China-Pakistan Economic Corridor (CPEC)

The recent agreement between Pakistan and China to upgrade the China-Pakistan Economic Corridor (CPEC) marks a significant development in the ongoing partnership between the two countries.

Background on CPEC

Inception and Objectives:

• Launch: CPEC was launched in April 2015 during a visit by Chinese President Xi Jinping to Islamabad. Initially valued at $46 billion, the investment pledges have since increased to $62 billion.
• Goals: The primary aims of CPEC are to modernize Pakistan’s infrastructure, including road, rail, air, and energy transportation systems, and to connect the deep-sea ports of Gwadar and Karachi with China’s Xinjiang province and beyond.

Geographical Scope:

• CPEC links China’s Xinjiang region with Pakistan’s Gwadar port, passing through Pakistan-occupied Kashmir (PoK), where China is involved in various projects.

Phases of CPEC

First Phase (Infrastructure Creation):

• Projects: The first phase included agreements on energy, infrastructure, port development, and railway construction.
• Progress: The progress has been uneven. Of the 21 proposed power projects, 14 are completed, two are under construction, and five have yet to begin. For transport projects, six out of 24 have been completed, while work on 13 projects has not yet started.
• Investment: By 2022, direct investment from CPEC into Pakistan had reached $25.4 billion, according to Xinhua.

Second Phase (Industrialization and Special Economic Zones):

• Industrial Cooperation: In February 2022, during a visit by the Pakistani PM to China, a significant industrial cooperation agreement was signed.
• Focus: The second phase emphasizes the development of Special Economic Zones (SEZs) and broader industrialization, aiming to boost economic growth and create job opportunities.

Recent Developments

Upgrade Agreement:

• During a recent visit by Pakistani Prime Minister Shehbaz Sharif to China, both countries agreed to upgrade CPEC. This includes advancing the high-quality development of the project in the second phase.

Analysis

1. Economic Impact: The upgradation of CPEC is expected to further boost economic ties between Pakistan and China. Enhanced infrastructure and industrial cooperation could lead to significant economic growth in Pakistan, particularly in areas targeted by the SEZs.
2. Challenges: Despite substantial investment, the first phase of CPEC faced challenges related to uneven progress and project delays. Addressing these issues and ensuring effective implementation in the second phase will be crucial.
3. Geopolitical Context: The inclusion of PoK in the CPEC route has geopolitical implications and is a point of contention with India. This aspect of CPEC continues to be a sensitive issue in regional politics.

Reasons Behind Stalled CPEC Projects

1. Chinese Concerns:
   • Corruption and Bureaucratic Delays: Chinese investors have expressed concerns about corruption and bureaucratic inefficiencies in Pakistan. These issues can delay project implementation and increase costs.
   • Political Instability: Frequent changes in government and political instability in Pakistan create an unpredictable environment for long-term investments.
2. Security Situation in Gwadar:
   • Terrorist Attacks: Gwadar, located in Balochistan, has faced significant security challenges. Baloch militants have targeted Chinese nationals and CPEC projects, leading to a high-risk environment for investments.
   • Local Discontent: The Baloch population has expressed grievances over the perceived lack of economic benefits from CPEC projects. The corridor has been seen as a symbol of economic injustice rather than a source of local prosperity.
   • Impact on Future Investments: The ongoing security issues in Gwadar are a major concern for future Chinese investments, potentially deterring further development in the region.
3. Chinese Approach of Not Partnering with Local Companies:
   • Limited Job Creation: One of the expectations from CPEC was the creation of over 2 million jobs for Pakistanis. However, government data indicates that fewer than 250,000 jobs have been generated so far.
   • Tax Exemptions and Imported Labor: Chinese companies involved in CPEC projects are often tax-exempt and prefer to bring their own labor from China. This practice limits job opportunities for local Pakistani workers and reduces the benefits of CPEC for the local economy.

Geopolitical and Security Concerns

1. CPEC and India's Sovereignty:
   • Territorial Disputes: CPEC passes through Gilgit-Baltistan, an area claimed by India as part of the former princely state of Jammu and Kashmir. This aspect of CPEC is viewed as a threat to India’s sovereignty and territorial integrity.
   • Geopolitical Tensions: The presence of CPEC in disputed territories exacerbates geopolitical tensions between India and Pakistan, contributing to regional instability.
2. Security Threats to India:
   • Chinese Military Presence: The construction of CPEC has been accompanied by increased Chinese military activity in the region. For instance, in 2017, Chinese troops participated in Pakistan’s Day parade in Islamabad, marking the first time Chinese military forces took part in a foreign parade.
   • Naval and Military Expansion: China has been strengthening its military and naval presence in the Indian Ocean region. This includes plans to build a naval base in Gwadar and the deployment of submarines in Pakistan. These moves are perceived as part of China’s strategy to encircle India and enhance its strategic influence in the region.

Conclusion

The stalled progress of CPEC is influenced by a combination of internal and external factors. Internally, challenges such as corruption, security issues in Gwadar, and the lack of local employment opportunities have hampered the project's success. Externally, geopolitical tensions, particularly with India, and concerns over Chinese military expansion further complicate the situation. Addressing these issues will be crucial for the successful advancement of CPEC and for improving its impact on the regional economy and security.