China, Pakistan Economic Corridor: salients and importance

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Ms. Sabahat Ali

 The Silk Road Economic Belt and the 21st Century Maritime Silk Road also known as The Belt and Road, One Belt One Road (OBOR) is a developmental strategy proposed by Chinese Supreme Leader Xi Jinping that focuses on connectivity and cooperation among People’s Republic of China and the rest of Eurasia. It consists of two main components, the land based ‘Silk Road Economic Belt (SREB)’ and oceangoing ‘Maritime Silk Road (MSR)’. The strategy underlines China’s push to take a bigger role in the global affairs and its need for priority capacity cooperation.

The coverage area of the initiative is Asia and Europe encompassing 60 countries, Oceania and East Africa also included. The anticipated cumulative investment is a staggering US$ 4-8 Trillion.

Likewise, China Pakistan Economic Corridor (CPEC) is a collection of projects currently under construction at an estimated cost of US$ 46 Billion, intended to rapidly expand and upgrade Pakistan’s infrastructure and broaden economic links between Pakistan and People’s Republic of China. The corridor is an extension of China’s ambitious One Belt, One Road initiative and the importance of CPEC is reflected by its inclusion as part of China’s 13th Five-year Development Plan.

The project is predicted to create about 700,000 direct jobs and add 2-3% to Pakistan’s Annual GDP. The proposed investment is equal to all foreign direct investment in Pakistan since 1970 and would be equivalent to more than 15% of Pakistan’s GDP.

The infrastructure projects under CPEC will span the length and breadth of Pakistan and will link the newly developed port city of Gwadar in south western Pakistan to China’s north western region of Xinjiang through a network of highways and railways.

US$ 33Billion have been allocated to improve the energy infrastructure which will be constructed by private consortia to help Pakistan with its energy crisis costing Pakistan about 2-2.5% of its Annual GDP.

Background

China has always wanted to get to the waters of the Arabian Sea through Pakistan. The first effort began with the construction of the Karakorum Highway in 1959. Later, China showed interest in constructing a deep water seaport in Gwadar in 1998 and began the project in 2002 which was finished in 2006. Further development in the project ceased due to political instability and law and order situation in Pakistan. The Chinese government interest was rekindled in November 2014, and it announced its intention to finance Chinese companies for its $45.6 billion energy and infrastructure projects as part of CPEC. On 20 April 2015, Pakistan and China signed an agreement to commence work on the $46 billion agreement, which is roughly 20% of Pakistan’s annual GDP. Approximately $28 billion worth of fast-tracked “Early Harvest” projects will be developed by the end of 2018.

Gwadar

The sea port of Gwadar forms the epitome of the CPEC.  It is considered a vital link between China’s ambitious One Belt, One Road project and its Maritime Silk Road project.

Gwadar Port will initially be upgraded to allow for docking of larger ships with deadweight tonnage of up to 70,000. Businesses located in the zone would be exempt from customs and many provincial and federal taxes. Business established will be exempt from various taxes for 23 years.  Likewise, contractors and subcontractors associated with China Overseas Port Holding Company will be exempted from the taxes for 20 years. China will grant $230 million to construct a new international airport in Gwadar which is to be operational by December 2017. A  300MW coal power plant, a desalinisation plant, and a new 300 bed hospital will also be constructed.

Road Projects

Under the CPEC project, China has announced financing for $10.63 billion worth of transportation infrastructure of Pakistan which will be upgraded and overhauled.

Three corridors have been identified for cargo transport, the Eastern Alignment, the Western Alignment and the future Central Alignment.

The 887 km long Karakoram Highway (N35) spanning from Burhan near Hasan Abdal to Pakistan-China border will be reconstructed and upgraded in portions. First portion till Havelian will be a 4-lane Expressway (E35 Expressway), the next till Shinkiari as a 4-lane dual carriageway and the rest as a 2-lane dual carriageway.

Eastern Alignment. The term Eastern Alignment of CPEC refers to roadway projects through the heavily populated provinces of Sindh and Punjab where most industries are located in Sindh and Punjab provinces.  A 1,152 km long motorway will connect Karachi and Lahore with 4 to 6-lane controlled access highway designed for travel speeds up to 120 kilometres per hour. The entire project will cost approximately $6.6 billion.

Western Alignment. The CPEC project envisages an expanded and upgraded road network in the Pakistani provinces of BalochistanKhyber Pakhtunkhwa, and western Punjab Province as part of the Western Alignment. This will result in the upgrading of several hundred kilometre’s worth of road into 2 and 4-lane divided highways by mid-2018.

Future Central Alignment. Long-term plans for a “Central Alignment” of the CPEC consist of a network of roads which will commence in Gwadar and travel upcountry via the cities of Basima, Khuzdar, Sukkur, Rajanpur, Layyah, Muzaffargarh, and terminating in Dera Ismail Khan, with onward connections to Karakoram Highway via the Brahma Bahtar–Yarik Motorway.

