Journal of the International Council for Small Business

ISSN: 2643-7015 (Print) 2643-7023 (Online) Journal homepage: https://www.tandfonline.com/loi/ucsb20

Revisiting the potential security threats linked

with the China–Pakistan Economic Corridor (CPEC)

Riaz Ahmad, Hong Mi & Lloyd W. Fernald

To cite this article: Riaz Ahmad, Hong Mi & Lloyd W. Fernald (2020) Revisiting the potential
security threats linked with the China–Pakistan Economic Corridor (CPEC), Journal of the
International Council for Small Business, 1:1, 64-80, DOI: 10.1080/26437015.2020.1724735

To link to this article: https://doi.org/10.1080/26437015.2020.1724735

Published online: 09 Apr 2020.

Submit your article to this journal

Article views: 883

View related articles

View Crossmark data

Full Terms & Conditions of access and use can be found at

https://www.tandfonline.com/action/journalInformation?journalCode=ucsb20
JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS
2020, VOL. 1, NO. 1, 64–80
https://doi.org/10.1080/26437015.2020.1724735

Revisiting the potential security threats linked with the

China–Pakistan Economic Corridor (CPEC)
Riaz Ahmada, Hong Mib, and Lloyd W. Fernaldc,d
a
Recent Doctoral Graduate, School of Public Affairs, Zhejiang University, Hangzhou, Zhejiang, China;
b
Director, Institute for Population and Development Studies, and Professor, Department of Social
Security and Risk Management, School of Public Affairs, Zhejiang University, Hangzhou, Zhejiang,
China; cDean of Graduate Studies, Orlando University, Orlando, FL, USA; dProfessor Emeritus,
Management Department, University of Central Florida, Orlando, FL, USA

ABSTRACT KEYWORDS
This study confirms the proposed positive outcomes associated Baluchistan; CPEC; One Belt
with the China–Pakistan Economic Corridor (CPEC) due to One Road
Gwadar Port development in Pakistan. In addition, the study
provides an insight into the challenges and threats regarding
the CPEC and proposes policy implications to improve the situa-
tion in Pakistan. The CPEC is a comprehensive development
agreement that not only establishes economic and strategic
connectivity between China and Pakistan but also has the poten-
tial of integrating other subregions of Asia that could play a key
role in improving the area’s economic and strategic environment.
This article highlights the future scenario of energy transactions
for both China and Pakistan and looks at how Gwadar Port can
revive the economy of Pakistan under the fast-growing mutual
interdependence between the two countries. This connectivity
will greatly impact the economy of Pakistan as China invests huge
sums of capital in terms of investment and transfer of technology
in building mega projects over a long period of time. Based on
the literature review, the article also investigates the vital role that
Gwadar Port is expected to play in the regional economic inte-
gration of South and Central Asia.

Introduction
Pakistan is one of the most important countries, population-wise, in Asia. It
is considered the sixth most populous country in the world, with an esti-
mated population of almost 200 million as of January 1, 2017, and
220 million in 2024, according to United Nations forecasts (Chandio,
Yuansheng, & Magsi, 2016; see Figure 1).
Most of the people reside in the four provinces of Khyber Pakhtunkhwa (KPK),
Punjab, Sindh, and Baluchistan. It is projected to be the fourth most populous
country by the year 2050. As of the mid-1990s, it is one of only eight countries with
a population in excess of 25 million in combination with a total fertility rate in
excess of five births per woman (Machel, Salgado, Klot, & Salgado, 2001).

CONTACT Lloyd W. Fernald lfernald1@cfl.rr.com

© 2020 International Council for Small Business
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 65

Figure 1. United Nations population forecast (Ahmed et al., 2016).

A famous Chinese saying is, “[T]o understand today, one needs to know
the history; and to know the future, one needs to review the past.” This is
very important to know about the rough understanding of the Pakistan’s
population today and population changes in the country’s history (Zhuo &
Liping, 2010, p. 42).
Other specific population details, until 2016, include a growth rate of
2.10 percent, a birth rate of 29.8 births/1,000 population, a death rate of
7.5 deaths/1,000 population, and life expectancy of 67.7 years, which is
65.8 years for males and 69.8 years for females. In addition, Pakistan’s
fertility rate, until 2016, was 2.68 children born/woman with an infant
mortality rate of 53.86 deaths/1,000 live births. The total fertility rate was
relatively high until the late 1970s but has been decreasing and is expected to
reach 2.5 in 2024 (see Figure 2).

Figure 2. Pakistan’s fertility rate (Sathar & Casterline, 1998).

