China and Pakistan beyond CPEC

Iqbal Khan: 

Alongside China-Pakistan Economic Corridor (CPEC), China continues to roll-in multi sectoral investment in Pakistan’s economy. Aconglomerate of Chinese investors has unveiled its intent to chip-in around $3b in infrastructure development and energy sectors. Infrastructure and energy are the two popular sectors with Chinese investors. Investment in these sectors is vital to consolidate the foundations of Pakistan’s economy which is on a smart up-trajectory; it is now amongst 10 emerging economies of the World. Recent Karachi Electric deal indicates that Chinese investors are ready to invest even in high risk sick units; this in turn, shows that government of China is taking a keen interest in re-railing difficult sectors of Pakistani economy.
Chinese companies, upbeat by the positive projections of CPEC are making a beeline towards Pakistan in a large number. This is time to put our house in order and take difficult decisions in the domains of fiscal and governance reforms. An approach of political inclusiveness is the need of hour to keep the FDI flow uninterrupted. Pakistan needs to formulate a strategy to keep the interest of investors alive; for this there is need for a policy to facilitate the investors through incentives and a sense of security. China has overtaken traditional donors to South Asian countries such as Pakistan, Sri Lanka and Bangladesh. Since 2009, China has become Sri Lanka’s largest donor. China’s financial assistance to Pakistan is also substantial. In 2014, there were 12 other countries that were investing more in Pakistan in terms of FDI than China. Now flow of Chinese FDI in Pakistan has reached the number one spot. Current financial assistance based entry of China to South Asia has similarities with the FDI based entry of Japan to East Asia in the 1980s.
Even though CPEC would take a couple of years to become fully operational, it became nominally functional on October 31, as first caravan consisting of 150 to 300 shipping containers began their journey from China to Gwadar;an important milestone has indeed been met.First convoy loaded with Chinese goods rolled into the Sost dry port in Gilgit-Baltistan (GB).Sost is a village in Hunza. It’s the last town in Pakistan on the Karakoram highway before the Chinese border. One thousand Chinese containers would pass through the Karakoram highway in Gilgit-Baltistan every week. Two weeks earlier,the first Chinese ship had docked at Gwadar port—a vital nodal point of CPEC. The corridor would comprise of highways, railways, pipelines and communication related fiber optics that will connect Western part of China to the rest of the world through Gwadar port.
China’s “One Belt One Road” (OBOR) initiative has grabbed international attention. It has a liquidity backing of $40b by the Silk Road Fund and $100b dollar by the Asia Infrastructure Investment Bank (AIIB). Other Chinese and non-Chinese banks shall also chip-in funding for various projects. OBOR is a century long project costing over a trillion dollars. Its initial activities will be geared towards building basic infrastructure. Beijing is planning six economic corridors along the OBOR route: China-Mongolia-Russia; New Eurasian Land Bridge; China-Central and West Asia; China-Indo-China Peninsula; China-Pakistan; and Bangladesh-China-India-Myanmar. Of OBOR, the flagship project is CPEC. While other projects are at various stages of planning, CPEC has become operational. CPEC has fascinated a number of countries from South Asia, Central Asia and beyond. Saudi Arabia, Turkey and Iran have also expressed their intent to invest in CPEC. Almost all central Asian countries,including Afghanistan, wish to join CPEC to connect with outside world through Gwadar port.
There are fears that Indian spy agency RAW could ferment trouble through different strategies and launch disruptive activities. India has declared this project as unacceptable and has set-up a 300 million dollar fund to sabotage CPEC. Indian National Security Adviser Ajit Doval is personally overseeing this nefarious activity. India has also poured in huge funds to create mistrust amongst provinces on the issue of sharing the benefits of CPEC. Some of recent terrorist attacks in Balochistan have been linked to Indian intent of disrupting CPEC. It was an important day for both Chinese and Pakistani people since trade activity under the CPEC has officially started. The federal government has approved projects worth Rs72 billion to provide GB with infrastructure and modern technology. The Shuntar pass, Babusar road and Gilgit-Skardu road would be constructed under the CPEC.
CPEC could create more than 700,000 direct jobs, along the route over the next 15 years. It is an inclusive development programme focusing on benefiting lesser developed regions of Pakistan through setting up of Special Economic Zones. Province wise allocation ofCPEC projects is: Balochistan 16, KPK 8, Sindh 13 and Punjab 12. Six projects have been allocated to Islamabad Capital Territory (ICT). Evolution of CPEC is a “game-changer” for Pakistan, CPEC related cash inflow roughly equals entire foreign direct investment (FDI) into the country since 1970. This ambitious effort will effectively re-create the ancient Silk Road that for centuries linked Asia to the rest of the world. This trade route would revive Pakistan’s economy and boost employment; and for China CPEC will provideit a new trade route to the Middle East, Africa and Europe.
The involvement of China in construction and running of the Gwadar Port and its funding of CPEC are a firm guarantee for successful implementation of these projects; and now there are clear signs of the dream coming true. Chinese are known for vigorously pursuing projects and accomplishing them within the stipulated period and cost. Another point is that Chinese want to do trade through the Corridor and for this purpose they want operationalisation of the route in the shortest possible time. At the first this could be done at the earliest by upgrading the existing infrastructure and providing missing links of various highways and motorways, later additional routes would supplement the effort.
Pakistan cannot afford to become complacent with the arrival of the inaugural convoy and the ship, it is just the beginning and a lot of mileage is yet to be covered to make the CPEC fully operational and politically viable. Federal government needs to build trust amongst the federating units and narrow down differences of opinion. Moreover, our counter intelligence agencies must implement proactive measures to nullify hostile acts before they are committed. Also, there is a need to work towards appropriate organizational structures to give appropriate cover to future growth and expansion of CPEC. China and Pakistan should now consider setting up of an “Organization of CPEC Counties”to formalize the inclusion of intending investors and users of CPEC.
*The writer is consultant to IPRI on policy and strategic response.