Essay on CPEC as a Geopolitical opportunity of Pakistan
1.Introduction (highlighting the dynamics of economic cooperation)
2.The geography of the economic corridor
3.The underlying geopolitical and economic reasons for project
4.The Chinese exportable surplus
5.The reason for the investment appetite
6.Utilization of the accumulated Foreign reserves
7.Making use of the skilled human resource and technology
8.Finding shortest routes both for exports and imports
9.CPEC as part of BRI
10. Collaborative adventures-win-win projects
11.Overcoming the apprehensions
12.The project as a geopolitical opportunity
To boost the economy of any country particularly of the developing world, the only role model which happened to be the success story is attracting foreign investment. Foreign investment not only becomes the immediate vital source of job creation but the cause of running of many other industries attached to the building of the physical infrastructure in the country. Since the governments are unable to create the desired number of jobs in the country, therefore investment whether local or foreign has been established as the primary source giving a kick-start of the economy of any state.
As regards Pakistan there is no blinking the fact that it is confronted mainly with the following problems:
2. Terrorism from across the border
3. Lack of both foreign and local investment
4. Energy crisis
5. Violence and crime in some parts of the country linked with poverty
6. Security threats
Under the existing circumstances, there appears no other country that has shown any interest in investing in Pakistan. It was China that came out with a considerable investment round worth $ 46 billion though in the form of a loan relating to CPEC. It was in April 2015, China signed a package of deals worth $46 billion to develop China Pakistan Economic Corridor (CPEC) an economic corridor connecting China’s northwestern region of Xinjiang and Pakistan’s Gwadar Port on the Arabian Sea just 600 kilometers from the Strait of Hurmuz (The gateway to the Persian Gulf through which 40% of world oil passes). Its economic dividends to China are apparent, but the building of the necessary substantial physical infrastructure appears to be an immediate remedy and impetus for the stagnated economy of Pakistan by way of the creation of jobs to Pakistanis. It also inherits trading benefits to countries like Russia, Kazakhstan, Kirghizstan, Uzbekistan, and Tajikistan. This port will allow Chinese oil tankers from the Persian Gulf to port and ship oil and gas to China’s Xinjiang-Shanghai oil pipeline directly. Also, Chinese products could also be shipped via land to Gwadar and then re-shipped to the Middle East and Africa once the road and rail links are completed. Chinese, Pakistani, and other international companies will be involved in communications infrastructure and power generation projects.
Overall CPEC is a $62 billion project mainly of energy collection and its transportation, partially in the form of a loan and somewhat investment will be invested to build the requisite physical infrastructure. China is developing its comparatively less developed Western region of Xinjiang adjacent to Pakistan and is also planning to manufacture the products to be exported to the Gulf and beyond in and around Gwadar.
It is not difficult to understand why China is interested in advancing such a colossal loans to Pakistan whose economic condition is not that sound. The reality is that China is developing its comparatively less developed Western region of Xinjiang adjacent to Pakistan. It is also planning to manufacture the products in that region to be exported through Pakistan via Gwadar to the Gulf region, North Africa, and even Europe through the Suez Canal, and import oil from the Gulf and certain minerals from Africa through the same route. China also wants to establish exportable items manufacturing units in Gwadar and other parts of Pakistan to be exported to the nearby countries.
At the moment most of the Chinese trade is going on by using the Sea route that is through the SouthChina Sea, Strait of Malacca, and the Indian Ocean for the above destinations. This route is not feasible as it is too long and is also not considered safe from the strategic point of view. Big powers can easily block this Sea lane if any confrontation develops in the region in the future mainly due to the ongoing disputes regarding certain islands in the South China Sea like Senkaku, and coral reefs between China, and countries like Vietnam, Taiwan, and Japan, etc.
Under the circumstances, the CPEC is the most convenient/appropriate/ feasible/ shortest and secure trade route for China to all the above destinations.
The investment abroad in the form of BRI and CPEC, in a way, is also an answer to the Chinese existing slowed down GDP growth rate. Therefore, BRI and CPEC project prima facie are Chinese next phase of boosting its economy via internationalization and disposal of its exportable and human surplus. Since it is based on extending loans from its banking system instead of the IMFand World Bank, therefore it is a point of concern for its competitors like India and USA. There exist some political issues between them like Taiwan where American interests are involved, and territorial disputes with India on its Northwest and Northeastern borders shared with China. Concerns seem genuine as political associations and influences mostly follow such economic collaborations.
While looking deep into the reasons of China’s these large projects we see that the Economic recession of 2007-8 also had an adverse impact on China. As the purchasing power of the European nations and even Americans went down affecting Chinese exports. During the recession period and afterward, the Chinese GDP growth rate came down to around 7% from the previous 9%. This forced China to universalize its economy differently. It called the conference of 28 heads of states in May 2017 to initiate the project of One Belt One Road (OBOR) generally called Belt and Road Initiative (BRI). The word ‘Road’ here refers to Sea lanes and ‘Belt”, roads and railways network on land. This involves a series of infrastructure development projects across Asia, Europe, and Africa to boost mutual trade. The required loans are to be released from the Chinese banking system. China’s BRI announced in 2013 is being implemented under China’s 13th Five-year plan (2016-20). It has two components one Silk Road Economic Belt originating from China’s Eastern coasts stretching towards Northwest China, and from there through CentralAsia into Europe, and the Maritime Silk Road from Eastern coasts to Southeast Asia through the South China Sea, Strait of Malacca to North Africa. The BRI and CPEC initiative aims at encouraging and utilizing Chinese firms enhanced capacity to invest internationally particularly in the emerging economies. This is to help China’s massive foreign exchange reserve to be used in FDI abroad. Additionally, it is to enable China to transfer its technology and development know-how to the less developed economies of Asia and Africa. The infrastructure development associated with BRI and CPEC will not only promote the economic development of the host countries but will help Chinese exportable surplus (products/services/skilled human workforce) to be adjusted world around. The BRI and CPEC are not only China dependent projects but are collaborative ones with the host countries as well as associating other TNCs from Europe and America though mainly contributed by Chinese companies.
