Is China-Pakistan Economic Corridor really a game changer?

Grand vision

April 2015 was a historic month for Sino-Pakistan relations when Chinese President Xi Jinping and Pakistani Prime Minister Nawaz Sharif signed an agreement worth $46 billion for the China-Pakistan Economic Corridor (CPEC), which is the considered to be the largest investment by China in a foreign country. This Corridor is of high significance, as it shall run through one of the most vital geostrategic locations in South Asia. It shall mainly act as a trade bridge between China, the Middle East and Europe through Pakistan but will generate thousands of jobs and revenue worth billions of dollars for both countries. However, there were some concerns raised by local and international stakeholders that require to be dealt with for long-term development goals.

According to the ‘String of Pearls’ Theory, this corridor is one of the many megaprojects planned by China in Central, South and South East Asia for expanding its political and economic influence to counter the relatively better established US sphere of influence in the region. The US has a similar agenda in the form of ‘Pivot to Asia’, which is aimed at countering China’s economic and military expansion in Asia-Pacific. According to a report published in 2013 by London based policy think tank Chatham House, ‘The increasing complexity of the Asia-Pacific region demands US attention, and the United States remains well-positioned to play a pivotal role in the region through the 21st century.’ This means that the US has partnered itself with key players in the region such as India, Japan, Indonesia and Singapore to prevent the Chinese ‘dragon’ from spreading its influence. The hostile nature of these moves has made Pakistan a major player that can potentially balance the superpower rivalries and promote trade cooperation in the region as it has good relations with both the West and China. A similar initiative taken by General Yahya Khan’s regime in 1970 had also brought the two great powers on the diplomatic table and in current scenario; a trade-oriented diplomacy by Pakistan can help reduce the complexities of this rivalry.

The Pakistan army already explored the possibilities of an inter-linked road network in 1997 when an internal research paper was prepared for the GHQ Rawalpindi called ‘The Army’s Role in Nation Building’ by Brigadier Riaz Ahmed Toor

In terms of trade route, China mainly relies on the shipping route that passes through the Strait of Malacca and it takes some 45 days to reach Europe via the Middle East. When the CPEC is completed, it would take approximately 10 days for Chinese shipments to reach their destination, as the Kashgar-Gwadar route will play a pivotal role in reducing the staggering amount of time and distance. Not only this, the reliance on the Malacca route would be significantly reduced, as it is already a potential flashpoint of blockade by the United States Pacific Command (USPACOM) in periods of major hostility.

Furthermore, it is to be noted that a large portion of CPEC is reserved for power projects to reduce demand-supply gap in energy-starved Pakistan while the expansion of road network across the country is a major key point for both infrastructural development and Chinese goods to pass through. The ministry of planning and development under Federal Minister Ahsan Iqbal has already clarified its position regarding the rumours of ‘change in trade route’ to concerned political stakeholders from smaller provinces. The three trade routes that shall stretch from the Himalaya Mountains to the Arabian Sea are actually inter-connected contrary to what the stakeholders believed. It is quite similar to the US Highway and German Autobahn systems that stretch to all corners of regions with entry and exit routes fixed at certain points for every state the highways pass through. These highways have inter-linked transportation and trade encouraging small towns and cities to develop along the routes and for Pakistan such a project is a jewel in the crown.

The Pakistan army already explored the possibilities of an inter-linked road network in 1997 when an internal research paper was prepared for the GHQ Rawalpindi called ‘The Army’s Role in Nation Building’ by Brigadier Riaz Ahmed Toor. This paper highlighted the need to develop a strong transportation network across all provinces by linking Gwadar and Karachi with the rest of the country for both peacetime and wartime periods. The CPEC’s road network project can be considered as the true practical face of this research paper published some 18 years ago.

Despite the positive outlook of the CPEC, we also need to understand the potentially long run negative impact it shall have on Pakistan’s industrial sector. The goods from China will likely flood Pakistan’s market more rapidly, which will potentially slow down or in worse case cripple the local industry

Since the signing of CPEC’s projects, India has also taken keen interest by trying to sabotage the prospects of CPEC through its intelligence agencies. For India, CPEC means that China shall have the upper hand in the Arabian Sea as it will have complete control over the Straits of Hormuz through Gwadar’s seaport. This will likely have adverse effects on India’s trade route and perhaps this is the reason that it has also started close working relationship with Iran for making Chabahar a significant seaport.

However, despite the positive outlook of the CPEC, we also need to understand the potentially long run negative impact it shall have on Pakistan’s industrial sector. The goods from China will likely flood Pakistan’s market more rapidly, which will potentially slow down or in worse case cripple the local industry. Furthermore, Pakistan may only get royalties from CPEC and China may require Pakistan to open trade route for Chinese goods to pass into Afghanistan, Iran and India depending on the economic situation. Though Pakistan has never granted Most Favoured Nation (MFN) status to India, a possibility might become a need in the future that must be taken care of.

Pakistan needs to secure its own national interests and keep the balance of its relations with both China and the West for relying on one sphere of influence can damage relations with the other. By becoming a diplomatic balancer, as pointed out previously, Pakistan can get the best from both powers and bridge their sloppy relations. CPEC is indeed a great ‘game changer’ which should complete its short term goals but for long-term trade goals, Pakistan shall really have to explore all options so that its own economy doesn’t get trampled beneath.