Cambridge, MA: Harvard University Press, 1968).
  • ↩ The “secret” visit of then-secretary of state Henry Kissinger to Beijing in 1971 was facilitated by Islamabad; Kissinger travelled to China in a state airliner while on a formal diplomatic trip to Pakistan.
  • ↩ Nasir Jamal, “ Mother China: A ‘Chinese Revolution’ Sweeps across Pakistan ,” Herald , August 2017.
  • ↩ Syed Irfan Raza, “ 15,000 Military Personnel Protecting CPEC ,” Dawn , February 21, 2017.
  • ↩ See Zhihe Wang , Huili He , and Meijun Fan , “ The Ecological Civilization Debate in China: The Role of Ecological Marxism and Constructive Postmodernism–Beyond the Predicament of Legislation ,” Monthly Review 66, no. 6 (November 2014): 37–59.
  • ↩ Khurram Husain, “ CPEC Cost Build-Up ,” Dawn , December 15, 2016.
  • ↩ “ BRICS Name Militant Groups as Regional Security Concern ,” Dawn , September 5, 2017.

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  • Chinese, Simplified
  • Introduction
  • Balancing Geopolitics and Economics
  • The Jihadist Factor
  • Security Challenges for Chinese Nationals and Projects
  • A Conceptual Leap?
  • Power Production and Debt
  • Special Economic Zones and Industrial Cooperation
  • Strains on the Federation
  • CPEC’s Exit Point: Gilgit-Baltistan
  • Developing Gwadar
  • Leaving Gwadar’s Communities Behind
  • Gwadar and the Baloch Insurgency
  • Agricultural Cooperation: Punjab’s Challenges
  • CPEC and Sindh’s Tharparkar District

Appendix B: Acronyms

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essay on china pakistan economic corridor

China-Pakistan Economic Corridor: Opportunities and Risks

The China-Pakistan Economic Corridor, opened in 2015, could bring needed jobs and investment to Pakistan. But many projects also risk widening social divides and heightening political tensions along the route. With Beijing’s support, Islamabad should seek the public’s input to ensure equity in economic gains.

What’s new?  Pakistani leaders say the China-Pakistan Economic Corridor (CPEC), launched in 2015, is a “game changer” for the country’s ailing economy. But opaque plans for the corridor, the upheaval likely to affect locals along its route, and profits flowing mostly to outsiders could stir unrest. The government has repressed CPEC critics.

Why does it matter?  CPEC could help revive Pakistan’s economy. But if it moves ahead without more thorough debate in parliament and provincial legislatures and consultation with locals, it will deepen friction between the federal centre and periphery, roil provinces already long neglected, widen social divides and potentially create new sources of conflict.

What should be done?  The government that assumes power after the July 2018 elections should encourage debate about CPEC; consult with business leaders, civil society and locals affected; ensure landowners receive fair compensation; encourage hiring local labour; and allow space for dissent. Beijing and Chinese companies involved should support such measures.

Executive Summary

Envisaged in mid-2013 and launched in April 2015, the China-Pakistan Economic Corridor (CPEC), a set of projects under China’s Belt and Road Initiative, marks a new era of economic ties in a bilateral relationship historically defined by security cooperation. Pakistan’s economy clearly needs reform to better serve its people, and many officials say CPEC will help in this regard. But as currently rolled out, the corridor risks aggravating political tension, widening social divides and generating new sources of conflict in Pakistan. The government that assumes power after Pakistan’s July elections should mitigate these risks by being more transparent about CPEC plans, consulting all stakeholders, including smaller provinces, the business community and civil society, and addressing concerns that the corridor subordinates Pakistan’s interests to those of China. For its part, Beijing also should consult stakeholders in regions that will host CPEC projects it agrees upon with Islamabad. It should encourage Chinese companies to display sensitivity to residents of those areas, including by hiring local labour.

CPEC, which comprises loans, investments and grants that could grow to around $60 billion, travels a 2,700km route. It starts on the Pakistani Arabian Sea port of Gwadar, in Balochistan province, climbs along the Karakoram highway through the Khunjerab pass in Gilgit-Baltistan, before crossing into the Kashgar prefecture in China’s Xinjiang region. Within Pakistan’s territory, the economic and development project prioritises transport infrastructure, industrial development, energy and Balochistan’s strategically located Gwadar port. Agricultural modernisation and production form another critical component.

The Pakistan Muslim League-Nawaz (PML-N) government, which came to power after elections in 2013 and stepped down on 31 May 2018, depicted CPEC as a leap forward both in relations with China and for the country’s economic development. Contenders to national office from across the political spectrum have broadly endorsed this view. Yet some high-level officials and prominent voices in Pakistani business are concerned about the failure to protect local economic interests, high guaranteed returns on equity to Chinese investors and unaffordable national debt.

While it is too early to assess if CPEC can deliver the economic gains Islamabad promises, the project risks inflaming longstanding tensions between the centre and smaller federal units and within provinces over inequitable economic development and resource distribution. Less-developed federal units such as Balochistan and Sindh contend that the corridor’s route, infrastructure and industrial projects will mostly benefit Punjab, already the country’s wealthiest and politically powerful province. Yet, even in Punjab, locals could forcibly resist the state’s acquisition of land for CPEC’s agricultural projects.

In Balochistan, CPEC is exacerbating existing grievances among a population whose perceptions of exploitation and neglect by the centre, together with authorities’ suppression of dissent, have long fuelled an insurgency. The province will receive no direct financial benefits from Gwadar port, a key CPEC project, which means local anger at Islamabad is likely to intensify. Instead of developing a sleepy fishing village into a bustling commercial hub as pledged by Islamabad and Beijing, the project is producing a heavily militarised zone, displacing locals and depriving them of economic lifelines. In Sindh’s Tharparkar district, coal-based CPEC power projects are not only damaging the environment, but are also displacing locals from their homes and could destroy livelihoods.

Many of these problems stem from opaque policy formulation, and the failure to heed regional and local concerns. CPEC’s Long-Term Plan (2017-2030) was formulated by the centre with little input from local leaders, business or civil society actors. It was not disclosed until December 2017 – and then only in broad strokes – after the rollout of some major elements had already begun. From the project’s entry point, Gwadar, to its exit point, in Gilgit-Baltistan, the state’s response to local dissent and alienation has been an overbearing security presence, marked by army checkpoints, intimidation and harassment of local residents, and crackdowns on anti-CPEC protest.

Perceived geopolitical gains could also take precedence over economic ones. Pakistan’s military establishment views a deeper economic relationship with China, even if tilted in Beijing’s favour, as a counterpoint to rising U.S. diplomatic and economic pressure to end support to Afghanistan- and India-oriented militant proxies. But as it expands its economic footprint in the country, Beijing, too, seems increasingly concerned about the threats posed by such proxies to its national and regional security interests. Moreover, unequal gains, combined with perceptions that CPEC projects undermine the economic, social and political interests of key stakeholders, could aggravate anti-Chinese sentiment within Pakistan. There already have been several attacks on Pakistanis employed in CPEC projects.

Islamabad should ensure that CPEC’s directions and priorities address the country’s economic and political interests, including by taking the following steps:

Build political consensus on the project’s direction, including by fostering debates in the national and provincial legislatures, to ensure that there are equitable gains for all provinces; and stop arrests, harassment and other coercion of critics.

  • Consult economists, chambers of commerce, the Pakistan Business Council, trade associations and other business community stakeholders, and incorporate measures to address their concerns in a new framework for CPEC special economic zones and development projects.  
  • Hire local labour and ensure that CPEC projects apply labour protections and practices.  
  • Consult extensively with local communities about the potential costs and benefits of major development projects and devise an appropriate compensation and resettlement plan for all those displaced, including not just formal landowners but also those with the informal land ownership common across Pakistan. If needed, parliament should consider relevant reforms to the 1894 Land Acquisition Act.

Beijing and Chinese firms should:

  • Consult and engage the full spectrum of Pakistani stakeholders, from competing elites to the grassroots, as CPEC projects are identified and/or implemented, and prioritise job creation for locals.  
  • Conduct comprehensive risk and political analysis of CPEC projects to ensure that benefits are shared equitably between competing interests.  
  • Complement such efforts with effective and extensive communication with Pakistani stakeholders at the local, regional and national levels, so as to illustrate common interests.

For all the risks and challenges, CPEC offers an opportunity to upgrade Pakistan’s aging and dysfunctional infrastructure, and revive a flagging economy. But to deliver on these promises, both Islamabad and Beijing need to implement it with considerably more sensitivity and consultation than they have displayed thus far, with provinces and the communities most affected given a greater voice in shaping CPEC projects. Locals need to see dividends; benefits that overwhelmingly flow to outsiders would aggravate social and political divides, fuelling tension and potentially conflict. As Pakistan’s democratic transition approaches another milestone, with a second consecutive elected government completing a full term, its successor should seize the opportunities of a fresh mandate, shape public debate on CPEC and adopt related policies that put the well-being of Pakistani citizens at their core.

Brussels, 29 June 2018

essay on china pakistan economic corridor

I. Introduction

Security cooperation has long defined Pakistan’s relationship with China, with economic ties lagging far behind military engagement. Since 2015, such ties, focused on the China-Pakistan Economic Corridor (CPEC), a set of projects that are part of Beijing’s Belt and Road Initiative, have assumed new significance. [fn] For analysis of China’s Belt and Road Initiative, see Crisis Group Asia Commentary, “The Twists and Turns along China’s Belt and Road ”, 2 October 2017; and Crisis Group Europe and Central Asia Report N°245, Central Asia’s Silk Road Rivalries , 27 July 2017. “Pak-China bilateral ties are time tested: Our relationship has attained new heights after the China-Pakistan Economic Corridor that is a game changer for the region and beyond”, stated then Prime Minister Shahid Khaqan Abbasi. Quoted in “Long Term Plan for China-Pakistan Economic Corridor (2017-2030)”, Ministry of Planning, Development and Reform, Government of Pakistan and National Development and Reform Commission, People’s Republic of China (2017), at www.cpec.gov.pk . Hide Footnote Pakistan’s political leadership calls CPEC a “game changer” that would bring prosperity by revitalising a fragile economy. Its military, which dominates foreign, defence and security policy, perceives closer ties with China as an opportunity to offset rising tensions with the U.S. over Pakistan’s support for Afghanistan- and India-oriented militant groups. [fn] For Crisis Group analysis of military-led security policy and militant proxies, see Asia Reports N°279, Pakistan’s Jihadist Heartland: Southern Punjab , 30 May 2016; N°271, Revisiting Counter-Terrorism Strategies in Pakistan: Opportunities and Pitfalls , 22 July 2015; N°255, Policing Urban Violence in Pakistan , 23 January 2014; N°242, Pakistan: Countering Militancy in PATA , 15 January 2013; N°178, Pakistan: Countering Militancy in FATA , 21 October 2009; N°164, Pakistan: The Militant Jihadi Challenge , 13 March 2009. Hide Footnote For China, geopolitical ambitions, sustained by greater connectivity and trade infrastructure across the region, drive the evolution of the relationship. [fn] Crisis Group discussions, Chinese and Western analysts, Beijing, Hong Kong, Shanghai and Washington, March-May 2018; Andrew Small, The China-Pakistan Axis: Asia’s New Geopolitics (London, 2015); “China’s diplomatic efforts to promote energy and resources cooperation along the ‘One Belt and One Road’”, CIIS Report No. 5, China Institute of International Studies, May 2015; Daniel Markey and James West, “Behind China’s gamble in Pakistan”, Council on Foreign Relations, 12 May 2016; Li Qingyan, “Opportunities and Challenges for Constructing CPEC: Regional and National Economic Perspectives”, China International Studies , vol. 62, January/February 2017; “Opportunities and Challenges of Implementing the ‘Belt and Road’ Initiative”, CIIS Report, vol. 17, China Institute of International Studies, April 2017; Huang Ying, “B&R, AIIB: Opportunities for Enhancing FDI in South Asia”, Contemporary International Relations , vol. 27, no. 1, January/February 2017; Michael Kugelman, “The China-Pakistan Economic Corridor: What It is, How It is Perceived and Implications for Energy Geopolitics”, in Asia’s Energy Security and China’s Belt and Road Initiative , NBR Special Report no. 68, National Bureau of Asian Research, November 2017; Andrew Small, “The Backlash to Belt and Road”, Foreign Affairs , 16 February 2018. Hide Footnote

This report examines CPEC’s economic and development projects within Pakistan, discusses whether it will bring the broad economic revival that Pakistani leaders claim it will generate, and assesses its political and security costs for Pakistan. It analyses CPEC’s impact on domestic stability and security, particularly the potential for heightened tensions between the federation and federal units, between Islamabad and Gilgit-Baltistan, and on conflict dynamics within provinces. It does not analyse in detail Beijing’s Pakistan policy or its options for CPEC. The report is based on interviews with officials, economists, politicians, security analysts, journalists, activists and other stakeholders in the federal capital, Islamabad, as well as in Balochistan, Punjab and Sindh, conducted from November 2017 to January 2018.

