June Edition, International, Ronit Hazarika
Pakistani President Asif Ali Zardari on May 22, 2013, sent out an invite to the various Pakistani leaders for a lunch, which was hosted in honour of the visiting Chinese premier Li Keqiang. It was here, where Zardari and Keqiang proposed for a special economic belt in Pakistan for the transfer of maritime trade from Pakistan’s coast and a supporting economic ecosystem, and sought cooperation from all sides. Thus, the China-Pakistan Economic Corridor or CPEC was born.
An economic plan of this size and scale was unprecedented, save perhaps the Marshall Plan post World War II, in modern history. On August 2013, a Joint Cooperation Committee (JCC) was set up and a three-pronged plan was formed. First, the Gwadar region of Balochistan would host the first and largest industrial park to support the trade from Gwadar Port, already built by China in 2006 and owned by them. The second, the development of a belt, made of multiple roadway as well as railway corridors running south-west to northeast, connecting the regions to the Xinjiang and Uyghur regions of China. Third is a massive expansion of the energy sector within Pakistan.
It guarantees the construction of multiple major four-lane roadways connecting virtually all the major cities as well as many small towns of Pakistan – the reconstruction of the Karakoram highway, a new ‘Eastern Alignment’, a ‘Western Alignment’, and a possible future ‘Central Alignment’. It promises to reinvigorate the railways by updating engine and track technology, as well as connecting Kashgar in Xinjiang, to Kyrgyztan, Takikistan and Kazakhstan through the One Belt, One Road (OBOR) initiative. Even the Orange Line – the name for the proposed Lahore Metro – falls under CPEC agenda. Under the ‘Early Harvest’ scheme of the CPEC, the country will see an addition of 10,500 MW capaci-ties by 2018. The Quaid-E-Azam Solar Park will be the largest solar power plant in the world, with a 1000MW capacity.
As big as this is, it is but a small part of the bigger picture. The China Development Bank (CDB) was entrusted with the compilation of the Long Term Plan for CPEC. The CDB decided in 2014 that two long term plans (LTP) would be drafted – one by China only, the second by both sides. The final LTP was leaked to the press last month, and it clearly presents a vision where China has ‘entered’ or ‘infiltrated’ every sphere of Pakistan’s economy and society.
For industry, the plan divides the country in three zones. The western and north-western zones, with its rural Baloch and Pashtun populaces, are marked for mineral extraction. The central zone is for textile, consumer items and cement. The southern zone will, predictably, harbour industry, engineering, trade processing and auto assembly. Gwadar is earmarked for petrochemicals-processing and iron-steel industries.
The fourth pillar of the CPEC is fibre optics and surveillance, besides border management technologies. China is looking to expand its internet traffic and Pakistan is suitable for submarine landing stations and gateways. Increased IT capacity is also expected to enhance surveillance technologies for purposes of civil order, border control and terrorism. There are talks of building a model ‘safe city’ in Peshawar, a city known for its troubles, to demonstrate this.
For the infrastructure projects, amounting to over $16 billion, Pakistan would get ‘concessionary loans’ at 1.6 pc to 2 pc. This interest was brought down from 3 pc after the JCC pressed itself to the CDB. The loan for the Gwadar projects of $757 million has a 0 pc interest rate. Much of the energy projects will be developed by independent power producers instead of state run agencies of either Pakistan or China, and the loans would be financed by the Exim (export-import) Bank of China at 5 pc-6 pc. The government must buy the power at a pre-decided rate, which is high by international standards.
The infrastructure projects are primarily meant to cater to businesses which would itself come from China, often Chinese state agencies. The Gwadar port area had been leased to the China Overseas Port Holding Company in 2015, for 43 years. The businesses and contractors within these regions would be exempt from custom duties, and several taxes for a minimum of 23 years. Besides this, there is a 40 year tax holiday for import of machinery.
CPEC is a gift from the heavens for China as the nation had to resort to the sea route across the straits of Malacca, the South China Sea, the Indian Ocean and the Arabian Sea for trade with the Middle East. The route was 12,000 km long, and was rife with pirates. CPEC shortens the trade route by 6000 km.
CPEC also gives Pakistan an upper hand in trade with Central Asia. Pakistan had a transit agreement with Afghanistan, which it needs to cross to reach central Asian nations. While Afghanistan was allowed to use Pakistani ports for trade, it could not trade across Wagah with India under the pact. President Ashraf Ghani, on his 2015 trip to India, promised ceasing of trade activities with Pakistan unless Wagah was opened for Indo-Afghan trade. The CPEC, however, renders the trade pact useless.
CPEC has significant diplomatic implications for India, besides the obvious economic implications. The reconstructed Karakoram highway, the pulmonary artery of the CPEC, goes through Pak-occupied Kashmir. Several of the granite and marble plants proposed in the LTP are situated in Gilgit, again in PoK. While internal terrorism in Pakistan is expected to wither after full implementation of the CPEC due to Chinese help and Pakistan’s diplomatic-economic compulsions, there is no guarantee of the ceasing of cross-border terrorism in India. Some even speculate that China would further Pakistan’s infiltration tactics to fuel tensions, appease the deep state in Pakistan, and distract the Pakistani electorate from their neo-liberal and neo-colonial exploitation. The CPEC is also but one part of the One Belt, One Road initiative of China, which will complement CPEC. India’s reaction to OBOR is affected by its attitude towards CPEC, and exclusion from OBOR might lead to not just an economic lag, but a slowdown in India’s economic growth as well.
(The author is a freelance journalist based in Assam