KARACHI:
Ten years have passed since President Xi Jinping first announced the China-Pakistan Economic Corridor as the flagship project of his $1.4 trillion Belt and Road Initiative. New roads, high-speed rail, power plants, pipelines, ports and airports, and telecommunications links are all part of the massive BRI programme, which is 11 times the size of the Marshall Plan that rebuilt Europe after World War II. This is all in an effort to revive the legendary “Silk Road” and increase trade with 60 countries across Asia, Europe, the Middle East, and North Africa.
With the potential to reach over half the world’s population and create GDP of over $21 trillion, the BRI has been called “potentially the most transformative engineering effort in human history” by former US assistant defence secretary Chas Freeman. Despite the lack of a military component, experts in the United States are concerned that this project could undermine the current global economic and political order.
Western media was rife with heated disputes as commentators attempted to paint BRI as a “debt-trap” that would trap developing countries in unpayable debts via “predatory lending” and give China too much sway over their policies. Western politicians popularised the term “debt trap diplomacy” in 2017 to describe China’s 99-year lease of Sri Lanka’s Hambantota port after the island nation defaulted on its debt obligations. The word has now been used dishonestly to refer to all BRI projects, not just CPEC.
Also, see: Pakistan’s Prime Minister Shehbaz Sharif begs India to stop obstructing CPEC.
Chinese Premier Li Keqiang first launched CPEC in 2013 during a visit to Pakistan, but President Xi’s visit to the nation in April 2015 gave it a tremendous boost. Pakistani officials called the project a “game changer” because they believed it would solve the country’s long-standing energy crisis, modernise its creaking infrastructure, create new industrial parks, and pave the way for transit trade with China via Gwadar Port. The $62 billion economic corridor further solidified the romantically described decades-long strategic alliance between the two countries. In response, Pakistan praised CPEC as a step towards “economic regionalisation in the globalised world” and “hope of better region with peace, development and growth of economy”.
For several reasons, the start of CPEC was critical for Pakistan. First, it occurred during a period when terrorists carried out terrible strikes virtually every day and national security was at an all-time low. Second, FDI had nearly dried up because of widespread security worries brought on by the surge of terrorism. Since Pervez Musharraf’s ouster in the early 2000s, when he liberalised the economy and attracted major foreign investments in the services sector, Pakistan had not seen much FDI. Third, the government of Pakistan spent billions of rupees on subsidies to prevent the loss of “political capital” due to a persistent electricity shortage that stunted industrial expansion and sparked violent demonstrations by domestic customers. The country’s macroeconomic stability was deteriorating, as seen by its rising current account and trade deficits and its currency’s depreciation. Fifth, the country has trouble allocating substantial funds for social and economic growth and implementing large-scale infrastructure projects.
Anticipation and optimism were buoyed by CPEC, notably the $43 billion worth of early harvest projects. In Pakistan’s eyes, CPEC was the silver bullet to all of its economic woes because it would (a) modernise infrastructure for long-term growth; (b) connect major economic regions in an effort to narrow regional economic development gaps; (c) upgrade development with the help of Chinese aid and investment; (d) elevate investment relations with China to promote exports, increase industry and employment, and form industry clusters.
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There has been a slowdown in CPEC progress since 2018 due to an incapacitating economic crisis, yet this massive initiative has nonetheless resulted in a number of road and energy projects. Multiple highway building projects are moving along on time. According to an update on CPEC published by the Chinese National Development and Reform Commission (NDRC) on May 17, 2023, “power plants that have entered commercial operation provide nearly one-third of Pakistan’s national electricity demand, having changed the situation of power shortage in Pakistan.” “China and Pakistan’s joint construction of the Gwadar port has made significant strides towards establishing a regional transportation centre and industrial base. The NDRC also reported “positive results in business attraction” following the completion of the first phase of construction at Pakistan’s Rashakai Special Economic Zone. As a result of this exceptional economic activity, 236,000 new employment were made available, 155,000 of which went to people in Pakistan.
Despite Beijing and Islamabad’s best efforts to control the story around CPEC, Western observers believe crucial elements, such as the conditions of the investments and loans, the scope of the projects, and the total cost to Pakistan, remain unknown. The United States has publicly criticised “China’s predatory lending to Pakistan” in recent months, alleging that Beijing is using Pakistan to further its own geopolitical goals. Specifically, it claims that Pakistan’s debt is increasing due to CPEC’s arrangements, which favour Chinese businesses and workers. Pakistan’s external debt is expected to have surpassed $100 billion by February 2023, according to the most recent forecasts. And more than $30 billion, or over a third, is in debt to China.
This is an inaccurate assessment of the project based on unfounded worries. To view CPEC solely as a government-to-government investment project designed to lock Pakistan in a cycle of debt would be a simplification. Private Chinese investment has flooded many sectors thanks to CPEC. Hui Coastal Brewery and Distillery of China has begun production in Hub, Balochistan, and a Chinese consortium has purchased 40% of the Pakistan Stock Exchange. Additionally, Alibaba Group has acquired 45% of the Telenor Microfinance Bank. Pakistan’s economy has benefited from the private Chinese investments made all around the country.
China’s foreign policy is predicated on the idea of non-interference with the internal affairs of other sovereign states. Because of this, despite being Pakistan’s largest lender, Beijing has abstained from interfering in Pakistani domestic politics, forming social pressure organisations, or influencing economic policy. Instead, Western multilateral financial institutions like the IMF and World Bank have frequently tried to impose their will on Islamabad’s budgetary practises. Similarly, Pakistan’s $8.5 billion in debt to the Paris Club (primarily the United States, France, Germany, and Japan) has often been leveraged for geopolitical and geostrategic ends.
However, in order to fully benefit from CPEC and its goal of transforming Pakistan into an affluent regional trading hub, Pakistan’s ruling class must assure political stability and continuity of policy, strengthen security, and adopt broad-based economic reforms.
