CPEC: The Economic and Political Game Changer of the region
Dr.Syed Mehboob
Pakistan China friendship is stronger than Himalayas and deeper than Pacific Ocean, its fragrance spreads all over the world; it is among people to people, in the hearts, minds, and sentiments of the people of both the countries. It is time tested, all weathered, long lasted, historical, unique and visionary. Pakistanis considers China as their brother, supporter, trustworthy, reliable and credible friend. Pakistan China friendship is so deep rooted that it is narrated in stories told by mothers to their children, it is told to students in schools, colleges and universities, it is found in poetry and music, it is found in scholars articles and research.
On April 20, 2015, Pakistan and China signed a landmark agreement to start work on a project worth US$46 billion known as the China-Pakistan Economic Corridor (CPEC). The project aims to connect Pakistani seaport of Gwadar, located on the Baluchistan coast of the Arabian Sea, with the Chinese city of Kashgar, located in north-western region of Xinjiang. It is CPEC and People-to-People Contacts through a network of rail, roads and oil and gas pipelines. The project is a continuation of Pakistani and the Chinese policies, pursued over the last decade, to expand and deepen traditional Pakistan-China friendship, and economic and trade relations. It is meant to materialize China’s initiatives for promoting physical and commercial connectivity with the neighbouring countries to achieve the goal of greater regional integration in Asia. As it is evident from the allocation of funds for various projects, the main focus of the project is on the development of energy sector and building of infrastructure, which will receive US$ 33.8 and US$11.8 billion respectively. While highlighting its benefits for Pakistan and China, its economic dimension is emphasized. However, the project has also a cultural dimension through a network of rail, roads and oil and gas pipelines. The project is a continuation of Pakistani and the Chinese policies, pursued over the last decade, to expand and deepen traditional Pakistan-China friendship, and economic and trade relations.
It is meant to materialize China’s initiatives for promoting physical and commercial connectivity with the neighbouring countries to achieve the goal of greater regional integration in
Asia. Moving away from its over 100 years of passive integration into the world order since the revolution of 1911, China has now decided to take an active role shaping a new world order by using its wide ranging and far-reaching development approach. China and the OBOR countries will become a consortium of geopolitical and geo-economic cooperation, eventually forming a community of common destiny, common interests, values and cultures, and a community of security. The CPEC, the hub of OBOR, links the belt in Central Asia and the road with the Indian Ocean. The region around the CPEC has seen the rise of the previous world cultural centers. This is the same area where the ancient world influenced China and China also influenced the world. If Karamayin northern Xinjiang is designated as the northern starting point of the CPEC, if a circle is drawn around it through Kashgar, Gilgit to Gwadar, it is clearly visible that the CPEC runs through the five highest mountain ranges (Tianshan, Pamir, Hindu Kush, Karakoram, and Himalaya) of the earth that are the sources of the Amu Darya (Amu River) and Indus River.
The China Pakistan economic Corridor is rightly called , a game changer or “ The Gateway to the prosperity” . CPEC is the pilot project and currently 11 projects had been completed with another 11 are under construction. Estimated seventy thousand employment opportunities had been created. Energy infrastructure has been earmarked for a capacity of 11,110 MW, of which 10,000 MW has been achieved. Pakistani and Chinese engineers are working shoulder to shoulder to combat against load shedding and to remove darkness.
The physical, commercial and cultural connectivity between Pakistan and China is bound to increase under the CPEC as the project aims to build a network of rail and road connections between the two countries. The CPEC is likely to provide an opportunity to all the regions of Pakistan to share the fruits of economic development under the CPEC. The huge investment in joint ventures in the economic zones linked to the CPEC will lead to the deployment of a large number of workers of both Pakistan and the China, which will provide an opportunity to them to interact with each other. A new generation of the Chinese oriented in their outlook more towards the West has grown up. They know very little about Pakistan. Similarly, Pakistani’s knowledge about the Chinese is also very limited. This can be enhanced only through the promotion of people-to people contacts for which the two countries have already started serious efforts. With the implementation of the CPEC, these efforts will gain new momentum.
