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Growth, not development: The China-Pakistan Economic Corridor

Mishele Ijaz

“This will be my first visit to Pakistan, but I feel as if I am going to visit the home of my own brother.”
– President Xi Jin Ping during his visit to Islamabad to finalise CPEC (2015)

In 2015, China and Pakistan officialised CPEC, a $46 billion (now estimated $62 billion) investment by China into various sectors of Pakistan’s economy. This investment includes interest free loans, soft loans, and export credit (Ramay 2018). The government of Pakistan has termed CPEC a ‘game changer’ for Pakistan, and leaders of both countries have signed over 50 project files for the initiative. The plan aligns with the Pakistan development vision for 2025, as well with China’s national 5-year plan (Government of Pakistan, People’s Republic of China 2017). The corridor links the city of Kashgar in western China with Gwadar Port that lies on the Arabian Sea in the south of Pakistan; the intention is to promote connectivity and boost growth across the country through networks of highways, railways, gas and oil pipelines, and infrastructure projects (Markey and West 2016). Special Economic Zones (SEZ) and Industrial Parks are also set up at various sites along the corridor.

The corridor consists of three major routes, Central, Western, and Eastern collectively working on three main sectors, Energy, Infrastructure and the Gwadar port (Government of Pakistan 2017).

Table: Estimated cost of CPEC projects (Board of Investment 2017)

 

A soft loan is often provided to developing countries and consists of “lenient terms and conditions as compared to other loans available in the market, such as lower interest rates and prolonged repayment duration.” (The Economic Times 2018)

In a period of 15 years, CPEC aims to add approximately 17,000MW to Pakistan’s national grid, create over 700,000 new jobs and add up to 2.5% to Pakistan’s annual growth rate (China Pak Investment Ltd 2017). In a long-term plan published by the two governments the goals for CPEC are divided into three phases (Government of Pakistan, People’s Republic of China 2017):

By 2020, CPEC initiatives seek to address major obstacles to Pakistan’s social and economic development and boost economic growth for both China and Pakistan.By 2025, the construction phase should be completed, industrial systems almost running, and major economic functions “brought into play in a holistic way”, which would scientifically improve the livelihood of people and achieve balanced development across the region; in doing so it will address all the goals of Pakistan’s Vision 2025.By 2030, CPEC will be completed in its entirety, the “mechanisms for sustainable economic growth will be in place” and the corridor will become an international economic zone holding global influence.

Primary Concerns

Lack of transparency and public participation in its process has also made CPEC the subject of a great deal of criticism. Time and again discrepancies have appeared in projects, or in the bidding process, that have kept these criticisms alive. Some of the main concerns are outlined below.

Figure: Major CPEC projects (China Pak Investment Ltd 2017)

Sustainability

Sustainable development is one of the priorities outlined in the goals for CPEC. Pakistan loses around $3.3 billion due to environmental degradation issues annually (Ramay 2018). Energy is the largest sector of CPEC, and 5 of its main plants are coal powered (Government of Pakistan 2017). The Asian Development Bank has expressed concerns over the potential environmental degradation that may be caused due to these plants, but these concerns were dismissed by the acting Chinese ambassador who stated that “environmentally friendly technology’ is being used in coal powered plants (Pakistan China Institute 2017). However, the coal that is used for energy generation in Pakistan is “lignite”, which emits gases that contribute significantly to global warming and climate change across the world (Shahid 2017). The project has issued no details on the technology being used to mitigate environmental damage done as a result of energy production.

Investment in hydropower plants has also raised alarms, particularly for the $50 billion 5-dam Indus Cascade that is set to generate more than 22,000MW. This cascade poses a threat to areas downstream of the river Indus, causing possible displacement of thousands of locals (Ebrahim 2017). Had this truly been a development initiative, priority would be given to accommodating the needs of communities of living around the river.

Cost

One of the more promising projects from an environmental sustainability point of view is the Quaid-e-Azam 900MW (formerly 1000MW) Solar Park in Bahawalpur. However, each panel requires 1 litre of water for maintenance, and Pakistan is already facing considerable water shortages (Ebrahim 2015). This is not so much the fault of solar panels as it is a lack of foresight from project managers. The panels have an age of 25 years, and no long-term planning has been done to ensure that the cost they bring can be sustained by the projected benefits. This, as previously discussed, is an indication of “uneconomic growth” where the costs of the project begin to outweigh the benefits, and in the long run, make Pakistan poorer (Daly 2007, 10).

Overall, too, China is not providing aid but rather investing through loans into the country. Eventually, the money spent will need to be paid back, with interest. Officials are banking on the prediction that this investment will create a range of economic opportunities for local businesses and industry, which can then generate enough revenue to help cover the debt incurred by this project. However, this is not Pakistan’s first experience with foreign loans; the country was under a debt of $85 billion by the end of 2017, after a year on year increase of 12.3% (State Bank of Pakistan 2017). This coupled with the fact that there are several concessions given to the Chinese, and not local businesses, makes it seem highly likely that the government is being over optimistic about the country’s future.

