China–Pakistan Economic Corridor

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China–Pakistan Economic Corridor

Length: 2,442 km (1,517 mi)

The China–Pakistan Economic Corridor (CPEC)[a] is a development megaproject which aims to connect Gwadar Port in southwestern Pakistan to China’s northwestern autonomous region of Xinjiang, via a network of highways, railways and pipelines to transport oil and gas.[1] The economic corridor is considered central to China–Pakistan relations and will run about 3,000 km from Gwadar to Kashgar. Overall construction costs are estimated at $46 billion, with the entire project expected to be completed in several years.[2][3] The Corridor is an extension of China’s proposed 21st century Silk Road initiative.[4][5] According to a Firstpost report, “this is the biggest overseas investment by China announced yet and the corridor is expected to be operational within three years and will be a strategic gamechanger in the region, which would go a long way in making Pakistan a richer and stronger entity than ever before.”[6]

Other than transport infrastructure, the economic corridor will provide Pakistan with telecommunications and energy infrastructure. The project also aims to improve intelligence sharing between the countries.[7][8] China and Pakistan hope the massive investment plan will transform Pakistan into a regional economic hub as well as further boost the growing ties between Pakistan and China.[9] The Pakistani media and government called the investments a “game and fate changer” for the region.[10][11] According to The Guardian, “The Chinese are not just offering to build much-needed infrastructure but also make Pakistan a key partner in its grand economic and strategic ambitions.”[12] The project will also open trade routes for Western China and provide China direct access to the resource-rich Middle East region, bypassing longer logistical routes currently through the Strait of Malacca.[13]

During the state visit of President of China Xi Jinping to Pakistan in April 2015, he wrote in an open editorial that “This will be my first trip to Pakistan, but I feel as if I am going to visit the home of my own brother.” During his visit, Islamabad was dotted with slogans and signboards such as “Pakistan-China friendship is higher than the mountains, deeper than the oceans, sweeter than honey, and stronger than steel.” [14]

History
In November 2014, Chinese government announced that it will finance Chinese companies to build $45.6 billion worth of energy and infrastructure projects in Pakistan as part of CPEC. Documents quoted by Reuters show that China has promised to invest around $33.8 billion in various energy projects and $11.8 billion in infrastructure projects which will be completed by 2017 at most. The deal includes $622 million for Gwadar Port. According to Reuters, under the CPEC agreement, $15.5 billion worth of coal, wind, solar and hydro energy projects will add 10,400 megawatts of energy to the national grid of Pakistan.[21]The project was proposed by Chinese Premier Li Keqiang during his visit to Pakistan in May 2013.[15][16] The Pak-China Economic Corridor Secretariat was inaugurated in Islamabad on 27 August 2013.[17] In February 2014, Pakistani President Mamnoon Hussain visited China to discuss the plans for an economic corridor in Pakistan.[18] Two months later, Pakistan Prime Minister Nawaz Sharif met with Premier Li Kequiang in China to discuss further plans.[19] While the project took shape during Sharif’s tenure, the vision for an economic route stretches as far back as the Musharraf era.[20]

On 20 April 2015, Pakistan and China signed an agreement to commence work on the $46 billion agreement, which is roughly 20% of Pakistan’s annual GDP,[22] with approximately $28 billion in immediate projects and the rest allocated for projects in the pipeline.[23]

The deal includes a $44 million fibre optic cable[24] and will add 10,400 Megawatts to Pakistan’s energy grid through coal, nuclear and renewable energy projects.[25] Also included are major upgrades to Pakistan’s transport infrastructure, including:

The plan also includes projects to address climate change, joint research in cotton Biotech and marine research, cooperation between China’s General Administration of Press and Publication and Pakistan’s Ministry of Information and Broadcasting as well as an agreement between China Central Television, PTV and the Pakistan Television Foundation on the rebroadcasting of CCTV news and documentary programs in Pakistan.

Some cities have been made sister cities – Chengdu in Sichuan province and Lahore, and Zhuhai in Guangdong province and Gwadar.[26]

Strategic importance
 

When the corridor is constructed, it will expand the number of trade routes between China, the Middle East and Africa. Energy security is a key concern for China, as it is the world’s biggest oil importer,[22] and oil pipelines through Pakistan would cut out ocean travel through Southeast Asia.[28]

The Asian Development Bank terms the project as “CPEC will connect economic agents along a defined geography. It will provide connection between economic nodes or hubs, centered on urban landscapes, in which large amount of economic resources and actors are concentrated. They link the supply and demand sides of markets.”[29]

According to Chinese Foreign Ministry Spokesperson Hua Chunying, the corridor will “serve as a driver for connectivity between South Asia and East Asia.” Mushahid Hussain, chairman of the Pakistan-China Institute, told China Daily that the economic corridor “will play a crucial role in regional integration of the ‘Greater South Asia’, which includes China, Iran, Afghanistan, and stretches all the way to Myanmar.”[18]