Rail Projects

The CPEC project emphasises major upgrades to Pakistan’s ageing railway system, including rebuilding of the entire Main Line 1 railway between Karachi and Peshawar by 2020. This single line railway currently handles 70% of Pakistan Railways traffic.  In addition to the Main Line 1 railway, upgrades and expansions are slated for the Main Line 2 railway, Main Line 3 railway. The CPEC plan also calls for completion of a rail link over the 4,693-meter high Khunjerab Pass. The railway will provide direct access for Chinese and East Asian goods to Pakistani seaports at Karachi and Gwadar by 2030.

Power Generation Projects

Major portion of CPEC investment of US$33 Billion is expected to be in power generation. As part of the “Early Harvest” scheme, an estimated 10,400 MW of electricity are slated for generation by March 2018. However, the energy projects under CPEC will be constructed by private Independent Power Producers. The Exim Bank of China will finance these private investments at 5–6% interest rates, while the government of Pakistan will be contractually obliged to purchase electricity at pre-negotiated rates.

China’s Zonergy company will complete construction on the world’s largest solar power plant – the 6,500 acre Quaid-e-Azam Solar Park near Bahawalpur with an estimated capacity of 1000 MW which is expected to be completed in December 2016.

Despite several renewable energy projects, the bulk of new energy generation capacity under CPEC will be coal-based plants, with $5.8 billion worth of coal power projects expected to be completed by early 2019 as part of the “Early Harvest” projects.

Geostrategic Impact of CPEC

Pakistan’s Economy. CPEC is considered economically vital to Pakistan in helping its economic growth.  The Pakistani media and government have called it a “game and fate changer.”  This massive investment plan will transform Pakistan into a regional economic hub.

 

 

Bypassing Straits of Malacca: The Straits of Malacca provides China with its shortest maritime access to Europe, Africa and the Middle East and approximately 80% of its energy imports pass through it. Energy security is a key concern for China since current sea routes are frequently patrolled by the United States’ Navy.

In any hostile actions, energy imports through the Straits of Malacca could be halted, which would paralyse the Chinese economy in a scenario that is referred to as the “Malacca Dilemma.”  In addition to these vulnerabilities, China is heavily dependent upon sea-routes that pass through the South China Sea, near the disputed Spratly Islands and Paracel Islands, which are a source of tension between China, Taiwan, Vietnam, the Philippines, and the United States.  The CPEC project will allow Chinese energy imports to circumvent these contentious areas, and thereby decrease the possibility of its confrontation with United States.

The Indian Navy has recently increased maritime surveillance of the Straits of Malacca region from its base on Nicobar Island owing to its fears of a Chinese “String of Pearls” encircling it.  Were conflict to erupt, India could potentially impede Chinese imports through the straits.  Indian maritime surveillance in the Andaman Sea could possibly enhance Chinese interest in Pakistan’s Gwadar Port–the Kyaukpyu Port, currently being developed in Myanmar by the Chinese government as another alternate route around the Straits of Malacca. The proposed Bangladesh-China-India-Myanmar Corridor (BCIM) would also be vulnerable to Indian advances, thereby increasing Chinese interest in CPEC.

Improved Access to Western China. The CPEC Alignments will improve connectivity to restive Xinjiang, and increase the region’s potential to attract public and private investment. The CPEC projects will also complement China’s Western Development plan, which includes Xinjiang and neighbouring regions of Tibet and Qinghai. CPEC will also provide China an alternative and shorter route for energy imports from the Middle East. The available sea-route is roughly 12,000 kilometres long, while the distance from Gwadar Port to Xinjiang province is approximately 3,000 kilometres, with another 3,500 kilometres from Xinjiang to China’s eastern coast.

Bypassing Afghanistan.  In February 2016, the Pakistani government signalled its intention to revive the QATT. The Quadrilateral Agreement on Traffic in Transit (QATT) devised in 1995, and signed in 2004 by the governments of China, Pakistan, Kazakhstan, and Kyrgyzstan was to facilitate transit trade between the various countries that could access Pakistani ports via Kashgar without having to rely on a politically unstable Afghanistan.

Given the long history of brotherly relations between the two countries in a region that is fraught with potential risks of confrontation between India and China, it was imperative that China and Pakistan realized the potential benefits of a strategic alignment. This can be traced back in time to the Silk Route binding these two countries. Successive governments in Pakistan have ensured that our relationship with China is not buffeted by the winds of change that have swept our region. No wonder people of both countries take pride in proclaiming that our relations are mightier than the “Himalayas and deeper than the oceans”. The warmth with which the CPEC has been received, it underlines the political resolve of people of Pakistan to see this strategic project succeed to its stated ends. It is hoped that with CPEC both China and Pakistan will emerge on the world scene as world/regional powers in the economic sense and in terms of geo politics, at the same time deterring other powers from encroaching upon their zones of interest.

The writer is human rights activist, member of PIHRO

Coordinator Women Wing Abbottabad.