Bias

The impact of the Free Trade Agreement already proved China’s competitive advantage in Pakistan’s market, yet concessions are being given to Chinese firms along the corridor; there is little evidence to suggest that the same is being done for local companies. For this reason and others, several scholars have compared CPEC to the former East India Company used by the British to colonise India. While it may seem like a stretch to associate the two, the lack of transparency and the obvious benefits provided to the Chinese gives evidence to such assertions. In a master plan revealed in 2017, for example, much was written about China’s investment in various segments of Pakistan’s culture and economy. The plan discusses acquisition of thousands of acres of agricultural land by the Chinese for ‘demonstration projects’, including work on fibre optics for internet and television to “disseminate Chinese culture” (Husain 2017). Additionally, most of material and labour for construction of various projects along the corridor is being brought from China. Several scholars and economists in China and Pakistan both seem to think this is being done to cater to the excess capacity in China’s industrial sector (Venkatachalam 2017).

Transparency

The first issue of transparency is that there has been no formal document set forth by either government that provides comprehensive details about the projects that are being financed by CPEC. A condensed document issued as the ‘Long Term Plan’ was published in 2017 but gives no information on how the goals of CPEC will be achieved, how the bidding process works, what are the terms of the projects, what are employment policies, and what measures are being taken to ensure protection of heritage, wildlife, ecology and local livelihood. All prior development and economic investment documents in Pakistan, such as national five-year plans and IMF agreements have remained open for public viewing, and critics argue that CPEC cannot be an exception (Dawn news 2017).

The project came under scrutiny again when, in February 2018, the National Highway Authority (NHA) “confessed irregularities in the award of a $2.9-billion contract to a Chinese firm for construction of a motorway under CPEC” (Rana 2018). The bidding process has already been heavily criticised, and this recent development has called for action against the NHA. Observers, however, feel that little will be done to the organisation for fear of “tarnishing the image of CPEC” (Mahmood 2018).

I would argue that CPEC comes across as an economic growth initiative but not a development project. The biggest indicator of this is the government’s ongoing praise of the initiative for boosting the national GDP and its complete silence on the project’s potential impact on human development in the country. The GDP boost is simply a citation of the amount of money flowing in the economy and says nothing about where it is being concentrated. This dependency on the GDP is often criticised, with academics cautioning that that the use of this indicator allows for increased tolerance for environmental degradation, income inequality, and poverty, all for the sake of “maximum economic growth” (Basu 2000). This is evident in the way that some of the aforementioned energy projects are being conducted.

Furthermore, if we look at the broad categories of CPEC; Transportation Infrastructure, Energy, Gwadar, Industrial Cooperation, Projects Annual Review, and Proposed Special Economic Zones, we can ascertain that none, on face value, focus on development as something that ‘transcends growth’. Development, according to Wolfgang Sachs, is meant to be “economic growth plus redistribution, plus participation, or plus human development (Sachs 2000, 9). These ‘pluses’ are not incorporated into the planning process of CPEC.

Investment can present itself as a great opportunity to address various social and economic issues plaguing the country. However, due to the lack of an adequate policy framework and Pakistan’s narrow approach to development, the country fails to utilise this investment in a way that it strengthens the social sector as well as the local economic structure. There is an urgent need to rethink the process by which ‘development’ projects are carried out in Pakistan. Although investment is an essential component of growth and development, it is merely a tool; in the case of Pakistan it is being used as the solution. Investment and capital will not contribute to progress if not coupled with policies and practices that ensure unbiased access to the opportunities created by the growing economy. The policies that have followed international investment are highly influenced by foreign consultants, to counter this Pakistan needs to demand inclusion of local expertise, critics, environmentalists, sociologists, academics and historians in the planning process.

CPEC, as the late architect and urban planner Perween Rehman would say, appears to be a “mega-project” devoid of “mega-management”, where the former only needs investment, contractors and construction and the latter requires intellect, knowledge and a much more comprehensive planning process. A more holistic framework of measuring development needs to be adopted, so as to steer away from our absolute dependency on the GDP as an indicator. More importantly, there is a need to rid ourselves of the notion that development can be measured using solely indexes and ranks; development, in its true essence, is assessed at a scale where its impact on human lives is accounted for by the decision-making bodies.

Qualitative research, that takes a closer look at the impact of development projects on the lives of indigenous communities, needs to be conducted in order to provide reliable feedback on the effectiveness of such projects. In this process, authorities from both the public and private sector will need to be held accountable if the work they do has a negative impact on social, economic or environmental conditions of a region.

The author is a graduate of City and Regional Planning from the Georgia Institute of Technology, and of Architecture from the National College of Arts. Her research interests lie in the field of development economics, in particular on local economic structures and empowerment of those groups and individuals who are often side-lined in the process of ‘development’. Her paper on CPEC has been presented at a conference by the Association of Public Policy and Management in Washington DC, and at the Conference of Urban and Regional Planning at NEDUET Karachi.


https://dailytimes.com.pk/253077/growth-not-development-the-china-pakistan-economic-corridor/

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