The China-Pakistan Economic Corridor: Under the Sugarcoating

The China-Pakistan Economic Corridor: Under the Sugarcoating

chinapakisanThe China-Pakistan Economic Corridor (CPEC)—a $46 billon development megaproject which aims to connect Gwadar Port and Xinjiang via a network of railways, highways, and pipelines—is being hailed by both countries as another testament to the “iron-clad” friendship between the two neighbors, which stands “higher than the Himalayas.” Given the massive economic payoffs that could be reaped from their joint ventures, it seems apt that Pakistani Prime Minister Nawaz Shareef calls the relationship “sweeter than honey.”

If the CPEC proceeds as planned, it will provide China with a shorter access route to the Middle Eastern and European markets, both for its exports and its growing energy needs. The route allows China to circumvent the narrow Malacca Strait, which is both longer and prone to being sealed. China is looking at the CPEC as an initial part of its “One Belt, One Road” project, an attempt to tap into markets to its west through a transportation and infrastructure network in Asia reminiscent of the Silk Road. Pakistan views it as a windfall opportunity to upgrade its infrastructure. The project includes $33 billion worth of energy projects and coal-fired electricity plants which can help Pakistan with its existing energy crisis that leaves it at a loss of billions annually.

Apart from reflecting a deep mutual strategic understanding, the floral language of brotherhood and kinship the two countries use to describe their relationship is also an attempt to rally domestic support in favor of the massive project. The corridor begins at the city of Kashgar in the China’s restive but resource-rich Xinxuang province, and ends at the port city of Gwadar in Pakistan’s restive but resource-rich province of Balochistan. Similarities abound in the nature of the decades-old conflicts in the two regions. Both provinces are marked by violent terrorism and separatists movements involving the local populace, the Uygur’s in China and Baloch in Pakistan. There have been claims of gross human rights violations by the respective States against the insurgents.

Maybe the two countries look to use the CPEC as an opportunity to resolve these conflicts through mutual support and economic upliftment. But this may not necessarily spell well, given the poor track record of the two nations in their approaches to quelling domestic conflict and grievances by the use of force. In Pakistan, grievances are already being aired and debates abound regarding the route of the corridor, which some claim is being diverted through the richer province of Punjab because that is where the largest voter base lies. Punjab is also home to the ruling Shareef government, which is no stranger to such accusations. Although it may very well be economically sound to route the infrastructure through the better developed areas, where the returns to the investment would be higher, the government should be concerning itself with the vicious cycle of perpetuated inter-regional inequality and conflict such otherwise economically expedient moves may make.

The Pakistani military has also accelerated on its crackdown on local terrorist groups and even organized crime in cities like Karachi. All this seems to be part of a larger effort to consolidate the political power of the establishment and also to ensure its partners that their investments are secure and not under threat from any instability. Indeed, earlier in the year, interior minister Chaudhry Nisar announced that a special security division with 12,000 personnel was being set up to protect Chinese workers involved in the CPEC project. This move toward promoting a stable image of Pakistan has also attracted interest from international investors, who are looking closely but cautiously as to how successfully the country can navigate itself out of turbulent waters.

The CPEC also further cements Pakistan’s relationship with China as a strategic hedge for Pakistan, should its other allies renege on their support. China is already Pakistan’s largest trading partner and arms supplier. The support of the East-Asian giant may also be allowing the country to wriggle itself loose from the influence of Saudi Arabia. For instance, Pakistan refused military assistance to the Middle-Eastern power for its Yemen campaign, and came under criticism from the UAE for doing so as well. The Pakistani government has even been bold enough to approach Iran with a friendly gesture and an invitation to coordinate on economic issues after the announcement that sanctions against Iran would be raised. In fact, recently there has even been a talk of Iran’s potential entry into the CPEC. This would have been unthinkable previously, given the sway held by Saudi Arabia and its amicable history with the Shareef family. This may also reflect a broad shift away from strategies based on an overtly Islamic national identity, which have often in the past come back to hurt stability, as in the case of the Taliban, domestic terrorism, and sectarian conflict.

In the context of the trilateral relationship among India, China, and Pakistan, the CPEC also brings more complexities. India, in its attempts to compete with China and its Silk Road project, has been pushing through the North-South Transportation corridor to ensure that its economy is not left behind in the rave to connect with world trade opportunities. Despite its earlier objections against the corridor going through Kashmir, however, the Indian government remained diplomatic. “India is not perturbed over Pakistan-China cooperation through the China Pakistan Economic Corridor (CPEC)… rather a stable Pakistan is in favor of India, which wants to achieve its high economic growth with the help of regional stability,” said the High Commissioner of India to Pakistan earlier in August. China also would want ties between the two countries to thaw. It wants the option of taking advantage of the CPEC to access the large market in India for its export. But tensions remain high recently. Pakistan has blamed India for interfering in its domestic affairs, including Balochistan. The UAE, which sees the Gwadar port as an unwelcome competition to its position as a transportation hub in the region, entered into an agreement with India on a $75 billion infrastructure project. This was definitely a snub to the hype being created by China and Pakistan around the CPEC.

In terms of Pakistan and China’s economic and political ambitions, the CPEC still promises to change the regional landscape in their favors, provided that it pans out as planned and isn’t compromised by the usual politicking that public investments often fall victim to. But there are already reasons to be wary. China’s investments come on the condition that CPEC projects will be contracted out not through an internationally competitive bidding process, but rather exclusively to Chinese companies. Similarly, the Shareef government has a history of investing disproportionately in the construction of infrastructure projects and highways, because these tangible investments are easier to sell to voters come reelection time. Private gains are also to be made by members of the ruling government, which comprise industrialists who gain business from large scale construction requirements.

Amjad Khan is a PhD student at the Economics Department at GWU, and recipient of Sigur Center summer field research grant in 2015 for his research in Pakistan. His current research looks at the political economy issues revolving around religious, ethnic and class identity in developing countries.