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The China-Pakistan Economic Corridor Three Years On

Photo Credit: AFP

BY ALVIN CHENG-HIN LIM

In the year since Jian Han, the Political and Press Counselor at the Chinese Embassy in Pakistan, announced the China-Pakistan Economic Corridor (CPEC) as having “entered the stage of fast-track implementation … with early-harvest projects reaching fruition,” several of these early-harvest projects have indeed been completed and delivered to the public. In view of the completion of this initial batch of projects just three years after Chinese President Xi Jinping’s announcement of CPEC, experts such as Zhou Rong, a senior researcher from Renmin University, have assessed the development of CPEC as having proceeded “faster than expected” (Lim, 2017b, p. 5).

 

The early-harvest CPEC projects which have begun operation include several power plants which have helped to relieve “electricity shortages in major industrial cities, which also made those areas much more competitive than previously.” These include the Neelum–Jhelum Hydropower Plant, whose first of four turbines commenced operations in April. When all four turbines become fully operational in the second half of 2018, they will add 969 MW to the national grid. As it runs on hydropower, Neelum–Jhelum will also “avoid the annual release of 2.5 million tons of CO2 from equivalent thermal plant.” Another early-harvest power plant which has begun operations is the Port Qasim Coal-fired Power Plant, which when fully operational will add 1,320 MW to the national grid, which is enough to bring the benefits of electricity to “4 million local families a year.”

 

In the transportation sector, several sections of the CPEC superhighway network have been completed and are now open to the public. A recent example is the 33 kmMultan-Shujaabad section of the 392 km M-5, the Multan-Sukkur Motorway, which Pakistani Prime Minister Shahid Khaqan Abbasi officially opened on May 26, 2018. When it is completed in August 2019, the M-5 will “connect the country’s southern port city of Karachi with northwestern city Peshawar through the populated provinces of Punjab and Sindh,” and will consist of a “six-lane superhighway” with “11 interchanges, 22 toll plazas equipped with latest intelligent technology, six public service areas, five rest areas, 107 underpasses, 188 subways, 100 bridges and other facilities,” allowing drivers to travel between Multan and Sukkur in just “four hours at the maximum designed speed of 120 km per hour.”

 

On May 29, 2018, PM Shahid Khaqan Abbasi officially opened another section of the CPEC superhighway network, the 138 kmSharqpur-Rajana section of the 230 km M-3, the Lahore-Abdul Hakeem Motorway. When complete, the M-3 will connect Lahore with the M-4, “the main artery connecting the southern port city of Karachi with the northwestern Peshawar.” For drivers, the M-3 will “reduce the traffic congestion drastically … and will attract maximum passenger and cargo movements.” In terms of economic development, the superhighways being constructed under CPEC will “connect major cities and will ensure efficient and safe transportation of passengers and goods to and from big industrial and economic hubs of the country,” thereby “stimulating the economic activities in the entire area.”

 

Chinese Ambassador to Pakistan Yao Jing, who attended the inauguration of the Multan-Shujaabad section of the M-5, revealed that “Chinese companies working at CPEC projects have provided over 100,000 jobs to local people and played their role to uplift people’s lives by doing several social welfare works, including restoration and establishment of schools and technical training centers.” With the expected completion of up to nine CPEC industrial zones “within the next two to three years,” further job creation is expected. Ahsan Iqbal, the Pakistani Minister for Planning, Development and Reforms, anticipates the generation of “massive employment opportunities” by these industrial zones. Experts predict CPEC will create up to800,000 jobs by 2030.

Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation, warns that investors in CPEC projects should pay attention to “potential risks” such as “Pakistan’s ability to repay its debts.”

At the municipal level, one key CPEC project, the Orange Line Metro Train (OLMT) in Lahore, is nearing completion with “88 per cent construction work and over 70pc of the electrical and mechanical work on the project” having been completed as of May 2018, and the first test run of the train took place on May 16, 2018. Punjab Chief Minister Shahbaz Sharif sees the project as having the potential to “transform people’s lives” by “creating a sense of equality and ownership in social terms.” When complete, the OLMT will provide improved transportation for up to half a million of Lahore’s residents, and the government eventually intends to introduce similar metro train systems in “other parts of the country, including Karachi and Peshawar.”

Gwadar Port, the southern terminus of CPEC, already has a “fully functional port terminal” and a sixty-acre Economic Free Zone. China’s COSCO shipping company has opened a shipping line at Gwadar, with “a cargo ship with a capacity of 5,000 containers on the route,” paving the way for the realization of the vision of Gwadar as a major international trade hub. The Gwadar Free Zone, which was inaugurated in January 2018, is aimed at generating more business at Gwadar Port, with the goal of fulfilling “the potential of the port city.” By April 2018, “some 30 companies in different businesses such as hotel, bank, logistics and fish processing” had been established at “the Gwadar Free Zone with expectations of generating 790.5 million US dollars annually after full operation.”

