The China-pakistan Economic Corridor

Pakistan’s Geographic Position Pakistan is a country with deserts, wetlands, plains, coastal belt, forested mountain, snow-covered peaks and coastal belt. On the Eastern border of the country lies India, the northeastern border of the country is shared by China, the country is bordered by Afghanistan to the west and northwest and Iran to the southwest. Towards the southern coast of Pakistan lies the Arabian Sea. Pakistan has a total area of around 796,096 square kilometers; Pakistan occupies a place of great strategic importance in Asia. Geopolitical and Geostrategic Importance of Pakistan Geopolitics or Geostrategic refers to the area of study that examines how well a country exploits its geography to achieve its political and strategic objectives.

Though Pakistan has gained many benefits from its important geostrategic position, it also has accrued many losses due to the same reason. For instance, Pakistan has always witnessed huge amounts of investments for being the route to the landlocked Central Asian countries, it also had to suffer enormously due to the global war on terror; following the September 9/11 attacks and direct threats by the then President of the United States, George W. Bush, Pakistan felt it was left with no choice than to provide access to the United States to land-locked Afghanistan; however this decision backfired as Pakistan continues to pay the cost of the decision to this day in the form of increased terrorism and loss of life of its citizens.

Pakistan-China Relationship paving the way to CPEC Pakistan and China have always maintained close friendly relations. China has always come to support Pakistan; in particular, whenever Pakistan is threatened by India or the United States-China comes for Pakistan’s support. China and Pakistan have managed to maintain a close relationship despite changing times and circumstances. What is CPEC? The China Pakistan Economic Corridor (CPEC) is regarded as the brainchild of Chinese President Xi who presented the CPEC as the pilot project of the majestic idea of “One Belt and One Road” (OBOR) also referred as Belt and Road Initiative (BRI). The Belt and Road Initiative (BRI) in addition to the CPEC also includes five other international economic corridors including the: 1. The New Eurasia Land Bridge Economic Corridor was also known as Second Eurasia Land Bridge. 2. The China-Mongolia-Russia Economic Corridor. 3. China-Central Asia-West Asia Economic Corridor. 4. China-Indochina Peninsula Economic Corridor. 5. China-Pakistan Economic Corridor. 6. Bangladesh-China-India-Myanmar Economic Corridor (BCIM). In a state visit to Pakistan in April 2015 Chinese President Xi Jinping presented a “1+4” cooperation model. According to this model, the first goal was to construct the CPEC, highlighting the “1” in “1+4” cooperation model along with focusing on the construction of Gwadar Port, energy, basic infrastructure and industrial cooperation highlighting the “4” in “1+4” cooperation model.

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 Stacey (2017) note that, • Total Investment by China: China plans to invest around $55 billion in Pakistan in lieu of CPEC. • Investment in Power Projects: China plans to invest around $35 billion in various power projects around the country. • Size of Chinese exports: The size of Chinese exports to Pakistan increased from $9.3 billion in 2012 to $16.5 billion in 2015, this rapid expansion in size of exports is enough to provide an idea of the increase that will be witnessed in the future. Benefits of CPEC for Pakistan Positive Impact on GDP. According to a forecast made by the IMF, the China Pakistan Economic Corridor (CPEC) is bound to increase the GDP of Pakistan by more than five percent by the end of 2020.

Price water house Coopers (PwC) forecast that if the CPEC plan is successfully implemented the GDP of Pakistan will increase from the present $988 billion to almost $4.2 trillion by the end of 2050 (Hussain D., 2017). Deloitte predicted that for Pakistan the total worth of the CPEC infrastructure projects would be equal to 17 percent of the GDP (Hussain D., 2017). Job Creation and Local Economic Development. The creation of China Pakistan Economic Corridor (CPEC) is bound to provide long-term economic and social benefits to Pakistan. In 2014, Pakistan’s Ministry of Planning, Development, and Reform published a long-term proposal for economic development in 2014 which set 2025 as the target for transforming Pakistan from a lower-middle-income nation to an upper-middle-income nation. In order to achieve this goal, Pakistan aims to attract huge amounts of foreign assistance, for this particular reason, the development of CPEC is especially important.

