A view of CPEC Project

By Agha Iqrar Haroon

Agha Iqrar Haroon is a Development Observer. His area of work includes Central Asia, South Asia and Eastern European regions

Chief of Pakistan Army Gen Qamar Bajwa while addressing Defence Day ceremony expressed his views that certain powers in the region do not wish success of China Pakistan Economic Corridor (CPEC) project and Indian-sponsored terrorism in Pakistan is directly link to frustrate CPEC initiative. Similar viewpoint is expressed by civilian leadership and the parliament of Pakistan.

Why CPEC is under attack by India and why United States is not comfortable with this huge project?, one can find answer if he/she has deep idea about this immense project.

CPEC is a flagship project of China’s “One Belt One Road” (OBOR) initiative. OBOR will be critical bridge that will connect China with its neighbours in Central Asia and South Asia but will go as far as Middle East and Africa.

By linking China with the Arabian Sea and the Persian Gulf through Pakistan, CPEC will expand trade potential and enhance energy and security presence of China not only in the region but as far as Africa.

CPEC can be considered as a package that will boost Chinese as well as Pakistani economies by providing transport and energy: roads, bridges, gas pipelines, ports, railways, energy plants to Pakistan and a deep regional security mechanism to China while overseeing and manage safekeeping of Chinese assets. Per unit cost of every product China exports today will drastically go down when freight cost will go down by adopting shortest possible route for export transportation through CPEC linkages.

Proposed by Chinese President Xi in 2013, the “One Belt One Road” (OBOR) initiative (program) is an estimated $5 trillion infrastructure spreading over 60-plus countries across Asia, the Middle East, Europe and Africa.

Chinese President considers this initiative as a “project of the century” and a biggest narrative that China is setting as an example in globalization by filling the gaps left by the US policy makers.

The “One Belt” part of it refers to the Silk Road Economic Belt while the “One Road” refers to the 21st-century Maritime Silk Road— a revival of the ancient Silk Road trading routes.

Пакистанская армия взяла на себя обязательство гарантировать безопасность китайско-пакистанского экономического коридора(CPEC)

A view of CPEC:

Being a flagship project of OBOR, China Pakistan Economic Corridor (CPEC) will connect China with Arabian Sea through shortest possible land and sea routes with one of the largest sea ports of the world —Gwadar Port of Pakistan. Situated at the southern end of CPEC near the ocean mouth, Gwadar port is an important project of the CPEC. In order to improve the operational capacity of the port, China Overseas Ports Holding Company Ltd. (COPHC) is looking after the port.

China and Pakistan have reached consensus on the basis of “one corridor, multiple passages”, aiming to benefit the economic and social development of all regions in Pakistan and provide effective connectivity to Gwadar port

Chinese Think Tanks consider OBOR and its foremost component —CPEC as “Builder of a New Civilization” along the One Belt One Road.

For making CPEC a success, China and Pakistan have agreed to promote a 1+4” pattern of economic cooperation, featuring a central role of the CPEC and four key areas including the Gwadar port, energy, transportation infrastructure and industrial cooperation (reference from CPEC documents published by Chinese Government).

In the medium-to-long term, both sides will expand the cooperation fields to financial services, science and technology, tourism, education, poverty elimination and city planning.

China and Pakistan have set up the Joint Cooperation Committee (JCC) with five joint working groups under, namely Long-term planning Group, Energy Group, Transportation infrastructure Group, Industrial cooperation Group and Gwadar port Group (reference from CPEC documents published by Chinese Government).

The JCC secretariats are working within the National Development and Reform Commission of China and Ministry of Planning, Development and Reforms of Pakistan respectively (reference from CPEC documents published by Chinese Government).

The two secretariats are responsible for communicating and coordinating with the line ministries related to the construction of CPEC. JCC is responsible for the overall planning and coordination of CPEC, and the joint working groups are responsible for the detailed planning and implementation of the projects within its field (reference from CPEC documents published by Chinese Government).

The CPEC shall essentially follow the North-south corridor in Pakistan and the existing road network shall be used in the beginning, developing the missing connections first. Two major CPEC transportation projects are under construction including expansion of Karakuram Highway (KKH) Phase-II (Havelian-Thakot section) and Peshawar-Karachi Motorway (Sukkur-Multan section). At the same time, Railway Line ML1 (Peshawar-Karachi) up-gradation project will start in year 2018.

CPEC consists of “one belt, three passages, two axes and five functional zones” in terms of its spatial layout. “One Belt” refers to the belt which consists of zone area of the CPEC and the economic cluster area of industries, population and cities. It runs from Kashgar to Karachi and Gwadar on the Arabian Sea. “Three Passages” refers to the eastern, central and western routes. Eastern Route consists of railway-highway network from Islamabad to Karachi via Lahore, Faisalabad, Multan, Sukkur and Hyderabad and is considered as the main traffic artery of the corridor. Central Route starts from Islamabad to Karachi via Jacobabad and Khuzdar through N25 or to Gwadar through M8. Western Route starts from Islamabad to Gwadar via D.I.Khan, Quetta, Basima and Hoshab. “Two Axes” refers to two east-west development axes in the corridor: Lahore – Islamabad – Peshawar” and “Karachi-Gwadar” development axes (reference from CPEC documents published by Pakistan Government)..

