CPEC which is generally called “China Pakistan Economic Corridor” represent the result of investment from the side of Chinese of more than $45 billion dollars in Pakistan to empower the international relations of Pakistan especially with China (Ritzinger, 2015). This article will brief on CPEC regarding its positive and negative regional impacts including the rationales that allowed it to be made. However, SWOT analysis and vulnerabilities of its arrangements would help in understanding far better about CPEC.
CPEC corridor was first announced in 2013 by Xi Jinping and also under the visualization of Chinese Premier Li Keqiang. It seems to be most remarkable project considering its scope and size. The idea behind this corridor was to provide directly the link between Kashgar (a city in China’s Independent Region Xinjiang Uyghur) and Gwadar (Pakistani Port) with the help of about 3000-kilometer road. This project was found most beneficial for Pakistan as well as for China as it may cover up the needs of economic infrastructure and power generation crisis for both countries.
China took such a positive decision to invest a huge amount in CPEC with Pakistan’s support as its size exceeds the total aid from U.S for about 14 years and the investment found indicative. The rationale behind this is to compel the dynamic regional alliance between the countries and also to achieve the global aims of increasingly populated country i.e. China (Bhattacharjee, 2015). However, the issues to implement this project are being debated and discussed in details while several geopolitical factors also playing their roles in troubling the survival of this corridor. Instead, experts are trying to investigate and solve the trouble generating problems.
Why CPEC is the Biggest Foreign Investment
There are several reasons to accept the reality that CPEC is the biggest foreign investment in Pakistan from China. First, for many years the increasing population of Pakistan with less power generation resources, the projects related to energy and high profile infrastructure will help Pakistan to operate itself with profitable entities. Concerning to power generation projects, if things will all be good, in coming five years, Pakistan would be able to get more than 17,000MW power with the help of CPEC. It is therefore, it is considered to be biggest ever foreign investment in Pakistan. Secondly, the road that connects the Gwadar port with Kashgar in China is predicted to connect more than 3 billion of population of region as Gwadar itself would be able to connect with three provinces under CPEC in Pakistan (DAWN, 2015).
Many political leaders also declare CPEC as the biggest ever foreign investment in Pakistan. For instance, in 2015, the federal minister for Planning, Development and Reforms Mr. Ahsan Iqbal concerning CPEC delivered his words which summarizes as friendly political relations of China will become historically strong with Pakistan after CPEC. In a conference, held by PBIT “Punjab Board of Investment and Trade” Ahsan Iqbal says about China that it was at 16th position before reaching at top in terms of foreign investments in Pakistan. It was also said in the conference that “A container which usually takes 50 days to reach Heimburg from Beijing with $3,000 will now arrive in only 15 days saving $1,800 after completion of the CPEC” (DAWN, 2015). The project that saves a huge amount of expenses in trade may found to be essential for both countries due to the biggest investment in history.
According to a vision for 2025 from political view, the aim of government was to bring the name of Pakistan under top 25 economies. This may be possible with CPEC as this journey of Pakistan with China is totally connected with this vision. Pakistani Ambassador in UAE, Mr. Asif Ali Khan Durrani also witnessed the benefits of CPEC and declares it positive game changer for Pakistan, China as well as for Gulf countries. It is because; the CPEC would or may also include the highways, natural gas pipelines and railways that results to connect China with Middle East. It is obvious that if it happens, Pakistan would easily be able to reach Middle East with low cost through China.
Rationales for CPEC
CPEC was allowed to be made due to many reasons either it provide sufficient support to China-Pakistan Trade or limits its benefits. First, let considers the rational of trade as this project will be able to provide the strategies to cover up the timely increasing needs and demands of export based products. This would definitely help both countries to expand their trade routes. According to White Paper - China in 2011, main idea of China’s foreign investment reflects the South Asian countries to strengthen their capacity to support developing themselves. In addition, it will help in promoting the economic growth of countries and to improve the basic living standards of people as CPEC covers up these aims of China. Secondly, the trade routes of energy to and from the Middle East will be applicably diversified by this project hence; this becomes the rationale for CPEC to be made. It is due to the fact that China wants to remove its dependency to import several products from only South China Sea and Indian Ocean (Ritzinger, 2015).
