Pakistan

[CRSS Analysis] The Political Economy of China Pakistan Economic Corridor

By – Shakeel Ahmad Ramay

Chief Operating Officer Zalmi Foundation

Introduction

Pakistan and China have been remained close allies and friends for decades. The two countries have faced both good and difficult moments together and tried to help each other without hesitation. From the very creation of the Peoples Republic of China in 1949 to date,  Pakistan has been extending to China whatever support it could at international and regional fora. This also includes recognition of the Republic, its membership of the United Nations (UN), and eventually facilitating the detente with the United States (US). China, on its part, too, has always demonstrated its gratitude for the support it received from Pakistan and has always been keen to help Pakistan where it is possible. The China-Pakistan Economic Corridor (CPEC) – flagship project of China’s Belt and Road Initiative (BRI) – is the latest manifestation of this unique bilateral relationship.

China understands that Pakistan is going through one of the worst economic phases in its history. This phase is attributed to various factors, mainly Pakistan’s participation in the US War on Terror, which inflicted both economic and human loss in the country. Among other factors, climate change is also posing a serious threat to the country. Moreover, poverty, food insecurity, and malnutrition are other issues that are also holding Pakistan back. However, China, by understanding Pakistan’s current woes, has yet again extended its hand of cooperation and help in the form of CPEC.

CPEC started with the initial estimates of US $46 billion. However, it expanded over time and has now reached to US $62 billion. It is a very comprehensive program covering a number of areas including, but not limited to, energy, infrastructure, agriculture, IT, social development and welfare, skill development, and tourism. CPEC has two dimensions; the first includes Pakistan and the second includes the Belt and Road Initiative (BRI). However, its focus is on the needs of Pakistan in the field of economic and social development. It is believed that the materialization of CPEC will turn around the fate of Pakistan. In its first stage, it aims to overcome the energy crisis of Pakistan and also improve its communication infrastructure.

Owing to their potential, China and Pakistan are putting huge importance on CPEC-related interventions and projects. Unfortunately, importance of CPEC for Pakistan and BRI has become a bone of contention for many countries. These countries, including India and the US, have started opposing the initiative either because of China or Pakistan. They have started portraying it as a geo-strategic and security maneuver, instead of an economic or development initiative. However, with such criticisms, it is important to discuss and analyze, in detail, both the security and political economy dimensions of CPEC and conclude whether such international criticisms on the project hold true.

Political Economy

The political economy of CPEC can be analyzed through national, regional and global perspectives. Nationally, it revolves around the allocation of funds, routes, the impact on livelihoods and environment, and climate change. Regionally, there is assumed paranoia of India, which considers CPEC a threat to its economy and security and is doing its best to undermine the initiative. In terms of a global perspective, the West, led by USA, finds China and its rise on the global stage as an irritant. Therefore, both regional and global players have tried making CPEC controversial, especially because of the project’s importance for the BRI. Therefore, it is necessary to have the background of these levels of political economy before delving into a detailed analysis of CPEC.

Presently, the debate on CPEC is divided into two groups; those who are strongly pro and those who are strongly anti CPEC. The pro-CPEC group is only interested in debating the project’s benefits for Pakistan, and therefore shy away from discussing its “negatives”. By doing so, this group is undermining the true spirit of CPEC, which was started and promised as a dynamic, not static, project. It was also argued that CPEC would always be open to any changes in the best interests of the stakeholders. The long-term plan of CPEC, hence, takes into account the “need for continuous improvement”. It is also in line with the basic philosophy of China’s governance, reforms and development agenda. China has always remained open to improvement, experimentation, innovation and devising best possible ways to achieve desired objectives. Therefore, the Joint Coordination Committee meetings are a proof of this strategy.

On the other hand, opponents of CPEC have a list of self-assumed perceptions to oppose the initiative. Since the project’s initiation, this group has tried finding all sorts of ills within the project and have therefore opposed it from the get go. Their favorite subjects include “issues of transparency”, “security”, “expansion of China”, and “the debt trap”. The Western countries are obsessed with the containment of China and want China to be a junior partner with plenty of do-nots. They are pursuing the agenda of containment in the disguise of security, transparency and debt trap. There is a plethora of material available which solely looks at CPEC and BRI in the context of security. Maritime route is especially a victim of criticism and all efforts are being applied to prove that it is a security intervention.

