CPEC – Myths from Realities

September 27, 2017

The China Pakistan Economic Corridor (CPEC), a key component in China’s ambitious 65-nation “One Belt-One Road” (OBOR) economic integration and development initiative, has long been the target of criticism. The concerns of skeptics are wide ranging, from security to political to economic. As soon as the ‘Long-Term Plan’ on CPEC’ was unveiled in May 2017, it was immediately labeled as one that would have long-lasting impact on Pakistan’s surveillance, entertainment, agriculture, tourism, transportation, finance, and security situations. Some have likened it to neo-colonialism claiming that China is not an NGO coming to distribute jobs and aid packages; nor is it a wealthy relative visiting us from abroad, bringing presents without demanding anything substantial in return. CPEC , they opine, is a project designated specifically for the Chinese – with any benefit enjoyed by Pakistan being purely accidental. Once fully implemented, it will greatly diminish Pakistan’s authority over its own land and resources and whereas, during its implementation, it does entail an impressive infusion of capital into Pakistan, but in the long run a lot more capital will be siphoned out than what was originally brought in.

The worst criticism comes on the manufacturing front where a vast number of local industrialists believe that if CPEC is allowed to be implemented without safeguarding the interests of local industry, it will not only end up dismantling the entire industrial base of Pakistan, but will also escalate the pace of premature deindustrialization in Pakistan, which some experts say is already taking place. For example, the Pakistan textile sector – the largest industrial sector in Pakistan – has started fearing the stiff competition that is likely to come its way after the introduction of a 10-year textile development plan by China in its Xinjiang Uygur Autonomous Region. According to this plan, by 2023, Xinjiang will build China’s largest textile production base and the largest garment-export’s processing base. Based on latest machinery, by 2023, Xinjiang will simply become the largest cotton textile industrial base of China and the most significant clothing export base in Western China. Ironically, the story on this side of the border portrays an opposite picture. Nearly 35% textile units in Pakistan have already shut down for various reasons, including the higher cost of doing business, becoming uncompetitive in the international markets, etc. Naturally, to the domestic textile players the huge investment on the world’s largest textile park (to be) at the bordering region with China poses a serious future threat.

Now it is all very well to get carried away with all these dooms day theories, but surely sanity must prevail in the end. China is a friend, - perhaps our most dependable friend – and has decided to put its trust and capital in Pakistan at a time when no other country was willing to do so. Also, the level of economic engagement that China is undertaking with Pakistan is unprecedented: $50 billion, which is the largest single initiative in the larger OBOR plan. On the matter of how to safeguard our interests amidst this flood of revenue inflows and on how to ensure that current benefits do not transform into long-term pain, the onus lies with us. It is primarily the duty of the government of Pakistan to take care of all such aspects and eventualities when finalising different projects under CPEC . More importantly, the Pakistani public must be aware that it should not believe all that it hears, since there is a very real external political element that does not want CPEC and is working consistently to undermine it. For example, India opposes CPEC , as it will pass through Kashmir (in Pakistan) and it fears that with connectivity and development taking place at Pakistan’s end, it will lose the other half occupied by it and where today the indigenous freedom movement already stands heated up. However, rather ironic that on one hand it wants to contain China in its initiatives with Pakistan while on the other hand it partners China in a fast growing trade equation (Sino-Indian trade is tipped to soon touch the $100 billion mark) and also in working closely with it on the common development forum of BRICS (Brazil, Russia, India, China, & South Africa). As we know BRICS’s contribution to world GDP growth has risen to 24 percent from 8 percent in 2000. Its new Development Bank, which was established to signal transfer of power in the international system from the traditional developed industrial countries to the new emerging economies, despite differences plays an increasingly important role in the global economic growth.

Coming back to CPEC , so what precisely should and can China bring on the table for Pakistan? The answer is: If we get our priorities straight and our act right, we can constructively partner with the Chinese companies to jointly work on the following:

* Large scale demonstration projects in agriculture covering development of everything from irrigation technology to seed development.

* An advance surveillance-system to be installed with 24/7 oversight covering all main cities (on the lines of ones currently running in Beijing, Shanghai, Canton, etc.) in order to enhance national security.

* A national fiber-optic backbone for internet-traffic and a terrestrial distribution of broadcasting material.

* Industrial parks and special economic zones that either encourage the Chinese companies to partner with their Pakistani counterparts or induce them to invest in a manner that boosts Pakistan’s exports; a good example: Chinese manufacturing investments in Vietnam.

* Developing of a cross tourism industry in Pakistan.

*Low interest loans that can be adjusted against currency swap agreements. For example, China and the ASEAN will also step up cooperation in multiple sectors under the OBOR Initiative. To facilitate this and to ease repayment outflows from the ASEAN members, China has just signed a 550 billion yuan currency swaps with ASEAN member countries and has expanded the Renminbi Qualified Foreign Institutional Investor (RQFII) quota to 200 billion yuan for them. Also, the Asian Bond Fund has played an important role in implementing infrastructure projects in other parts of Asia. Pakistan should also look for similar arrangements with China.

The possibilities though are endless!