66 R. AHMAD ET AL.

Baluchistan is the most deprived province of Pakistan. It is located at the

eastern edge of the Iranian Hill and it is difficult to define the border regions
between Southwest, Central, and South Asia. It is geographically the largest
of the four provinces at 347,190 km and equates to 42 percent of the total
land area of Pakistan. The population density is very low due to the hilly
territory and insufficiency of water and other human resources. It has 26
districts and the approximate population of Baluchistan is 13,162,222,
according to the 2014 census.
Baluchistan is rich in natural resources. The economy is largely based on
the production of natural gas, coal, and minerals. The province’s natural
resources significantly help to meet the energy needs of Pakistan as a whole.
Limited farming in the east and fishing along the Arabian Sea coastline are
other forms of income and sustenance for the local population. Baluchistan is
very poor in basic education. Literacy is a major cornerstone of human
development and in the fight against poverty. Its influence spans many
sectors—health, social, and economic. The children of literate parents are
much more likely to be educated and prepared for a better life and a literate
population has better economic prospects than an illiterate one (Khan, 2013).
As shown in Table 1, the literacy rate of Baluchistan is very low, with only
39 percent of males receiving basic education. The urban male percentage is
65; the rural male percentage is 33. The female ratio of education is only
16 percent, with an urban percentage of 40 and rural percentage of 10. This
reflects a huge gap between male and female literacy (39 percent vs. 16 per-
cent). The urban and rural male and female percentages (65 percent vs.
40 percent) and (33 percent vs. 10 percent), respectively, show a huge gap
of discrimination. Finally, the total literacy of male and female is 28 percent.
It is 54 percent in urban areas and only 23 percent in rural areas (Ghaffar,
Pongponich, Ghaffar, & Mehmood, 2015).
There are only five public universities in Baluchistan and most of the
population are, as noted above, deprived of education. The China–Pakistan
Economic Corridor (CPEC) will bring significant change to education levels.
Therefore, education is the primary way to standardize the lifestyle of the
people of Pakistan, especially in Baluchistan. The CPEC especially will create
educational opportunities in deprived areas. It will help reduce poverty,
unemployment, and grievances of inequities for the underdeveloped pro-
vince. Rising insurgency is one of the most serious threats to the federation

Table 1. Literacy rate in percentages for 10 years.

Baluchistan Urban Rural
Male 39 65 33
Female 16 40 10
Total 28 54 23
Note. Taken from Ghaffar et al. (2015).
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 67

of Pakistan. The Baloch tribal homeland is a vast area of desert and moun-
tains. Geographically, the province of Baloch is considered the largest pro-
vince of Pakistan, while demographically it is smallest. Baluchistan is the
most underdeveloped province and this underdevelopment reveals an alarm-
ing situation. Since 1947, Baloch has been facing different forms of depriva-
tions and this sense of deprivation in Baloch has become one of the major
reasons for a number of uprisings against the federal government. Political
arrangements under long military rule add doubts in the minds of the Baloch
people who have had scant representation in Pakistani military and civil
services. This situation has become a major source of strengthening the sense
of nationalism among the people of Baluchistan (Majeed & Hashmi, 2014).

Literature review
The demographic composition of Gwadar–Baluchistan
Demographic changes are identified by region. According to the estimates of
the Gwadar Development Authority, around 1.7 million people are expected
to move to Gwadar within a span of 30 years. The port is not yet functioning,
but noticeable signs of progress have been seen. Similarly, new residential
areas, hotels, buildings, schools, hospitals, and roads are indicative of modern
trends. It also is expected to have a positive impact on the rest of the
province, which has been neglected for a long time. Gwadar Port is a mega
project of CPEC and a vast amount of investment is anticipated in both its
infrastructure and extensions (Ali, 2015).
In April 2015, Chinese president Xi Jinping visited Pakistan, the second
visit of a Chinese leader to Pakistan since the beginning of the 21st century,
after Hu Jintao’s visit in 2006. Xi wished to visit Pakistan in 2014 during his
South Asia trip to Maldives, Sri Lanka, and India; however, the trip was
postponed due to political problems in Pakistan. During his visit, approxi-
mately 51 agreements were signed between China and Pakistan with a total
worth of $46 billion, which also included the development of the CPEC. The
original $46 billion that China invested in Pakistan under the CPEC has now
expanded to approximately $54 billion. This amount exceeds all foreign
direct investment. The result is that, over the last several years, Pakistan
has received considerably more aid than it has received from the United
States since September 11, 2001 (Ali, 2015).

CPEC and Gwadar Port

The CPEC also will help generate economic and trade activities through
a land route that will connect Kashgar to Gwadar, where China already has
an economic zone. It also will extend the transportation journey by more
68 R. AHMAD ET AL.

than 4,500 miles from Shanghai to major ports in the Gulf region (Ghauri,
2006).
The government of Pakistan has increased its attention on education. As
a result, they have started a laptop scheme for all talented students in the
Higher Education Commission, which includes all recognized colleges and
universities. While Baluchistan is one of the backward provinces of
Pakistan on every aspect of standard life, this region is full of natural
resources. The CPEC and Gwadar Port will utilize these resources as soon
as possible and will educate people in this area, primarily because this mega
project will create more than 70,000 job opportunities, according to the
Chinese ambassador and planning minister of Pakistan (Hali, Shukui, &
Iqbal, 2015). Education is a powerful instrument of socioeconomic and
political change concomitant to global, technological, and democratic devel-
opment. This is why it is necessary to improve the quality of education in the
less developed areas of Pakistan (Hali et al., 2015).