The Stockholm International Peace Research Institute (SIPRI) recently published a policy brief which addressed security aspects of the BRI in the context of the South China Sea and the Indian Ocean. The policy brief concluded that it was necessary for China to maintain its presence in these seas to secure its trade lines and ensure smooth functioning of its international trade.

However, China’s geo-political rivals are not ready to accept this role and therefore blame the country on all fronts. In the past, USA and other western countries openly deployed their resources along their trade lines and also built military alliances in the name of their security. In 1948, the US introduced Marshall Plan for Europe as an instrument for Europe’s rehabilitation and revival but attached many strings with it, which addressed US’ security and foreign policy. The superpower used this as a mechanism to ensure its own peace and economic interests and attain its foreign policy objectives. The study of Marshall Plan and its objectives clearly exhibit USA’s own security against the Union of Soviet Socialist Republics (USSR).

The story does not stop there; USA, in collaboration with European and other partners, built The North Atlantic Treaty Organization (NATO) in 1949 which was a purely a security venture. NATO was established in the name of security of Europe after the implementation of Marshall Plan. USA and its partners excluded World War-II ally USSR from the designing and implementation of both Marshall Plan and NATO. Although USSR had shown interest at first, but later due to the attitude of USA it changed its mind. By establishing NATO, USSR was portrayed as an enemy of the West. The Marshall Plan was extensively used to counter communism and forge partnerships for promoting the American agenda during the Cold War.

Contrary to the Marshall Plan, CPEC or BRI do not have any such strings attached. It is purely conceptualized on the basis of the economic growth model and development. President Xi has many a times reiterated that China wants a destiny of “Shared Prosperity”. International forums like the World Bank, the UN, European Union (EU) and the International Monetary Fund (IMF) had already accepted the development dimensions of BRI and related projects. World Bank President considers it as a step for better connectivity, increased competitiveness and smooth regional trade. The bank has already invested around US $87 billion in BRI ventured countries. The UN Secretary General himself attended the BRI forum and stressed on the need for more cooperation.

Furthermore, it is also interesting to observe that despite all opposition to CPEC and BRI, the US is looking for enhancing its trade with China. Although, currently, USA is engaged in a trade war but still is looking for ways to improve trade relations with China. European countries are also moving closer to China to improve and build close economic and trade relations. China has already started a railway cargo service for Europe to shorten the delivery time and improve efficiency. But, unfortunately, at the same time, the West also criticizes other countries for building relations and look for avenues for maligning them.

On the security front, China is only trying to secure its economic interests like other countries. Supplementing BRI efforts with security measures is necessary for the smooth functioning of its development and trade initiatives. This is nothing new, it is a common practice as the US and western countries have already been doing it to protect their trade and economic interests for decades. If China is doing it now, it must be analyzed through this prism, not by a geo-strategic prism. Moreover, it is common sense just how an individual wants to secure its economic interest by employing guards at a street shop.

In the context of CPEC, there are no security strings attached. All projects are either economic or social. Only security personnel are deployed to protect the workers and other personnel working on the projects. This is a common and usual practice, especially in the context of Pakistan. This is because CPEC has attracted a lot of negative attention, and therefore the Chinese personnel have become high profile targets of miscreant attacks. However, the western media portrays it as a point of justification for their assumed security dimension of CPEC.

Furthermore, Pakistan and China do not need to associate any security strings especially with CPEC as both countries are cooperating with each other in security and military sector for decades. Pakistan and China have many successful ventures in security and defense sectors such as Heavy Complex, JF-17 Thunder and others. These ventures were executed well before the CPEC and BRI.