Official documents of Government of Pakistan about CPEC project indicates that CPEC has the potential enhance economic growth of Pakistan by removing key infrastructural bottlenecks (energy, roads, highways, railways etc.), shaping new industry clusters, improving living standards and social stability and promoting regional connectivity.

The CPEC is expected to fuel economic growth of Pakistan by adding 2.0 percentage point to its growth between 2018 and 2022; another 1.5 percentage point between 2022 and 2030. It is likely to create 700,000 to 1.0 million new jobs. The length of newly built or upgraded roads and railways would reach 3871 km and 1529km, respectively. Power generated by newly built sources will reach 19.785 million KW, and length of optical fiber Cable will reach 2084km (reference from CPEC documents published by Chinese Government).

Available design of CPEC indicates that garment and textile industry will be developed in Kashgar (China) Economic Development Zone through importing raw materials from Pakistan. Textile and Garment Centers or EPZ will be built in Lahore and Karachi. To enrich cotton textile varieties, Pakistan is considering importing high quality top grade cotton yarn from Uzbekistan.

Some Chinese enterprises have already established plants in Pakistan. A household appliance industrial park will be established near Lahore through joint ventures. International companies from all over the world would be invited to bridge demand of household appliance. Companies will be encouraged for producing parts locally.

The demand for cement will continue to rise because of the rising construction activity. More investment can be made in cement industry to meet the growing demand for the CPEC – related construction projects. Mineral Exploration is another area where Chinese enterprises will have interest. Industrial Park Construction along the corridor would be considered by Pakistani-Chinese investors.

For food security, agricultural modernization would be promoted along the corridor. Key target is to increase per acre yield of rice, wheat, cotton and sugarcane and the output of livestock and dairy sectors including fish and shrimp. Organic and chemical fertilizer production would be developed around Lahore and Karachi. A modern agricultural demonstration zone is considered to be built in the Quetta and Gwadar to lead local agricultural development. To increase farm employment along the corridor, efforts will be made to focus on developing agricultural product processing. By introducing modern agricultural product processing equipment and facilities, an agricultural industry cluster could be built around Islamabad, Lahore and Karachi. To reduce losses of fresh agricultural produce and increase local farm income, agricultural produce warehousing and logistics facilities be built in Peshawar, Islamabad, Lahore and Gwadar.

Gwadar Port infrastructure will be improved for fishery production. Epidemic disease prevention and control related to agricultural produce would be developed in Faisalabad and Lahore. Coastal tourism development has enormous potential under CPEC. Coastal tour line is Keti Bundar-Karachi-Somiani-Ormara-Gwadar-Jiwani. Landmark hotels, golf courses, high-end nursing homes, race courses and a hot air balloon facility along coastal city tourism zone are mostly likely to be built.

Financial impacts:

CPEC financial support is design Chinese investments spreading over 15 years having a total outlay of up to $46 billion: $35 billion on the energy sector in the mode of IPPs (independent Power Producers) and $ 11 billion for infrastructure development; like industrial zones roads and railways etc.

Construction of 3,218 km long route from Chinese province of Kashgar to Pakistani port of Gawadar will connects China, Tajikistan (Central Asia) with Gawadar Port. Through this shorter route, Chinese goods will have easier access to the Middle East, Africa and beyond. Currently these goods have to travel a long distance from the South China Sea through the Strait of Malacca to reach the Gulf. Almost 80% of the China’s oil is currently transported from Strait of Malacca to Shanghai, (distance is almost 16,000 km and takes 2-3 months), with Gwadar port becoming operational, the distance would reduce to less than 5,000 km. This would be a great strategic benefit for China. On the other hand, it would help Pakistan to counter Indian influence in the region, position itself as a major transit point connecting Eurasian region with South Asia and South East Asia.

Presently China is some 13,000 Km from Persian Gulf with a long shipping time of about 45 days. CPEC will shrink this distance to merely 2500 Km (80% reduction). The shipping time will reduce to 10 days (78% reduction). Bulk of China’s trade is through the narrow sea channel of the Strait of Malacca. Top security analysts are of the opinion that in the event of a future war in Asia, United States’ Navy can block the Strait of Malacca which will suffocate China’s trade route. CPEC, besides providing an alternate route, will reduce the shipping time, from China to Europe, from 45 days 10 days.

The largest part of the project would provide electricity to Pakistan. The plans envisages at adding 10,400 megawatts of electricity at a cost of $15.5 billion by 2018. And after 2018 further 6,600 megawatts, at an additional cost of $18.3 billion, will be added which would double Pakistan’s current electricity output.

Gwadar port, the South most point of CPEC has total traffic of 0.5 million tonnes of Cargo today. But by 2018 it is expected to handle 1.0 million tonnes of Cargo. When completed and fully functional, it will handle 300-400 million tonnes of cargo per annum as against India’s total port capacity to handle 500 million tonnes of cargo. The Long Beach Port of the United States is the largest port of the US. It handles 80 million tonnes of cargo each year which is just 20% of Gwadar’s future capacity.