China plans to build oil storage facilities and a refinery at Gwadar Port, with oil transported to its Xinjiang Uighur Autonomous Region via road and pipeline. This will let it move energy and goods to inland China without going through the Strait of Malacca, which could be blocked by the U.S. or India should hostilities break out in the region. The project will also lead to development in western China, where tensions are simmering from activities by radical separatists.[30][31] Iran has also responded positively over the proposal to link the Iran–Pakistan gas pipeline with China, with the Iranian ambassador to China describing it as a “common interest” between the three countries.[32]

CPEC is considered economically vital to Pakistan in helping it drive economic growth.[33] Moody’s Investors Service has described the project as a “credit positive” for Pakistan. In 2015, the agency acknowledged that much of the project’s key benefits would not materialise until 2017, but stated that it believes at least some of the benefits from the economic corridor would likely begin accruing even before then.[34]

in 2014, the Chinese government committed to spending $45.6 billion over the next six years to build the China–Pakistan Economic Corridor, which will include the construction of highways, railways, and natural gas and oil pipelines connecting China to the Middle East. China’s stake in Gwadar will also allow it to expand its influence in the Indian Ocean, a vital route for oil transportation between the Atlantic and the Pacific. Another advantage to China is that it will be able to bypass the Strait of Malacca. As of now, 60 percent of China’s imported oil comes from the Middle East, and 80 percent of that is transported to China through this strait, the dangerous, piracy-rife maritime route through the South China, East China, and Yellow Seas.

Council on Foreign Relations[13]

A study by the Pew Research Center in 2014 found that 78% of Pakistanis have a positive view of China, while only 14% have positive views of the United States.[25][35] This deal will be a greater investment in the country than the United States has spent on aid.

Infrastructure

The first phase involves development at Gwadar Port and the construction of an international airport. It will be carried out by 2017, with Chinese companies expected to participate. The Karakoram Highway connecting the two countries will also be widened, while the rail network between Karachi in southern Pakistan and Peshawar in the north will be upgraded. The two countries also plan a fiber-optic communications link between them.[citation needed]

The project received a major boost when control of Gwadar Port was transferred to China’s state-owned China Overseas Ports Holding in February 2013.[citation needed] Built by Chinese workers and opened in 2007, Gwadar is undergoing a major expansion to turn it into a full-fledged deep-water commercial port. Pakistan and China have signed agreements for constructing an international airport at Gwadar, upgrading a section of the 1,300-kilometre Karakorum Highway connecting to Islamabad and laying a fibre-optic cable from the Chinese border to the Pakistani city of Rawalpindi.[36][37] With the development of the corridor Central Asia, traditionally an economically closed region owing to its geography and lack of infrastructure, will have greater access to the sea and to the global trade network.[38]

The world’s largest solar power project will be undertaken at the Quaid-e-Azam Solar Park in Bahawalpur. The project will be worth 900 megawatts on an investment of $1.5 billion by the Chinese company Zonergy Limited.[39]

Projects

A total of 51 memorandums of understanding were signed in diverse sectors between China and Pakistan during visit of Chinese president to Pakistan on 20 April 2015.[40] Major projects under the corridor umbrella are:

Project Details
Gwadar Port Completed, handed over to China for 40 years starting 2015[41]
Upgrading of Karachi–Peshawar Main Line Feasibility study underway[42]
Khunjerab Railway Feasibility study underway[40]
Karachi – Lahore Motorway (KLM) Approved, Construction to begin 2015[40]
Havelian to Khunjrab Rail track Approved[43]
Hazara Motorway Under construction[40]
Iran–Pakistan gas pipeline Under construction, Iran’s part of the pipeline is complete.[40]
Gwadar-Ratodero Under construction, approx. 820-km long, expected completion Dec, 15 [40]
Economic Corridor Support Force Completed, armed division of the army for security of workforce, cost $250 million[44]
Havelian Dry Port Feasibility study underway for the container port
Orange Line (Lahore Metro) Approved[40]
Upgrading of Gwadar International Airport Approved[40]
China-Pakistan Joint Cotton Bio-Tech Laboratory Approved[40]
Gwadar-Nawabshah LNG Terminal and Pipeline Project Approved[40]
70 MW Hydro-Electric Suki Kinari Hydropower Project Approved[40]
Port Qasim 2x660MW Coal-fired Power Plant Approved[40]
720MW Karot Hydropower Project Approved[40]
Zonergy 9×100 MW solar project in Punjab Approved[40]
Jhimpir wind Power project Approved[40]
Thar Block II 3.8Mt/a mining Project Approved[40]
Thar Block II 2x330MW Coal Fired Power project Approved[40]
Development of Private Hydro Power Projects Approved[40]
Dawood Wind Power project Approved[40]
Hubco Coal-fired Power Plant Project Approved[40]
Cross-border fibre optic data communication system project, a digital terrestrial multimedia broadcast pilot project at Murree Approved[40]