II. The Beijing Connection

A. balancing geopolitics and economics.

Geopolitics and security dynamics have long determined the contours of Pakistan’s China policy, with mutual animosity toward India a major factor. In the 1950s, Pakistan anchored its foreign policy in close relations with the U.S., while China and India established strong ties in the Non-Aligned Movement. When a border dispute triggered the 1962 war and unravelled the Sino-Indian relationship, Islamabad seized the opportunity to forge stronger ties with Beijing, including settling their own border dispute by ceding Gilgit-Baltistan’s Shaksgam valley to China. [fn] Until 2009, Gilgit-Baltistan was officially called the Northern Areas. Hide Footnote During Pakistan’s 1965 war with India, China provided it limited military but significant diplomatic support. After Pakistan’s loss in the 1971 war with India, resulting in East Pakistan’s secession and the formation of Bangladesh, military ties between Islamabad and Beijing deepened and soon came to define the relationship, including China’s eventual support for Pakistan’s nuclear weapons program. [fn] A prominent Chinese academic argues that for Beijing this relationship’s objective “has not been to strengthen the two countries’ welfare interests but to strengthen them against common threats. It should be described as a shield to protect their traditional security interests rather than a bridge to lead to common prosperity and wealth”. Quoted in Small, The China-Pakistan Axis , op. cit., p. 25. Paul K. Kerr, Mary Beth Nikitin, “Pakistan’s Nuclear Weapons”, Congressional Research Service, 1 August 2016, p. 3. Hide Footnote

Economic ties were also historically shaped by strategic priorities such as road connectivity in the border region of Gilgit-Baltistan and Xinjiang. Built in the 1970s, the Karakoram highway connects Pakistan’s north, via Gilgit-Baltistan, through the Khunjerab pass, to Xinjiang’s Kashgar prefecture, rising to 4,700m above sea level in rough mountainous terrain. [fn] The 1,300km road, officially called National Highway 35 but commonly known in Pakistan as the Karakoram highway, was built between 1959 and 1986. The 887km highway starts in Punjab’s Hasan Abdal district, and then traverses Khyber Pakhtunkhwa and Gilgit-Baltistan; the remaining 413km are in Chinese territory, where the road is designated China National Highway 314. Hide Footnote

Yet Pakistan’s alliance with China has thus far yielded few economic benefits. Not only does China-Pakistan trade lag far behind Sino-Indian trade, it is also outstripped by Chinese trade with similar-sized and even smaller economies than Pakistan’s, such as those of the Philippines and Vietnam. [fn] Small, The China-Pakistan Axis , op. cit. Small, The China-Pakistan Axis , op. cit. Hide Footnote

Moreover, Pakistan’s trade deficit with China has tripled over the last five years, reaching around $12 billion in 2017. [fn] Pakistani exports to China increased from $0.5 billion in 2006-2007 to $1.47 billion in 2016-2017. Chinese exports to Pakistan jumped from $4 billion to $14.56 billion in the same period. “Trade bodies meet commerce officials over China FTA concerns”, The News , 28 March 2018; “All set for signing of revised FTA with China”, Dawn , 20 March 2018; “Pak-China FTA”, Dawn , 10 February 2018. Hide Footnote Leading economists and representatives of Pakistan’s business community see the country’s Free Trade Agreement (FTA) with China, signed in 2006 and operational the following year, as disproportionately benefiting the latter. [fn] Crisis Group interviews, economists, representatives of business and industry and the finance sector, Lahore and Karachi, November-December 2017. Hide Footnote Chinese goods have flooded Pakistani markets because the FTA’s concessions mainly favour China and also because Pakistan’s liberal import policy, including low duties and general sales tax, keep down the prices of Chinese machinery and other imports. [fn] In the FTA, Pakistan’s concession list covered 59 per cent of Chinese imports, while China’s concession list covered 5 per cent of Pakistani imports. Hussain H. Zaidi, “Revising FTA may not make a big difference”, Dawn , 19-25 February 2018. See also Ehsan Malik, “Don’t let Chinese imports kill Pakistan’s local industry”, Dawn , 20 May 2018. Malik is CEO of the Pakistan Business Council. Hide Footnote Meanwhile, high Chinese tariffs make it hard for Pakistani exports to penetrate the Chinese market. A former State Bank governor pointed out: “Part of the problem is our own policies, but the Chinese haven’t done what they could have”. [fn] Crisis Group interview, Shahid Kardar, Lahore, November 2017. Hide Footnote

Islamabad is renegotiating the FTA, seeking safeguards for local industries and incentives for exports and Chinese measures to facilitate duty-free import of some 70 Pakistani items. China has reportedly agreed to liberalise 90 per cent of tariff lines, among other measures to appease Pakistani industry. [fn] “China urged to encourage imports from Pakistan”, Dawn , 17 January 2018; “Pakistan, China agree on terms of FTA phase II”, The Nation , 26 May 2018. Hide Footnote A prominent economist described Islamabad’s efforts to renegotiate the FTA as “locking your door after everything’s already been stolen”. [fn] Crisis Group interview, Faisal Bari, Lahore, November 2017. Hide Footnote That said, improved conditions would benefit Pakistan’s economy.

Economic ties appear to have gained more importance since CPEC was launched in 2015, as part of China’s Belt and Road Initiative, an ambitious program to invest as much as $1 trillion in new transport and trade infrastructure connecting China to the rest of the world. [fn] Crisis Group Report, Central Asia’s Silk Road Rivalries , op. cit. Hide Footnote Islamabad and Beijing conceived CPEC in mid-2013 and formally launched it in April 2015 as a $45 billion economic and development package including loans, investments and grants that could grow to around $60 billion. Some Chinese analysts now consider it the “flagship” of the Belt and Road. [fn] In late April, Ahsen Iqbal, then minister for interior, planning and development, disclosed that the two countries had spent $29 billion on CPEC projects by that month. “PM hails CPEC as springboard for development”, Dawn , 24 April 2018; Ruan Zongze, “Belt and Road Initiative: A New Frontier for Win-Win Cooperation”, China International Studies , July/August 2017. Hide Footnote

Despite this new emphasis on economic ties, Pakistani policymaking is still shaped by the ostensible strategic dividends of a close relationship with China as a counterpoint to India and a means of deflecting U.S. pressure. A Lahore-based business leader with close knowledge of Pakistan’s dialogue with China said, “as Pakistan gets more isolated internationally, we’re hoping that China will give us a veto [exercise a veto on Pakistan’s behalf] in the UN Security Council, diplomatic and moral support, as well as put pressure on India. That’s what the military wants”. A senior journalist who has long covered security issues said, “the military sees CPEC as a counterforce to a hostile U.S. and India. It will latch on to China even if the deals [under CPEC] are unfair to Pakistan”. [fn] Crisis Group interviews, Lahore, November 2017. Hide Footnote

Pakistan’s ties with China have weathered political instability, including previous regime changes and coups, but the removal of former Prime Minister Nawaz Sharif in July 2017 has slowed the pace of CPEC projects, and damaged investor confidence, local and Chinese. [fn] A Lahore-based business representative who strongly supports CPEC said: “The day the JIT [joint investigation team] was formed [to investigate Sharif], I told people not to invest in Gwadar”. Crisis Group interview, Lahore, November 2017. The Supreme Court used a controversial constitutional provision, Article 62 (1) (f) [requiring that parliamentarians be sadiq (truthful) and ameen (trustworthy or righteous)], to disqualify Sharif from holding public office. The judgment, given in a case related to leaked records of offshore assets disclosed in the Panama papers, was based on Sharif’s failure to disclose employment in his son’s Dubai-based firm in his 2013 election nomination papers even though he did not take a salary. The Supreme Court’s verdict was based on the findings of the JIT that had two military representatives, one each from Military Intelligence (MI) and Inter-Services Intelligence (ISI). At the time of the verdict, Sharif’s relations with the military had soured as he tried to expand civilian control over national security and foreign policy, particularly attempting to improve relations with India. Aqil Shah, “Pakistan’s court sets a dangerous precedent”, The New York Times , 28 July 2017; “Nawaz Sharif steps down as PM after SC’s disqualification verdict”, Dawn , 28 July 2017; Article 62: Qualifications for membership of Majlis-e-Shura (parliament), constitution of Pakistan. Hide Footnote Although China insists that political changes in Pakistan have no impact on the bilateral relationship, a senior Sindh official who interacts regularly with Chinese officials and investors said, “the Chinese were disappointed when Nawaz Sharif was ousted; they don’t like this political merry-go-round”. [fn] Crisis Group interview, Karachi, December 2017. A senior Chinese foreign ministry official said, “it makes no difference (to China) who comes in (government) and who goes out as both countries have brotherly relations”. “Change of govt in Islamabad won’t affect CPEC: China”, Dawn , 3 November 2017 Hide Footnote A political economist added, “CPEC has been on hold since Nawaz Sharif’s dismissal; the Chinese are waiting to see what happens after the elections.” [fn] Crisis Group interview, Karachi, January 2018. Hide Footnote Polls are scheduled for 25 July 2018.

