The new game changer in Pakistan

Much hope floats on the potential of the ambitious China-Pakistan Economic Corridor — but many are also highlighting the ambiguity about some links in the project

May 28, 2016 03:34 am | Updated September 20, 2016 05:34 pm IST

Illustration: Keshav

Illustration: Keshav

Is China about to transform Pakistan? The unanimous consensus in Pakistan is that it is, and quite comprehensively too. Since April 2015, the term which has probably received far greater traction in the print and electronic media, more than any other, is “game changer”.

This term does not refer to the change in policy and tactics of the Pakistan military, which initiated armed action against different categories of militants and Islamist radicals, first in the Pakistani region, the Federally Administered Tribal Areas (FATA), and now more comprehensively in the rest of Pakistan under its “Zarb-e-Azb” campaign, and has by most accounts changed the game regarding support for Pakistan’s Islamist radicals, and as a result, allowed the military to re-emerge as Pakistan’s dominant institution. The “game changer”, which government officials, military generals, diplomats, journalists and a host of other observers refer to, is the $46 billion >China-Pakistan Economic Corridor (CPEC) project, a highway which is to run from Kashgar in China to Gwadar in Balochistan, on the edge of the Persian Gulf, in Pakistan.

S. Akbar Zaidi

Fate changer This Economic Corridor has been called a “game changer” and even a “fate changer” by an overly enthusiastic Pakistani press and government, with some analysts even saying that this $46 billion “unprecedented” Chinese investment over the next decade-and-a-half will make Pakistan the next Asian Tiger. There has been an effusive “thank you” by government officials and by analysts and journalists made to China for agreeing to build the Corridor, with important Pakistani commentators going so far as saying that this measure “speaks volumes about the commitment of the Chinese leadership towards Pakistan and its 180 million people”, especially when contrasted to the (only) $5 billion investment made by the U.S. in the period 2009-15.

Moreover, the fact that the Chinese President, when he visited Pakistan in 2015, >agreed to the $46 billion investment also gave rise to a sense of gloating in the press, since he promised only $20 billion in investment to India when he visited the country in 2014. The Pakistani Finance Minister stated that the corridor would change the destiny not just of Pakistan, but of three billion people in the region! Such has been the hype over the projected road. Clearly, all provincial governments (with their own particular ethnic and regional alliances), political parties and interests realise the huge externalities which are expected to accrue to the infrastructure and road building along the corridor, and hence their interest in acquiring political and economic returns from it.

There is an expectation, well-founded no doubt, that such projects will give rise to jobs (particularly unskilled ones), will allow local businesses to benefit, and might open the way to development. Fortunately, some sceptical commentators, the very few who dare to voice caution amidst the euphoric din still ringing through Pakistan and having to contend with allegations that they are unpatriotic and anti-national, have questioned whether the Chinese investment represents Chinese strategic and economic interests solely focussed on what will benefit China, much more than it does economic investment which might be of some benefit to Pakistan in the end.

The Chinese President’s visit gave rise to the signing of 51 Memoranda of Understanding and projects worth $46 billion in sectors which include energy, infrastructure, security, and broader economic development. For energy, $34 billion investment was envisaged and $12 billion in infrastructure projects. It was estimated that $15.5 billion would be spent on coal, wind, solar, and hydroelectric projects. The ambitious plan includes energy projects with a capacity close to 10,000 MW to be completed by 2018, with more to follow. Most of the money is expected to be spent on the construction of the corridor itself. One of the key externalities to the Chinese investment is the fact that a >“Special Security Division” of the Pakistan Army, consisting of perhaps 10,000 Pakistani troops and headed by a Major General, would be set up to guard the Chinese workers and their investment, particularly in Balochistan, given the militancy and insurgency in the province.

Scale of the project Even a year after the initiation of the CPEC project, there continues to be much ambiguity about what the $46 billion project entails. There is little public information and disclosure as to what will be built, how it will be financed (that is, whether some of the money will be a grant or a loan, and on what terms and from whom), and who will implement the various parts of the corridor, which includes roads, railway lines, pipelines and other infrastructure. In fact, other than the more obvious road which will link Kashgar to Gwadar, some other projects — such as a metro bus route in the city of Lahore — are reportedly to be part of the corridor. Such is the absence of public information about this huge “fate changer”, causing much controversy and consternation, with allegations that the Punjab and its incumbent government, which is also in power in Islamabad, will benefit disproportionately. Already, the provincial governments of Khyber Pakhtunkhwa and Balochistan have claimed that they have been short-changed.

Nevertheless, one cannot deny the fact that sections of what might constitute the corridor have been constructed in the last year and work is underway in many regions. An important indicator of the work in progress is the huge Chinese foreign direct investment (FDI) which has come into Pakistan over the last year. Pakistan has been an FDI-starved country for a host of reasons, but the first 10 months of the current fiscal year (Pakistan’s fiscal year runs from July to end June) saw FDI increase by 5 per cent on a year-on-year basis, to $1 billion, of which 55 per cent came from China alone. In fact, China’s contribution to Pakistan’s FDI increased 152 per cent over this period. The largest chunk of the FDI, 52 per cent, has gone to the power sector, suggesting that work on CPEC-related infrastructure is underway. Much of the hype about the CPEC has also led to a “feel good” factor about prospects for Pakistani development, and many business and investment interests are waiting in the wings to cash in once the corridor and its ancillary investments take off.

Pakistan’s Chief of Army Staff >General Raheel Sharif , who has just returned from a meeting with the Chinese Premier, has reiterated the Pakistan military’s resolve to safeguard the CPEC, and has stated on many occasions that all opponents to the project will be dealt with. He was reported as saying recently that “hostile intelligence agencies averse to this grand project, especially Indian intelligence agency RAW ... [are] blatantly involved in destabilising Pakistan”, and that “we are totally aware of all campaigns against the corridor and I vow that the security forces are ready to pay any price to turn this long cherished dream into reality.” China’s civil and military leadership has also pledged “full support”. Much is at stake here, for both countries.

Different opportunities The Nawaz Sharif government too can gain much with economic development linked to the corridor taking off, offering far greater prospects for re-election in 2018 when some projects come on stream. The Pakistani military is an obvious beneficiary with its role in security and with its fingers in numerous infrastructure and economic projects around the corridor. Perhaps some underdeveloped regions in Balochistan and Khyber Pakhtunkhwa will also benefit. The Chinese are too savvy to invest in such a project without counting the numerous economic, geopolitical and geostrategic returns to their investment and agenda of regional economic connectivity through their One Belt One Road initiative.

There are many unanswered concerns as well. For Pakistan, will U.S. and Saudi imperialism now be replaced by the Chinese variety? What if the Chinese interests shift to other regions and projects, and CPEC abandoned like some African mining site? Would India attempt to sabotage Pakistan's future development, as the Pakistani Army Chief has hinted? Does CPEC come at a cost to the bonhomie between India and China? Or, will this be the great “destiny changer” for Pakistan at the further loss of its sovereignty, given the absence of any indigenous economic strategy other than one corridor? There is bound to be an ancient Chinese proverb warning about all eggs in one basket.

S. Akbar Zaidi is a political economist based in Karachi. He teaches at Columbia University in New York, and at the IBA in Karachi.

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