Editorials, GS-2, International Relations, Uncategorized

The new game changer in Pakistan BY INSIGHTS · MAY 28, 2016

Summary:

Much hype has been created around the $46 billion China-Pakistan Economic Corridor (CPEC) project, since it was announced in April 2015. It is a game-changer and is expected to transform Pakistan into an Asian Giant, say some experts in Pak. This gains even more prominence when contrasted to the $5 billion investment made by the U.S. in the period 2009-15 in Pakistan.

What is this project all about?

The 3,000-km corridor linking China’s far-western region to Pakistan’s south-western Gwadar port on the Arabian Sea through Pakistan-occupied Kashmir (PoK) is massive project of road, rail, energy schemes, pipelines and investment parks.

  • The corridor is also expected to serve as a terminal for China to pump oil procurement from Persian Gulf. It is also being seen as a project to strengthen China’s connectivity with neighbouring countries and an initiative set to aid strategic framework for pragmatic cooperation between the nations.
  • The corridor would transform Pakistan into a regional hub and give China a shorter and cheaper route for trade with much of Asia, West Asia and Africa.
  • The corridor — expected to be ready in three years and provide about 10,400 MWs of electricity — gives China direct access to the Indian Ocean and beyond.
  • The corridor will pass through Pakistan’s poor Baluchistan province, where a long-running separatist insurgency that the army has vowed to crush will raise questions about the feasibility of the plan.

Developments so far:

In this regard, China has signed 51 Memoranda of Understanding and projects worth $46 billion in sectors which include energy, infrastructure, security, and broader economic development. For energy, $34 billion investment has been envisaged and $12 billion in infrastructure projects. It is estimated that $15.5 billion would be spent on coal, wind, solar, and hydroelectric projects.

  • One of the key externalities to the Chinese investment is the fact that a “Special Security Division” of the Pakistan Army, consisting of perhaps 10,000 Pakistani troops and headed by a Major General, would be set up to guard the Chinese workers and their investment, particularly in Balochistan, given the militancy and insurgency in the province.
  • An important indicator of the work in progress is the huge Chinese foreign direct investment (FDI) which has come into Pakistan over the last year. Pakistan has been an FDI-starved country for a host of reasons, but the first 10 months of the last fiscal year saw FDI increase by 5% on a year-on-year basis, to $1 billion, of which 55% came from China alone.
  • Also, China’s contribution to Pakistan’s FDI increased 152% over this period. The largest chunk of the FDI, 52%, has gone to the power sector, suggesting that work on CPEC-related infrastructure is underway.

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Concerns:

However, some experts have questioned whether the Chinese investment in the country represents Chinese strategic and economic interests solely focussed on what will benefit China, much more than it does economic investment which might be of some benefit to Pakistan in the end.

Also, even a year after the initiation of the CPEC project, there continues to be much ambiguity about what the $46 billion project entails. There is little public information and disclosure as to what will be built, how it will be financed, and who will implement the various parts of the corridor, which includes roads, railway lines, pipelines and other infrastructure.

Benefits associated with this project:

The present Pakistan government can gain much with economic development linked to the corridor taking off, offering far greater prospects for re-election in 2018 when some projects come on stream. The Pakistani military is also an obvious beneficiary with its role in security and with its fingers in numerous infrastructure and economic projects around the corridor. Also, some underdeveloped regions in Balochistan and Khyber Pakhtunkhwa will also benefit.

India’s concerns:

China has maintained that it merely wants to develop infrastructure in the area without undermining India’s position on the Kashmir dispute. However, India has expressed its reservations to China over the project as it is laid through the PoK. But, China defended the project by saying it will help in the regional development.

Way ahead:

The development of the CPEC is not necessarily bad for India or the region. On the contrary, Pakistan’s young people who find meaningful work in the projects are unlikely to enter the jihad factories. India should also welcome the impending joint initiative by China and Pakistan to curtail terror groups along the corridor and in Afghanistan, provided the two countries are able to steer clear of an exclusionary agenda, limiting India’s legitimate interests in Kabul.

India should welcome this initiative. CPEC will no doubt boost Pakistan’s progress and prosperity. It will also help Pakistan tackle many social and other internal problems, including the menace of religious extremism and terrorism. It is in India’s vital interest to see a stable, prosperous, progressive, united and democratic Pakistan, which is at peace with itself and also at peace with all its neighbours.

Conclusion:

However, CPEC in its present form does not comprehensively capture the benefits of regional cooperation. It needs to be extended into landlocked Afghanistan, which is in urgent need of national reconstruction after several decades of war. It should also be extended into India through Kashmir and Punjab, the two provinces which are today divided between India and Pakistan. Its linkage with the Indian side of Kashmir is especially important. A better strategy would be to propose the construction of a sub-corridor bringing CPEC into the Indian side of Kashmir and beyond. In addition, sea transport linking Pakistan, the western coast of India, Sri Lanka, the eastern coast of India, Bangladesh and Myanmar should be strengthened.

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