B. The Jihadist Factor

The military’s support for Islamist militants and their political fronts, both to protect its jihadist proxies and to destabilise the civilian government, could frustrate Pakistan’s hopes that China would help to neutralise U.S. pressure. Most recently, these fronts include two new Islamist groups, the Barelvi Tehreek-i-Labaik Ya Rasool Allah (or Labaik), and the Milli Muslim League, a political front for the anti-India Lashkar-e-Tayyaba/Jamaat-ud-Dawa; both contested 2017 by-elections in Peshawar and Lahore. [fn] In November 2017, Labaik occupied a road and bridge linking Islamabad and Rawalpindi, which hosts the army’s headquarters, gravely undermining the PML-N government’s credibility as access to the federal capital was barred by violent Labaik protesters. The government’s public standing was further eroded after it had to agree to Labaik’s demands for the resignation of Law Minister Zahid Hamid, held responsible for an election reform bill which the protesters believed weakened the oath taken by legislators on the finality of the prophethood. The siege ended after a military-brokered deal, with a serving major general signing it as guarantor. “Faizabad sit-in ends as army broker’s deal”, Dawn , 28 November 2017. Hide Footnote A retired top intelligence official said, “there’s a misperception about being able to handle the fallout of the games we play. We assure Beijing, ‘don’t worry’, but then look at our record. The immediate objective might have been to undermine Nawaz Sharif, but we won’t be able to manage the fallout”. [fn] Crisis Group interview, Lahore, November 2017. Hide Footnote

China is particularly concerned about links between militants in Pakistan’s tribal borderlands and disgruntled Uighurs organised as the East Turkestan Islamic Movement (ETIM) in Xinjiang Uighur Autonomous Region. [fn] Crisis Group Report, Central Asia’s Silk Road Rivalries , op. cit. Hide Footnote After the 11 September 2001 attacks in the U.S., ETIM members found sanctuary along with other jihadist groups in Pakistan’s Federally Administered Tribal Areas (FATA). Pressured by China, the Pakistani military moved against Uighur militants, claiming to have eliminated them, though many appear to have crossed the border into Afghanistan after the Pakistani military’s 2015 operation in FATA’s North Waziristan. [fn] No political party, not even the Islamists, condemns reports of Chinese abuses of Uighur rights or military action against the Uighurs. Crisis Group interview, Ahmed Rashid, journalist and author, Lahore, November 2017. “Bombing of Chinese separatists shows how Trump’s Afghan war changed”, The Washington Post , 11 February 2018; “Pakistan says ‘almost all’ Uighur militants eliminated”, Reuters, 2 September 2015; “China leans on Pakistan to deal with militants”, Time , 10 April 2009; “Pakistan announces it has defeated ETIM. So what?”, The Diplomat , 22 October 2015. Hide Footnote

According a senior ex-intelligence official, “the [Pakistani] military and Chinese perceptions on the jihadi proxy issue will diverge and become an issue but the India factor will prevail and limit any serious Chinese pressure”. [fn] Crisis Group interview, Lahore, November 2017. Hide Footnote Indeed, Beijing has repeatedly blocked the U.S.-backed Indian bid at the United Nations to list Masood Azhar, the leader of the anti-India jihadist Jaish-e-Mohammed, as a “global terrorist”. [fn] “China blocks Indian bid to list Masood Azhar as global terrorist”, The News , 2 November 2017. Also Crisis Group Report, Pakistan’s Jihadist Heartland , op. cit. Hide Footnote

That said, China’s patience with the military’s support for jihadist proxies may be waning. At the September 2017 BRICS (Brazil, Russia, India, China, South Africa) summit in China’s city of Xiamen, those countries expressed concern over “the security situation in the region and violence” because of several transnational organisations – these included Pakistan’s Lashkar-e-Tayyaba, Jaish-e-Mohammed and a close ally, the Afghan Haqqani network. [fn] “Brics name Pakistan-based militant groups as regional concern”, Reuters, 4 September 2017. Hide Footnote China’s decision to support the Financial Action Task Force (FATF)’s move to “grey-list” Pakistan – in other words to include it in the list of countries with weak “anti-money laundering” (AML) and “countering financing of terrorism” (CFT) regimes – during the task force’s plenary session in February this year is yet another signal that it shares, at least to some degree, U.S. and Indian concerns about Pakistan-based jihadist groups. [fn] Pakistan will be included in the watch list in June 2018. It was first put on the list during 2012-2015, but for failure to curb money laundering. The charge of terror financing is now included. China first reportedly opposed the U.S.-sponsored motion, backed by the UK, France and Germany, to include Pakistan in the watch list and then withdrew its objection during the second vote called by the U.S. Crisis Group discussion, analyst, Washington, April 2018; “Pakistan set to be placed on FATF grey list in June”, Dawn , 24 February 2018; “Economic fallout of being on grey list”, Dawn , 5-11 March 2018. Hide Footnote

Warning that Pakistan faced international isolation because it had failed to end state support for such groups, former Prime Minister Nawaz Sharif said that allies like China were concerned. [fn] “We have isolated ourselves”, Sharif warned, because “militant groups are active”, adding, “President Xi has said it”. Cyril Almeida, “For Nawaz, it’s not over till it’s over”, Dawn , 12 May 2018. Hide Footnote There are even signs that the coming together of U.S. and Chinese positions on these proxies might inspire a rethink in the military command about the institutional costs of such support – the first step toward policy change – given the possible impact on Pakistan’s already troubled economy of a FATF grey-listing (and possible blacklisting). [fn] The military leadership, in closed-door discussions, has acknowledged that Islamabad will have to respond to Beijing’s concerns. In a briefing to a hand-picked group of journalists and security analysts, army chief Qamar Javed Bajwa, reportedly declaring his intention to eliminate all militant and jihadist groups in Pakistan, said that the military would heed China’s advice to peacefully resolve differences, including over Kashmir, with India. Suhail Warraich, “The Bajwa doctrine”, The News , 18 March 2018; “The ‘Bajwa doctrine’”, Dawn , 25 March 2018. Hide Footnote

C. Security Challenges for Chinese Nationals and Projects

As China’s economic footprint expands in Pakistan through CPEC, so, too, do concerns about security threats to its interests and personnel. While exact numbers are not available, there are an estimated 30,000 Chinese nationals living in Pakistan. The numbers of Chinese visiting Pakistan on short term, including tourist visas (often used to bypass bureaucratic hurdles in obtaining business visas) could be as high as 70,000. “With large numbers of Chinese citizens coming into Pakistan”, said a senior police official in Lahore, “security challenges are becoming graver”. [fn] Crisis Group interview, Lahore, November 2017. According to a Chinese analyst, there are approximately 10,000 Chinese employed in CPEC projects, and a further 9,000 participating in other construction projects. Crisis Group interview, Beijing, April 2018. “Massive Chinese investments a boon for Pakistan”, Economist , 8 September 2017; “Braving security fears, Chinese seek ‘Silk Road’ riches in Pakistan”, Reuters, 28 August 2017. Hide Footnote

In October 2017, the Chinese embassy in Islamabad claimed there was a militant threat against the ambassador and requested additional security. In December, the embassy said it had received “some information that the security of Chinese institutions and personnel in Pakistan might be threatened”. [fn] “Chinese embassy warns of threat to envoy”, The Nation , 22 October 2017; “Chinese citizens in Pakistan warned of possible terror attacks”, Dawn , 8 December 2017. Hide Footnote Chinese firms and analysts see a need to train and employ more private security personnel and enhance security protocols. [fn] Zi Yang, “China’s Private Security Companies: Domestic and International Roles”, China Brief , vol. 16, issue 15, 4 October 2016; Fu Xiaoqiang, “Holistic Counter-terrorism Efforts and Better Protection of Overseas Interests”, Contemporary International Relations , March/April 2018. Hide Footnote

A report by a leading Chinese think tank warned that CPEC risks becoming a new arena for competition among deeply divided political parties, levels of government, the military and civilians, and ethnic groups in Pakistan; other Chinese analysts concurred. [fn] “Opportunities and Challenges of Implementing the ‘Belt and Road’ Initiative in South Asia”, Research Report Vol. 17, China Institute of International Studies, April 2017; Crisis Group discussions, Chinese analysts, Beijing and Shanghai, March-May 2018. Hide Footnote

Deeming it a national security priority, the Pakistani military has sought more control over key parts of the project. Along with thousands of police and paramilitary officers, a Special Security Division, comprised of 15,580 army personnel and the Maritime Security Force, are tasked with protecting Chinese workers and CPEC projects. [fn] “Over 92,000 foreigners visit Pakistan since launch of CPEC”, The News , 5 March 2018; “Murder of Chinese man was inside job, says police official”, Dawn , 8 March 2018.   Hide Footnote This larger military footprint is alienating locals even as CPEC strains relations between the federal units and the federation. [fn]

III. Demystifying CPEC

A. a conceptual leap.

A Pakistan Business Council representative argued that, “CPEC is primarily a geopolitical project. Economics have merely been added on to it”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote But not all business leaders are as sceptical. Given the fragility of Pakistan’s economy, some believe that CPEC could have a useful “demonstration effect, indicating to other investors that Pakistan is a safe and attractive destination for foreign direct investment”. [fn] Arif Rafiq, “The China-Pakistan Economic Corridor: Barriers and Impact”, U.S. Institute of Peace, 25 October 2017. Hide Footnote The CEO of a major Karachi-based business conglomerate described CPEC as a “win-win” that will provide Pakistan “much-needed project financing lines to make up for its infrastructure shortages”, and attract other countries’ suppliers and financial institutions to do business in the country. A senior partner at a leading corporate services firm said that once Chinese industrial units were set up in Pakistan, instead of merely exporting raw materials, the country could export high-value products to China. [fn] Arif Habib, “Why CPEC is a no-brainer”; Shabbar Zaidi, “Reality versus myth”. Texts of speeches in “CPEC 2018 Summit: Supplement”, reprinted in  Dawn , 22 May 2018. Crisis Group interview, Lahore, December 2017. Hide Footnote

Politicians across the political spectrum also are mostly supportive. The leader of the opposition in the Senate noted that CPEC could encourage the modernisation of manufacturing; Punjab’s chief minister believed that CPEC would help create jobs. [fn] Punjab Chief Minister Shahbaz Sharif said, “Pakistan has a huge youth bulge that can benefit from opportunities coming this way thanks to CPEC. If not given opportunities, our youth will be pushed into a bloody revolution”. Sherry Rehman, “CPEC: A momentum for prosperity”, texts of speeches in “CPEC 2018 Summit”, op. cit.   Hide Footnote In its annual credit analysis for Pakistan, Moody’s Investors Service concluded that, if successfully implemented, CPEC could transform Pakistan’s economy by stimulating local and foreign investment. [fn] “Moody’s reaffirms Pakistan’s rating, but vulnerabilities remain”, Dawn , 22 May 2018. Hide Footnote

Still, analysis of the economic promise and impact of CPEC – as well as its ability to support a broad set of economic goals and an Islamabad-devised integrated strategy to develop the economy – is hampered by the opacity of its formulation and rollout. Pakistan’s Planning Commission reportedly presented China with a full menu of projects for financing, with little apparent consideration for how these would be best sequenced. The menu includes everything from investment in the power sector to road and rail infrastructure, industrial cooperation and agricultural development. A former Planning Commission head described it as a “kitchen sink approach”. [fn] Crisis Group interview, Nadeem ul Haque, Lahore, November 2017. Hide Footnote

There has been little input from key stakeholders, whether parliament, chambers of commerce or civil society organisations. [fn] Crisis Group interviews, business leaders, chambers of commerce representatives, civil society activists, Lahore, Karachi and Islamabad, November 2017-January 2018. Hide Footnote A major daily noted: “The ambitious CPEC partnership has deepened doubts about the willingness of the Pakistani state to be transparent and its ability to negotiate the best possible economic terms in every deal”. [fn] Editorial, “Balancing ties”, Dawn , 7 March 2018. Hide Footnote

CPEC’s Long-Term Plan (2017-2030), released in December 2017, defines the project broadly as “a growth axis and a development belt”, with “the comprehensive transportation corridor and industrial cooperation between Pakistan and China as the main axis” and “concrete economic and trade cooperation” as “the engine”. The plan names four priorities in Pakistan – the Gwadar port, energy, transport infrastructure and industrial cooperation, which would speed up Pakistan’s industrialisation and urbanisation. According to CPEC’s timelines, short-term projects would be completed by 2020; medium-term projects, including the industrial system, close to completion by 2025; and long-term projects in place by 2030. [fn] The belt, consisting of CPEC’s “core zone”, would include all four Pakistani provinces, the federal capital territory, Islamabad, and Gilgit-Baltistan, and Xinjiang in China. “Long-Term Plan for China-Pakistan Economic Corridor”, op. cit. The Long-Term Plan’s memorandum of understanding was signed on 21 November 2017. A major daily had published a leaked version of the Long-Term Plan in May 2017. “Exclusive: CPEC master plan revealed”, Dawn , 15 May 2017. Hide Footnote Yet the plan provides barely any details on planned and proposed projects and agreements.

