All weather friendship: Pakistan sees CPEC as a magic wand that will make all its economic woes disappear overnight

There has been much jubilation in Pakistan over the formal launch of the $46-billion China-Pakistan Economic Corridor (CPEC) from Gwadar in Balochistan to Kashgar in Xinjiang during the visit of the Chinese President Xi Jinping to Pakistan in April 2015.

Despite the euphoria, no doubt aimed partly at the US and partly at India, six months later, as more details of the ‘game-changing’ project have come to light, it is clear that more than CPEC this is going to be China’s Pakistan Corridor (CPC).

China has specific objectives. First, the Corridor, part of President Xi Jinping’s pet project of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road, exploits Pakistan’s strategic location to bypass the ‘chokepoint’ of the Malacca Straits. Rerouting part of its energy supplies to Xinjiang from the Persian Gulf via Gwadar shortens the distance by several thousand km and lessens the transport time by about 10 days. Second, the Corridor will unlock the potential of landlocked western China, especially Xinjiang. Third, by establishing its physical footprint in Gilgit Baltistan, China hopes to cut off the ingress and egress of Uighur militants enroute to Afghanistan and Pakistan for jihadi training.

Pakistan sees the project as a magic wand that will make all its economic woes, especially energy, disappear almost overnight. The biggest chunk of the investment of approximately $35 billion will be allocated to expensive thermal energy projects based partly on imported coal and LNG. These are expected to create about 17,000 MW of power. The energy crisis in Pakistan is not due to generation but productivity, distribution and line losses. Thus, additional generation will not solve the long-term issues plaguing the energy sector.

Moreover, Pakistan is yet to get its act together. First, barely had Xi Jinping flown away, Balochistan and Khyber Pakhtunkhwa accused the federal government of changing the Corridor route to benefit Punjab and have threatened protests. Some are even calling it China-Punjab Economic Corridor. The Balochistan government has held the eastern route through Punjab to be longer and more expensive than the original, making it economically unviable. Stung by such criticism a cabinet minister has called those opposing CPEC as ‘traitors’.

Second, Pak-China ‘all weather’ friendship does not extend to economics. For example, Pakistan’s attempts to reduce the tariff from 14.15 cents to 9.25 cents per unit for the $1.5-billion 900 MW solar power project being built by a Chinese company Zonergy has put this project on hold and could adversely impact other Chinese companies involved in CPEC. Another example is the 6,600 MW Gadani energypark announced with much fanfare in August 2013. By March 2015 it was shelved because the government failed to provide profit guarantees to Chinese investors who wanted to take up the project on their own terms.

Third, apart from Pakistan’s large trade deficit with China for lack of goods to export, the total trade between Xinjiang and Pakistan was a paltry 2.6% of the total trade of around $12.35 billion in 2014.

For China, a major worry is the security of their 10,000-strong workforce that will increase as the CPEC projects get online. According to Pak media reports, over 200 security-related incidents have taken place on the Balochistan stretch of the Corridor. The statement of the Vice-Chairman of the Central Military Commission of China, General Fen Changlong, during his mid-November visit to Pakistan that China looked forward to close cooperation with Pakistan to ensure security of CPEC was a clear signal that security was a continuing concern.

Despite this, given the personal interest that Jinping is taking in the project, China is likely to ensure that its objectives are met. With Pakistan seeing the project through the prism of Punjab, the mega-project is becoming ‘China’s Pakistan Corridor’ rather than ‘China Pakistan Economic Corridor’.


First published at Economic Times, 29 December 2015

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