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From China to Pakistan: A well-thought-out 3,000km lifeline

Through September, working groups of Chinese and Pakistanis will finalise 40-plus projects to launch the $46 billion China-Pakistan Economic Corridor (CPEC). Both governments see this as more than just a construction project.

world Updated: Aug 30, 2015 01:58 IST
China,Pakistan,China-Pakistan Economic Corridor

Through September, working groups of Chinese and Pakistanis will finalise 40-plus projects to launch the $46 billion China-Pakistan Economic Corridor (CPEC). Both governments see this as more than just a construction project. The corridor is designed to transform Pakistan’s economy—and potentially China’s global status.

Already in the Arabian Sea port of Gwadar, the southern terminus of the corridor, the Chinese have begun upgrading the harbour. So has the expansion of the highway out of the port, a road that will run 3000 kilometres to the Chinese border town of Kashgar.

Much of the corridor’s initial expenditure is on power plants. Nearly $34 billion of the corridor’s funds will go to energy projects, with over half of this going to electricity production. When completed, Pakistan’s national grid will receive 10,400 MW additional power.

Beijing’s logic is simple. As an ex-Chinese ambassador to Pakistan explained, “Solving Pakistan’s power deficit is the first step to stabilising its economy.” Pakistan struggles with rolling blackouts thanks to an annual power deficit of about 5,000 MW. The contracts also help Chinese makers of generators, solar cells and the like, all of which suffer from huge overcapacity and need overseas buyers. Pakistan’s Prime Minister Nawaz Sharif, publicly says before his term ends in 2018, power cuts will be a thing of the past.

The CPEC agreement goes far beyond a port, highway and power plants. Gwadar will be all but rebuilt with a hospital, new drinking water supply and an international airport. The agreement spans Chinese biotech for cotton farmers to a multi-million dollar fibre optic network to slots on Pakistani Television for Chinese shows.

While the Karachi-to-Kashgar axis—Gwadar included—receives the most attention, it is only the easternmost of three corridors. Plans exist for central and western alignments—the latter running from Gwadar to Quetta and beyond.

Beijing has made the eastern alignment priority, postponing the central alignment that many Pakistanis prefer. China cites the July 2013 memorandum which says construction would “take the easiest [route] first”.

This has not gone down well with many provinces. Balochistan economic advisor, Kaiser Bengali, complained the present plan would not help economic activity in backward areas. Senator Taj Haider of the Pakistan People’s Party, noting wealthy Punjab would benefit the most, has promised his party would “protest” against “the choice of route” and “the placement of some of the projects”. Under pressure from the military, however, the provinces have grudgingly endorsed the corridor. Balochistan chief minister Abdul Malik Baloch, a strident critic, is among those who have backtracked recently.

China has security concerns about the two other alignments, fed by Pakistani fears that India would somehow sabotage the corridor’s construction.

Pakistani army chief, General Raheel Sharif, last month twice warned “enemies of the state” would try to stop the corridor.

Islamabad plans to train 12,000 security personnel to protect the coming hordes of Chinese workers. This will be in addition to the 8,000 security personnel already deployed to guard existing Chinese workers. Chinese media has already fretted about its workers being abducted. Reports say Chinese and Pakistani intelligence are sharing information on the anti-corridor activities of “foreign hostile agencies”—a reference to India’s Research and Analysis Wing.

Beijing’s heavy-handedness is because Chinese leader, Xi Jinping, wants CPEC to come up as fast as possible for prestige reasons.

His vision of an Asia-spanning infrastructure web with China at its centre—One Belt, One Road—has been less than popular with many countries. India Prime Minister Narendra Modi has pointedly refused to endorse the idea. Indian officials say this was in large part because CPEC, seen as part of One Belt, One Road, runs through Indian-claimed parts of Kashmir.

Says Andrew Small, author of The China-Pakistan Axis: “CPEC will be a test case for One Belt, One Road. It’s pretty much the most advanced set of projects within the whole initiative.” If China can transform a basket case like Pakistan, a place where the United States has spent billions in vain, Beijing’s standing in the developing world will be massively enhanced. As some diplomats have said, this could be Beijing’s “Marshall Fund moment”.

Another motive, not mentioned in public, is terror. Chinese academics and military officers admit the rise of Islamist militancy inside their country is “their number one security concern.” As the US leaves Afghanistan, China sees the corridor as a preventive against a coming jihadi epidemic.

As a senior US official said, “China follows a simple Marxist logic about this: low economic development means greater militancy.” The idea the corridor could save Pakistan, however, is also attractive to the Obama administration. Iran is sniffing at the possibility of linking itself to the corridor.

Though the CPEC has just started, Islamabad already benefits. Credit rating agency Moody’s, which puts Pakistan just two notches above default, declared the corridor a “credit positive”. This, despite the IMF slashing Pakistan’s forecasted 2015 growth rate to 2.6%. Beijing wants to turn this figure around quickly and has frontloaded $28 billion of its corridor expenditure.

Chinese officials say that as the corridor comes up, they hope to move factories to Pakistan. At present total Chinese FDI into Pakistan is less than $1 billion.

The strategic ambition behind the CPEC is sprawling. This is the largest foreign investment in Pakistan’s history and the largest overseas venture by China. Beijing’s commitment dwarfs the $1.5 billion a year Pakistan gets from the US.

Normally cautious when it ventures overseas, with this corridor China shows the confidence of a big-time gambler. The CPEC excites Beijing because it has so many pluses for Chinese strategy: stabilise an ally and jihadi source; create a market for Chinese capital goods; and offers a flagship project for Xi’s global plan.

First Published: Aug 29, 2015 23:29 IST