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
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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
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attacks and direct threats by the then President of the United States, George W. Bush, Pakistan
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felt it was left with no choice than to provide access to the United States to land-locked
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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.
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Pakistan-China Relationship paving the way to CPEC Pakistan and China have always
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maintained close friendly relations. China has always come to support Pakistan; in particular,
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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
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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

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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
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development of CPEC is especially important.
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Once achieved successfully, the CPEC would not only assist in economic development of
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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
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between 2015 and 2030 and would contribute around 2.5 percent to the annual growth rate
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(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
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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.
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Disadvantages and Risks associated with the CPEC for Pakistan The Debt Trap. It is risked that
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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
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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
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and military leaders; this has caused much turmoil within Pakistan.
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President General Pervez Musharraf resignation in Pakistan in 2008 was the last time a military
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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
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PML (N) came into power. For the first time in the history of Pakistan the political landscape of
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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
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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
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stable Pakistan would only be of its own benefit. China believes that any assistance it provides
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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
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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
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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
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that “Government has seen reports with regard to China and Pakistan being involved in
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infrastructure building activities in Pakistan Occupied Kashmir (POK), including construction of

China-Pakistan Economic Corridor.
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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
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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
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Pakistan. India has almost half a billion troops stationed in Kashmir to exert its control over the
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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.
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 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.

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