The seventh meeting of the CPEC Joint Coordination Committee, which reviews and approves CPEC projects, took place in November 2017. The committee’s discussions reportedly suggest a potential shift from concessional loans for energy and infrastructure projects to commercially viable projects that would not qualify for concessional loans. [fn] Crisis Group interview, Naheed Memon, chairperson, Sindh Board of Investment, Karachi, December 2017. Memon was part of the Sindh delegation to the Joint Cooperation Committee meeting. Hide Footnote Since sovereign guarantees would likely apply to such commercial loans, it would further increase Pakistan’s national debt. Yet detailed information is limited. A senior journalist investigating CPEC said, “we still know very little about CPEC. The material that would tell us more is still vigorously concealed”. [fn] Crisis Group interview, Khurram Hussain, Karachi, December 2017. Hide Footnote Another analyst commented, “the launch of the detailed CPEC plan neither adds anything new to our understanding of the project nor helps remove the concerns of critics regarding the overall impact of the project”. [fn] Mushtaq Rajpar, “CPEC concerns”, The News , 21 December 2017. Hide Footnote

The government is largely responsible for this lack of transparency. But though individual parliamentarians have raised concerns about inequitable distribution of CPEC projects and resources, all the major opposition parties have also supported CPEC and been reluctant to discuss it in parliament. Committee chairs and ranking members have failed to promote open debate or exercise oversight over one of Pakistan’s most ambitious economic and geostrategic undertakings.

essay on china pakistan economic corridor

B. Power Production and Debt

Islamabad has encouraged CPEC investment in power production, with power projects included in its first (“early harvest”) phase. [fn] For example, in 2016 the Karot hydropower project was initiated as the first investment by China’s Silk Road Fund. Ruan, “Belt and Road Initiative”, op. cit. Hide Footnote To attract Chinese investment, most plants are being built with Chinese equipment and many will be Chinese-owned. More wattage for the national grid will certainly help reverse the decline in economic productivity caused by long power outages. Yet the pace of implementation has been slow at best. [fn] The Planning Commission initially said CPEC’s energy component would generate 17,000 megawatts by 2020, but the current pace suggests only half that output would be in place by then. Rafiq, “The China-Pakistan Economic Corridor”, op. cit. Hide Footnote Moreover, International Monetary Fund (IMF) assessments show that Pakistan’s repayment obligations, including the payment of debts and guaranteed rates of return on equity for investors (17 per cent for power projects), “will likely offset a significant share of these [foreign direct investment and other external funding] inflows, such that the current account deficit would widen”. It warned, “Pakistan’s capacity to repay could deteriorate at a faster pace, with faster depletion of foreign exchange reserves and significant implications for economic growth”. [fn] In 2018, Pakistan’s current account deficit will be around $16.6 billion; according to IMF estimates, its gross international reserves were $12.7 billion by mid-February 2018, while foreign exchange liabilities were $13,496 billion. Rejecting criticism that CPEC was a debt trap at the April 2018 CPEC summit, then Planning, Development and Reform Minister Ahsen Iqbal said, “out of the total package, an estimated amount of 34 billion [U.S. dollars are] in the form of investment by Chinese companies in the energy projects in Pakistan”. According to a former Pakistani finance minister, if Pakistan has to return $100 billion in principal and interest over the next twenty years, it would amount to $4-5 billion annually. Abdul Hafiz Sheikh, “Is Pakistan ready to make the right choices?”, text in CPEC 2018 Summit, op. cit. According to IMF, estimates of annual outflows for CPEC-related investment and government-to-government loans would reach $3.5 billion by 2024-2025. “IMF warns of looming CPEC bill”, Dawn , 17 October 2016. “IMF projects gross external financing needs at $24.464 billion in FY2018”, The News , 16 March 2018; Editorial, “IMF warning”, The News , 12 March 2018; “Govt to secure $1,5bln commercial loan in April to shore up reserves”, The News , 28 March 2018; “Sheer size of CPEC portfolio appals IMF”, The Express Tribune , 13 December 2017; Ishrat Hussain, “Financing burden of CPEC”, Dawn , 11 February 2017. Hussain is a former governor of Pakistan’s State Bank. Hide Footnote

These assessments reflect that in its bid to attract investment, Pakistan offers overly generous terms to foreign (including Chinese) investors. These will be unaffordable if the increased power generation does not yield the expected economic growth. If, and when, Islamabad seeks another IMF bailout, the IMF will likely demand greater transparency in CPEC energy and other projects’ financing, so as to assess the impact of expensive Chinese loans on Pakistan’s balance of payment crisis. [fn] See “Pakistan needs IMF support, Mulk warned”, The Express Tribune , 5 June 2018; and “Pakistan refutes IMF as it eyes bonds, China funding”, Bloomberg, 8 March 2018. Hide Footnote

The new plants are in any case inadequate since an aging and inefficient power infrastructure will remain unreformed. Domestic industries and consumers will also continue to pay more, because of a tariff policy that is overly generous to foreign investors and reflects rising expenditure on security for CPEC projects and personnel (discussed below). [fn] In August 2017, the National Electric Power Regulatory Authority allowed power producers to charge consumers 1 per cent of capital cost in nineteen CPEC power projects for 20-30 years, for the provision of security to Chinese personnel and projects. Jawad Syed, “Terrorising the Belt and Road: A Critical Analysis of Security Threats to Chinese Nationals and Businesses in Pakistan”, working paper, Lahore University of Management Sciences, China-Pakistan Management Initiative, November 2017. “If energy input costs don’t come down, we can’t benefit”, said a senior Pakistan Business Council representative. Crisis Group interview, Lahore, November 2017. Hide Footnote

C. Special Economic Zones and Industrial Cooperation

Special Economic Zones (SEZs) and industrialisation are among the key areas of cooperation, and possibly the most critical for economic growth and job creation. Of several provincial economic zones Pakistan has proposed so far, China has agreed to first develop one each in Sindh, Khyber Pakhtunkhwa and Punjab. Work has already begun on the largest, the M3 industrial city in Punjab’s Faisalabad district. [fn] The other provincial SEZs are Dhabeji Industrial Park in Thatta, Sindh, and Hattar Industrial Estate-II in Khyber Pakhtunkhwa. Other approved SEZs include one each in Azad Jammu and Kashmir (Mirpur), Gilgit-Baltistan (Moqpondass SEZ) and FATA’s Mohmand agency (Mohmand Marble City). Islamabad is pushing for two federal SEZs, in Port Qasim, Karachi and in Islamabad (ICT Model Industrial Zone). “China to continue concessional financing under CPEC”, Dawn , 22 May 2018; “Govt keen to launch Islamabad, Karachi SEZs this year”, Dawn , 2 February 2018; “Due to delay, Centre plans to take over development of economic zones”, The Express Tribune , 14 January 2018; “Three economic zones set to take off under CPEC”, The Express Tribune , 13 November 2017. Hide Footnote

Special economic zones were integral to China’s 1980s economic reforms, subject to free-market and export-oriented policies and measures such as tax benefits and preferential treatment of foreign investment. [fn] Frank Holmes, “China’s new special economic zone evokes memories of Shenzhen”, Forbes , 21 April 2017. Hide Footnote For CPEC, Pakistan’s GSP+ access to the EU will likely attract Chinese investors and producers, as will tax rebates and other incentives. [fn] The EU granted Pakistan GSP+ access to its markets in December 2013, including zero tariffs on 20 per cent of Pakistani products and preferential rates for 70 per cent. Hide Footnote If Pakistani producers and labour benefit, the zones, coupled with pro-export and growth reforms, could indeed create opportunities for Pakistan.

If not, they could undermine existing domestic industry. Information is scarce about how the zones will relate to the rest of the economy, which could slow other investments. For example, producers would be hesitant to establish factories or mills if a nearby CPEC zone produces similar goods but with the benefit of tax, duty and other concessions. An industrialist complained: “There’s no mechanism for such information flows. If the Chinese plan to set up something that competes with me, I’ll find out too late”. [fn] Crisis Group interviews, Lahore, December 2017. According to CPEC’s Long-Term Plan, CPEC will “encourage various forms of Chinese enterprises to enter the Pakistani market”. “Long-Term Plan for China-Pakistan Economic Corridor”, op. cit. Hide Footnote Whether these zones will ultimately produce products that can compete in the international market, including against Chinese manufactures is also debatable.

Much depends on Pakistan’s regulatory framework, where there have been few changes to level the playing field. Pakistan’s more than 60 industrial zones (unrelated to CPEC) have done little to increase industrial competitiveness, and the most prominent industries, such as textiles and automobile manufacturers, survive on subsidies and other forms of protection, with few incentives to be competitive. Pakistani policy is skewed toward imports, given a one-time 6 per cent import duty, rather than production. Manufacturing accounts for 13 per cent of the economy but almost 60 per cent of the tax burden. [fn] Statistics provided by Pakistan Business Council, Karachi, December 2017. Hide Footnote “China is not contracted to make Pakistan more competitive”, said a senior Lahore Chamber of Commerce member. “We have to do that ourselves”. [fn] Crisis Group interview, Lahore, November 2017. Hide Footnote

IV. CPEC: End to End

A. strains on the federation.

The earliest tussle between the federation and federal units is related to CPEC’s route from Kashgar in Xinjiang to Gwadar port in Balochistan. CPEC was originally meant to pass through and thus help develop impoverished areas of Balochistan as well as southern Punjab and Khyber Pakhtunkhwa. Activists and politicians in all three smaller provinces, Balochistan, Sindh and Khyber Pakhtunkhwa, including the Pashtun nationalist Awami National Party (ANP) and the Islamist Jamiat Ulema-e-Islam [Fazlur Rehman (JUI-F)] alleged that Sharif’s PML-N government had changed the route to benefit its constituents in wealthier parts of central Punjab, the party’s political bastion. [fn] In 2015, when the military reportedly requested additional expenses to secure CPEC projects, the provinces refused to provide them their share of the federal budget, asking, according to a senior official, how much of CPEC “would pass through their territory”. Umer Farooq, “The federation question”, The News on Sunday , 1 April 2018. See also “Altering reality”, The News , 16 May 2015; Rafiullah Kakar, “Making sense of the CPEC controversy”, The Express Tribune , 21 January 2016. Hide Footnote

A compromise between the federal and provincial governments yielded three planned routes: western, central and eastern. The western route would pass from the Karakoram highway’s Khunjerab pass on the Gilgit-Baltistan-Xinjiang border, through Islamabad, Khyber Pakhtunkhwa’s Dera Ismail Khan district, Balochistan’s Zhob, Qilla Saifullah, Quetta, Panjgur and Turbat districts, before reaching Gwadar. A central route would pass through Dera Ismail Khan and reach Balochistan’s Khuzdar district and Basima town via interior Sindh and southern Punjab. The eastern route would cover southern and central Punjab districts, including Lahore, Faisalabad, Rahimyar Khan, Bahawalpur and Multan. [fn] For an overview of the route controversy, see Rafiq, “The China-Pakistan Economic Corridor”, op. cit. Hide Footnote

The controversy continues, however. With renegotiations and new Chinese conditions on the western corridor, CPEC’s immediate focus is on using and upgrading the existing eastern route before eventually turning to new western routes. [fn] According to a senator from Balochistan, during a visit to China, the delegation learned that the western route did not even exist in the Chinese record. “Senators in shock: CPEC western route doesn’t even exist in Chinese record”, The News , 10 March 2018. Hide Footnote A Baloch member of parliament said Chinese officials were wary of developing the western route because of security concerns: “The federal government has created this impression in their mind”. Afrasiab Khattak, a former senator and senior ANP leader from Khyber Pakhtunkhwa, a major jihadist sanctuary, was also critical of the current focus on further developing the eastern route. “We feel cheated”, he said, “Punjab gets the industrial zones and trade; Khyber Pakhtunkhwa gets [militant] training grounds and madrasas”. [fn] Crisis Group interviews, Islamabad, February 2018. A Khyber Pakhtunkhwa official alleged that none of his government’s proposed projects were included in CPEC. “No KP-proposed projects land among CPEC”, The Express Tribune , 17 November 2017. See also “The Baloch concerns”, The News , 31 December 2017. Hide Footnote Yet addressing the adverse impact of CPEC on local communities, both in remote regions and the heartland, is arguably more urgent than settling the controversy about routes.