Geopolitics could be another driver of economic activity for CPEC. In 2017, Pakistan became a full member of the Shanghai Cooperation Organization (SCO). While primarily focused on security issues, the SCO also has initiatives to improve connectivity between its member states, and in February 2018, PM Abbasi officially announced his country’s interest in connecting CPEC with the SCO, which would “greatly enhance their vitality to become a conduit for linking Eurasian landmass, China, Russia and Central Asia with the Arabian Sea.” The integration of CPEC with the SCO could in turn intensify the existing flows of mutual trade and investment between the SCO member states.

The emerging track record of successfully completed CPEC projects is important for China’s broader Belt and Road Initiative (BRI), as this will show interested countries that BRI projects need not result in the “debt trap” scenario that Sri Lanka has fallen into, which led the Sri Lankan government in 2017 to cede its deep-water port at Hambantota to China for 99 years “in exchange for debt relief.” Myanmar’s government, for instance, is currently considering a proposed multibillion dollar financing package from China for the development of a deep-water port at Kyaukpyu, and some government officials are resisting the Chinese proposal due to fears of a repetition of the Sri Lankan experience. The successful completion of CPEC projects in Pakistan — without the government falling into default on its Chinese loans — would go far towards alleviating the concerns of Myanmar and other interested countries by demonstrating that BRI megaprojects can indeed be completed without the recipient countries falling into debt traps.

To that end, Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation, warns that investors in CPEC projects should pay attention to “potential risks” such as “Pakistan’s ability to repay its debts.” This is especially important given the Pakistani government’s growing debt burden: “The country’s total debt level stands at $91.8 billion, and it will balloon to $144 billion in the next five years … Pakistan expects to obtain new Chinese loans worth $1 billion to $2 billion to help it avert a balance-of-payments crisis.”

Apart from financial risk, security remains another significant risk factor that could endanger the successful completion of CPEC. This was highlighted in May 2017 when two Chinese nationals were murdered by Islamic State terrorists in Quetta, the capital of Balochistan province. The police investigation into this double homicide soon revealed that the victims — who were ostensibly in Pakistan on the pretext of establishing a language school — were in fact covert Christian missionaries, and “the Pakistani government subsequently repatriated back to China eleven other Christian missionaries who had arrived in the same group as the murder victims.” This incident alerted the Chinese and Pakistani governments to an unexpected security concern: the secretive transnational flow of missionaries. If left unchecked, this could have unpredictable consequences for CPEC and the BRI, especially since “underground church leaders in China have set the target to increase the number of their covert missionaries in foreign countries from the estimated 1,000 at present to 20,000 by 2030, and they fully intend to use the BRI as their gateway into foreign mission fields.” As the pastor of one such underground church explained: “We have the Belt and Road policy, so there will be economic entry. Alongside the economic entry will be companies and other groups entering, including missionaries” (Lim, 2017b, pp. 7-8).

References

Bhatti, J. (2018, April 24). China-Pakistan Economic Corridor starts to deliver benefits to Pakistani peopleXinhua.

Chen, Q. Q. (2018, May 30). China, Pakistan see progress in CPECGlobal Times.

China-Pakistan Economic Corridor brings economic benefits to Pakistan: report. (2018, March 2).Xinhua.

China-Pakistan Economic Corridor helps boost Pakistan’s economy: PM. (2018, May 29). Xinhua.

Gwadar Free Zone opens for business. (2018, January 29). Pakistan Today.

Hancock, T. (2017, August 11). China missionaries seek converts along the Belt and RoadFinancial Times.

Koutsoukis, J. (2018, May 11). The Fishing Port That May Become a $10 Billion Chinese Debt Bomb.Bloomberg.

Lim, A. C. H. (2017a, May 29). The China-Pakistan Economic Corridor Two Years OnIPP Review.

Lim, A. C. H. (2017b, October 11). The Moving Border of the China-Pakistan Economic Corridor.Geopolitics. Advance online publication. doi:10.1080/14650045.2017.1379009.

Marlow, I. (2018, April 18). China’s $1 Billion White ElephantBloomberg.

Pakistan to set up nine industrial zones under CPEC: Minister. (2018, May 7). Xinhua.

Pakistan PM offers to connect CPEC with SCO’s approved routes. (2018, February 7). Xinhua.

PM Inaugurates much-awaited 969MW Neelum-Jhelum Power project. (2018, April 13). APP.

Rehman, D. (2018a, March 7). First commercial shipment from Gwadar leaves for UAEDaily Pakistan.

Rehman, D. (2018b, May 27). Pakistan opens 1st section of CPEC’s largest superhighway in Punjab.Daily Pakistan.

SCO member countries reap tangible benefits from China’s Belt and Road Initiative, play bigger role. (2018, May 9). Xinhua.

Sheikh, A. (2018, May 16). Lahore’s Orange Line Metro Train conducts trial runDawn

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