The China-Pakistan Economic Corridor (CPEC) stands as a symbol of the deep-rooted and unwavering friendship between Pakistan and China. Initiated as a flagship project under the Belt and Road Initiative (BRI) in 2013, CPEC was envisioned to revolutionize Pakistan’s infrastructure, energy sector, and economy. Over the years, it has achieved significant milestones, however, like any ambitious endeavor, CPEC has faced challenges that demand thoughtful planning and collaboration for its second phase. This article reviews the targets and achievements of CPEC, identifies its shortcomings, delves into the vision for CPEC Phase-II, including the establishment of new joint working groups, discusses planning, the future, and the way forward for this transformative initiative, and concludes with the immense potential it holds for both nations and the broader region.
The Targets of CPEC under BRI
Infrastructure Development: CPEC aimed to transform Pakistan’s infrastructure by constructing modern transportation networks, including highways, railways, ports, and airports. The goal was to enhance regional connectivity and facilitate trade and economic growth. Energy Security: Addressing Pakistan’s energy crisis was a core objective of CPEC. The corridor aimed to develop various energy projects, including coal, hydro, solar, and wind power plants, to boost the country’s energy capacity and reduce its dependence on costly energy imports.
Economic Growth and Industrialization: CPEC aimed to stimulate Pakistan’s economic growth by attracting foreign direct investment (FDI) from China. This investment was expected to create job opportunities, spur industrialization, and improve living standards for the Pakistani people.
Regional Connectivity: As part of the Belt and Road Initiative, CPEC envisioned fostering regional connectivity by creating a network of roads, railways, and pipelines linking China to the Arabian Sea through Gwadar Port. This connectivity aimed to benefit China, Pakistan, and landlocked Central Asian countries.
It must be kept in mind that the structural planning of CPEC was as follows in four stages:
i. Early Harvest 2015-2018: Most of the projects related to the Energy sector,completed or expected to be completed by 2018, had approximately 5,000 MW of electricity added to the national grid and thus easing the energy shortages and load shedding that had crippled the industry and exports.
ii. Short-term projects up to 2020:Roads, Gwadar Development, Optic fiber network and the Hydel, coal mining, and power projects.
iii. Medium projects up to 2025: Railways and Industrial zones.
iv. Long-term projects up to 2030:Completion of Industrial zones, Agriculture, Tourism, Science and Technology, Information Technology, Water Resources, Oil and Gas Sector, Mines and minerals, and Socioeconomic based grant projects.
Achievements of CPEC under BRI since formal launch in 2013 are as followings:
In the energy sector, both Governments envisaged overcoming the critical issue of energy under CPEC with multiple projects of 17,045MW (FDI $33 billion). As of now, thirteen (13) power generation projects with a total installed capacity of 8,020 MW & one HVDC transmission line with evacuation capacity of 4,000 MW have achieved their commercial operation. One (01) energy project, 884 MW Sukki-Kinari HPP, is expected to be completed in July 2024. In addition, 700.7 MW Azad Pattan Hydro Power projects, 1,124 MW Kohala, and 300 MW Gwadar Coal Power Project are in the pipeline.
In transport infrastructure sector, CPEC effectively helped Pakistan improve the major transport networks from north to south and laid down the foundation for a resilient infrastructure including ports, airports, roads and railway lines. In the early harvest projects of CPEC, six mega infrastructure projects were completed; Havelian-Thakot section of KKH, Multan-Sukkur (M-5) Motorway, Hakla-D.I.Khan Motorway, Optical Fiber Cable, Eastbay Expressway, and Orange Line Metro Train. Furthermore, on the western alignment of CPEC, work on different sections is ongoing and will be completed in July 2024. Since most of these highways pass through the far-flung areas of Pakistan, it has opened those areas for business to bring prosperity. According to the statistic, approximately 200,000 jobs were created in the first phase of CPEC development for locals, including engineers.
CPEC is also playing a significant role in enriching people-to-people connectivity. Before Covid-19, 28,000 Pakistani students were studying in China in various disciplines, which shows a strong lobby of goodwill Ambassadors. Studying and training in China is an important opportunity for future researchers to gain first-hand knowledge of Chinese culture, business models, and practices. Moreover, China is also offering several scholarships besides training programs.