The CPEC is a mutually beneficial, joint responsibility, and a shared destiny. However, there is an apprehension in the developed world that in the long run, China’s these projects will open up new markets for Chinese companies in areas that are currently dominated by Western companies, ranging from engineering and telecoms to shipping and e-commerce. Therefore they sometimes show their reservations and resentments against it. In the case of Pakistan, India has also demonstrated such reservations. That reservation is both political and economic, and strategic as well. India believes that CPEC provides an opportunity for Pakistan to share its security with
China hence it will go a long way in relieving Pakistan of Indian regional hegemonic pressure. Additionally, India objects that the route is passing through the disputed territory of Kashmir. It is also pointed out by anti-CPEC countries particularly India that Pakistan may face Sri Lanka like situation. Because on account of the inability of Sri Lankan government to payback the loans to China for building its Seaport Sri Lanka had to hand over the port to China on the lease. As a matter of fact, all the loans taken have to be paid back. I believe even leasing out Seaport by Sri Lanka is not against its interests. As this deal has already brought so many dividends to Sri Lanka in many forms. During its building process, it created so many jobs in Sri Lanka. China helped Sri Lanka in suppressing the independence movement going on in the Jaffna Peninsula by the Tamil Tigers, and the terrorist activates carried out by them against the Majority Sinhalese all over Sri Lanka. This was the most disturbing issue of Sri Lanka’s history which kept it from moving forward for decades. It is not only Pakistan that is entering into economic cooperation with China. There are more than 60 countries around the world spreading in the four continents of the world viz: Asia, Africa, Europe, and Latin America via BRI. As an emerging power, China has cultivated a cooperative relationship worldwide particularly with Central Asia, Africa, Latin America, the Caribbean, and members of the Association of Southeast Asian Nations (ASEAN). During a visit to Brazil, Argentina, Chile, and Cuba in November 2004, Chinese President Hu Jintao announced the U.S. $100 billion worth of investment over the next decade. Though China has long been a close ally of North Korea, it has developed a valuable trading relationship with South Korea as well. Chinese trade between African countries along with infrastructure development projects has surpassed $200 billion. The Sino-Arab Cooperation Forum had formally been established in January 2004. Its current trade volume with South Asian nations is over the U.S. $20 billion a year. India, though considered China’s adversary, is China’s principal trading partner. As regards Europe, China is now the EU’s second-biggest trading partner behind the United States.
China in May 2017 invited 28 heads of state to Beijing mainly from the developing world. They all reaffirmed their commitment to build an open economy and ensure free and inclusive trade, under the ambitious Belt and Road initiative led by Beijing agreeing upon to promote a rules-based, non-discriminatory trading system with the World Trade Organization at its core and to oppose protectionism. Many more countries the world over are willing to join the One belt One road initiative of China, testifying to China’s collaborative approach and not the confrontational or coercive one. Even the USA has the highest bilateral trade with China with no direct hot issue with China.
The economic dividends of this project to China are apparent, but the building of the necessary substantial physical infrastructure appears to be an immediate remedy and impetus for the stagnated economy of Pakistan not to talk about the hidden job opportunities it could bring to the jobless youth of Pakistan. No doubt it is a win-win situation for the partners, and all those who want to benefit from this like Russia, Kazakhstan, Kirghizstan, Uzbekistan, and Tajikistan as passing through unstable Afghanistan is not being considered a better option by them at least for the time being. India, subject to the normalization of relations with Pakistan in the future could also benefit from this route via Wahga border.
Additionally, the security of the CPEC route and the areas through which it will pass is going to be shared by China as well, another benefit for Pakistan. This will also go a long way in stabilizing the region particularly Baluchistan which is going to benefit from the economic dividends of this trade route to the maximum. Chinese presence in the Gwadar port militarily will also add to the security of Pakistan particularly in the face of the unwarranted offensives launched (including engineering the terrorist attacks) by its both Eastern and Western neighbors against Pakistan which as a matter of fact has kept the foreign investment and tourism from Pakistan.
India has helped Iran to develop its Chahbahar port (not far away from Gwadar), but that is not that much deep seaport as Gwadar. It is not feasible for China to use it as a substitute for Gwadar for the reason that there comes a politically unstable Afghanistan between China and Iran in addition to its extended length.
This all shows that the opportunity of CPEC granted to Pakistan was primarily on account of its geographical positioning. The historic friendly relations between the two countries also happened to be instrumental in cultivating the requisite trust to move forward on this great economic adventure.