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The other side of CPEC

Pakistan’s territorial sovereignty will surely be at stake if it defaults on its debt payments

Moonis Ahmar

MAY 11, 2018

While speaking at the opening ceremony of the 8th Judicial Conference organised by the Law and Justice Commission of Pakistan in Islamabad, the Chief Justice of Pakistan suggested that, “there must be a consensus among all the stakeholders in going forward and evaluating the legal, social, cultural and economic aspects of the multi-billion dollar Chinese investment. There is a need for a serious dialogue to assess the impact of the China-Pakistan Economic Corridor.”

Since 2015 when CPEC was inaugurated as a 46 billion dollar Chinese investment project in Pakistan under its One Belt One Road (OBOR) initiative to seek connectivity for its Western region of Xinxiang to the southern Pakistan port of Gwadar, a lot of change has taken place in terms of Beijing’s role to modernise infrastructure and improve the energy production of Pakistan. While the Chinese investment has gone up to 58 billion dollars under CPEC, the construction of economic zones in different provinces of Pakistan is termed as a landmark in boosting the country’s economy and enhance its Gross Domestic Product (GDP). But the other side of CPEC which the Chief Justice of Pakistan has drawn the attention seems to have been overlooked by Islamabad. He rightly pointed out the need the other areas that CPEC will impact, “such as environment and ecology” should also be looked at. Conflicts arising out of CPEC, according to him needs to be addressed by creating a mechanism for Alternate Dispute Resolution (ADR).

The debate on different pros and cons of CPEC is not a national phenomenon, but this mega multi-billion-dollar project is a source of interest, anxiety and concern in different important capitals of the world and also in Pakistan. If CPEC is termed as a ‘game changer’ or a ‘life time opportunity’ for Pakistan to transform from an under-developed to a middle-income economy, one also needs to visualise and contemplate how it will impact on the country’s financial, environmental and societal patterns. Is there a thought process in Pakistan to deal with the doubling of Pakistan’s external debt in coming 10 years as a result of loans to be provided by China under CPEC? Can a process of development take place relying on foreign resources while not pursuing a policy of self-reliance? Already, concerns are being raised by different quarters in Pakistan about the viability of CPEC in unleashing the process of infrastructural, industrial and economic modernisation of the country. Contentious issues which will arise in the near future dealing with ecological and environmental implications of projects carried out under CPEC must be analytical and critically addressed.

Regardless of its pitfalls and challenges, CPEC can be utilised as an opportunity to enhance the level of modernisation and development in Pakistan, if the fault lines in the mega billion-dollar project are dealt with

Four major realities account for the other side of CPEC. First, the capacity and capability of Pakistan to do the needful under its part of projects linked with CPEC particularly in terms of implementation is a major challenge. With improper and fragile work ethics and lack of professionalism, can one expect smooth sailing of CPED projects, which are expected to bring ‘sea change’ and a major breakthrough in modernising the infrastructure and economy of Pakistan. Several times, China has made it clear to authorities of Pakistan dealing with CPEC related projects that the failure to meet deadlines may result in the stoppage of Beijing’s investment and China may find a new partner. The Federal Minister for Planning and Reforms of Pakistan has also complained that provinces are causing delay in presenting plans for special economic zones.

In its essence, the ball is in Pakistan’s court as non-compliance of deadlines and agreements to complete CPEC projects may cause irreparable loss to the country. If China is providing financial resources to Pakistan to transform CPEC into a reality within a stipulated time line, it is now the responsibility of Islamabad to take things seriously. There is no such thing as free lunch and Pakistan must need to take note of the reality of fulfilling its own responsibilities in a best possible manner. Second, the other side of CPEC is also a stark reality that a huge sum of 58 billion dollars is not in the form of grants, but loans provided by different Chinese banks and financial institutions which Pakistan will have to start repaying when the first installment will be due in 2025. The current Pakistani government is trying to dilute the huge economic implications of CPEC by arguing that as a result of increase of its GDP, the modernisation of infrastructure and economic growth rate, the country will be able to pay loans which it had taken from China. The flip side of CPEC projected by the Pakistan government may not match with the ground realities because the current external debt of the country which is 85 billion dollars will double by 2025 not only because of CPEC loans but also in view of excessive borrowings to meet day to day expenditures and to pay the installment of existing loans.

Third, the question of Pakistan’s sovereignty will further worsen because of huge Chinese involvement in Pakistan under the cover of CPEC. Already, China is exerting pressure on Pakistan to allow the use of Chinese currency in Gwadar. So far Pakistan has resisted that pressure but for how long it can withstand such a demand particularly when it will need funding to complete projects under CPEC? The other side of CPEC will be unavoidable when in case of Pakistan’s failure to repay loans to China, Beijing will simply take control of Gwadar port and deprive Pakistan of its strategic asset. One can cite the example of Sri Lanka, when in December 2017 after having failed to pay debts to Chinese lending firms, it had to hand over control over its port of Hambantota to China for 99-year lease. Whereas, Pakistan’s debt to China, notwithstanding loans taken under CPEC, will accumulate to 70 billion dollars by 2030. Pakistan’s territorial sovereignty will surely be at stake if it defaults on its debt payments. Finally, the other side of CPEC cannot be ignored because of severe environmental and ecological implications of the traffic of heavy Chinese vehicles containing items from Gwadar to Khunjrab on their way to Kashgar and onwards. The coal and gas based energy power plants built under CPEC will cause an environmental havoc in Pakistan. How Pakistan will cope with an impeding environmental catastrophe taking place as a result of multi-billion dollar CPEC is yet to be seen.

Most important, has any one thought the relevance of CPEC when shipping and navigation will start taking place from the Arctic or the North Pole once the ice melts leading to the launching of a new trade route from Europe to East Asia? While CPEC will still be relevant as a shortest trade route from China to Africa, its trade with Europe will surely take place from the North Pole because such an option will sharply cut distance for China-Europe trade.

Regardless of its pitfalls and challenges, CPEC can be utilised as an opportunity for enhancing the level of modernisation and development of Pakistan provided the fault lines in the mega billion-dollar project are dealt with. Lack of professionalism; dangerous security situation in Balochistan; deepening of foreign debt and environmental implications are issues which must be seriously resolved by the stakeholders of CPEC. Alternate dispute resolution mechanism as suggested by the Chief Justice of Pakistan can go a long way in transforming CPEC as a win-win situation for both China and Pakistan.

The writer is Meritorious Professor of International Relations at the University of Karachi. He can be reached at

Published in Daily Times, May 11th2018.


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