The debt trap is another tool being used by USA, western media and India to malign CPEC. They present CPEC as a “trap” and not an “economic and development” opportunity. In reality, Pakistan’s total debt represents a very small portion from China. Moreover, Pakistan will have to start paying back the debt in the next decade after the maturity of energy projects. Remaining debts are from the IMF, World Bank and other development partners. The irony is that the West does not give any attention to debts from IMF and constantly focuses on China. Although, there are cases of Latin American countries, which tumbled under the debt of IFIs (International Financial Institutions) and other partners, these countries are still working with the same IFIs, whereas the media ignores these cases while criticizing Chinese investments.

Moreover, under CPEC, China’s investment does not bring major attached strings for Pakistan. But IMF, World Bank and other partners’ debt is accompanied by a number of strings. It ranges from micro and macro governance to security and international relations. These strings, from western IFIs, often dictate the country’s domestic policies as well.

Even in the past USA has also attached strings to its assistance for other countries. One only needs to look at the documents of Marshall Plan to find all the answers. During and after the period of Marshall Plan, USA continued to interfere in European countries’ foreign and security policy. President Trump is more vocal about this. In this backdrop, it is understandable why USA is questioning CPEC and therefore, it is easy to understand the behavior of USA. It has always extended economic help with political, security or diplomatic strings. Therefore, it assumes every other country is doing the same.

The issue of transparency is also being used to undermine CPEC. Although, the government has developed a portal for information sharing on CPEC, there is still debate on its transparency. Data relating to different projects is available for public access on various websites. However, every country has the right to determine what to share and what not to share. This is because certain information can compromise bilateral and security ties. Hence, no country can compel any other country to share details of their agreements. Despite these facts, China and Pakistan always remain open to sharing details of their bilateral pacts. For example, Pakistan even shared CPEC’s details with the IMF. To this end, Pakistan and China are even inviting all other countries including India, USA, and other western states to join CPEC. If China and Pakistan had to hide any information, both countries would never invite other countries.

Pakistan and China are already trying to expand CPEC, at least at the regional level. Pakistan has offered India, on various occasions, to become a part of CPEC. However, India has always rejected the offer by presenting one excuse or the other. On the other hand, Iran and Afghanistan have shown a keen interest to join CPEC. China, Pakistan and Afghanistan are in advanced stages of finalizing a mutual CPEC understanding that would include Kabul. The three countries are discussing the issues at different regional forums and trilaterally as well. The recent meeting of foreign ministers in December 2018 explicitly talked about the subject. The inclusion of Afghanistan will provide an opportunity for sustainable peace and prosperity in the war-torn country. CPEC will be an opportunity to connect Afghanistan with Gwadar and other ports of Pakistan for trade as well.

On the other hand, Iran is gradually moving towards joining hands with Pakistan and China for CPEC. It is planning to declare Chabahar and Gwadar as sister ports. Iran had also officially requested China for investment in Chabahar port, as India could not provide the required funding. Iran is also a big exporter of oil to China and Pakistan, and Pakistan is expecting to import gas from Iran as well. More importantly, Iran has no influence from USA or the West and makes its decision independently.

In recent months, Saudi Arabia has also proposed to be a part of CPEC related projects in Pakistan. It is more interested to invest in the oil and refinery sector of Pakistan. The inclusion of Saudi Arabia, Iran and Afghanistan is very important to expand CPEC to Central Asia and beyond. Pakistan’s dream to connect with the Central Asia and beyond can only come true if Afghanistan is part of CPEC. Iran will help to connect to Turkey and Europe through railway.

Afghanistan’s desire to become a part of CPEC may be an irritant for the US as it has heavily invested in security in Afghanistan. It is also providing substantial budgetary support to Afghanistan. Iran’s inclusion is also perceived as a challenge to US’ sanctions on Iran. Therefore, China and Pakistan must be ready to see the renewed pressure on CPEC on different fronts.

CPEC is also facing political issues at the national level due to varied aims of Pakistan’s provinces and different interest groups. It took a long time to settle the route controversy. Previous governments tried to bury the issue but could not succeed fully. However, they did a good job to contain it. Now, the Pakistan Tehreek-e-Insaaf (PTI) government is trying to handle this issue by allocating more resources for marginalized areas. Interventions from previous and current governments are bearing fruits and things are settling in a positive trajectory.