Once achieved successfully, the CPEC would not only assist in economic development of Pakistan but would also result in creating a huge number of job opportunities. It is expected that the China Pakistan Economic Corridor (CPEC) would create around 700,000 direct jobs between 2015 and 2030 and would contribute around 2.5 percent to the annual growth rate (Shah, 2017). Eradication of Religious Extremism. An oft-cited reason for the creation of CEPC is that it will bring in economic prosperity for Pakistan that will help in eradicating the menace of religious extremism. Pakistan holds the belief that rapid economic development facilitated by the CPEC would help to stabilize the economic, political and security situation in Pakistan. Disadvantages and Risks associated with the CPEC for Pakistan The Debt Trap. It is risked that the CPEC would ensnare Pakistan into a debt trap that it would never be able to get out. It is estimated that once the CPEC becomes fully operational Pakistan will have to pay around $3.5 billion annually for a period of 20 years. Khurram Hussain, a prominent economist of Pakistan calculates these costs as, “the debt service outflows will be about $1 billion and the return on equity will be $646 million if it is kept at 17 percent.

Add to that $1.9 percent as repayment of principal. That means an annual net outflow of $3.546 billion per year once the corridor becomes fully operational” (Hussain, 2016). Another prominent Pakistani economist, Hafiz Pasha has also expressed reservations over amount of debt Pakistan will undertake to build up the CPEC, he estimates that CPEC debts would add up around $14 billion to Pakistan’s total debts increasing them to around $90 billion by the end of the fiscal year 2019 (Venkatachalam, 2017). What is more frightening to note is the fact that Pakistan has no strategy prepared to repay the growing Chinese debt burden as Khurram Hussain notes with irony that when IMF team inquired Pakistan officials about their planned strategy to repay the Chinese debt the Pakistani officials replied, “additional Chinese investment over the longer term, building on CPEC as a platform, could also help cover the projected CPEC-related outflows”. The Risk of Terrorism. One of the most important risks facing the establishment of China Pakistan Economic Corridor (CPEC) is terrorism. Terrorism has been a significant concern for Pakistan for the last two decades. Terrorism has adversely affected Pakistan’s economic growth and development prospects.

Although Pakistan has been engaged in fighting a long, hard battle against terrorism, it has not yet succeeded in its battle. Since the CPEC is hugely important for the future of Pakistan economic growth and national prosperity, it is feared that the construction sites and the personnel working at these sites may become a target for potential acts of terrorism. Indeed there have been several occasions where Chinese engineers working in Pakistan have become a target; many lost their lives in these attacks while numerous others were injured. In September 2016, Baloch Separatists killed two Chinese engineers working in Baluchistan while injuring many others. Although the Pakistani authorities have promised security to the Chinese staff employed for the CPEC, it is merely a short-term commitment. As the time passes and as the transportation network for the CPEC expands towards far flung areas it will become difficult to guarantee security to the Chinese workers as the cost to provide security personnel and the material support will also increase accordingly. Till date, it is uncertain how Pakistan will manage to ensure a strong military presence to ensure the security of the transportation routes. In this regard, no security blueprint has been outlined by Pakistan. Unstable Political System in Pakistan. A stable political system in Pakistan is essential for the success of the China Pakistan Economic Corridor (CPEC). One of the biggest problems plaguing Pakistan since independence is its unstable political system. Power in Pakistan continuously oscillates between the civilian and military leaders; this has caused much turmoil within Pakistan.

President General Pervez Musharraf resignation in Pakistan in 2008 was the last time a military ruler ruled the country, after the general elections of 2009; Pakistan People’s Party (PPP) came into power and completed the first 5 year term of a civilian government. Following PPP tenure PML (N) came into power. For the first time in the history of Pakistan the political landscape of Pakistan has become a bit stable, however, the past history of Pakistan dictates that the nature of Pakistani politics is uncertain and anything may happen anytime. This uncertain political culture may deeply hurt the future of the China Pakistan Economic Corridor. Benefits of CPEC for China Stability of China’s Western Periphery. China firmly holds the belief that a safe and stable Pakistan would only be of its own benefit. China believes that any assistance it provides to Pakistan in the political, economic or security arena it would ultimately translate into its own benefits. China is hopeful that injecting money to spur rate of Pakistan’s economic development would not only reinvigorate Pakistan’s economy through construction of oil and gas pipelines and investment in infrastructure and all this would ultimately lead towards an internally stable Pakistan.

Chinese logic is simple; China believes stability can only be achieved through economic development. A sound and stable Pakistan is essential for Chinese interests as it would result in the provision of stability for Chinese Western Periphery, especially the province of Xinjiang. Helping Conserve Chinese Interests in East Asia. China sees the CPEC in terms of its strategic benefits in East Asia and the way the United States continuously threatens them. China believes a move to secure and expand the strategic space by heading west would help to counter the threat of increased influence of the United States in the East. In this regard, Pakistan is of utmost importance to China as it can act as a bridge between China and South and Central Asia and the area having the greatest level of strategic importance, the Middle East. An internally stable Pakistan would help China to apply far greater influence in these regions. This is one of the most important reasons why China is willing to invest a large amount of money in Pakistan in the economic corridor. Disadvantages and Risks associated with the CPEC for China Risk Imposed by Cultural Differences.