Third, the global relevance of China will become stronger by this investment as it may be able to put its hand economically to support Pakistan till a long period and build a strategic hedge on it. However, it would also bring the possible reasons to build the connections with west world through which China may be able to expand its trustworthy influence. On the other hand, other rationale of China to invest in CPEC is the position of rampant officials to be ill-famed, separatism, militancy, status of corruption and political volatility in Pakistan (Bhattacharjee, 2015). Though this investment, the people of Pakistan may have trust on China and they may not terrorize the Chinese officials again in Pakistan as happened in 2004 by some Baluchi insurgents and by Taliban in 2008 and 2014. Since, this may be the real cause for China to invest in CPEC as it concerns about susceptible situation of insurgency and terrorism in Pakistan.
Vulnerabilities in CPEC Arrangements
The vulnerabilities are found in both internal (domestic) and external sides in CPEC arrangements. The domestic or internal vulnerabilities include the slippages in implementing the policies and to face the challenges related to surcharges for power supplies (Qureshi, 2015). The challenges related to security and political conditions may also arrive at the time when CPEC will be arranged. It may affect the activities based on strong economy and friendly international relations between the countries (IMF, 2015).
In the external vulnerabilities, the issues of deterioration of exports and damaging the quality of remittances in case of slower growth period may arrive in spite of CPEC arrangements. In addition, the variation in the global exchange rates may also affects the CPEC arrangements in quick trading between two countries. Moreover, the erosion of competitive advantage may also occur at same time (IMF, 2015). Subsidies of energy reforms may deadly affect by the continuous increase in volatility in oil prices. However, in case of fast implementation in project may suddenly boost in growth, security and liquidity risks. The CPEC may remove financial and international trade sanctions comparably with Iran which may affect Pakistan in terms of temporary energy supply.
SWOT Analysis of CPEC
In strength, CPEC project will be strengthen both Pakistan and China in terms of trade and other areas. First, China is expected to invest $3.5 billion in Pakistan’s Railways network from Karachi to Peshawar. By this, many areas in Pakistan will be strengthening due to easy travel by train. Secondly, CPEC project will provide a new way to trade and investment in Pakistan in the sectors of minerals, energy, power, communication, and other regional development programs (Griffin, 2015). Furthermore, CPEC will allow extending the Kashgar offshoot of ECB (Eurasian Continental Land Bridge, Lianyungang-Rotterdam) to Peshawar in Pakistan's northwest. From this extension, China and Pakistan can benefit enormously from it along the shortest route, i.e. from Karachi to Peshawar.
Since, CPEC is a multimillion project; it is not possible that it will result perfect by all means. First, in this project, many long routes of roads are going to construct where many political viewpoints may create problems for people of Pakistan and China. Second, big project required to hire a huge man power where all may not perfect therefore lack of seriousness may arrive in its implementation. In addition, lack of transparency in using provided funds may also be faced by investors. In last, project’s policies (internal or external) creation and amendments may be lack in terms of its interruption (Qureshi, 2015).
In case, CPEC project becomes successful in achieving its goals, it will create many opportunities for Pakistan as well as for China. First, it will be best opportunity for Pakistan and China to have plus point for several businesses parties to get additional business opportunities. Hence, it may create the economic condition of both countries more essential. Secondly, according to CPEC route, it is designed as to pass through Punjab therefore; many employment opportunities for people in Punjab will provide quality of living standards (Saleem, 2015). In addition, CPEC surfaced as a co-development agenda over a wide range of strategic investment opportunities which was proposed to China by Islamabad. However, it occurred at a time when the world’s highest “Tsinghai-Tibet railway” began performance debut.
Where CPEC is providing many opportunities for businesses in Pakistan and strength its economy, it will also face many threats related to security. CPEC project commencements designed for the corridor can be threatened by the growing militancy. Pakistan as well as China will be facing the challenge of quash militant groups on their borders. Both countries may require assistance of each other to save themselves from such threats. Threat to citizens, engineers and workers in China may appear in future from Pakistani militant groups as in the past, they have been targeted. Other threats include ethno-political violence in Karachi, Taliban militancy in many tribal areas and in KPK, increasing religious radicalism and extremists and domestic insurgence in Baluchistan (Sial, 2014).