Regional Political impact:

CPEC is called “Game Changer” by Pakistan and Chinese governments. Ruling Party Pakistan Muslim League (PML-N) in Pakistan considers the project the biggest achievement of the government and will go to get vote from people in 2018 elections by selling this project politically. This project will boost economy of Pakistan manifold and will gear industrial revolution within Pakistan.

There are certain voices asking the impacts of terms and conditions of loans Pakistan is acquiring from China calling this project “East India Company” of 21 century. These voices suggest that CPEC is not a gift from Beijing to Islamabad rather a complicated set of infrastructure investments that will be paid for mostly by Pakistani investors, consumers, and taxpayers in the form of commercial loans from Chinese banks paid back by Pakistani power generation companies and the government, and electricity tariffs paid by ordinary Pakistani consumers.

Some economists are of the view that infrastructure development with low level of economic activity and at the cost of accumulation of loans is a not a good deal. Pakistan is already repaying loans at an average of $5 billion per anum and further loans means a disaster for its economy.

However, such criticism has failed to attract common man because economic activity being generated by such huge project is considered as biggest gift to Pakistan that was no more on “Investment Map” of the world due to terrorism acts that played a major role to dent Pakistan’s economy since year 2002.

According to estimations, CPEC project will create over 700,000 direct jobs in Pakistan by 2030.

The Indian and Western Look towards CPEC:

The International Monitory Fund (IMPF) has also warned that CPEC could add to Pakistan’s medium- and long-term risks, predicting that the country’s gross external financing needs would rise to $15.1 billion in 2018-2019 from $11.4 billion in the current financial year.

United States is looking at the CPEC as an early sign of the beginning of the end of its global hegemony on the economic front. Japan is worried that with the completion of CPEC any competitive edge that it currently has in world markets over China would simply disappear as while the physical distance between China and its markets would shorten by as much as 9,000km, its cost of producing exportable surpluses would as a consequence come down steeply.

India, on the other hand, is worried about the safety and security of its oil supplies that pass through the Strait of Hormuz at the mouth of which is located Gwadar, the entre-port of CPEC and where New Delhi fears in due course of time China may set up a Naval Base. India seems also concerned about the future of Chahbhar sea port that it is helping build in Iran along the Strait of Hormuz about 72 km from Gwadar for which it is contributing as much as $20 billion. It had perhaps wanted to deny Pakistan the Afghan and Central Asian markets through Chahbhar.

While the US and Japan still seem to be engaged in getting China to bog down in the South China imbroglio, India appears to have already finalized a stratagem to counter the self-perceived threats to its sovereignty and integrity emanating from CPEC. India boycotted One Belt Forum in China this year which was attended by 59 countries including USA, UK, Saudi Arabia, Russia and all South Asia countries except Bhutan and India.

Indian Prime Minister Narendra Modi during his speech at Lal Qila on August 15, 2016 openly declared his intentions to foment trouble in Balochistan believing perhaps that once an insurgency in the province heats up uncertainty that would engulf the region as a result would make it impossible for the CPEC project to take off.

India is objecting CPEC passing through Gilgit Baltistan which in its opinion is a disputed territory and claims that the region cannot be used for any purpose without prior permission from New Delhi. India fears that China would set up its military base in GB in collaboration with Pakistan making it doubly dangerous for India’s occupation of Occupied Kashmir.

India also fears that once CPEC takes a final shape it would render the Chahbhar sea port redundant, its supplies of oil from Iraq, Iran and Saudi Arabia would become totally dependent on the good will of Pakistan and China and its plans to capture the Central Asian market would be nipped in the bud as China would be able to access in the shortest possible time the CA states through CPEC while India would be left with its round-about route going through Afghanistan which is still in the grip of a wasteful civil war.

Pakistan categorically blames India for injecting terrorism in Pakistan to dent CPEC project. Indian spy Yadev who was arrested in Pakistan in year 2016 testified in his video confessional statement that he was sent by India to destabilise Balochistan, Karachi and Punjab—- all core regions from where CPEC land route is going through.

Pakistan is installing over 15,000 special troops to ensure security of CPEC route from Sust Pak-China border to Gwadar Port. Pakistan Army takes the responsibility of protecting this prime project of China and Pakistan.

Regional experts believe that US policy shift in South Asia is directly linked with CPEC project and United States by making India as its “Strategic Partner” is trying to confine development in Southern China and blocking Chinese trade.

Experts believe that US can design a situation where Pakistan becomes physically engage with its arch-rival India, resulting losing its concentration on CPEC. India is increasing its presence on Line of Control (LoC) between Indian occupied Kashmir and Pakistani Kashmir and on Line of Actual Control between India and China in Sikkim region.

Indian forces are constantly violating seize-fire on LoC by firing small to heavy artillery towards Pakistan. However, Pakistan is refraining to lock with engage with India by knowing its (Indian) designs.

Since 2013 when One Belt One Road project was showcased, US engagement with India has increased while Pakistan is working to get support of Russia for making Eurasian bloc.

One can say that CPEC has altogether change the dynamics of the region.

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