History of China–Pakistan and CPEC/One Belt One Road

Pakistan and China share a classic relationship history that has flourished
with time regardless of differences in culture, leisure, beliefs, and geographi-
cal proximity. The first formal diplomatic relations were established between
the two countries on May 21, 1951. The relations between the two countries
had a rocky start, however. In 1949, India’s devaluation of currency stopped
the bilateral trade between India and Pakistan. Pakistan was severely affected,
as it was importing coal from India to run its emerging industries. When
China soon signed a coal for cotton trade deal with Pakistan, the relations
between the two countries improved and Pakistan became the first Muslim
country to recognize China as an independent state. Pakistan also supported
China’s inclusion in the United Nations Security Council and China sup-
ported Pakistan during the 1965 war. In addition, both countries improved
their bilateral trade. In 1963, the first bilateral trade agreement was signed
between the two countries. Later, a free trade agreement was signed between
the two countries in 2006 and another Foreign Trade Agreement on trade in
services was signed in 2009. Trade between the two countries expanded from
US$ 1 billion in 1998 to US$ 13 billion in 2013 and further to US$ 20 billion
in 2015 (Ahmed, Mahmood, Hasan, Sidhu, & Butt, 2016).
The CPEC is an important agreement in improving regional connectivity
as “strategic partners.” The idea of an economic corridor between China and
Pakistan had been in place for many years but became a reality in 2013
through the visit of Chinese Premier Li Keqiang to Pakistan. The historic
memorandum of understanding between the two countries on CPEC was
signed on July 5, 2013. In the same year, Prime Minister Nawaz Sharif visited
China and signed eight agreements. In 2014, the president of Pakistan,
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 69

Mamnoon Hussain, visited China and discussed various plans related to

CPEC. Prime Minister Nawaz Sharif visited China again and 19 more agree-
ments were signed (Ahmed et al., 2016).
The CPEC is an important part of One Belt One Road (OBOR), which has
been heralded as a major change that promises to bring peace and prosperity
to Pakistan. It is a package of infrastructure and energy projects, an extension
of China’s ambitious OBOR Initiative. Its specific purpose is to upgrade and
expand Pakistani infrastructure, linking China’s western province of Kashgar
with Pakistan’s Gwadar Port on the Indian Ocean. Pakistan is a developing
country; the CPEC is a great opportunity to enhance its economy. Through
this mega project (CPEC), Pakistan’s population can reduce its poverty and
achieve a higher standard of living. As stated previously, CPEC is the major
part of OBOR, a global project of Chinese President Xi Jinping with roots in
the ancient and medieval Silk Roads (Kazi, 2006), although set in a modern
background (Kazi, 2017).
An early analysis of the CPEC at the national level, which provides an
initiative to economic growth and development, was conducted by Naseem
(2015). He collapsed the total investment in the overall Chinese investment
(see Table 2).
In their second analysis, they studied the potential impact of investment on
local Gross Domestic Product (GDP). In this effort, for one-unit incremental
growth in GDP, there was a need for 3.6 units of incremental investment. It was
predicted that the CPEC project would increase the GDP growth rate at 1.5 per-
cent over the next 3 years. CPEC planners also perceive opportunities for private
investment if the environment is positive. Private investment will add 0.5 percent
to the GDP of the country (see Table 3; Abid & Ashfaq, 2015).
The cumulative impact of private investment would be .02 percent during
2016–2018. It was expected that the growth rate over the 3-year period would
be near .06 percent (Ramay, 2016).

Table 2. Estimation of local component in CPEC.

Investment (US $ bn) Domestic share Domestic share (US$ bn)
Energy (breakup) 33.8
Coal 7,560 MW 8.8 20 percent 1.8
Wind 200 MW 0.5 20 percent 0.1
Hydel 1,590 MW 4.2 50 percent 2.1
Solar 1,000 MW 1.7 0 percent 0
Second phase 6,445 MW 9.5 20 percent 1.9
Mining expenditure 9.0 50 percent 4.5
Road 5.9 80 percent 4.7
Rail 3.7 50 percent 1.8
Mass transit in Lahore 1.6 50 percent 0.8
Gwadar Port 0.7 50 percent 0.3
China Pak Fiber optics 0 0 percent 0
Total 45.7 18.1
Note. Taken from Naseem (2015).
70 R. AHMAD ET AL.

Table 3. Impact of GDP growth potential.

GDP—FY 2015 US $ bn 287
Total investment size US $ bn 54 (approximately)
Total investment size Percent of GDP 16 percent
Time period Years 3
Annual addition to inventory/GDP ratio Percent of GDP 5.30 percent
Additional GDP growth potential Percent of GDP 1.50 percent
Increment private sector investment Percent of GDP 1.80 percent
Additional GDP growth potential Percent of GDP 0.50 percent
Total increase in GDP growth potential Percent Pont 2.00 percent
Source: Abid and Ashfaq (2015).

The role of Gwadar in the development of Baluchistan

The role of Gwadar in the development of Baluchistan is very important
because of its port facilities and being a hub for natural resources. Port utilities
relates to the handling of cargo and passengers and the storage and transport-
related activities, both within the port and the adjoining centers. It also could be
used as a ship repair facility. In addition, the port also would have a set of
processing industries. The functions of trans-shipments and the transformation
of imported material prior to their further shipment would be included. The
industrial complex of the port would cater to heavy commodities related to the
oil and chemical industry, such as iron, steel, and sugar refineries (Kazi, 2017).
The fourth function of the port could accommodate the recreational and
tourism industries. With the expansion of the industrial base at Gwadar and
the economic activity generated, employment opportunities would be pro-
vided to the people, consequently contributing to the development of the
region. It is expected to generate about two million new jobs in about 8 to
10 years. The Baluchistan region could be expected to become rich in almost
every aspect of life (Khetran, 2014).
Baluchistan is full of natural resources, but their exploration is yet to be
experienced. CPEC is expected to attract international attention on its large
gas reservoirs, potential oil reserves, and precious materials to not only
China, but to central Asian countries, Europe and Africa. Investors have
shown a keen interest in its development process. The subsoil holds
a substantial portion of Pakistan’s energy and mineral resources, accounting
for 36 percent of its total gas production. It also holds large quantities of coal,
gold, copper, silver, platinum, aluminum, and uranium. There are an esti-
mated 200 million tons of iron and 217 million tons of coal. In Saindak, gold
and copper mines are estimated to contain reserves of up to 412 million tons.
Similarly, Reko Diq contains 5.9 billion tons of copper and gold. The
province, however, lacks proper infrastructure to exploit and transport
these resources (Khetran, 2014).
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 71