B. CPEC’s Exit Point: Gilgit-Baltistan

All three prospective CPEC routes cross from Pakistan into China from Gilgit-Baltistan, which Pakistan considers part of disputed Kashmir. Its constitutional status within Pakistan is undetermined and political autonomy a façade, given the circumscribed powers of its elected legislative assembly. Nevertheless, because the Khunjerab pass via the Karakoram highway marks CPEC’s border for both Pakistan and China, there were high expectations among residents that CPEC would offer Gilgit-Baltistan major development dividends. Indeed, Beijing’s ambassador to Pakistan has promised major CPEC-related benefits to the region, including enhanced cross-border trade, upgraded infrastructure and hydropower projects. [fn] “CPEC to benefit Gilgit-Baltistan the most: Chinese envoy”, Dawn , 1 April 2018. Hide Footnote

Residents’ hopes thus far appear to have been misplaced. Given the mountainous terrain, the single-lane highway in Gilgit-Baltistan can only be upgraded and not significantly widened. “Overland trade”, said a CPEC expert, “is in any case very expensive and would remain so even if the route is developed further”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote

Locals in Gilgit-Baltistan are already resentful of what they see as their region’s political and economic isolation. Adding insult to injury is that CPEC projects, designed and implemented without their input, will be of little benefit to them. [fn] “CPEC in Gilgit-Baltistan”, The News , 22 August 2017; “‘Thousands’ protest govt’s negligence of Gilgit-Baltistan under CPEC”, Dawn , 15 May 2017. See also Crisis Group Report, Discord in Pakistan’s Northern Areas , op. cit. Hide Footnote The ecological costs of infrastructure projects in a mountainous region prone to landslides, and carbon emissions from the expected increase of truck traffic, have also angered environmental and local activists. Locals are also sceptical of government claims that CPEC will reduce high rates of unemployment, suspecting that most jobs will go to outsiders from Punjab and Khyber Pakhtunkhwa, which could also affect Gilgit-Baltistan’s delicate Sunni-Shia demographic balance. [fn] The region, which has a major Shia population, has witnessed violent sectarian conflict in the past. On Gilgit-Baltistan’s sectarian dynamics, see Crisis Group Report, Discord in Pakistan’s Northern Area s , op. cit. Also, “Scepticism in Gilgit-Baltistan over China-Pakistan Economic Corridor”, Deutsche Welle, 3 January 2018. Hide Footnote

Instead of addressing such concerns, authorities have regularly invoked the 1997 Anti-Terrorism Act and the 2016 cybercrimes law against political party and human rights activists. Intelligence officials have warned local journalists in Gilgit-Baltistan against criticising CPEC. [fn] Crisis Group interviews, journalists reporting on CPEC in Gilgit-Baltistan, Islamabad, June 2018. “Gilgit-Baltistan protests”, Dawn , 29 December 2017; “Pervasive militarisation undermining democratic system, rights”, Human Rights Commission of Pakistan (HRCP), 3 April 2016; “Five BNF activists arrested in Gilgit Baltistan”, The Nation , 10 September 2016; “GB police arrest two people for ‘anti-state’ activities”, Dawn , 12 February 2017; “HRCP reports rights abuse in Gilgit Baltistan by agencies”, The Nation , 3 March 2017; Ammar Rashid, “Gilgit-Baltistan’s prisoner of conscience”, The Daily Times , 15 May 2017. Hide Footnote Officials accuse Indian intelligence agencies of trying to stir up anti-state sentiment in the region, implying that dissidents and protesters are Indian spies, contributing to a generally restrictive environment where criticism of CPEC is especially fraught. Replicating familiar conspiracy theories about Indian sabotage, in February 2018, the federal Interior Ministry notified Gilgit-Baltistan’s Home Department of alleged Indian plans to use Muslim recruits trained in Afghanistan to attack CPEC installations on the Karakoram highway and other routes. This allegation provoked heightened security measures and stricter monitoring of foreigners and visiting Pakistanis, including searches in hotels and guesthouses, and more patrolling of the route and exit and entry points. [fn] “India may target CPEC installations, interior ministry tells GB”, Dawn , 5 February 2018. Hide Footnote

Tensions with Islamabad have also risen as the result of the May 2018 promulgation of the Gilgit-Baltistan Order 2018, with the Pakistani prime minister retaining significant authority, with only some powers delegated to a council headed by an appointed governor to the elected Gilgit-Baltistan legislative assembly. In ongoing protests throughout the region, thousands of its inhabitants are demanding full democratic rights and representation. Protesters have regularly clashed with police, who have used tear gas and shot in the air to disperse crowds. [fn] “Many injured during protest against new Gilgit-Baltistan law”, Dawn , 27 May 2018; “Protests held across GB against new order”, Dawn , 26 May 2018. Hide Footnote According to a former senator, locals ask why CPEC passes through their region when Islamabad denies them fundamental rights. [fn] Former Senator Farhatullah Babar said, “the people of GB have been fed on false hopes, broken promises and utter lies”. “Farhatullah warns of emergence of GB Tahafuz (Protection) Movement”, The News , 17 May 2018. Hide Footnote

While the last government’s hasty, flawed reforms, with limited local buy-in, have aggravated longstanding grievances in Gilgit-Baltistan, anti-Chinese sentiment also is on the rise. In 2016, China detained around 50 Chinese Uighur women married to Gilgit-Baltistan residents, reportedly on suspicions of links to Islamist militants in Xinjiang; the Gilgit-Baltistan legislative assembly has urged the federal government to work for their release, though as yet to no apparent avail. Asked about their detention, Chinese Ambassador Yao Jing said, “the women are being interrogated as Chinese citizens”. [fn] Quoted in “CPEC to benefit Gilgit-Baltistan the most: Chinese envoy”, Dawn , 1 April 2018. See also “Women victims of cross-border marriages”, The News , 25 March 2018; “Call for release of Chinese wives of GB men in Xinjiang”, Dawn , 4 March 2018. Hide Footnote These actions will likely further fuel local alienation from both Islamabad and Beijing, with inevitable implications for CPEC.

CPEC’s Gilgit-Baltistan component also has geopolitical implications. India claims the region as part of its Jammu and Kashmir territory, rejecting Pakistan’s cession of part of the region to China under the 1963 border agreement . [fn] Article 6 of the treaty acknowledged a need for Pakistan and China to formally renegotiate their boundary after the “settlement of the Kashmir dispute between Pakistan and India”. “The boundary agreement between China and Pakistan, 1963”, signed by Marshal Chen Yi, plenipotentiary of the government of People’s Republic of China and Zulfikar Ali Bhutto, plenipotentiary of the government of Pakistan. See also Crisis Group Report, Discord in Pakistan’s Northern Areas , op. cit. New Delhi protested the Gilgit-Baltistan Order 2018. Hide Footnote Former Indian Foreign Secretary S. Jaishankar argued, “China is very sensitive about its sovereignty. The economic corridor passes through an illegal territory”. Indian Prime Minister Narendra Modi contended, “connectivity in itself cannot override or undermine the sovereignty of other nations”. [fn] Harsh V. Pant, “Responding to the China-Pakistan Economic Corridor”, Live Mint , 1 December 2017. That China neglected to negotiate with India over the launch and branding of CPEC meant it got off to a rough start from Delhi’s perspective. Crisis Group discussion, Chinese scholar, Shanghai, April 2018. Hide Footnote Beijing seems sensitive to these concerns, but equivocates. Briefing a visiting Pakistani media delegation, a Chinese foreign ministry official said, “India’s accusation of Chinese occupation of any part of Kashmir is baseless”. Yet in a pointed reference to tense relations between Pakistan and India, he also said, “the CPEC is neither the way to achieve political aims nor to be used in regional conflicts”. [fn] “China trying to convince India CPEC is for prosperity”, The Express Tribune , 16 November 2017. Hide Footnote

C. CPEC’s Entry Point: Gwadar

1. developing gwadar.

Purchased by Pakistan from Oman in 1958, Gwadar is a fishing town on the Arabian Sea not far from the Iranian border. General Pervez Musharraf’s military regime (1999-2008) sought assistance from China and other countries to develop the town into a modern deep-sea port, along with a master plan for refineries, power plants and industrial estates. The Port of Singapore Authority assumed control over Gwadar port in January 2007, and inaugurated it in March that year. Yet because of a mix of insecurity in Balochistan, nationwide political instability and economic crises – all largely the result of the regime’s policies – none of the elements of the master plan materialised. [fn] For Crisis Group’s analysis of Balochistan’s security dynamics, see Asia Briefing N°69, Pakistan: The Forgotten Conflict in Balochistan , 22 October 2007; and Report N°119, Pakistan: The Worsening Conflict in Balochistan , 14 September 2016. Hide Footnote

In February 2013, Pakistan transferred leasing rights from the Port of Singapore Authority to the China Overseas Port Holding Company-Pakistan. [fn] See website at http://cophcgwadar.com . Gwadar Port became formally operational in November 2016 and can now berth 50,000-tonne oil tankers. Fu Mengzi and Xu Gang, “New Silk Roads: Progress, Challenges and Countermeasures”, China International Studies , July/August 2017. Hide Footnote Gwadar subsequently became integral to CPEC, with proposed energy pipelines, and road and rail links connecting it to China’s Xinjiang province through Gilgit-Baltistan via the Karakoram highway, aimed at turning it into a bustling commercial hub. [fn] “Chinese-Pakistan project tries to overcome jihadists, droughts and doubts”, Wall Street Journal , 16 April 2016. Hide Footnote

In a November 2017 briefing to the Senate, Hasil Bizenjo, then federal minister for ports and fisheries, confirmed that China would receive 91 per cent of Gwadar port-generated profits over 40 years and the Gwadar Port Authority, controlled by the federal government, the remaining 9 per cent; Balochistan’s provincial government would get nothing. [fn] Unveiling his National Party’s election manifesto, Senator Bizenjo called for consultations with Baloch leaders before signing any CPEC project in Balochistan, and to give the provincial government control over Gwadar port. The National Party is a Baloch nationalist party. “NP vows to struggle for empowerment of federating units”, Dawn, 25 June 2018; “China to get 91pc Gwadar income, minister tells Senate”, Dawn , 25 November 2017; “The Baloch concerns”, The News , 31 December 2017. Hide Footnote The Port of Singapore Authority, the previous Gwadar port operator, had the same lopsided terms but many local officials and business community representatives believed that Islamabad should have renegotiated them with the Chinese operator. “As details emerge, there is more alarm about how much CPEC actually offers Balochistan”, said an expert with deep knowledge of Gwadar. [fn] Crisis Group interviews, Karachi, December 2017. Hide Footnote

