The China-Pakistan Economic Corridor at Five | World Defense

The China-Pakistan Economic Corridor at Five

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THE ISSUE

The China-Pakistan Economic Corridor (CPEC), a flagship of China’s Belt and Road Initiative (BRI) that was off icially launched in April 2015, promised transformational gains. Five years later, a quarter of announced projects have been completed, energy projects dominate, and industrialization efforts are lagging, according to data collected by the CSIS Reconnecting Asia Project and made available to the public here.


KEY FINDINGS

  • Scaled-back Ambitions: Of 122 announced projects, a quarter (32 projects) have been completed, or roughly $20 billion of the estimated $87 billion in funding. While this is a significant amount of activity, particularly in the transport and energy sectors, it also highlights a gap between projects announced and completed.

  • Energy Focus Carries Environmental Costs: Energy projects account for nearly two-thirds of CPEC funding, and nearly 40 percent of the planned generation capacity uses coal, despite ongoing concerns about the high public health costs of pollution in Pakistan.

  • Stuck on the Value Chain: Despite promises to turn Pakistan into a higher-value manufacturing hub, the vast majority of special economic zones (SEZs) remain empty, and information and communication technology (ICT) projects have been limited.
SCALED-BACK AMBITIONS

Since the CPEC’s official announcement in 2015, Chinese and Pakistani officials have declared it a success. “Good progress has been made in building the China-Pakistan Economic Corridor,” Xi Jinping told Pakistan’s parliament during his visit in April 2015. (While the CPEC has a much longer history, and includes projects started earlier, Xi’s visit marked its formal announcement.) Three years later, a joint statement declared: “As a signature project of BRI, the fast development of the CPEC has played a significant role in the Belt and Road cooperation.” At last year’s Belt and Road Forum, Pakistani Prime Minister Imran Khan said: “The China-Pakistan Economic Corridor, one of the BRI’s major components—and one of its earliest manifestations—has made substantial progress.”


Using official targets, however, the CPEC has underperformed. “By 2020 . . . major bottlenecks to Pakistan’s economic and social development shall be basically addressed, and the CPEC shall start to boost the economic growth along it for both countries,” a joint planning document promised in 2017. By 2018, Pakistan was again facing unsustainable debt levels and sought assistance from China, Saudi Arabia, and the United Arab Emirates. In 2019, Pakistan received a bailout from the International Monetary Fund, and its economy mostly appeared to be moving in reverse: growth slowed to 3.3 percent, inflation hit a five-year high, and deficits soared. The CPEC is not responsible for all Pakistan’s troubles, of course, but it has exacerbated long-standing challenges.

 

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How the United States Should Deal With China in Pakistan

How the United States Should Deal With China in Pakistan

Daniel Markey
  • April 08, 2020
  • Article
Source: Getty
Summary: The Trump administration holds a decidedly critical view of China’s infrastructure initiatives in Pakistan. Although there is much to criticize in the China-Pakistan Economic Corridor, the administration’s fixation on commercial and economic issues threatens to distract U.S. policymakers from deeper concerns.

By the end of 2019, the China-Pakistan Economic Corridor (CPEC), China’s high-profile development initiative in Pakistan, had shifted to a new phase. Whereas the first CPEC projects were mainly devoted to building new physical infrastructure, like power plants and highways, the next iteration of CPEC will tackle a wider array of projects intended to spur economic development and job creation.


Changes in CPEC were motivated by Pakistan’s political and institutional realities as well as by the broader evolution of China’s globe-spanning Belt and Road Initiative (BRI), of which CPEC has always been a prominent part. Yet the early stages of CPEC were themselves slowed or stymied by Pakistan’s own weak institutions and domestic political cleavages. The next phase is almost certain to yield similar if not greater frustrations.


In the midst of CPEC’s transition, the administration of U.S. President Donald Trump has unveiled a decidedly more critical view of China’s infrastructure initiatives in Pakistan, one aligned with Washington’s tougher posture in the global competition with China. Although there is much to criticize in CPEC, the administration’s current fixation on commercial and economic issues threatens to distract U.S. policymakers from deeper concerns, including how Chinese political influence contributes to illiberal governance and undermines personal freedoms in Pakistan. Washington needs to keep one eye on the prize of regional stability, especially in the context of deepening hostility between India and Pakistan, and the other eye on the longer-term geopolitical challenges posed by China’s increased involvement throughout the region.


U.S. policymakers should also remember that even when China’s overseas policies are dangerously flawed, foreign leaders and citizens will respond better to a United States that does less finger-wagging and more concrete problem-solving. For Pakistan as for so many other states around the world, the U.S.-China global competition is in itself of little practical concern when compared to other pressing needs, such as economic development, public health, and security. Until U.S. officials hone their messages and policies to better appeal to the interests of overseas audiences, they are likely to be greeted with lackluster, even dismissive, responses.

Playing CPEC Politics

Amid much fanfare, Chinese President Xi Jinping visited Islamabad in April 2015 to announce the launch of CPEC. Pakistan’s leaders characterized the initiative as nothing less than a “fate changer,” a transformative development package that would simultaneously deliver economic growth, political stability, and security to Pakistan. By extension, CPEC would also help address China’s concerns about the threat of Islamist ideology along its western border. Even if China’s official statements were more circumspect about Beijing’s specific funding plans, promises of $40 billion–$60 billion or more in Chinese investment, with an emphasis on Pakistan’s troubled energy sector, stole the headlines in Pakistan.


