China Pakistan Economic Corridor: Challenges and implications of delays

Work on the China Pakistan Economic Corridor (CPEC) was initiated in 2015. The corridor was to be a flagship project of the Chinese Belt and Road Initiative (BRI) and the idea was to link China via Pakistan to the Arabian sea. The Chinese committed some $42 billion initially to this project. 

This Chinese economic miracle was to be replicated in Pakistan, as an enduring testimony to the legendary relationship between the two countries. The project henceforth became the hallmark of the Pakistan-China friendship. In the first phase infrastructure, energy and port development was to be undertaken, and all the while, CPEC was lauded by the people of Pakistan.

The first phase went off well. Infrastructure development starting from Khunjerab to Gwadar as well as inland connectivity produced amazing results. Simultaneously, energy projects were undertaken enabling Pakistan’s generative capacities to improve manifold. The port development in Gwadar was also taken and substantial progress was achieved. All this despite Pakistan’s inherent weaknesses in terms of bureaucratic and political mismatch between the Chinese and Pakistani systems. The Chinese companies came in a big way and a special security division was raised to ensure security for Chinese citizens in Pakistan. 

The fact is that China alone has the capacity to bail Pakistan out. 

- Salman Bashir

Multilateralizing the CPEC became the new catch phrase. CPEC was to be extended toward Afghanistan and Iran. It could go east toward India, theoretically if India were at some stage to get interested. It was a peace pipe promising hope for regional trade and economic cooperation. The regional economic cooperation in central and South Asia were the policy frameworks which needed to be pursued with diligence. Pakistan prioritized economic security over others and it seemed that Pakistan was coasting toward an enlightened new era of prosperity built around CPEC.

The second phase of CPEC was to launch, establishing some 33 special economic zones with seven or nine zones to begin with. It is here that the situation took a turn for the worse. Afghanistan- Pakistan relations with the Taliban in control of Kabul deteriorated suddenly. The Tehreek-e-Taliban Pakistan (TTP) which had taken refuge in Afghanistan was reactivated and carried out terror attacks against Pakistan. The targeting of Chinese people in Pakistan increased in settled areas as well as in Balochistan. A mass movement was started in Gwadar, demanding rights for the locals. Accompanying this, was an intense campaign against CPEC and China, meant to sow divisions among the people. Chinese loans for energy and infrastructure were also called into question. 

Then came the financial crisis that Pakistan faces today, being used to advocate that it is Chinese loans that have created a debt crisis, while only 25 percent of the total debt is owed to China and the Chinese have not raised this issue. 

The situation has become mixed with Pakistan’s internal political situation which is getting worse each passing day. Charges of corruption involving Chinese companies and Pakistan’s inability to make payments due to the Chinese are questions that have spoiled the harmonious relations that existed between the two sides.

It had been the norm that differences, if any, between the two sides were discussed on the quiet. The Chinese were always receptive to reason and would accommodate Pakistan’s concerns. In the fraught political environment in Pakistan this is no longer the case. For all practical purposes, CPEC projects have come to a grinding halt. And without China, Pakistan’s strategic relevance is being diminished each passing day. 

It is not strange that Pakistan is looking toward the west for raising money to be able to float.

It is also not strange that during this period, the US-China relations are being defined by a new cold war. US interest in the Indo-Pacific warrants a defense partnership with India and an array of alliances and arrangements are being set up to contain China. The halting of CPEC suits the West. 

However, the fact is that China alone has the capacity to bail Pakistan out. There were some indications that China could consider giving Pakistan around $15 billion to shore up reserves. The Chinese have already given smaller amounts and could be waiting for Pakistan’s political situation to clarify with elections due. Pakistan, therefore, must consider the massive consequences of the folly of abandoning CPEC any longer. 

- Salman Bashir is a Pakistani diplomat who served as Foreign Secretary of Pakistan and as High Commissioner of Pakistan to India.
Twitter: @Salman_B_PK