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CPEC — Corridor of uncertainty

Updated Feb 10, 2016 02:00pm

At the beginning of 2015, the focus of debate over the China-Pakistan Economic Corridor (CPEC) was whether it would go ahead at all. The history of economic relations between China and Pakistan had been routinely disappointing. Xi Jinping, the Chinese president, kept putting off his visit to Islamabad. The fantastical dollar figures being thrown around by the Pakistani government seemed to be plucked from thin air. Even after Xi finally showed up in April 2015, the global reaction to the announcements of 46 billion dollars worth of projects was one of pervasive scepticism. We had seen these large numbers being announced before, with very little of it translating into action on ground.

Yet, moving into 2016, while many questions and doubts remain, these are now more concerned with “how” rather than “if” the CPEC will happen. What are the debt implications for the Pakistani economy? Will Punjab be the disproportionate beneficiary? What will be the local impact of the projects? Which route will be completed first? Does the government have the capacity to build a set of projects on as grand a scale as the CPEC includes?

Even when there are no ready answers to these questions, the very fact that these are being asked reflects a genuine step forward. The political battles around the CPEC are an indication of the fact that there is actually something to fight over. These are far preferable problems to wrestle with than the persistently weak levels of Chinese investment in the past. There is a tangible push to get the first round of projects completed in the next two years – roads, power plants, port development and special economic zones – to demonstrate meaningful progress by the time the next Pakistani elections become due in 2018.

But the challenges that these plans face are formidable, and hang over not just the CPEC, but the entire ‘One Belt, One Road’ Silk Road initiative of which the corridor forms a part. If China simply attempts to externalise the development model that it has pursued domestically, it may leave some valuable infrastructure behind but it will also create a set of political pressures that risk undermining much of the purpose of the venture.

The first issue is transparency. The opaque fashion in which many of the projects are being pursued may be viable for a few billion dollars worth of investment but it is not tenable on the huge scale envisaged by the CPEC. When Pakistan’s central bank governor publicly states that he does not understand the composition of financing for the projects, we have a real problem. Routine accusations that one route or another for the corridor is being favoured are easy to make when it is so difficult to figure out what is really going on. While no one expects the details of every deal to be made public, greater clarity on routes, timetables and figures would do much to allay these concerns.

The second issue is social impact. China hopes that all these new investments will have a politically stabilising effect in its western neighbourhood. But without serious efforts to ensure demonstrable local benefits, the danger is that the influx of investment will exacerbate existing political and social grievances and divisions rather than reducing them. For the CPEC, this risk is perhaps most obvious in Balochistan, though the planning for the scheme as a whole has not given sufficiently prominent attention to issues ranging from job creation to education and training. Even if a national-level political consensus has been built behind the CPEC, community buy-in and sustained support at the grass-roots level will be equally important. Again, this is hardly an insoluble problem. Diverting even a small fraction of the CPEC financing towards local schools and hospitals, and coming up with projected employment figures that are as striking as the overall investment numbers, will go a long way in addressing this.

Yet, Chinese officials still lack the instinct to take measures of this sort. Transparency and social impact have not tended to rank high on the list of priorities in China. At present, Beijing is trying to do a lot, very quickly. While there is good reason for Islamabad to prioritise speedy project delivery, ensuring that Beijing gets the underlying politics of the economic corridor right too will save Pakistan, China and many other countries along the putative Silk Road from a lot of future headaches.


Photo: Commuters pass through a newly-built tunnel in Gojal Valley. The tunnel is part of the China-Pakistan Economic Corridor | AFP

This was originally published in Herald's Annual 2016 issue. Through a selection of photographs, the Herald took a look at some of the events and developments that were extremely significant in 2015.To read more, subscribe to Herald in print.