The China-Pakistan Economic Corridor Two Years On
Photo Credit: Reuters
By Alvin Cheng-Hin Lim

The China-Pakistan Economic Corridor Two Years On

May. 29, 2017  |     |  0 comments


In the two years since Chinese President Xi Jinping’s official announcement of the China-Pakistan Economic Corridor (CPEC) during his state visit to Pakistan on April 20, 2015, the first slate of “early harvest” CPEC projects are poised to be completed. Jian Han, the Political and Press Counselor at the Chinese Embassy in Pakistan, describes CPEC as having “entered the stage of fast-track implementation,” with 2017-18 being “the year of comprehensive implementation with Early Harvest Projects reaching fruition.”


CPEC Project Director Hassan Daud Butt states that with the completion of the Early Harvest Projects in 2018, “about 7,000 MW of energy would be added to the national grid and linkages of Eastern and Western routes would be completed.” This will set the foundation for CPEC to move into its “industrialization phase,” with “the commencement of work on the development of nine industrial zones to be set up under CPEC across the country.” Chinese experts and Pakistan’s Board of Investment will work together “to ensure maximum investment” in these industrial zones. The completion of the Western route would also open up the underdeveloped provinces of Khyber Pakhtunkhwa and Balochistan for accelerated development, with the completion of the network of highways linking Gwadar Port in the south with the Khunjerab Pass in the north providing much-needed transportation connectivity to previously inaccessible areas.


To support these ongoing projects, the Pakistani government has budgeted “180 billion rupees (USD 1.71 billion) for the China-Pakistan Economic Corridor (CPEC) and its projects during the 2017-18 financial year,” which will be the third year of CPEC’s implementation. Also, in late May 2017, during Pakistani Prime Minister Nawaz Sharif’s visit to Beijing to attend the Belt and Road Forum, PM Sharif and President Xi signed almost USD 500 million worth of additional deals for CPEC, including agreements for Gwadar Airport, East Bay Expressway, and Havelian Dry Dock.


In the broader Central Asian region, the connectivity to the Indian Ocean offered by CPEC’s growing land transportation network and Gwadar Port, and the oil and gas pipelines that will be constructed under CPEC, have drawn the interest of the governments of Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan. In the long-term, even after CPEC is completed within Pakistan, the CPEC network could potentially be extended beyond Pakistan’s borders into Central Asia.


Long-Term Projects


The Pakistani government has submitted its proposal to China for projects to be completed under CPEC’s long-term plan, which are projects scheduled to be completed by 2030. (Projects under the short- and mid-term plans are scheduled to be completed by 2020 and 2025 respectively.) In terms of connectivity, Pakistan has proposed the development of an “integrated transport system” which includes the expansion of the highway network as well as the “expansion of existing railway lines and … the modernization of the railway.” The development of the integrated transport system also includes the construction of the “East Bay Expressway and the new international airport.”



In the energy sector, Pakistan’s proposal to China for CPEC long-term projects includes the construction of oil and gas pipelines from Gwadar Port into China.


In the finance sector, Pakistan has proposed to China that they expand their cooperation on currency swaps “to support the financing for projects along the CPEC.” Pakistan has also proposed the creation of a “bilateral payment and settlement system to reduce the demand for third-party currency” as well as “the establishment of a settlement platform for RMB cross-border trade and investment.” Pakistan has also recommended greater support for both countries’ “enterprises and financial institutions in carrying out direct financing for projects along the CPEC in each other’s capital markets,” including greater cooperation between their stock exchanges and the development of a “cross-border credit system” and “cross-border financial services.” In addition, in its proposal for the CPEC long-term plan, Pakistan has also requested increased financing from the China-led Asian Infrastructure Investment Bank to support its future development needs.



In terms of IT and communications, Pakistan has proposed developing “information connectivity … through construction and operation of local communication networks and broadcast and TV networks.” The proposal recommends that this development of Pakistan’s IT and communications connectivity be facilitated through the construction of a cross-border fiber-optic network and the upgrading of “Pakistan’s network facilities, including the national data center and the second submarine cable landing station.” Pakistan has also proposed cooperation with China for the incorporation of IT in e-commerce, “IT industrial parks and IT industry clusters,” as well as e-government initiatives such as electronic border controls.