In the 1970s, Pakistan and China signed a formal agreement for the
development of Saindak copper and gold mining. The mine was leased to
Metallurgical Corporation of China, Ltd. for 10 years. This agreement was to
be extended after every 5 or 10 years under the renegotiated terms of the
lease. The Saindak mine is estimated to have 412 million tons of gold and
silver, containing an average of 0.5 grams of gold per ton and 1.5 grams of
silver per ton. According to official estimates, the project also has the
capacity of producing 15,800 tons of blister copper annually, containing 1.5
tons of gold and 2.8 tons of silver. The Saindak mining project has made
a significant contribution to the economy of Pakistan. According to the
Ministry of Petroleum and Natural Resources, Mines and Minerals
Department, the annual export of copper from the Saindak project is around
$280 million. It has been historically ignored for a variety of reasons,
including complicit inattention by the feudal tribal aristocracy, corruption,
lack of education, and neglect on the part of the Central Government. As
a result, this mineral-rich province has not developed as has the rest of the
country. Its natural resources are untapped. For example, it has the world’s
fifth largest reserves of gold and copper with easy access to the Tethyan belt
of gold and copper reserves. This belt stretches from Hungary in Europe to
Indonesia in the Far East across Eurasia, but it is much more easily accessible
in Baluchistan (Khetran, 2014).

Challenges and impediments

Pakistan faces many challenges and impediments to achieving the maximum
benefits of CEPC, including economic instability, especially in Baluchistan;
security threats; terrorism and the religious impact of CPEC; foreign involve-
ment and other external challenges; convergent interests; geographical cir-
cumstances; and poor weather. Each will be discussed in turn.

Economic instability of Pakistan, especially in Baluchistan

In spite of all its resources, Pakistan faces severe economic and political
challenges. CPEC could prove to be a wildcard in stabilizing its economy
while refining relations with its neighbors and by making Gwadar a trade and
economic hub of the region. The corridor could offer a solution to its
unstable economy and open new horizons of development by improving
socioeconomic conditions and improving quality of life. Many special eco-
nomic zones are being conceived for Punjab, Gilgit-Baltistan, KPK,
Baluchistan, and Sindh. They would eventually bring affluence from potential
international investors and help Pakistan drive its economic growth. The
ongoing CPEC project is considered to be a game changer for the region. The
corridor will not only connect the Gwadar Port to Xinjiang but also would
reduce geographical distances. Successful completion of the project is
72 R. AHMAD ET AL.

expected to lead Pakistan toward prosperity and help it become economically

strong (Khetran, 2014). However, there is a deep-seated regionalism in
Pakistan that must be considered. Regionalist forces have opposed CPEC
through demands of a greater share in the project or by completely rejecting
it. It was shown that the Chinese engagement in Pakistan is leading to tighter
control of the military over civilian matters relating to the project (Hameed,
2018).

Security threats
The most obvious of the challenges to the functioning of Gwadar Port could
be that of security. Unfortunately, some people with vested interests have
tried to exaggerate apprehensions about the security situation in Gwadar. It is
therefore vital that such elements are controlled and security of the entire
corridor be ensured. The best way to achieve this goal would be to keep the
local population in the decision-making and implementation process and
ensure signs of progress are visible to the general population. Without the
full-fledged support of the locals, it would be naive to believe that such an
extensive project could be implemented successfully. Another daunting task
for the successful completion of the CPEC is the security threat at both
internal and external levels. Both China and Pakistan have internal security
issues and Pakistan is facing the brunt of extremism and terrorism. From
Xinjiang to Gwadar there are many extremist groups, consisting of the East
Turkestan Islamic Movement (ETIM), Tehreek-e-Taliban Pakistan (TTP),
Lashkar e-Tayyiba, Lashkar e-Jhangvi, Daesh, Balochistan Liberation Front,
and the militant wings of some political parties. All of these groups are trying
to stop the CPEC project. Two Chinese were killed in Baluchistan province in
recent years. As a result, the government of Pakistan has deployed more
security for the 5,000 Chinese workers in different sectors of the project
(Ghaffar et al., 2015).

Terrorism and religious impact of CPEC

Another challenge is related to terrorism and the highly religious impact on
CPEC, as well as increasing insurgency in Afghanistan. It may disrupt the
work because the TTP group is still active despite the Zarb-i-Azb operation.
Although it is divided into small groups, terrorists could target military
personnel, laborers, and engineers working in the area. Similarly, on the
Chinese side, the ETIM in Xinjiang also may create problems for land-route
economic activities. However, China has adopted sufficient measures to
control the insurgency and develop the western part of China (Salman, 2015).

