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 bene ts 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 back red 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 ve 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 rst 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. Bene ts 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 ve
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 bene ts 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 out ows 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
out ow of $3.546 billion per year once the corridor becomes fully operational”
(Hussain, 2016). Another prominent Pakistani economist, Ha z 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 scal
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 of cials
about their planned strategy to repay the Chinese debt the Pakistani of cials
replied, “additional Chinese investment over the longer term, building on CPEC as
a platform, could also help cover the projected CPEC-related out ows”. 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 signi cant
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 ghting 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 ung areas it will become dif cult 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 rst 5 year term of a
civilian government. Following PPP tenure PML (N) came into power. For the rst
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.
Bene ts of CPEC for China Stability of China’s Western Periphery. China rmly
holds the belief that a safe and stable Pakistan would only be of its own bene t.
China believes that any assistance it provides to Pakistan in the political, economic
or security arena it would ultimately translate into its own bene ts. 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 bene ts 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 in uence 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 in uence 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 rms 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 of cials
occupying high-level positions in the Indian government con rm 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 nds it unacceptable that a route which bene ts 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 ful ll 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 con rmed 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 re ection 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 nance, 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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