A socio-economic development framework agreement was signed with the Chinese under CPEC whereby the Chinese government pledged a grant of USD 1 billion for assistance. Moreover, small interventions are being planned and implemented in numerous fields, including agriculture, medicine, education, vocational training, poverty alleviation, and fresh water supply across the country.
The development of Gwadar smart port city has been a major focus under the CPEC framework. The city is ready to become a hub of international trade and commerce as it provides direct access to the Arabian Sea and the Strait of Hormuz. Gwadar has significant implications for Pakistan’s economy and the region’s geo-economics, particularly in trade, investment, and employment. The development of Gwadar includes; the construction of a deep-sea port, a new international airport, highways, and other infrastructure projects. With Gwadar Free Zone as the port’s hinterland and the country’s largest airport spanning over 4300 acres of land under construction in the port’s vicinity, all of the necessary ingredients are in place to kick start the socioeconomic development of Gwadar and beyond.
As many as 12 Joint Cooperation Committee (JCC) Meetings, clubbed with 11 Joint Working Groups (JWGs), were held until July 2023. And now in CPEC Phase-II;
CPEC Phase-II aims to build upon the achievements of Phase-I and address its shortcomings. It envisions the establishment of new joint working groups to strengthen bilateral cooperation in various fields. Some key objectives of CPEC Phase-II include:
Industrial Cooperation: Phase-II will emphasize industrial cooperation, technology transfer, and value-added production in Pakistan. Also, Special Economic Zones (SEZs) will be developed to attract investments and promote industrialization.
Energy Diversification: The focus will be on renewable energy sources, such as wind and solar power, to promote sustainable development and reduce Pakistan’s reliance on fossil fuels.
There are new areas of cooperation added to the ever-expanding portfolio of CPEC under the JWG of Science and Technology and Information Technology; the China-Pakistan Knowledge Corridor have worked out for the Establishment of China-Pakistan Technology Transfer Center, Capacity Building & Training for Teachers for S&T Engineering Mathematics (STEM), Mutual recognition and accreditation of engineering education. The S&T initiated is also currently working for the Joint Research Center on Earth Sciences in Quaid-e-Azam University, Institute of Smart Semiconductor Technology, Silicon Solar Cells and PV Panel Fabrication Facility of 500 MW. The Chinese side is forthcoming and welcome collaborations in cross-cutting multiple sectors of CPEC;Electric Vehicle, Nano sciences, Health Sciences and Bioinformatics.
Agriculture cooperation under CPEC, was envisaged for 2nd phase of CPEC. A comprehensive action plan for agriculture development was signed during the 2nd JWG meeting on Agriculture Cooperation under CPEC in April 2020. In 2020, due to sheer negligence in controlling the locust, a state of emergency was declared in Pakistan. However, China came to help Pakistan and donated 300 tons of locust control pesticides and 350 vehicle-mounted sprayers to fight against the locust plague.
Recently, during the visit of H.E. He Lifeng, Special Representative of President Xi Jinping, Vice Premier of China, and Member of the Politburo of the Central Committee of Communist Party of China undertook an official visit to the Islamic Republic of Pakistan from 30th July to 1st August 2023 on the occasion of the celebration of the decade of China-Pakistan Economic Corridor (CPEC). The visit of the Chinese vice Premier symbolizes the deep-rooted, time-tested, and all-weather friendship between China and Pakistan. Both sides expressed their satisfaction with the significant progress made in various sectors of cooperation under CPEC.
Both leaders took note of the signing of minutes of the CPEC Joint Cooperation Committee (JCC), which reviewed the progress of ongoing projects and agreed to continue the momentum of CPEC’s high-quality development.
Recognizing that ML-1 is a project of key significance under the CPEC framework and of importance to Pakistan’s socio-economic development, the two sides agreed to build upon the leadership consensus, and to advance the process of its earliest implementation. They also endorsed the Minutes of the 21st Conference of Technical Committees on Promoting the ML-1 Project. They also witness the signing of “Completion Certificate of Realignment of KKH Phase-II (Thakot-Raikot) Project Feasibility Study Final Report.”
In line with the leadership’s consensus to accelerate cooperation in agriculture, mining, IT, socio-economic development under CPEC, and the two sides witnessed the signing of “Protocol of Phytosanitary Requirements for Export of Dried Chilies from Pakistan to China”.