Foreign involvement/other external challenges

External elements actively supporting and funding the Baloch militant orga-
nizations in Pakistan are another challenge to the economic corridor.
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 73

Pakistan has raised this issue with neighboring countries in order to elim-
inate the insurgency. China and Pakistan have agreed to work together to
counter insurgency and terrorism, and have agreed on a joint security
mechanism for Chinese workers in Pakistan (Bhutta, 2015). In addition,
the United States has recently warned Pakistan that it faced long-term
economic damage with little return if China keeps pursuing its giant infra-
structure push.
The top U.S. diplomat for South Asia said that CPEC would profit only
Beijing and that the United States offered a better model. The multibillion-
dollar initiative with China is driven by non-concessionary loans, with
Chinese companies sending their own labor and material in the face of
a growing toll on the Pakistan economy. This will be exacerbated when the
bulk of payments come due. On the other hand, U.S. private investment,
coupled with U.S. grants, would improve fundamentally the troubled econ-
omy (World, 2019).

Convergent interests
The convergent interests of the opposing forces may join hands to jeopardize
the CPEC project. In this process, the separatists within Baluchistan could be
made instrumental through the support of India and other foreign countries
(Khan, 2013). Additionally, while CPEC could transform Pakistan, it also has
clear implications for the Gulf States because it will be an area of competition
for them (Cole, 2019).

Geographical circumstances
Another potential hurdle in the construction of the oil pipeline is its high
altitude. The pipeline will cross an area that is 15,000 feet above sea level,
creating technical complexities. Because the Chinese have experience in
constructing natural gas pipelines from Central Asian republics to China,
they would likely construct the pipeline via Gwadar. This project would bring
even more benefits to the Chinese economy. For instance, it would decrease
the dependency on oil transportation through the Indian Ocean via the Strait
of Malacca (Zubir, 2004).

Poor weather
Poor weather also is a hurdle for the project. CPEC will face the weather
challenge because, in the winter season, transportation over roadways
becomes difficult as roads get blocked by heavy snow in the northern
region. Snow-clearing activities would need to be launched for opening
the routes. Even so, the snowfall can cause severe road accidents and
blockages (Khan, 2013).
The aforementioned realities must be addressed because each factor is
expected to hinder the project. The governments of China and Pakistan must
74 R. AHMAD ET AL.

be committed to constructing the economic corridor in order to begin a new

era of economic revival. Chinese authorities know that Gwadar Port could
play a significant role and may shape future trade relations with regional
countries. China also is well aware that the United States and India would
not be happy if China controls the Gwadar Port, and both countries will
likely feel threatened by China’s presence in the Indian Ocean. Therefore,
Pakistan’s reliance on China may increase difficulties for India, although
China has not shown hegemonic aspirations in the region (Khan, 2013).

Opportunities for Pakistan

CPEC is the name of a win-win situation, a major change, and a big bank for
Pakistan. This is especially true for less developed areas like Baluchistan.
Pakistan’s strategic location gives it an immense importance in the region
and would be enhanced upon completion of the corridor. It could reduce
poverty, unemployment, and inequity grievances under a developed pro-
vince. It could generate massive trade and economic activity and open new
vistas of progress and prosperity for the peoples of both countries (Ahmed
et al., 2016).
According to the Chinese ambassador to Pakistan, CPEC can be expected
to provide energy sources, transportation, infrastructure, and industrial pro-
jects that will be beneficial to all the provinces of Pakistan. In addition, the
corridor is not limited to roads and infrastructure but would connect with
many motorways and infrastructure projects, including Gwadar Port.
The second phase of the project includes the Karakoram highway,
a motorway project between Lahore and Karachi, the Thakot-Havelian
motorway, and Gwadar Port expressway (Jabri, 2015).
The project also would mitigate the chronic energy crisis, which has
a negative impact on the Pakistan economy. The energy shortage hampers
industrial production in the country. Businesses are closing and shifting to
other countries. Pakistani industry needs an uninterrupted energy supply for
smooth economic growth. CPEC is the central and ideal project that could
free the country from its energy crisis (Akram, 2015). This was confirmed by
the chief minister of Punjab (Pakistan) who stated that China is extending
great economic cooperation to Pakistan for resolving its energy crisis, and
that other projects with Chinese assistance would start producing needed
electricity (Staff Report, 2015). These projects are based on wind, solar, coal,
and hydro power generation of 16,400 MW, as well as its transmission
system, to be located in the various provinces of Azad Kashmir. In addition,
China would establish 10 projects of 6,600 MW in the Thar Desert that
would transform this remote and underdeveloped region into Pakistan’s
energy capital (Bhattacharjee, 2015).
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 75

With the full operation of Gwadar Port, there are bright prospects for
Baluchistan to be on a par with the rest of Pakistan. The real value of Gwadar
Port could be witnessed when Chinese trade grows with the Gulf States,
Middle East, and European countries. Any transportation or defense issues in
the Strait of Malacca, the Strait of Hormuz, and the Suez Canal would
promote the significance of Central Asia as a strategic trade corridor
(Anwar, 2010).
China, Iran, and India are desperate to gain closer ties with Afghanistan
and other Central Asian states. Iran’s main considerations are not only to
boost trade but to secure its borders and avoid conflict with the American
Navy in this region. This is consistent with the fact that Pakistan is striving
for peace in the region and does not want militants to spoil its economy.
Thus, Pakistan wishes to establish the best possible relations with
Afghanistan and other Central Asian states. In the wake of such develop-
ments, both Chabahar and Gwadar can equally benefit from Central Asian
businesses (Butt & Butt, 2015).