Although CPEC is unlikely to live up to these early claims, the achievements of the past five years should not be dismissed. Pakistan received at least $19 billion in new infrastructure, including Chinese-built power plants that have reduced, if not eliminated, the country’s once debilitating rolling blackouts. Beijing claims that its projects have created jobs for an estimated 75,000 Pakistani workers, and other China-backed infrastructure improvements are literally set in concrete, such as roads, rails, and the new deep-sea port of Gwadar in Balochistan Province. These are significant accomplishments for Pakistan, which has been challenged by a difficult business environment, contentious politics, and long-standing domestic and regional security threats.

By the end of 2019, the China-Pakistan Economic Corridor (CPEC), China’s high-profile development initiative in Pakistan, had shifted to a new phase. Whereas the first CPEC projects were mainly devoted to building new physical infrastructure, like power plants and highways, the next iteration of CPEC will tackle a wider array of projects intended to spur economic development and job creation.


Changes in CPEC were motivated by Pakistan’s political and institutional realities as well as by the broader evolution of China’s globe-spanning Belt and Road Initiative (BRI), of which CPEC has always been a prominent part. Yet the early stages of CPEC were themselves slowed or stymied by Pakistan’s own weak institutions and domestic political cleavages. The next phase is almost certain to yield similar if not greater frustrations.


In the midst of CPEC’s transition, the administration of U.S. President Donald Trump has unveiled a decidedly more critical view of China’s infrastructure initiatives in Pakistan, one aligned with Washington’s tougher posture in the global competition with China. Although there is much to criticize in CPEC, the administration’s current fixation on commercial and economic issues threatens to distract U.S. policymakers from deeper concerns, including how Chinese political influence contributes to illiberal governance and undermines personal freedoms in Pakistan. Washington needs to keep one eye on the prize of regional stability, especially in the context of deepening hostility between India and Pakistan, and the other eye on the longer-term geopolitical challenges posed by China’s increased involvement throughout the region.


U.S. policymakers should also remember that even when China’s overseas policies are dangerously flawed, foreign leaders and citizens will respond better to a United States that does less finger-wagging and more concrete problem-solving. For Pakistan as for so many other states around the world, the U.S.-China global competition is in itself of little practical concern when compared to other pressing needs, such as economic development, public health, and security. Until U.S. officials hone their messages and policies to better appeal to the interests of overseas audiences, they are likely to be greeted with lackluster, even dismissive, responses.

Playing CPEC Politics

Amid much fanfare, Chinese President Xi Jinping visited Islamabad in April 2015 to announce the launch of CPEC. Pakistan’s leaders characterized the initiative as nothing less than a “fate changer,” a transformative development package that would simultaneously deliver economic growth, political stability, and security to Pakistan. By extension, CPEC would also help address China’s concerns about the threat of Islamist ideology along its western border. Even if China’s official statements were more circumspect about Beijing’s specific funding plans, promises of $40 billion–$60 billion or more in Chinese investment, with an emphasis on Pakistan’s troubled energy sector, stole the headlines in Pakistan.


Although CPEC is unlikely to live up to these early claims, the achievements of the past five years should not be dismissed. Pakistan received at least $19 billion in new infrastructure, including Chinese-built power plants that have reduced, if not eliminated, the country’s once debilitating rolling blackouts. Beijing claims that its projects have created jobs for an estimated 75,000 Pakistani workers, and other China-backed infrastructure improvements are literally set in concrete, such as roads, rails, and the new deep-sea port of Gwadar in Balochistan Province. These are significant accomplishments for Pakistan, which has been challenged by a difficult business environment, contentious politics, and long-standing domestic and regional security threats.
In Pakistan, the most readily identifiable shift on CPEC came during the 2018 national elections, when Prime Minister Imran Khan’s party defeated the incumbent leadership. For years leading up to the national campaign, Khan played the outsider card and repeatedly criticized the government for cutting unfavorable and opaque deals with Beijing. He called for a greater commitment to job creation and social programs rather than heavy infrastructure projects. Khan largely muted his criticism soon after assuming office, however, in large part because Pakistan’s economy had fallen into crisis and his government required external bailouts to stay afloat. Lacking leverage with Beijing, Khan failed to renegotiate the CPEC deals struck by the previous government.

Despite these commitments, there are many reasons to anticipate that CPEC’s second phase could run into even more challenging headwinds than did the first. Building physical infrastructure was challenging, but with Chinese enterprises, engineers, and workers in the lead, it was not entirely at the mercy of Pakistan’s own governing institutions and human capital. By contrast, many of the core elements of CPEC 2.0 will touch politically sensitive and contentious issues, from land rights and education to economic and institutional reform. Even quite measured expectations could go unmet unless both sides take a patient, long-term perspective.

Rather than aping Chinese infrastructure investments, U.S. officials should instead think more broadly about what makes the United States an especially attractive partner. U.S.-style education, scientific research, and technological innovation tend to land at the top of that list. All are widely valued by Pakistanis because they offer a means to address real-life needs. The United States has wisely invested in Fulbright scholarships for thousands of Pakistanis to study in the United States, and the Pakistani government has reciprocated with millions of dollars in scholarships to support Pakistani PhD students in the United States. Unfortunately, Trump administration visa and immigration policies threaten to restrict Pakistanis from traveling and working in the United States, and the overall number of Pakistani students in American schools already pales (even in per capita terms) in comparison to those in India and China.4 With due consideration of security issues, these policies should be reconsidered.

At the same time, Washington should consider the long-term potential that Pakistan offers China in terms of military power projection. There are many reasons to anticipate that China will eventually establish a permanent naval presence on Pakistan’s coast at or near Gwadar. A second military base of the sort that the People’s Liberation Army opened in 2017 in Djibouti is not something that, in itself, should inspire undue concern at the Pentagon. Still, it would offer China the strategic benefit of an overland route to the Arabian Sea, a critical point on the way to the hydrocarbon-rich Persian Gulf.

 
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