In recent years, environment and climate change have emerged as new tools to criticize CPEC. Some international organizations are portraying that CPEC will wreak havoc for the environment. Coal fired power plants are usually used for devising their strategy of criticism. However, they conveniently forget the truth that coal will not be more than 10 percent in the overall energy mix of Pakistan. Moreover, CPEC is also putting greater weight to renewable energy resources like wind, solar and hydro. Pakistan has already established solar and wind parks, which are operational now. Both governments have also decided to expand them further. Now the governments are talking about more rigorous investment in hydro sector.

Conclusion

CPEC, which is a predominantly economic venture, has become a victim of global and regional criticism. Globally, USA looks at this as a challenge to its hegemony and super power status. China has already taken over USA on a parity basis and now its economy is on the course to surpass USA’s economy in the coming years. The US hegemony was built on three pillars; diplomacy, economy and military. Right now, USA’s hegemony in the field of economy and diplomacy is being challenged. The most recent example at the diplomatic level is US’ loss at the UN General Assembly. Economic crises of 2007 have already shaken the basis of US economy. Moreover, continuous war on terror and other wars that it had started have deeply dented the American economy. Thus, China’s growth on the economic front further complicates the situation for USA.

On the regional level, India is facing a dual dilemma; i) it cannot see positive developments in Pakistan, and ii) it considers China as a challenger of its dream of becoming an Asian power. India is the only country which considers developmental and economic interventions as a security threat. It is openly talking about sabotaging CPEC to hinder the development of Pakistan. On the other hand, it assumes that China will take over Asia. However, the point here is that China is already an un-challenged major power of Asia. Furthermore, China is thriving for a global role, not regional.

Although, China has many a times reiterated that it does not want any type of confrontation with any country, USA and India are still trying to create alliances to create problems for Beijing. USA and India are busy in building a four country group alongside Australia and Thailand. India is also working with Japan to build the Asia Africa Growth Corridor. America had been presenting The Transatlantic Trade and Investment Partnership (TTIP) and The Trans-Pacific Partnership (TPP) as alternatives to BRI and asking countries to join it. However, many analysts believe that TTIP and BRI are complimenting each other, as TTIP deals with software and BRI with hardware of trade and economic integration. However, Mr. Trump withdrew from these initiatives and they do not have relevance now, especially without USA.

From the discussion above, one thing is very clear: the criticism on China is mostly originating from the political economic front, not on the basis of hard facts and figures. It seems that countries are not talking about the BRI’s economic potential, but are interested in attaching security strings to it.

On the domestic front, Pakistan’s government has not been able to effectively communicate with the local and international stakeholders regarding CPEC. The government has treated it as an achievement and projected it for its glorification by trying to sell it to voters without realizing the side effects. This attitude has led to feelings of undermining other political parties. As a result, other political parties have started to question certain parts of CPEC just to remain relevant. Political point scoring at the domestic level has further led to confusion, which was used by opponents to prove their point.

All governments and political parties need to understand that CPEC is a project between two “States,” not governments. It does not matter who is in power, the project will keep going. Therefore, it is better to discuss the projects in the parliament or in meetings, and not on TV channels.

Finally, from the discussion above, one lesson is clear: CPEC was never analyzed on the basis pure academic or program-based approach. It always has been studied with bias, either pro or against. There is a need to study CPEC on a scientific basis and without any biases.

Policy Recommendations

The following are some of the major policy recommendations for the current government on how to deal with CPEC on a larger scale:

  • CPEC must be analyzed through the lenses of economic development, not a lens of security with the government taking the onus of conveying these dimensions to the international community
  • Pakistan is a sovereign country, and no one has the right to interfere in its affairs or its international agreements with important partners
  • There is no development intervention which is free of environmental concerns, hence the government needs to ensure that security concerns of the project are also addressed
  • The government needs to ensure that CPEC remains a “politics-neutral” project domestically, so that no political party, including the PTI, can use it for political point scoring. This would help in maintaining brotherly ties with China
  • CPEC is one of the few economic lifelines that Pakistan has at its disposal at present, hence, this lifeline should be utilized in the most effective manner.

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Copyright Center for Research and Security Studies, Islamabad.

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