Promoting people-to-people contacts

Another important prospect of CPEC for both Pakistan and China would be
enhancing people-to-people contact and increasing cultural cooperation. In
the words of President Xi Jinping:
It is the people who advance the progress of nations and history. The support of
our peoples is an inexhaustible source of fostering China-Pakistan all-weather
friendship and all-round cooperation. We should use the platforms of sister cities,
cultural centers, and media organizations to conduct diverse events of celebration.
China and Pakistan should continue to send 100-member youth groups to visit
each other’s country and encourage more contacts and exchanges between young
Chinese and Pakistanis. In the next five years, China will provide 2,000 training
opportunities for Pakistan and train 1,000 Chinese language teachers for Pakistan.
(Quoted in Nawaz, Sharif, & Rabbani, 2015, p. 1)

Expansion of trade routes for China

From a strategic viewpoint, the corridor would bring unlimited benefits
to China because it can expand the number of trade routes between
China and other regional countries. China imports 60 percent of its oil
from the Middle East and 80 percent is transported to China through
the long, expensive, and dangerous piracy-rife maritime Malacca Strait.
This route goes through the South China, East China, and Yellow seas.
At present, transportation of energy through the Strait takes around
45 days, which could be easily reduced to less than 10 days if done via
Gwadar Port, the best possible land and sea routes for this purpose.
Thus, the Gwadar–Xingjian route can serve as an alternative to the
76 R. AHMAD ET AL.

Malacca Straits for the transportation of energy, which will be time and
cost effective. It also will enable China to import energy and find new
markets for its products in Central Asia, Africa, and the Middle East.
The importance of the CPEC is amplified by the fact that it also would
link the greater Chinese plan of the Silk Road Economic Belt (SREB)
that would connect China with Europe through Central Asia. The con-
nections proposed by the Chinese leadership for the SREB are policy
exchange, road network, currency circulation, and people’s friendship.
Connecting with the SREB, the CPEC is of immense significance to
China. Therefore, a serious long-term focus on the project by both
Pakistani and Chinese leadership has the potential of further cementing
the close bonds between the two countries. Linking Gwadar with
Kashgar and onward with Central Asia would improve Pakistan’s trade
and investment relations with China as well as Central Asia. It is
believed that at some point in time the Iran–Pakistan gas pipeline
project also could be extended to include China. The importance of
the Gwadar seaport for trade between the Persian Gulf and the western
part of China, which includes Middle Eastern oil, also is underscored by
the fact that, as stated earlier, it could reduce the time taken for the
transportation of goods to that part of China by around two weeks. In
terms of distance, the CPEC would reduce the trade route distance of
16,000 km between the Arabian Sea and the South China Sea to
2,500 km. The CPEC also is considered important for China’s trade
with Afghanistan as well as its strategic projection into West Asia and
Africa (Khan, 2013).
CPEC includes the construction of roads, railway tracks, energy pipe-
line routes, and Gwadar’s international airport. This promises Pakistan
a novel asset in the form of infrastructure. With CPEC, Pakistan would
acquire an advanced infrastructure. For this, China is lending billions of
dollars at low interest rates and with extended grace periods so that
Pakistan does not have to request higher interest rate loans from other
international financial institutions. According to the Pakistan planning
minister, of the $46 billion Chinese investment, $11 billion will be spent
for infrastructure on the economic corridor (Ahmad & Hong, 2017).
There are many challenges, however. One example is the Karakoram
Highway revamp, a key part of China’s trade and infrastructure initiative
in the region. Much is expected of the highway, which curls through the
tall mountain ranges of northern Pakistan, reaching western China. Both
countries see its potential as a trade route, whereas Pakistan also views it
as a means to consolidate control over territories contested with India.
The major problem is some of the 500-mile route is barely a two-way
road, carved out of the rock face that slopes sharply into valleys below. It
is plagued by rockfall, floods, and earthquakes. A landslide in 2010
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 77

blocked a river and inundated approximately 14 miles of the road (Sattar

& Hadid, 2019).

