CPEC – an overview

CPEC was originally proposed by the Chinese Premier, Li Keqiang, during his visit to Pakistan in May 2013, with a project linking Kashgar in northwest China with Gwadar Port on the Arabian Sea coastline in Baluchistan. The initiative is also driven strongly from China’s quest for Warm Waters. Mindful of the under development of its western provinces which are a soft belly and ongoing Uighur movement, China wants speedy modernisation of Xingjiang and of its other under developed provinces to bring them at par with its eastern provinces. For the accomplishment of these dreams, China needs access to warm waters in the Arabian Sea through Gwadar since this route to world markets is not only the shortest and cheapest, but also provides China with an alternative to the Strait of Malacca. CPEC envisages developing Gwadar into a free trade zone with a modern airport and as the largest deep seaport overshadowing Chahbahar and Dubai, in the process turning it into a gateway for China’s one belt-one road initiative.

CPEC investments will be spread over 15 years with a total outlay of up to US $46 billion: around $35 billion on the energy front in an IPP (Independent Power Producers) mode and the balance will go to infrastructure development. Though CPEC cooperation will initially come in two main sectors (infrastructure development and energy generation) going forward, the scope will be extended to other fields of finance, science and technology, which would hold paramount importance in order to reap more social and economic gains for the mutual benefit of people of both countries. As projects under the CPEC gather pace, broader synopsis of the short-term and long-term plans for the Corridor also slowly begin to get unveiled. Both Pakistani and Chinese governments need to be careful on a number of risks to smooth implementation of their partnership framework. Much of these concerns on CPEC projects focus on the general lack of know-how on finances, public private partnerships and the extent of the benefit to both China and Pakistan, and then weighing them against each other.

Today, despite being the sixth largest country in the world on the basis of population, ranks 126 out of 140 in manufacturing competitiveness, 90 in innovation and technology sophistication, 150 out of 183 in per capita income, 147 in the human development index, 123 in education facilities, a lowly 44 on GDP’s size, and finds itself heavily in debt. Without indulging in a blame game, the reality today is that more than ever before, Pakistan needs to be engaged, invested-in, and taken along both financially and technologically. With West closing its doors and suddenly turning exclusionary the choice for us has become quite straightforward – all roads lead to China! Naturally, with little options in hand, Pakistan at times appears almost over-eager to make CPEC happen at any cost; even if that cost in some areas threatens to be unsustainable for the country’s economic health in the long-run.

Everyone from politicians to bureaucrats to military hierarchy and some self-styled business experts are busy singing endless praises for China’s generosity as if some divine windfall seems headed Pakistan’s way, in the process making CPEC a sacrosanct initiative where even slight or rational criticism is being regarded as a sin. While not denying, even for a minute, China’s long-standing friendship, its support to us in difficult times and its favor to put investment per se back on the center of our economic plate – especially at a time when most western investors are treating Pakistan as an investment pariah – the reality remains that at the end of the day CPEC is a business proposition and needs to be looked as such. Like the Chinese we also need to approach CPEC professionally and not emotionally. Basically, we need to learn from them how to corporatize economic propositions in order to overcome concerns on: prevailing lack of transparency, on-going political bickering (joint satisfaction of all provinces will always be the key to CPEC’s success), a general public mistrust, and competence related operational hazards. Regrettably, misplaced perceptions, innuendos and politicization of CPEC seem to be taking root and unless (like in China) CPEC in Pakistan is also quickly put under professional control these emerging controversies carry the danger of undermining the entire program. The only solution is to give CPEC’s decision making and its implementation control under an autonomous, non-political and professional Board.

Economic decisions and their outcomes cannot be frozen in a time warp. Fifteen years is a long time and local, bilateral, regional and global economic events will keep on evolving during this period. We needful to be mindful of the emerging developments around us and on the very likely possibilities of altered global equations and new partnership. Effectively countering India and at the same time maintaining a constructive relationship with the USA is going to pose a real challenge in the future. We need to convince India, Afghanistan and Iran that CPEC can work inclusively if everyone plays a fair role in it and can essentially benefit the entire region. India, which openly airs its reservations and negative sentiments about the CPEC should be engaged and convinced that like pre 90s, it is once again aligning itself with the wrong economic theme. India’s economic progress only came when it shunned the closed socialist policies of the iron curtain and connected with the world. Today it is making the same mistake by opting to shun the Asian economic inclusiveness and instead allying itself with West’s newly found mindset on pursuing exclusionary and protectionist policies.

However, to succeed amidst all these challenges the onus lies on us. When assuming a debt burden of as large as $46 billion we need to ask questions like: what if oil and energy prices crash internationally? How prudent is our choice of coal as the main fuel in a potentially $34 billion investment proposal and what possible financial repercussions could we face say if the power tariff drops to a point that can no longer justify the returns being promised by us to our investors? How do we work and compete with China at the same time? How do we maintain a balance in our relations with the westerns economies who still represent the bulk of global consumption and account for our main exports – after all we do not want to end up being another North Korea with merely a singular friend?

Lastly, Chinese generosity may not last endlessly. Already their patience is running thin with what they regard the inability on the Pakistani side to keep CPEC non-controversial. This coupled with a deteriorating Chinese economy carries the potential danger of affecting CPEC if we fail to live up to the operational and financial discipline that China seeks in return. And for this reason alone we must act quickly to not only convince our Chinese friends that we have a sound CPEC management structure in place to judiciously use the allocated funds, but to also in-turn satisfy ourselves that a professional team is indeed in place to manage these investments prudently and sustainably. Failure is just not an option!