In the energy sector, Pakistan’s proposal to China for CPEC long-term projects includes the construction of oil and gas pipelines from Gwadar Port into China. These pipeline projects will involve the construction of oil refineries and storage facilities “at Gwadar and along CPEC route.” The proposal also includes the development of clean energy such as hydropower, wind, and solar power plants. In the industrial sector, Pakistan proposes cooperation with China to improve its textile and garment manufacturing industries as well as “industrial capacity cooperation in sectors such as chemicals, engineering, agro, iron & steel and construction materials.” In the agricultural sector, Pakistan proposes cooperation with China in “biological breeding, production, processing, storage and transportation, infrastructure construction, disease prevention and control, water resources development and utilization, land development and remediation, ICT-enabled agriculture and marketing of agricultural products.”


Security Concerns


The kidnapping in late May 2017 in Quetta, the capital of Balochistan province, of two Chinese nationals who were operating a Chinese language school, has raised concerns in China over the security arrangements for CPEC, especially since Balochistan is the province where Gwadar Port is located. As Wang Wenwen reminds us, “Islamic militants have often carried out abductions of foreigners on Pakistani soil, either for ransom or to get publicity for their cause. Chinese people have also been targeted occasionally, despite the friendly relations between the two countries.” Balochistan in particular “has seen frequent violence committed by Islamic terrorists and separatists and the Belt and Road program is often exposed to potential threats. Last year, a Chinese engineer was injured in a bomb attack in southern Pakistan and a separatist group, the Sindhudesh Revolutionary Army, claimed responsibility for the attack, saying they were targeting the CPEC.”


As with the jihadi militant groups who have attacked CPEC installations, violence against CPEC has come from separatist groups as well, including the abovementioned Sindhudesh Revolutionary Army and the Balochistan Liberation Army (BLA), which in mid-May 2017 murdered 10 laborers working at a road construction site in Gwadar. As Syed Ali Shah notes: “Though the road where the laborers were working was not a specific CPEC-funded project, it was a part of a network of connecting roads that are part of the corridor — a common target for separatist militants who view construction projects as a means to take over their land.”


In the meantime, one of the tribal leaders of the Baloch community, the current Khan of Kalat, Mir Suleman Dawood Jan, who is currently living in exile in the UK, has condemned CPEC as a “Chinese military project” and an “existential threat” to the Baloch people. The Khan’s comments could add fuel to the fire of the BLA and the Baloch separatist movement, which see Balochistan as a victim of “illegal occupation” by the “‘barbarian Pakistan army.”


Apart from militant violence, another significant threat to the successful completion of CPEC comes from India. A recent report from UNESCAP (United Nations Economic and Social Commission for Asia and the Pacific) warns of the danger posed by the geopolitical tensions and “political instability” which are likely to be triggered should CPEC installations be constructed in Pakistan-occupied Kashmir — disputed territory which is controlled by Pakistan but which is claimed by India. CPEC threatens to draw China into this long-standing bilateral dispute.


References


Completion of CPEC early harvest project would lead to sustainable dev in Pakistan. (2017, May 26). Pakistan Observer.


CPEC an existential threat to Baloch: Khan of Kalat. (2017, May 27). ANI.


CPEC: Why Pakistan will not gain much from this OBOR project in its present form. (2017, May 25). Financial Express.


Haider, M. (2017, May 2). Pakistan, China close to adopting long-term plan for CPEC. The News International.


Johnson, K. (2017, May 13). Pakistan signs nearly $500 million in China deals at Silk Road summit. Reuters.


Khawar, H. (2017, May 28). The real CPEC plan. Daily Times.


Lim, A. C. H. (2016, March 1). “Iron brothers”: Sino-Pakistani relations and the China-Pakistan Economic Corridor. IPP Review.


Pakistan allocates Rs 180 billion for CPEC in budget. (2017, May 27). IANS.


Shah, S. A. (2017, May 13). 10 labourers killed in Gwadar as unidentified assailants open fire at construction site. Dawn.


Shah, S. A. (2017, May 24). Two Chinese nationals kidnapped from Quetta. Dawn.


Shahbazov, F. (2017, May 25). Will the China-Pakistan Economic Corridor be a gateway to Central Asia? The Diplomat.


Wang, W. W. (2017, May 25). Kidnapping highlights risks along China-Pakistan Economic Corridor. Global Times.


Yousafzai, F. (2017, May 25). Long-term CPEC to bring $300bn investment. The Nation.

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