Chinese interests and opportunities

China has a great strategic interest in Gwadar because it is heavily
dependent on oil from the Persian Gulf. As stated above, this oil passes
via a very long route through the Strait of Malacca, which is under
U.S. influence. After this oil reaches Shanghai or the Chinese East
Coast, it must be transported thousands of miles inland to the West of
China. By using Gwadar and then the Karakoram Highway, the oil follows
a much safer, cheaper, and shorter route to the West of China. In
addition, the Middle East is a very important region in the world because
of its oil reserves and large markets. China has a natural dependence on
this, but does not have the means to influence it. Because Pakistan has
already committed to providing a naval base to China in Gwadar, this will
not only help secure Gwadar defensively but also take the Pakistan–China
alliance to new heights. There are concerns, however. Some analysts claim
that China intends to establish a naval presence at Gwadar, while others
argue that China will be cautious about such a development. China may
not wish to become involved in Pakistan’s domestic conflicts and
a Chinese military presence in Gwadar may provoke a significant reaction
from both the United States and India (Malik, 2012).
Beijing’s effort to outflank U.S. naval operations by using an overland
route might itself be outflanked in wartime. Should Washington direct the
U.S. Navy to interdict Chinese petroleum shipments, it would probably do
so within the confines of the Persian Gulf, where tracking and intercept-
ing shipments bound for Hormuz is a fairly simple matter for
U.S. warships and aircraft. On the other hand, strategically located near
the Strait of Hormuz, the new seaport represents both a new economic
gateway and a military opportunity for Beijing. In terms of energy secur-
ity, Gwadar could act as a strategic hedge, giving Beijing a workaround
should the United States blockade the Malacca Strait during a Taiwan
contingency or other Sino–U.S. clash. Persian Gulf oil could be offloaded
at the port and transported (or pumped, should plans for a pipeline bear
fruit) overland to China. Beijing might find the high price of such an
alternative worth paying to assure energy supplies in the face of a U.S.-
imposed embargo. From a military standpoint, Gwadar already offers
a useful installation for monitoring commercial and military traffic
through the critical choke point at Hormuz. Over the longer term, should
China develop a navy robust enough to project credible power into the
Indian Ocean, then the port promises to allow Beijing, for the first time,
to directly shape events in the Persian Gulf (Malik, 2012).
78 R. AHMAD ET AL.

Conclusions and recommendations

The CPEC is a win-win arrangement. Linkages of transportation, energy, and
telecommunications networks will enable the region to emerge as a thriving
economic belt that will promote social development of communities along
the corridor in spite of numerous challenges. The Chinese government is
investing approximately $54 billion (U.S.) in the CPEC project, from which it
expects to harvest plentiful economic results. Many other countries also are
taking a keen interest in the Chinese-led project and there are more chances
of other economic corridors being formed, linking Gwadar to Central Asian
states in the future. For this reason, Pakistan should take quick action on all
projects. It also must realize that delays in the projects can provide oppor-
tunities for terrorism and extremists (Ahmad & Hong, 2017).
The CPEC project is expected to incorporate an approximately 2,000-
kilometer joint transportation route between Kashgar in northwestern
China to Gwadar Port on the Arabian Sea, very close to the Iranian border.
After the completion of the corridor, oil from the Middle East can be
offloaded at Gwadar. This will provide Pakistan a chance to be an “Asian
Tiger.” In the past, Pakistan has neglected two of its most rich resources
areas, that is, Baluchistan and the sea. CPEC is a great opportunity to reverse
this strategic course (Kazi, 2017).
The CPEC would not just open incentives for China and Pakistan, but also
for the Middle East and African regions. An in-depth sectoral analysis should
be conducted to properly determine the demand for labor and then allocate
that demand according to the various skill sets in these areas. The demand
for interpreters and linguists for translating Chinese into English/Urdu and
vice versa for this collaboration must be carefully conducted to be a success
(Starr, 2007).
To conclude, almost two thirds of the world’s population lives in the South
Asian region, which is considered to be the least integrated region in the
world. Unemployment rates are high because of low market and investment
incentives. The CPEC would pave the way between these remote markets and
investment incentives. It further would lead to urbanizing underdeveloped
areas of China and Pakistan, especially Baluchistan, and would lead to
industrialization. It would eventually create numerous opportunities for
both countries (Starr, 2007).
Pakistan should take full advantage of these projects and assist Baluchistan
in creating jobs, improving living standards, and developing adequate health-
care, education, and skill development. The critical importance of promoting
connectivity between Gwadar Port and the western part of China was
recognized when, on November 13, 2016, CPEC became partly operational,
with Chinese cargo being transported overland to Gwadar Port for onward
maritime shipment to Africa and West Asia (Ramachandran, 2016).
 JOURNAL OF THE INTERNATIONAL COUNCIL FOR SMALL BUSINESS 79

Equally important, the CPEC must be introduced to all Pakistan commu-

nities, including business and industry, through social media, local news-
papers, and television to gain popular support. Finally, the most crucial
component for success of any connectivity project is mutual trust. China
and Pakistan need to work together to bring about a fundamental change in
their bilateral relations. In doing this, the parties involved in the CPEC can
begin to hope for its success.