In November 2015, the China Overseas Ports Holding Company-Pakistan assumed control over Gwadar’s free trade zone. A prominent Karachi-based financial sector representative said this change would disadvantage Pakistani businesses: “If I want to set up a factory there, I would have to approach a Chinese manager”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote In November 2017, Beijing asked for its currency, the renminbi, be given legal tender in Gwadar’s free trade zone, which Pakistan rejected. [fn] Pakistan’s State Bank has approved the yuan for bilateral imports, exports and financial transactions with China. A bilateral currency swap agreement (10 billion yuan) from the Chinese side and Rs. 140 billion from Pakistan ($1.6 billion) was signed in December 2011 by exporters and importers but was seldom used by traders. Since the private sector is playing a major role in both CPEC bilateral trade and SEZ industrialisation, there are concerns that Pakistani businesses might still be resistant to trading in Chinese currency. Pakistani businesses do not want to trade in Chinese currency. They would much rather continue to use currencies such as the U.S. dollar. “Doors open to yuan-based trade with China: SBP”, Dawn , 31 January 2018. Hide Footnote

Gwadar suffers from acute water and electricity shortages, major challenges to transforming it into a commercial hub. Iran exports electricity to Gwadar, but outages can extend up to ten hours a day. [fn] Crisis Group interviews, officials, business representatives and residents, Gwadar, January 2018. Hide Footnote With pipelines running dry, privately owned tankers supply water at high prices. [fn] A Baloch analyst wrote: “The situation as it stands is in stark contrast to the images of a pulsating sea and a bustling port that are often used to describe Gwadar. Truth be told, Gwadar’s water emergency puts any gains to be made out of CPEC projects in jeopardy – after all, how can an industrial city survive without potable water? Are we being set up for a fall?” Muhammad Akbar Notezai, “Thirsty in Gwadar”, Dawn , 10 September 2017. Hide Footnote The Mirani dam in Kech/Turbat to Gwadar’s north, inaugurated in 2008, is meant to irrigate some 30,000 acres but instead is being used to channel water to Gwadar, provoking resentment in Turbat, already a hub of Baloch dissent, with regular clashes between Baloch insurgents and the military. [fn] Crisis Group interview, former senior Balochistan government official, December 2017. See also “Mirani Dam termed a big disaster”, Dawn , 13 June 2011; Crisis Group Briefing, The Forgotten Conflict in Balochista n , op. cit. Hide Footnote Attacks on tankers carrying water from the dam to Gwadar have provoked strikes by owners and drivers and strikes in thirsty Gwadar’s markets and businesses. [fn] “Attack on water tankers prompts protest in Gwadar, Turbat”, Dawn , 12 November 2017. Hide Footnote Two desalination plants have been built with Chinese support in Gwadar, and the military intends to build another. Yet several local officials complained that the existing plants benefit the port, not the city’s residents. A resident said: “They say that Gwadar will be a major hub of industry; for the people who live here, it is Karbala”. [fn] Crisis Group interviews, government officials, Gwadar, January 2018. In the battle of Karbala (680 AD), the Umayyad commander blocked access to the Euphrates so that Imam Hussain and his followers would have nothing to drink. See also “Thirsty to thriving? Parched Pakistani port aims to become a new Dubai”, Thomson Reuters Foundation, 25 April 2018. Hide Footnote

Gwadar’s apparently limited commercial potential is raising suspicions about China’s real intentions. Some Pakistani security analysts believe that China is less interested in developing a road and logistical network that would enable access to the Arabian Sea and Persian Gulf from Xinjiang via Gwadar than in using the port for military purposes. [fn] Crisis Group interviews, Islamabad, Lahore and Karachi, November 2017-January 2018. When a June 2017 Pentagon report implied that Gwadar could become a Chinese military base, a Chinese defence ministry spokesman said such talk was “pure guesswork”. “China lavishes aid on Pakistan’s Gwadar”, Reuters, 17 December 2017. Hide Footnote One analyst wrote, “Gwadar will be a critical addition to Beijing’s so-called string of pearls: a ring of ports around the Indian Ocean, including in Sri Lanka, Djibouti and the Seychelles, which are intended to outflank China’s nuclear-armed rival for supremacy in Asia: India”. [fn] Saim Saeed, “China’s plans to rule the seas hit trouble in Pakistan”, Politico , 17 August 2017. Hide Footnote As it is, the ongoing militarisation of Balochistan’s coastal belt by the Pakistani army and navy, justified in part on the grounds of safeguarding CPEC assets, is holding back commercial activity in the district. [fn] Crisis Group observations, interviews, officials, Gwadar, January 2018. Hide Footnote “The cost of securing CPEC projects in Gwadar”, said a political economist, “could far exceed economic gains”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote

2. Leaving Gwadar’s Communities Behind

Alienation is fast increasing as locals in Gwadar’s inner city fear their homes could become the first casualty of the CPEC port and free (trade) zone project. While the Gwadar city master plan has yet to be finalised, according to several Gwadar officials, the federal government plans to expropriate land, bulldoze the old city and resettle residents; it is already prohibiting the Gwadar Development Authority from allocating any funds for the inner city’s development. A senior Gwadar official said, “right now, the idea that residents will be forced out is not a myth”. [fn] Crisis Group interviews, Gwadar, January 2018. See also “Short-term consultancy required for study and preparation of PC1 document for expropriation and resettlement of old town Gwadar”, Gwadar Development Authority, September 2016. Hide Footnote

A federal government directive to the development authority to stop approving new housing and commercial developments until the master plan is finalised came after 103 housing schemes had already been approved, with some 100 private firms acquiring 14,500 acres of land. [fn] “Plea to launch Gwadar housing, commercial societies rejected”, Dawn , 29 January 2018. According to one report, “Pakistani real estate giant Rafi Group made a ten-fold profit last year from its sale of hundreds of acres of land in the remote fishing town of Gwadar, acquired soon after the government announced plans for a deep-sea port there”. Maqbool Ahmed, “Unreal estate: The boom in Gwadar’s property market”, Herald , June 2017. Hide Footnote The navy has launched its housing scheme on some of the most attractive land overlooking Gwadar’s east and west bays, and speculators and developers are pushing property prices out of reach for locals.

A state-led land expropriation is now underway in and around Gwadar under the 1894 Land Acquisition Act, including over 2,200 acres for CPEC’s free trade zone, with an estimated 290,000 acres of land required for Gwadar city and 160,000 acres for residential purposes. An urban planner and expert on Balochistan said: “No consultation on land use has been held, even with local officials, not even a cosmetic consultation”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote Landowners say properties have been expropriated without advance notice as required under the Land Acquisition Act. [fn] The urban planner said that the government and contractors are likely to adopt a “take it or leave it” approach to acquiring land from locals. They will make offers, but if locals refuse to sell, they will simply seize the land. Crisis Group interview, Karachi, December 2017; Crisis Group interviews, Gwadar officials and businesses, Gwadar, January 2018. See also “Violation of land acquisition act”, Dawn , 5 September 2010. Hide Footnote

As local alienation increases, so does security surveillance and control. Several intelligence agencies monitor movement within and around the city. Residents, even local officials, are subjected to frequent and demeaning questioning by soldiers at checkpoints. Even children are not exempt. A schoolgirl said: “CPEC has given us nothing; we can’t even walk freely in our own city”. A Gwadar official added, “the plan seems to be to make life so miserable for the residents that they leave on their own”. [fn] Crisis Group interviews, Gwadar, January 2018. Hide Footnote

Instead of improving the lives of locals, CPEC’s presence is depriving them of their livelihoods. According to a Baloch analyst: “Around 70-80 per cent of the locals there are dependent on fishing, and at the moment they fear being crushed under the weight of the CPEC flagship”. [fn] Shah Meer, “The plight of the Gwadar fishermen”, The Diplomat , 8 August 2016. Hide Footnote Local fisher folk and other stakeholders say the project will close Gwadar’s jetty. Fisher folk, whose daily catch provides them just enough to feed their families, already have been denied access to the sea for days on end on security grounds. During the Gwadar Expo in the free trade zone in January 2018, boats were beached for three days during a critical season of calm waters. [fn] Crisis Group interviews, Gwadar-based officials, business representatives, civil society activists, Gwadar, January 2018. Hide Footnote Fishing communities are also being relocated to nearby fishing areas along the coast, such as Sur Bandar, with some resisting pressure to move. [fn] A representative of the fisher folk said, “we will not leave …. This is the spot where we can fish all the year round; at Sur, there are three months – June, July and August – when fisher folk cannot go to the sea due to high waves”. Quoted in Zofeen T. Ebrahim, “Gwadar fisherfolk worry about One Belt, One Road”, Dawn , 8 December 2017. Hide Footnote In the long run, such resistance is unlikely to halt the development of the port, but the cost of ignoring it would be further local alienation.

Locals also resent exclusion from employment in the port and in construction. Many criticise the military-run Frontier Works Organization, which dominates construction contracts in Balochistan and elsewhere, for using labour from central and northern Punjab. A former senior Balochistan official said, “everyone sees the Baloch as uneducated so they won’t invest in them”. [fn] Crisis Group interviews, Gwadar, Karachi, December-January 2017. Hide Footnote Although some programs are underway to train and employ locals, the backlash against CPEC in Balochistan is already apparent. [fn] Gwadar’s Pak-China Technical and Vocational Training Institute is reportedly training 5,000 locals, who will complete their courses in mid-2018. “Will CPEC alter Balochistan?”, The News , 22 February 2018; “Blossoming Gwadar”, Dawn , 29 January 2018. Hide Footnote If Baloch unskilled and semi-skilled workers are deprived of the benefits of the planned mega-development in Gwadar, Baloch insurgents potentially could expand their outreach and appeal by recruiting such workers.

3. Gwadar and the Baloch Insurgency

Over the past two decades, Baloch alienation has reached new heights. During Musharraf’s regime (1999-2008), the military and paramilitary Frontier Corps attempted to suppress Baloch dissent, abducting, torturing and killing hundreds, if not thousands, of Baloch nationalists and sympathisers. Even after the restoration of democracy, torture, enforced disappearances and extrajudicial killings continue unabated. [fn] “Pakistan: End enforced disappearances now”, Amnesty International, 6 November 2017; “No More ‘Missing Persons’: The Criminalisation of Enforced Disappearances in South Asia”, International Commission of Jurists, August 2017; “Balochistan war: Pakistan accused over 1000 dumped bodies”, BBC, 28 December 2018. See also Crisis Group Briefing, The Forgotten Conflict in Balochistan ; Crisis Group Report, The Worsening Conflict in Balochistan , both op. cit. Hide Footnote In mid-2017, a major monthly commented that the “security forces’ scorched-earth tactics” seem to have pushed more youth “to take up arms against the state”, joining the ranks of insurgents fighting for Baloch rights. [fn] “The simmering conflict in Balochistan”, The Herald , June 2017. See also Siraj Akbar, “Beijing to Balochistan”, The News , 4 March 2018. Hide Footnote

The state has made few attempts to address Baloch calls for greater political and economic autonomy, which underpin the insurgency. It has also failed to prevent various jihadist groups, including Lashkar-e-Jhangvi and Lashkar-e-Tayyaba/Jamaat-ud-Dawa, from expanding their presence in Balochistan. As such groups expand their presence, Chinese nationals could soon become high-value targets, as demonstrated by the 2017 abduction and killing of two Chinese Christian missionaries in Quetta. [fn] The Islamic State claimed credit for the killings, claiming that the Chinese were proselytising. “Murder of Christians”, Dawn , 4 April 2018; “Risky road: China’s missionaries follow Beijing west”, BBC, 4 September 2017; “Crackdown on Christians in China after killing of two missionaries in Balochistan”, Dawn , 5 September 2017; “Two Chinese nationals kidnapped from Quetta”, Dawn , 24 May 2017; “Abducted Chinese nationals killed, claims IS”, Dawn , 9 June 2017. Hide Footnote