The successful completion of any joint business venture between two entities, corporations, organizations or countries as in the case of CPEC depends on how well the people work and interact with each other. At the core of any successful business venture lie the people as the actual work on the ground has to be completed by them. The better the people belonging to the two parties to the joint venture cooperate with each other the greater becomes the chances of success. As China and Pakistan expand cooperation with regard to the China Pakistan Economic Corridor and as a greater number of Chinese corporation start investing within Pakistan, the chances of cultural difference giving rise of misunderstandings may increase that in turn may adversely affect the success of the CPEC. In order to successfully operate the Chinese corporation must learn how to behave and act according to local norms, cultures and moral practices. It is essential for the Chinese firms operating in Pakistan that they possess enough information to carry out business in Pakistan. In order to ensure successful completion of CPEC, the Chinese government must also abandon its old habit of dealing only with the Pakistani government and instead ensure people to people contact and engage with the local communities. CPEC and India’s Dilemma The strategic China Pakistan Economic Corridor (CPEC) seems to have greatly threatened Indian interests. India fears that if the plan of China Pakistan Economic Corridor (CPEC) is materialized it will shift power in favor of Pakistan and will cause it to lose its position in the world (Kumar, 2016). The statements of various officials occupying high-level positions in the Indian government confirm this fact. While responding to questions of the Lok Sabha in December, Minister for External Affairs, Sushma Swaraj noted that “Government has seen reports with regard to China and Pakistan being involved in infrastructure building activities in Pakistan Occupied Kashmir (POK), including construction of China-Pakistan Economic Corridor.

The government has conveyed its concerns to China about their activities in Pakistan Occupied Kashmir, and asked them to cease such activities” (Chandra, 2016). India’s anger over the CPEC seems to have been propelled by the fact that the route to the corridor passes through the disputed Kashmir region. Kashmir has long been a center of a dispute between India and Pakistan. India has almost half a billion troops stationed in Kashmir to exert its control over the region. In these circumstances, India finds it unacceptable that a route which benefits Pakistan, its arch-enemy passes through this region. Commenting on this matter, Seshadri Chari, a senior member of the ruling Hindu nationalist Bharatiya Janata Party remarked, “China is using Indian land area illegally occupied by Pakistan”. The Prime Minister of India, Narendra Modi also seems to have been highly perturbed by the proposed China Pakistan Economic Corridor, while speaking at a seminar in New Delhi on January 17, 2017 he remarked, “Only by respecting the sovereignty of countries involved, can regional connectivity corridors fulfill their promise and avoid differences and discord.” Two days later, on January 19, 2017, the fact that Modi was referring to the China Pakistan Economic Corridor was confirmed by the foreign secretary of India, Subrahmanyam Jaishankar who remarked, “The CPEC passes through a territory that we see as our territory. Surely people will understand what [the] Indian reaction is. There needs to be some reflection and I am sorry to say that we have not seen signs of that.” United States Concerns over the CPEC. The United States of America has repeatedly aired its concerns over the CPEC.

The Trump administration has informed Congress that it believes that the CPEC passes over a disputed territory. The fact that the United States openly opposes the CPEC became apparent when the US Defence Secretary James Mattis told the Senate Armed Services Committee that, “the One Belt, One Road also goes through disputed territory, and I think that in itself shows the vulnerability of trying to establish that sort of a dictate” (Iqbal, 2017). The China Pakistan Economic Corridor is touted as the project of the century. The CPEC will not only be a trade route that connects two regions, it will be much more than that.

For Pakistan, the economic corridor is bound to provide millions of people job opportunities, improve the economic well- being of million others as well as provide facilitation in setting up large-scale finance, industry, trade and energy-related projects. For China, the CPEC will provide it a geostrategic advantage and will help it to emerge as the new superpower in the world. China and Pakistan both want a successful completion of the CPEC; however, it is important that the countries stay wary of the external threats posed by the United States and India and the internal threats posed by terrorism in Pakistan and an unstable political climate. For Pakistan, it is important that it keeps checking that it does not enter into such debt terms with China that makes it impossible for the country to pay off loans in the future.