References
Abid, M., & Ashfaq, A. (2015). CPEC: Challenges and opportunities for Pakistan. Journal of
Pakistan Vision, 16(2), 142–169.
Ahmad, R., & Hong, M. (2017). China-Pakistan economic corridor and its social implication
on Pakistan: How will CPEC boost Pakistan’s infrastructures and overcome the challenges.
Arts and Social Sciences Journal, 2, 265–273.
Ahmed, S., Mahmood, A., Hasan, A., Sidhu, G. A. S., & Butt, M. F. U. (2016). A comparative
review of China, India and Pakistan renewable energy sectors and sharing opportunities.
Renewable and Sustainable Energy Reviews, 57, 216–225. doi:10.1016/j.rser.2015.12.191
Akram, M. (2015). The cup and the lip. The Dawn, April 26.
Ali, S. (2015). The far reaches of the corridor. The Tribune, Islamabad, Pakistan.
Anwar, Z. (2010). Gwadar deep sea port’s emergence as regional trade and transportation
hub: Prospects and problems. Journal of Political Studies, 17(2), 97.
Bhattacharjee, D. (2015). China Pakistan economic corridor. New Delhi, India: Indian Council
of World Affairs. Available at SSRN 2608927. doi:10.2139/ssrn.2608927
Bhutta, Z. (2015). India bid to halt Pakistan projects fails. The Express Tribune, August.
Butt, K. M., & Butt, A. A. (2015). Impact of CPEC on regional and extra-regional actors. The
Journal of Political Science, 33, 23.
Chandio, A. A., Yuansheng, J., & Magsi, H. (2016). Agricultural sub-sectors performance: An
analysis of sector-wise share in agriculture GDP of Pakistan. International Journal of
Economics and Finance, 8(2), 156–162. doi:10.5539/ijef.v8n2p156
Cole, J. (2019, June). The China-Pakistan economic corridor and the Gulf Crisis. Series Report,
Gulf Studies Center Monographuc Series, Qatar University No. 4 (pp. 1–22). Brussels,
Belgium: International Crisis Group.
Ghaffar, A., Pongponich, S., Ghaffar, N., & Mehmood, T. (2015). Factors associated with
utilization of antenatal care services in Balochistan province of Pakistan: An analysis of the
Multiple Indicator Cluster Survey (MICS) 2010. Pakistan Journal of Medical Sciences, 31
(6), 1447.
Ghauri, I. (2006). Pakistan, China considering oil pipeline from Gwadar. Daily Times.
Islamabad, Pakistan, May 24.
Hali, S. M., Shukui, T., & Iqbal, S. (2015). One belt and one road: Impact on China-Pakistan
economic corridor. Strategic Studies, 34(4), 147–164.
Hameed, M. (2018). The politics of the China-Pakistan economic corridor. Palgrave
Communications, 4(1), 64. doi:10.1057/s41599-018-0115-7
Jabri, P. (2015). CPEC projects to benefit all provinces of Pakistan: Chinese envoy: Associated
press of Pakistan. Retrieved from www.brecorder.com/top-news/108-pakistan-top
Kazi, A. (2006). Pivotal Pakistan: GCAP and the geopolinomics of Central Asia’s traditional
Indus Basin corridor. Paper presented at the International Conference on “Partnership,
Trade and Development in Greater Central Asia”, Kabul, Afghanistan.
80 R. AHMAD ET AL.

Kazi, A. (2017). CPEC: Impact on Central and South Asia. Paper presented at the CPEC
Conference, Islamabad: Strategic Vision Institute.
Khan, S. A. (2013). Geo-economic imperatives of Gwadar Sea Port and Kashgar economic
zone for Pakistan and China. IPRI Journal, 13(2), 87–100.
Khetran, M. S. (2014). The potential and prospects of Gwadar Port. Strategic Studies, 34(4/1),
70–89.
Machel, G., Salgado, S., Klot, J. F., & Salgado, S. (2001). The impact of war on children:
A review of progress since the 1996 United Nations report on the impact of armed conflict on
children. London: Hurst.
Majeed, G., & Hashmi, R. S. (2014). Baloch resistance during Zulfiqar Ali Bhutto’s Era:
Causes and consequences. South Asian Studies, 29(1), 1026–6784.
Malik, H. Y. (2012). Strategic importance of Gwadar Port. Journal of Political Studies, 19(2),
57–69.
Naseem, A. (2015). Impact of China Pak economic corridor-A bird’s eye view. [online].
Islamabad, Pakistan: BMA Capital.
Nawaz, M. M., Sharif, Y. E., & Rabbani, R. (2015). Full text of president Xi Jinping’s speech to
the joint session of parliament in Pakistan. Retrieved from http://issi.org.pk/wp-content
/uploads/2015/07/Pak-China_Year_of_Friendly_Exchange_Doc-1.docx.pdf
Ramachandran, S. (2016). CPEC takes a step forward as violence surges in Balochistan.
Retrieved from www.atimes.com
Ramay, S. A. (2016). China Pakistan economic corridor: A Chinese dream being materialized
through Pakistan. Retrieved from https://sdpi.org/publications/files/China-Pakistan-
Economic-Corridor-(Shakeel-Ahmad-Ramay).pdf
Salman, A. (2015). Pak-China economic corridor: A cost-benefit analysis. The Express
Tribune, May 3.
Sathar, Z. A., & Casterline, J. B. (1998, December). The onset of fertility transition in
Pakistan. Population and Development Review, 24(4), 773–796. doi:10.2307/2808024
Sattar, A., & Hadid, D. (2019). Life along Pakistan’s mountain highway, where China is
investing billions of dollars. Washington, DC: NPR, December 14.
Staff Report. (2015). Committee criticizes NHA chief for changing economic corridor route.
THE Dawn.
Starr, F. S. (2007). New silk roads: Transit and trade in greater central Asia. Washington, DC:
Central Asia-Caucasus Institute and Silk Road Studies Program at SAIS, Johns Hopkins
University.
World. (2019). China’s belt and road initiative will take “toll on Pak economy”: US Agence
France Presse. Retrieved from https://www.ndtv.com/world-news/chinas-belt-and-road-
initiative-will-take-toll-on-pak-economy-warns-us-diplomat-alice-wells-2136623
Zhuo, Z., & Liping, X. (2010). Bottlenecks and countermeasures of technological innovation of
developing the low carbon economy [J]. Paper presented at the Forum on Science and
Technology, School of Economics, Guanddong University of Business, Guangzhou, China.
Zubir, M. (2004). The strategic value of the Strait of Malacca. Analysis paper, Maritime
Institute of Malaysia, Kuala Lumpur, Malaysia.