A prominent political economist said: “The military’s response to discontent in Balochistan is extremely heavy-handed”. [fn] Crisis Group interview, Karachi, January 2018. Between November 2017 and early January 2018, at least nine Baloch students at Karachi University were illegally abducted, allegedly by security officials. Five online activists, including critics of enforced disappearances in Balochistan, had been abducted a year earlier, in January 2017, again allegedly by security officials. Four were subsequently released. “Two KU students among three picked up from their houses by ‘masked men’”, The News , 5 January 2018; “Fifth activist reported missing in Pakistan, alarming rights groups”, Reuters, 11 January 2017. Hide Footnote Balochistan’s militarisation – the army’s southern command is de facto the supreme authority in the province, sidelining an already dysfunctional civilian administration – has imposed enormous pressures on local populations. Those populations are also threatened by Baloch militants. “If anyone cooperates with the military, if anyone shares information with them, the militants interrogate them and attack them. Many have ended up fleeing to Karachi”, said an informed observer. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote

With animosity toward Islamabad heightening, Baloch insurgent groups such as the Baloch Liberation Army have condemned CPEC projects as another attempt by the state to exploit Balochistan’s resources while giving little back to the province and its citizens. “Anywhere the Chinese are working will be perceived as a CPEC project and could hence be subject to attack”, said Kaiser Bengali, a prominent economist and former senior adviser to the Balochistan government. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote

Baloch militants have killed scores of Pakistani workers employed on CPEC projects, including three labourers in Turbat district working for the military-run Frontier Works Organization on the Gwadar-Quetta highway in May 2017, and ten construction workers in Gwadar earlier the same month, also working on CPEC road projects. “Though the Baloch insurgents are not strong enough to counter an overwhelming military presence”, an analyst said, “these attacks are a message to the Chinese that the state will not always be able to protect them”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote

Frequent killings of police and paramilitary personnel – by both Baloch insurgents and jihadist groups – including in normally safe areas such as the provincial capital Quetta, have raised questions about whether the state, even with a heavy military and paramilitary presence, can maintain security. Even if such attacks do not deter Chinese enterprises, they could be used to justify an even greater security presence, which, in turn, would risk feeding Baloch dissent and fuelling the insurgency. [fn] An analyst who works on Balochistan warned: “If the Chinese conclude that the military is not effective [in providing security], they’ll increase pressure [on Pakistan] to either provide better security or come up with an alternative plan to maintain their own security. It will start with calls to ‘do more’, then joint surveillance and patrols. That would be even more disastrous”. Crisis Group interview, Karachi, December 2017. Hide Footnote

V. Punjab and Sindh: Land Grab in the Heartland?

The CPEC Long-Term Plan outlined a focus on agricultural modernisation, setting as goals, among others, “to strengthen agricultural construction” and “to promote the systematic, large-scale, standardised and intensified construction of agricultural industry”. [fn] “Long-Term Plan for China-Pakistan Economic Corridor”, op. cit. Hide Footnote These aspirations dovetail with Islamabad’s pleas to Beijing to encourage Pakistani food imports as one way to mitigate a sizeable trade imbalance. [fn] “China urged to encourage imports from Pakistan”, Dawn , 17 January 2018. Hide Footnote A Lahore-based agriculturalist and food business representative, who was close to the PML-N government, said that Pakistani land and labour would be used, with Chinese enterprises introducing better technology and marketing efforts. “We currently meet 7 per cent of the world’s food needs”, he said. “We could be meeting 20 to 25 per cent”. [fn] Crisis Group interview, Lahore, November 2017. Hide Footnote

While CPEC advocates expect that Pakistan’s “untapped agricultural potential” can be realised through such cooperation with China, there is still little clarity about CPEC’s agricultural component. “What has the government promised the Chinese in this sector?” queried a political economist. [fn] Crisis Group interview, Lahore, November 2017. “Agriculture’s golden promise”, “CPEC 2018 Summit”, op. cit. Hide Footnote Moreover, CPEC’s focus on agricultural development could result in opposition similar to that in Gwadar in other parts of the country, including in the Punjab heartland and Sindh, where most land is privately owned. [fn] Crisis Group interviews, Lahore, November 2017; Karachi, January 2018. Hide Footnote Chinese agricultural projects in Central Asia have sparked protests over agricultural deals and reforms perceived as friendly to Chinese enterprises. [fn] In Kazakhstan, the protests “became a vehicle for airing other grievances, including fears of an influx of Chinese migrants and distrust of Chinese companies, particularly their labour and environmental practices”. Crisis Group Report, Central Asia’s Silk Road Rivalrie s , op. cit. Hide Footnote The same could occur in Pakistan.

A. Agricultural Cooperation: Punjab’s Challenges

Any ambitious agricultural modernisation project will require the acquisition and consolidation of large tracts of cultivated or cultivable land but such state-owned lands are in short supply. Small farmers own much of central Punjab’s cultivated agricultural land, the most fertile in the country. There are large private landholdings in southern Punjab and Sindh but these are the currency of political fortunes; landowners would risk losing political influence should they sell up. An analyst noted: “Many of these landlords won’t be able to get elected to a local body if they sell”. [fn] The average holding in central Punjab is around 5-6 acres. Nationally, only 10 per cent of owners own more than 12.5 acres of land. Crisis Group interview, Lahore, November 2017. See also Agricultural Census 2010, Pakistan Bureau of Statistics, government of Pakistan. Hide Footnote

One model, a high-level Punjab official said, could entail purchasing smaller farmers’ properties and leasing them back, while guaranteeing the supply of high-quality seeds, low-cost fertiliser and agricultural machinery, as well as good prices for their crops, thus reducing the risks of landlessness and displacement. [fn] Crisis Group interview, Lahore, November 2017. Hide Footnote The lure of cash compensation might convince many to sell their lands and/or accept relocation. But the availability of such land, and the provision of quality inputs and guaranteed prices, could attract entrepreneurs seeking to maximise profits in a short timeframe with little interest in the long-term viability of such projects. [fn] Crisis Group interview, Punjab-based agriculturalist, Lahore, November 2017. Hide Footnote

Large-scale displacement and dispossession, were they to accompany CPEC agricultural projects, would increase social and political tensions. Tenant and small farmers have resisted past attempts by the state to deprive them of their land or their rights to cultivate it, a notable example being the mobilisation of tenant farmers on military-run farms in Punjab’s Okara district, a dispute that has lasted for years. Despite arrests and harassment, the Tenant Associations of Punjab (Anjuman Muzareen Punjab), spearheading the resistance, continues to fight for ownership rights for tenant farmers of lands claimed by the army. [fn] Under the Musharraf regime, in 2000, the army tried to force around 200,000 tenants in the Okara military farms to pay rent, instead of a share of the crop, which would have given the army ownership rights. Leased in 1930 for twenty years to the army, the lease since then had not been renewed. Farmers cultivating lands with unclear property rights for 25 years have the first right of ownership. Though Okara tenant farmers were forced to sign contracts for the cash rent system in early 2018, the Tenants Association continues to support their struggle for ownership rights. “Harvest of hope: The struggles of tenant farmers in Okara Military Farms, Pakistan”, La Via Campesina, 15 June 2018; Kunwar Khuldune Shahid, “This land is our land: Peasants in Okara fight for their rights”, Newsline , June 2016; “Soiled Hands: The Pakistan Army’s Repression of the Punjab Farmers’ Movement”, Human Rights Watch, 20 July 2004; Shahrukh Rafi Khan and Asim Sajjad Akhtar, The Military and Denied Development in the Pakistani Punjab (London/New York, 2014). See also Basim Usmani, “The peasants’ revolt”, The Guardian , 4 November 2007. “If the state forces small farmers to sell”, said a human rights activist, “there will be local resistance and conflict”. [fn]

There are three broad categories of land ownership: individual; collective (ten or more owners); and land whose transfer or sale was not completed officially and whose ownership and property rights therefore are not clear. Tenants and farmers on land in the last category are particularly vulnerable to expulsion; according to activists, journalists, economists and other close observers, they will likely resist pressure by officials to vacate their lands. [fn] Crisis Group interviews, Lahore, Karachi, November-December 2017. Hide Footnote According to the Land Acquisition Act of 1894, under which the state can acquire land “needed for a public purpose or for a Company”, compensation is only given to formal owners of land, and excludes tenant farmers and those without deeds. [fn] Text of the Land Acquisition Act, 1894 at www.punjablaws.gov.pk. Hide Footnote Absent measures that recognise the right to compensation of tenant farmers and those lacking formal ownership documentation, whether through legal reform or, in its absence, executive decision, lands acquired for CPEC projects under the 1894 act could devastate pastoral communities. Given otherwise limited job opportunities and the inadequate shelter provided by the state, land dispossession will have a particularly adverse impact on women-led households.

essay on china pakistan economic corridor

B. CPEC and Sindh’s Tharparkar District

Sindh’s impoverished Tharparkar district is the site of Pakistan’s largest coal mining and power project, now a high-profile element of CPEC. The CPEC envisages mining thirteen blocks, covering 9,000 sq km, and doing so will likely displace many locals. As speculators enter the property market, many locals also could sell their lands and join the ranks of the unemployed. This reliance on coal for power projects will also pose serious environmental risks. [fn] A Thar-based coal engineer said, “[Sindh Chief Minister] Murad Ali Shah knows that coal is Sindh’s only major resource. His government knows that it has to maximise now because the world later won’t let us rely on coal-powered projects”. Crisis Group interview, Tharparkar, February 2018. Hide Footnote

One component of the Tharparkar mining and power project, run by a Pakistani multinational firm, provides a model for mitigating the disruptive effects of such development by giving locals stakes in the enterprise. The firm, which has the contract for one of the thirteen blocks, mainly employs locals on the mining site, with Chinese workers only providing technical expertise. [fn] Sindh Engro Coal Mining is a joint venture of the Sindh government and six private companies, Engro Energy, Habib Bank Ltd, Hubco and two Chinese companies, CMEC and SPIC. “First layer of Thar coal extracted five months ahead of schedule”, Dawn , 11 June 2018. Hide Footnote It is building model villages, including homes, places of worship and markets, to resettle some 450 displaced families, and making long-term investments in skills development, training, jobs, education and health, including for women and girls. In a region with high maternal and child mortality, the company has set up a free health clinic for women, operated by a well-regarded hospital. Local women work for the mine, including as dump truck drivers and engineers. [fn] The provincial government provides the land and the firm, Engro, builds the houses. If the locals agree, the houses will be transferred to women family members. Crisis Group interview, company representative, Tharparkar, February 2018. Quality education is being provided through a well-regarded privately owned network of low-cost formal schools. Crisis Group visited these and other projects. Crisis Group interviews, Engro employees, woman engineer working on Engro coal project, Tharparkar, February 2018. See also “In Pakistan’s coal rush, some women drivers break cultural barriers”, Reuters, 29 September 2017. Hide Footnote

The next mine to come online will be run and staffed by a Chinese company. A well-informed coal industry professional said that thus far the project envisages no guarantees of employment for locals and has involved limited consultation with communities potentially affected. [fn] “This company (Engro) has been socially responsible”, said an analyst, “but what will other companies do?” Crisis Group interviews, Karachi, December 2017, Tharparkar, February 2018. Hide Footnote The federal and provincial governments should develop a socially and economically responsible regulatory framework, including through local consultations and with input from civil society organisations, for all companies awarded contracts for coal mining and power projects in Tharparkar. That framework should include employment guarantees for locals, including women, mitigation of environmental damage and protection of local culture. Employing non-residents would provoke resentment and disrupt the region’s delicate religious, demographic and socio-cultural balance.