The 15-year project is being executed in four phases: First Phase: 2018 – Early Harvest The first phase of the economic corridor is focused on the “Early Harvest” scheme of the CPEC, which has been completed . It will bring transformational change by solving the problems of energy and infrastructure sector. In this phase, the road connectivity would also be completed to interconnect not only all the provinces but also the entire region. Second Phase: 2020 Second phase of the CPEC envisages the construction of cross border optical fiber cable system between China and Pakistan; textile garments industrial park projects in Pakistan; numerous ventures in the energy sector yielding power from various sources comprising hydel, coal, wind, solar and nuclear, entailing the development of coal mining projects, construction of dams and the installation of nuclear reactors; besides creating a network of roads, railway lines and oil and gas pipelines. Agreements have been made to construct a new airport, Eastbay Expressway, fully equipped hospital, technical & vocational training institute, water supply and distribution, infrastructure for free-zone and export processing zones, port related industries, refineries, and marine works. Major Chinese companies investing in Pakistan’s energy sector will include China’s Three Gorges Corporation, which built the world’s biggest hydro power project, and China Power International Development Ltd. Under the agreement signed by the Chinese and Pakistani leaders at a summit in Beijing recently, US$15.5 billion worth of coal, wind, solar and hydro energy projects will come online and add 10,400 megawatts of energy to the national grid. An additional 6,120 megawatts will be added to the Regional and Global Scenarios of the CPEC 51 national grid at a cost of US$18.2 billion by 2021. The transport and communication infrastructure — roads, railways, cable, and oil and gas pipelines — will stretch at about 2,700 km from Gawadar on the Arabian Sea to the Khunjerab Pass at the China-Pakistan border in the Karakorum. Starting in 2016, the Chinese companies will invest an average of over US$7 billion a year until 2021, a figure exceeding the previous record of US$5.5 billion foreign direct investment (FDI) in 2007 in Pakistan. Third Phase 2025 The third phase of CPEC mostly comprises of major upgrades to Pakistan's ageing railway system, including rebuilding of the entire Main Line 1 railway between Karachi and Peshawar ; this single railway currently handles 70 per cent of Pakistan Railways traffic. In addition to the Main Line 1 (railway), upgrades and expansions are slated for the Main Line 2 and 3 (railway). The CPEC plan also calls for completion of a rail link over the 4,693-meter high Khunjerab Pass. The railway will provide direct access for Chinese and East Asian goods to Pakistani seaports at Karachi and Gawadar by 2030. Procurement of an initial 250 new passenger coaches and reconstruction of 21 train stations are also planned as part of the first phase of the project – bringing the total investment in Pakistan’s railway system to approximately US$5 billion. 180 of the coaches are to be built at the Pakistan Railways Carriage Factory near Islamabad, while the Government of Pakistan intends to procure an additional 800 coaches at a later date, with the intention of building 595 of those coaches in Pakistan. Fourth Phase Long Term 2030 Longer term projects under CPEC also call for construction of the 682 kilometre long Khunjerab Railway line from the city of Havelian to the Khunjerab Pass on the Chinese border, with CPEC 52 extension to China’s Lanxin Railway in Kashgar, Xinjiang. The railway will roughly parallel the KKH, and is expected to be completed in 2030. The cost of the entire project is estimated to be approximately $12 billion, and will require five years for completion. A 300 million rupee study to establish final feasibility of constructing the rail line between Havelian and the Chinese border is already underway. A preliminary feasibility study was completed in 2008 by the Austrian engineering firm TBAC. Special Economic Zones Beyond the initial phase, there are plans to establish Special Economic Zones (SEZs) in the Corridor where Chinese companies will locate factories. Extensive manufacturing collaboration between the two neighbours will include a wide range of products from cheap toys and textiles to consumer electronics and supersonic fighter planes. The basic idea of an industrial corridor is to develop a sound industrial base, served by competitive infrastructure is a prerequisite for attracting investments into export oriented industries and manufacturing. Such industries have helped succession of countries like Indonesia, Japan, Hong Kong, Malaysia, South Korea, and Taiwan, China and now even Vietnam rise from low-cost manufacturing base to more advanced high-end exports. As a country’s labour gets too expensive to be used to produce low-value products, some poorer country takes over and starts the climb to prosperity. Once completed, the CPEC with a sound industrial base and competitive infrastructure combined with low labour costs is expected to draw growing FDI from manufacturers in many other countries looking for a low-cost location to build products for exports to rich (The Organization for Economic Cooperation and Development) OECD nations. Regional and Global Scenarios of the CPEC Borrowing the concept from corporate China, the establishment of SEZs along the CPEC where Chinese factories will be located is likely to boost the manufacturing sector. The idea of SEZs has already been a successful phenomenon, besides China, in Japan, Indonesia, Hong Kong, Malaysia, South Korea, Taiwan and Vietnam where low-cost manufacturing provides the impetus to the production of high end exports; thus it is expected that this time-tested methodology will bear fruit in Pakistan as a success story. Logistic Dimension to provide overall policy guidance on the CPEC, a Project Management Unit (PMU) has been set up in the Planning Commission and a functional unit in the Prime Minister’s Office and concerned ministries. It has been emphasized that International development partners and the private sector to work together in achieving the desired objectives.