The Chinese side also appreciates the efforts of the Pakistani government in vigorously developing renewable energy projects, two Hydropower projects; 700MW Azad Pattan and1124MW Kohala. Also, solar power projects as they align with the green, low-carbon, and environmental development of the energy sector and encourage the participation of Chinese companies in this Pakistani endeavor.
The two sides agreed to actively promote the implementation of Industrial Cooperation to support Pakistan’s industrial development and the signing of the “MoU on Industrial Workers’ Exchange Program” and “MoU on Establishing an Expert Exchange Mechanism within the Framework of the CPEC.”
Both leaders also unveiled the “Commemorative Postage Stamp & Coin” to celebrate successful decade of CPEC. The Stamp & Coin would serve as a tangible and enduring tribute to the accomplishments made through CPEC. Moreover, this Stamp & Coin will symbolize the enduring friendship and collaboration between ‘Iron Brothers’. The design of the Commemorative Postage Stamp feature elements such as the flags of China and Pakistan, iconic landmarks projects (Gwadar Port, Motorway, and Power Plants) along the CPEC route, and symbolize the key sectors that have thrived under this project.
Shortcomings of CPEC under BRI
Debt Sustainability: Accumulating debt from Chinese loans has raised concerns about Pakistan’s ability to manage repayments. Ensuring debt sustainability and responsible financial management are essential to prevent an unsustainable debt burden. Almost25 Billion dollars, out of which 15 billion is private liability and will be paid by power companies, and the remaining 10 billion dollars are direct G2G loan liability. ). Someone can argue that $15 billion is not a liability because it’s a private FDI model of power companies. However, it is a public liability because these power companies will extract their private loan repayments from the Central Power Purchasing Authority Guarantee (CPPAG), which will then collect this directly from public and governmental subsidies directly. So, practically, it seems like a debt cycle, but massive reforms in the energy sector can manage or defer its impact on the economy.
And yes, it’s a game changer if governmental authorities handle it properly because nothing is free in this world. If someone came to help you through investments, they deserve the earnings and should earn the profits as per agreements. Unfortunately, Pakistan’s internal political unrest has destroyed pace, sentiment, and trust of existing and new investors. There is no ill intention from the Government of China, and its CPEC state owned companies, to put Pakistan in debt trap, as claimed by Western donors like IMF. Now, IMF is not very forthcoming in helping Pakistan because they are always afraid that Pakistan might take dollars as a loan from IMF and pay Chinese State Owned CPEC companies. Nothing is without debt in this world. Pakistan was supposed to boost its economy through the help of Chinese brothers, but we didn’t put our house in order at the right time.
Security Challenges: CPEC faces security threats, particularly in Balochistan and Khyber Pakhtunkhwa, which have impacted the progress of certain projects. Ensuring a secure environment for CPEC’s implementation and operation remains a top priority.
Socio-economic Issues: Land acquisition for CPEC projects has raised concerns about fair compensation and the resettlement of local communities. Addressing these issues transparently, is essential to maintain public support.
Geopolitical Tensions: The strategic location of CPEC has raised geopolitical tensions, particularly with India, which views the corridor as infringing on its sovereignty due to its passage through disputed territories.
Environmental Issues: Before CPEC, there was no coal power plant in Pakistan. CPEC added almost 5,500MW of Coal Electricity to the national grid of Pakistan. Although these all are environmentally complaint. However, it triggered the international agencies to blame CPEC and China for environmental flood disasters in Pakistan.
Conclusion
The China-Pakistan Economic Corridor under the Belt and Road Initiative has strengthened the historical relationship between Pakistan and China and created new avenues for economic growth and regional connectivity. The achievement of CPEC in infrastructure development, energy security, and economic progress are commendable. The initiative, nevertheless, has also faced headwinds, stemming from, in and outside of Pakistan. Administrative lethargy, tardy bureaucratic processes, absence of a vision that could match that of the Chinese, and accumulating financial issues, accruing from power projects have come across as big challenges. These demand well thought-through strategic planning and collaboration for the success of the second phase.
With a vision for industrial cooperation, energy diversification, agricultural collaboration, and people-to-people bonds, CPEC Phase-II holds immense potential for further uplifting the economies of both nations. Engaging regional partners, ensuring transparency and sustainability, and prioritizing social development will be pivotal in charting the path ahead for CPEC. As CPEC continues to unfold, it stands poised to become a driving force for economic growth, regional integration, and friendship, embodying the enduring bond between Pakistan and China.