Financing

According to South China Morning Post, Beijing does not plan to use either the Asian Infrastructure Investment Bank or its Silk Road Fund to finance the US$46 billion Pakistan-China economic corridor, with money to come from both countries instead:

Several different facets will be utilised for the financing of these projects. Both sides will increase cooperation, to jointly provide financing support…….As to whether the AIIB or the Silk Road Fund will be used, at present these [projects] are being looked into, or are in the planning stages. So at the moment we are not considering using these mechanisms or platforms or financial organisations to provide financing

[45]

Security

China has expressed concern that some separatist groups in Xinjiang may be collaborating with insurgents in Pakistan, and has expressed a desire to strengthen security ties.[22] The outlawed Tehrik-i-Taliban has claimed responsibility for past attacks on some Chinese nationals,[46] and Chinese commentators have raised concerns that construction workers could be kidnapped and ransomed.[47] The Express Tribune reports that Pakistan plans to train 12,000 security personnel to protect Chinese workers on the corridor.[48][49][50] Presently, 8,000 Pakistani security officials are deployed for the protection of over 8,100 Chinese workers in Pakistan.[51]

Some militant separatist groups operate in Balochistan, including the Balochistan Liberation Army and Jundallah, which have carried out bombings.[24]

The route of the Economic Corridor passes though Azad Kashmir, one of the regions that has been contested in the Kashmir conflict between India and Pakistan, and border guards have occasionally exchanged fire.[52][53] Chinese intelligence agencies also shared information with Pakistani authorities regarding “foreign hostile agencies” who could support anti-state elements to sabotage the project, a reference mainly to the Indian intelligence agency, Research and Analysis Wing.[54]

Controversy

Some planning aspects and technicalities associated with the route have been criticized on political forums and the media for varying reasons. The Provincial Assembly of Khyber Pakhtunkhwa province adopted a resolution[55] against the alleged decision of the central government to change the multibillion route of the proposed project by diverting the northwestern province of Khyber Pakhtunkhwa. The provincial assembly advised the central government to stick to the same route as agreed upon between the governments of Pakistan and China, and passed a resolution stating that a change in the route not incorporating Khyber Pakhtunkhwa would disadvantage the economic interests of the people of the war-torn province. The federal Minister of Planning Development and Reform Ahsan Iqbal formally denied any change in the alignment.[20][56][57] In addition, some local Baloch nationalists have expressed dismay at the project, noting the difficult economic conditions of Gwadar residents and saying any such development would deny locals control over their native resources. Other Baloch nationalists view it as a “conspiracy” that would stimulate migration of people from other provinces and make the Baloch a “minority” in their homeland.[58]

According to Dr Ahmad Rashid Malik, Senior Research Fellow at the Institute of Strategic Studies Islamabad (ISSi), the route controversy is “baseless and an unfounded reality…”.[59]

Wu Zhaoli, an assistant research fellow at the National Institute of International Strategy, Chinese Academy of Social Sciences, in his article published in Global Times, argued that “security concerns are a critical cause which helps to determine the path of this corridor.[47]
On May 28,2015 the prime minister of Pakistan called on all parliamentary parties and all parties assured their support for the projects.The All Parties conference agreed that the western route of the corridor (which pass through Khyber Pakhtunkhwa and North Balochistan) would be completed first which would be built from Hasan Abdal to Gwadar, passing through Mianwali District, Dera Ismail Khan and Zhob.[60]

Strategic implications

According to experts, the completion of Gwadar would make it the economic hub of Balochistan and create a strategic nexus between Pakistan, China and Central Asia, generating billions in revenue and providing shorter land routes.[33] It would provide links from the Caspian Sea to the Strait of Hormuz, and enable Gwadar to compete with Persian Gulf ports.[58] The United States, wary of Chinese strategic access to the Arabian Sea and its presence in the region, has reportedly tried several times to persuade Pakistan against involving China in the development. According to one official, the US had played an instrumental role in promoting the Port Authority of Singapore for control of the port previously.[58]

India, which maintains tense relations with Pakistan, has viewed the project with objections, particularly as it crosses through the Pakistani-administered side of Kashmir, a region contested between the two countries. According to the Indian foreign affairs ministry, Prime Minister Narendra Modi during his visit to China raised his objections over the corridor.[61] However, Chinese President Xi Jinping dimissed the statements, describing CPEC as a “commercial project.”[62] India may also have apprehensions over China’s access to the sea,[31] and has invested significantly in the Port of Chabahar in neighbouring Iran. The development of Chabahar, which lies a few miles away from Gwadar, is part of India’s efforts for access to landlocked Afghanistan and Central Asia while bypassing rival Pakistan.[58]