This corridor is one of the many mega-projects planned by China in Central, South and South East Asia for expanding its political and economic influence to counter the relatively better established US sphere of influence in the region. The US has a similar agenda in the form of ‘Pivot to Asia’, which is aimed at countering China’s economic and military expansion in Asia-Pacific. According to a report published in 2013 by the London-based policy think tank Chatham House, ‘The increasing complexity of the Asia-Pacific region demands US attention, and the United States remains well-positioned to play a pivotal role in the region through the 21stcentury.’39 Resultantly, the US has partnered itself with key players in the region such as India, Japan, Indonesia and Singapore to prevent China from spreading its influence. Pakistan’s Position The big power game has placed Pakistan in a unique position. It can potentially balance the major power rivalries and promote trade cooperation in the region as it enjoys good relations with both the West and China. Historically, there is a precedence when a similar initiative had been taken by General Yahya Khan’s regime in 1970 that brought the two great powers on the diplomatic table and, in current scenario trade-oriented diplomacy by Pakistan can help reduce the complexities of this rivalry.Virginia Marantidou, “Revisiting China’s 'String of Pearls’ Strategy,” Issues & Insights, vol. 14, no. 7. (Washington: D.C.) Centre for Strategic and As far as China is concerned, Gwadar Port has a special significance, as it will serve as the trade nerve center for China, since most of its trade especially that of oil will be conducted through the port, which is already managed by Beijing. Currently, 60 per cent of China’s oil is transported by ship from the Persian Gulf to the only commercial port in China, Shanghai, a distance of more than 16,000 km. The journey takes two to three months, during which time the ships are vulnerable to pirates, bad weather, political rivals and other security risks. Using Gwadar Port instead will reduce the distance these ships must travel and will also enable oil transfers to be made year-round. Chinese industries are facing problems to compete in global market due to high transportation cost & delivery time. CPEC will decrease travel distance & cost significantly from China to Gulf countries. Even if China uses CPEC for 50% of its Oil supplies, it will save $ 6 Million everyday & almost $ 2 Billion every year. Currently export of goods from China to Middle East and Africa via Strait of Malacca takes about 45 days that could be reduce to less than 10 days, if transported through Gwadar Port. In broader view the CPEC will closely connect the central Asia West Asia and Gulf states through energy and economic cooperation. Through CPEC, China will get autonomous path that will be free from India & USA’s influence.
CPEC will result in establishment of Strategic & Economic trade routes within as well as outside the country. Development and uplift of new and existing infrastructure is being undertaken under the umbrella of CPEC. The corridor will focus on development of some of the most under developed regions of Pakistan like FATA, KPK, Baluchistan & Southern Punjab. Increased trade activity in Pakistan will result in generation of Job Opportunities. Investments by China will boost Pakistan’s $ 312.57 Billion GDP by over 15%. Pakistan can avail great opportunities .
Lahore-Islamabad-Peshawar and Karachi-Gwadar development axes. The economic development levels and geographical location conditions of the area where the “Two Axes” are located differ greatly. These are the key areas for strengthening of regional linkage and promotion of coordinated development of regions in the Corridor construction. The first axes Lahore-Islamabad-Peshawar may not be considered as true alignment of East-West rather partially may be called north –south axes but it passes through the major built up area.
Five Functional Zones The Corridor is divided into five function zones according to the regional development level, industrial structure, resource and environmental bearing capacity, and growth potential. These zones cover major node cities, traffic passages and industrial cluster areas. These are: Southern Xinjiang Zone of Industry, logistic, and economic development (Kashgar – Atushi – Tumshuq – Khunjerab) Northern Pakistan Zone of border logistic channel, resource exploration and ecological conservation (Islamabad – Khunjerab) Central Pakistan Zone of industrial and economic development (Karachi – Sukkur – Multan – Islamabad – Lahore) Western Pakistan Zone of logistic channel, mineral exploration and ecological conservation (Gwadar – Quetta – Dera Ismail Khan) Southern Pakistan Zone of energy, logistics, trade and business development (Gwadar – Karachi)
In a nutshell this project would bring prosperity, development, employment opportunities. trade enhancement and stability in the region.