Tharparkar is one of the few regions in Pakistan with a Hindu majority and has a sensitive location bordering India. As a result, locals claim, security agencies doubt their loyalty to the state. [fn] Crisis Group interviews, Tharparkar, February 2018. Hide Footnote As in Gwadar and Gilgit-Baltistan, the security presence is overbearing, with agencies keeping a close eye on activists and others that question CPEC developments. In late 2016 and 2017, enforced disappearances of activists and journalists in the district became common. Some observers suspect that opposition to CPEC was a factor. A writer and researcher in Umerkot town said, “the intelligence agencies treat [the critics of CPEC] as their enemies”. [fn] Quoted in Moosa Kaleem, “Reasons behind the increase in missing persons in Sindh”, Herald , 13 November 2017. See also Editorial, “Missing in Sindh”, Dawn , 8 August 2017; and “Sindh abductions: Three more activists go missing in Thar”, Dawn , 8 August 2017. Hide Footnote A representative of a company working in Tharparkar added, “the security presence in the region is already overbearing. In this atmosphere of intimidation and fear, locals do not dare openly criticise any CPEC project”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote Stifling democratic debate could result in anti-CPEC sentiments assuming a far more hostile form in the future.

VI. Conclusion

If properly carried out, CPEC could promote economic development and growth and thus have a profound impact on Pakistan and its citizens. Yet, as a high-profile business representative rightly warned, “if there are opportunities, there are also serious risks”. [fn] Crisis Group interview, Karachi, December 2017. Hide Footnote Unless there is a serious rethink in policy circles, CPEC could inflame tensions between the centre and federal units, and could trigger or worsen conflict within provinces.

To avoid such outcomes, Pakistan’s CPEC projects and programs should be guided by diligent planning and policy. Islamabad should determine the direction of Pakistan’s CPEC policy, based on its – and not Beijing’s – economic and political interests. It should place CPEC in the context of a broader strategic vision for modernising its economy in ways that do not destabilise the polity.

The best chances for the country’s stability – and indeed CPEC’s success for Pakistan and, by extension, China – lie in giving provinces and communities a voice in shaping CPEC projects and thus helping promote local buy-in. Rather than suppressing criticism and dissent, the federal and provincial governments, as well as the security institutions, should recognise that the viability of CPEC projects rests on stakeholder ownership. Unequal prosperity, favouring outsiders over local communities, would aggravate social and political divides, fuelling tension and potentially conflict.

Beijing and Chinese companies face a steep learning curve with CPEC, but many problems could be mitigated through consulting and engaging the full spectrum of Pakistani stakeholders, from competing elites to the grassroots, and conducting comprehensive risk and political analysis to balance competing priorities. Efforts to ensure benefits are shared equitably need to be complemented by effective and extensive communication to illustrate common interests. [fn] Crisis Group discussions, Beijing and Shanghai, April 2018; “Opportunities and Challenges for Constructing CPEC”, and “Opportunities and Challenges of Implementing the “Belt and Road” Initiative”, both op. cit. Hide Footnote

As Pakistan’s democratic transition approaches another milestone, with a second consecutive elected government completing a full term and a successor assuming power in August 2018, the new parliament should seize the opportunities of a fresh mandate by shaping public debate on CPEC, and informing government policy. That policy should have the well-being of Pakistani citizens at its heart, rather than treating it as something that can be negotiated away in the pursuit of mega-development or perceived strategic interests.

Appendix A: Map of CPEC Special Economic Zones

essay on china pakistan economic corridor

ANP                       Awami Nationalist Party

CPEC                     China-Pakistan Economic Corridor

ETIM                     East Turkestan Islamic Movement

FATA                     Federally Administered Tribal Areas

FATF                     Financial Action Task Force

FTA                        Free Trade Agreement

GDA                       Gwadar Development Authority

IMF                        International Monetary Fund

JUI-F                    Jamiat Ulema-e-Islam (Fazlur-Rehman)

PML-N                  Pakistan Muslim League-Nawaz

SEZ                        Special Economic Zone

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essay on china pakistan economic corridor

Text: A A A Print ECNS Wire

China's first overseas nuclear power unit gains acceptance in pakistan.

(ECNS) -- The K2 unit of Karachi Nuclear Power Plant, which use Hualong One, China's third-generation nuclear power technology obtained an acceptance certificate in Pakistan, its operator, China National Nuclear Corp announced on Monday.

It was the first delivery of China's Hualong One reactor overseas and a milestone project in nuclear energy cooperation, the Belt and Road Initiative and the China-Pakistan Economic Corridor.

The K2 unit began construction in August 2015 and was put into official operation on May 20, 2021, making it the first nuclear power unit to achieve 100 days of continuous operation in Pakistan.

Since commercial operation started three years ago, unit performance and WANO(World Association of Nuclear Operators) indicators continue to improve and gradually climb toward the advanced global standards.

It has generated nearly 23 billion kilowatt-hours, equivalent to reducing carbon dioxide emissions by 18.768 million metric tons, the consumption of standard coal by 7.176 million tons per year, and afforestation by 161 million trees. The project has paved the way for construction of Unit 5 at the Chashma Nuclear Power Plant in Pakistan.

Nuclear energy cooperation between China and Pakistan began in the late 1980s. Over the past three decades, the two countries have jointly built two major nuclear power bases - Chashma Nuclear Power Base and Karachi Nuclear Power Base, while Unit 5 of the Chasham Plant broke ground in 2023.

essay on china pakistan economic corridor

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Pakistan will pay $2.58 million in compensation to the families of five Chinese engineers who were killed in March when a suicide bomber targeted the vehicle carrying them in the northwest, the finance ministry said.

The Chinese were attacked in the town of Bisham as they were heading to Dasu Dam, Pakistan’s biggest, where they worked.

The ministry said in a statement Thursday night that the government will also pay $8,950 to the family of the Pakistani driver who also died in the March 26 attack.

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  1. China-Pakistan Economic Corridor moving forward

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  2. 10 Key Points On CPEC (China–Pakistan Economic Corridor)

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  3. 10 Points On China–Pakistan Economic Corridor

    essay on china pakistan economic corridor

  4. Opportunities and risks

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  5. (PDF) China Pakistan Economic Corridor

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  6. China-Pakistan economic corridor.

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  1. China Pakistan Economic Corridor

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  5. China 🇨🇳 Pakistan Economic Corridor UPSC @Inspire721

  6. Deputy PM arrives in Beijing, China

COMMENTS

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    China-Pakistan Economic Corridor (CPEC), massive bilateral project to improve infrastructure within Pakistan for better trade with China and to further integrate the countries of South Asia.It is part of the larger Belt and Road Initiative (BRI) to improve connectivity, trade, communication, and cooperation between the countries of Eurasia announced by China in 2013.

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  9. PDF Strategic Implications of the China Pakistan Economic Corridor

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  10. Introduction

    Introduction. China-Pakistan Economic Corridor is a framework of regional connectivity. CPEC will not only benefit China and Pakistan but will have positive impact on Iran, Afghanistan, Central Asian Republic, and the region. The enhancement of geographical linkages having improved road, rail and air transportation system with frequent and free ...

  11. Opportunities and risks

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    The China-Pakistan Economic Corridor (CPEC) has deepened the decades-long strategic relationship between the two Asian nations. But it has also sparked criticism, including that it burdens Pakistan with mountains of debt, allowing China to use "debt-trap diplomacy" to gain access to strategic assets. While some of this criticism is valid, a closer look indicates that concerns around debt ...

  13. Monthly Review

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  15. The BRI in Pakistan: China's flagship economic corridor

    The plans for an economic corridor between Pakistan and China preceded China's Belt and Road Initiative. The project was first announced in the summer of 2013, when then-prime minister Nawaz Sharif met Chinese prime minister Li Keqiang in Beijing. The focus was on connecting China with the Chinese-invested Pakistani port of Gwadar through highway, rail and pipeline infrastructure. Project ...

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    The framework of China-Pakistan Economic Corridor CPEC envisions an intrinsic regional development goal. It promises connectivity across the length and breadth of the region and its periphery, together with achieving an economically strengthened neighborhood. ... Foreign Affairs Essay, (March/April 2009). 6 Official Website: 'The China ...

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    This paper is about a package of infrastructure investment, the China-Pakistan Economic Corridor (CPEC). This paper uses a range of theoretical perspectives (buttressed by historical and contemporary evidence) to think about the likely impact of CPEC on economic (especially industrial) growth in Pakistan. The theory includes crowding in of ...

  21. China Pakistan Economic Corridor (CPEC)

    The China-Pakistan Economic Corridor (CPEC) is viewed as a cardinal subset of China's larger 'One Belt One Road' initiative. Give a brief description of CPEC and enumerate the reasons why India has distanced itself from the same. (2018) Q. China and Pakistan have entered into an agreement for the development of an economic corridor.

  22. The China-pakistan Economic Corridor

    The China-Pakistan Economic Corridor (CPEC) is a 3,000-kilometer network of roads, railways, and pipelines to transport oil and gas from southern Pakistan's Gwadar Port to Kashgar city, northwestern China's Xinjiang Uygur autonomous region. Financial Metrics associated with CPEC According to a report published in the Financial Times, Sander and ...

  23. China pressures Afghanistan to stop attacks on its interests in Pakistan

    The restive province is home to the Chinese-operated port of Gwadar, the cornerstone of the envisioned US$65 billion China-Pakistan Economic Corridor (CPEC) linking it overland to Xinjiang.

  24. Social network analysis of stakeholder governance landscapes in

    Search 218,549,295 papers from all fields of science. Search. Sign In Create Free Account. DOI: 10.1007/s41062-024-01521-6; ... China Pakistan Economic Corridor (CPEC) is a game changer initiative of South Asian Pacific Rim. It has great importance for almost all Asian countries.

  25. China's first overseas nuclear power unit gains acceptance in Pakistan

    It was the first delivery of China's Hualong One reactor overseas and a milestone project in nuclear energy cooperation, the Belt and Road Initiative and the China-Pakistan Economic Corridor.

  26. India and Chabahar: Navigating the Tides of US Sanctions

    Photo Essays New Delhi's Quiet Student Solidarity With Palestine. ... particularly through its investments in Pakistan's nearby Gwadar port under the China-Pakistan Economic Corridor ...

  27. Why Are People Protesting Against a Fence in Gwadar?

    The coastal town of Gwadar is the gateway to the $62 billion China-Pakistan Economic Corridor (CPEC). In early 2020, the Gwadar Development Authority with the assistance of the federal government ...

  28. Pakistan to pay $2.58 million in compensation to families of 5 Chinese

    Thousands of Chinese are working on projects related to the China-Pakistan Economic Corridor. Some have been attacked in recent years by militants who accuse them of plundering mineral resources.

  29. The Luzon Economic Corridor: A Badly-Needed Win For the ...

    The success of the Luzon Economic Corridor is also important for U.S. strategy in Southeast Asia. A common criticism of American engagement with the region is that it disproportionately focuses on ...

  30. United States, Philippines, and Japan Launch the Luzon Economic

    The Luzon Economic Corridor is the first PGI economic corridor in the Indo-Pacific region. The Corridor will support connectivity among Subic Bay, Clark, Manila, and Batangas as well as facilitate strategic, anchor investments within each hub in high-impact infrastructure projects, including rail, port modernization, agribusiness, and clean ...