Regional Impact of CPED
Project of CPEC will have the biggest impact on Gwadar Region. This will impact on Gwadar in the manner that it will provide an alternative exit of traffic to and from greater Central Asia warrants undoubted attention. Secondly, it will impact on Port Qasim and Karachi routes as according to ADB (Asian Development Bank)’s Ports Master Plan studies “this new transport hub excels both Karachi and Port Qasim in terms of proximity to the main international shipping routes and superior harbor conditions”. These superior conditions include draft and turnaround time of large bulk carriers. Hence, together with the interconnected domestic traffic network it evokes the whole system to overcome the harsh and complex terrain blocking century-old north-south flow of goods and services.
The regional impact of CPEC would be on trade ports in Middle East as it might reflect loss in shipping traffic. However, other countries such as Kingdom of Saudi Arabia are also interested in collaborating with Pakistan on arrangements in OGDC sector which have been based after CPEC arrangement. It basically boosted the investor’s confidence in Pakistan. Evidently, it is both for Pakistan and China, as the minimum to expedite the sequence of development projects envisaged, as the Ministerial Committee meeting of the Pakistan government dismissed on 1 October, 2008, Karachi and Port Qasim as the candidates for establishing shipyards and transshipment trade (Griffin, 2015). Instead, Gwadar was chosen for it is “a place of great strategic value, enhancing Pakistan's importance in the whole region, extending from the Persian Gulf through the Indian Ocean to Southeast Asia and the Far East”. ADB errs nevertheless in maintaining from the viewpoint of Central Asian Regional Economic Cooperation Program (since 1997) that “Gwadar is for Central Asia, not for Pakistan”. Essentially, Gwadar may turn into a pivotal harbor city, comparable to Singapore, Hong Kong, Colombo and Dubai. Liquid fuels reaching Gwadar by tanker/pipelines would flow to Kashgar, Xinjiang Uyghur Autonomous Region (XUAR), therewith cut thousands of kilometers off the distance to ship oil from Middle East and Africa to China.
In conclusion, it is found that CPEC is the biggest foreign investment because it will definitely benefit the energy resources, increase in foreign trade through its feasible routes and found to be historical investment in Pakistan. Hence, additional business opportunities may also found rationale for CPEC which allowed it to be made. In addition, global relevance of China is another reason as it has been predicted to be stronger by this investment and possible improvement in Pakistani rampant officials hence removing the sense of separatism, negative militancy, corruption and political volatility. However, internal and external vulnerabilities are also there that reflects a kind of threat for both countries. In last, the region that would impact by CPEC would be Gwadar, in both positive and negative way.
Syed Danish Ali is a Senior Consultant at SIR consultants, a leading actuarial consultancy in the Middle East and South Asia. He is also a graduate of University of London in Sociology and Career ambassador of Institute and Faculty of Actuaries (IFoA UK). He has more than 75 publications across a range of international platforms and is a regular contributor to various research activities in IFoA, CAS, SOA and International Actuarial Association including the ASTIN journal. His non-actuarial publications include articles in Data Science, Banking, Quantitative Finance, International Relations & Foreign Policy, Astrophysics, Philosophy and Sociology.
- Bhattacharjee, D., 2015, Indian Council of World Affairs, Retrieved from http://www.icwa.in/pdfs/IB/2014/CPECIB12052015.pdf
- DAWN, 2015, China top foreign investor in Pakistan, The Newspaper Staff Reporter
- Griffin, C.E., Titcombe, A., Headquarters, C.P.E.C. and San Juan, P.R.S.L., n.d., Caribbean Regional Human Resource Development Program for Economic Competitiveness (CPEC).
- IMF, 2015, IMF - Country Report No. 15/278 Retrieved from https://www.imf.org/external/pubs/ft/scr/2015/cr15278.pdf
- Qureshi, A.H., 2015. China/Pakistan Economic Corridor: A Critical National and International Law Policy Based Perspective. Chinese Journal of International Law, p.jmv045.
- Ritzinger, L., 2015, The China-Pakistan Economic Corridor - Regional Dynamics and China’s Geopolitical Ambitions, (NBR) The National Bureau of Asian Research, Retrieved from http://nbr.org/research/activity.aspx?id=589
- Shahid, S., 2015, CPEC projects offer great opportunities to business community, DAWN NEWS, Retrieved from http://www.dawn.com/news/1203932
- Sial, S., 2014. The China-Pakistan Economic Corridor: an assessment of potential threats and constraints. Conflict and Peace Studies, 6(2), pp.11-40.