Policy Brief CPEC and Skepticism

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Policy Brief CPEC and Skepticism

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Team CPGS

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List of Acronyms

i. BLA Baluchistan Liberation Army

BRI Belt and Road Initiative

ii.

iii. CPEC China Pakistan Economic Corridor

iv. GDP Gross Domestic Product

v. IMF International Monetary Fund

vi. ISIS Islamic State of Iraq and Syria

vii. ISKP Islamic State of the Khorasan Province

viii. OBOR Baluchistan Liberation Army

ix. SCO Shanghai Cooperation Organization

x. UNGA United Nations General Assembly

xi. US United States

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CHINA PAKISTAN ECONOMIC CORRIDOR AGAINST

REGIONAL AND GLOBAL SKEPTICISM

1. Introduction

China has dominated the multifaceted discussions on global economy and politics since the

second decade of 21st century. China’s ambition to realize its potential did not go unnoticed by

the developed world. Its mega development plans are seen with suspicion from its rivals in

region and all over the world. The latest and most prominent of such plans is Chinese Belt and

Road Initiative (BRI), also known as New Silk Road and One Belt One Road (OBOR). The

initiative was launched in 2013 by Chinese President Xi Jinping and stretches over

three continents (Asia, Europe and Africa), giving China access to about 60 percent of the world

population. It includes vast network of roads, pipelines, energy projects and railway in the 70

countries along the BRI and amounts to around $575 billion.1 China Pakistan Economic

Corridor (erstwhile referred to as CPEC) is a cog in the greater BRI. The corridor will connect

Chinese remote western region to Indian Ocean through corridor in Pakistan, minimizing the

transportation cost and distance for China. Governments of Pakistan and China shook hands on

the $46 billion (now $62 billion)2 CPEC in April 2015. The project includes a series of

transportation infrastructure and energy projects. Where Pakistan welcomed this golden

opportunity, China’s regional rival India and its global rival United States (US) geared up to

keep the project from being operational. A series of actions have come into light from rivals to

undercut the CPEC continuity. Pakistan and China have categorically denied the allegations on

CPEC and refused to give in to the pressure. However, in long run it will be a tough test of

Pakistan-China relations to not let this opportunity fall and open the doors to a promising future

for Asia altogether.3

1https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative 2http://cpec.gov.pk/brain/public/uploads/documents/CPEC-Quarterly-Magazine-reduced.pdf 3https://www.stimson.org/wp-content/files/file-attachments/The%20China- Pakistan%20Economic%20Corridor%20-%20Final.pdf

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2. Analyzing CPEC in Detail

CPEC covers a great deal of territory in China including Xinjiang Uygur Autonomous region

and about whole of Pakistan passing through major cities of Gilgit, Peshawar, Dera Ismail

Khan, Islamabad, Lahore, Multan, Quetta, Sukkur, Hyderabad, Karachi and Gwadar.4 Rest of

the details are enlisted below:

Commencement April 2015

Monetary value $62 billion5

Projects completed 13 (worth $11 billion)6

Projects under implementation 13 (worth $18 billion)7

Projects in pipeline Worth $21 billion8

Total routes 2 (Eastern and Western)9

Total Length 2,800 kilometers (Approx.)10

Projects Included Energy, Transportation

Infrastructure, Special Economic

Zones (SEZs), Industrial Parks,

Agricultural Development and

Tourism11

CPEC is the convergence of multilayered interests for Pakistan and China. Some major

benefits for each are:

4https://www.pc.gov.pk/uploads/cpec/LTP.pdf 5http://cpec.gov.pk/brain/public/uploads/documents/CPEC-Quarterly-Magazine-reduced.pdf 6https://nation.com.pk/10-Jan-2020/cpec-pakistani-government-announces-completion-of-13-projects-worth- dollar-11-billion 7https://nation.com.pk/10-Jan-2020/cpec-pakistani-government-announces-completion-of-13-projects-worth- dollar-11-billion 8https://nation.com.pk/10-Jan-2020/cpec-pakistani-government-announces-completion-of-13-projects-worth- dollar-11-billion 9https://www.usip.org/sites/default/files/2017-10/pw135-the-china-pakistan-economic-corridor.pdf 10https://www.hindawi.com/journals/jat/2019/7178507/ 11https://www.pc.gov.pk/uploads/cpec/LTP.pdf

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For China

The corridor will connect China with Indian Ocean by covering less distance

CPEC will allow China to bypass maritime chokepoints contentious in the South China Sea

It will enable China to develop its remote western region

CPEC will be a cost-effective route for China to import shipments (the distance from

China’s Kashgar to ports in the Middle East and Europe is decreased by around

11,000 to 13,000 km)12

Gwadar port with its geostrategic location allow China to access Central Asia

Gwadar Port will facilitate China’s trade from Persian Gulf and Africa to Western and

Northern China reducing the distance by around 12,500 kilometers while also diminishing

the cost considerably13

Currently about 80 percent of China’s oil is transported through Strait of Malacca to

Shinghai. After completion of CPEC pipeline projects the transportation duration of oil

imports from the Middle East and Africa will be reduced from over 30 days to just 2 days.14

Moreover, shipments will not be bound to shipping through Straits of Malacca and the

vulnerable maritime routes

Gwadar will provide China with strategic advantage against its regional rivals

For Pakistan

CPEC has brought the much sought investment to Pakistan

CPEC confirms Pakistan’s independent foreign policy while allowing breathing space

against sole dependency on the US

CPEC is an economic growth stimulator for Pakistan

Pakistan can use the opportunity to develop its remote Gilgit Baltistan and

Baluchistan region

Energy projects under CPEC will allow Pakistan to cover its energy shortfall An operational Gwadar port will decrease the burden on Bin Qasim port in Karachi

12https://www.hindawi.com/journals/jat/2019/7178507/ 13 http://cpecinfo.com/cpec-symbiosis-offers-a-number-of-benefits-to-china-and-pakistan/ 14https://www.hindawi.com/journals/jat/2019/7178507/

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3. Regional Skepticism: Insecurities and Efforts to Undercut CPEC by India

Indian concerns on CPEC emerged soon after Pakistan and China inked the deal. Though

rebutted again and again by both Pakistan and China, India adheres to the stance that CPEC

undermines Indian sovereignty.

Indian concerns can be categorized in two areas:

Territorial integrity

Threat perception

For the first part, Indian Prime Minister Narendra Modi

said CPEC was “unacceptable”15 after barely two

months of the announcement by Chinese President XI

Jinping in 2015. Later India opened up about its

insecurities on the Raisina Dialogue forum in 2017.

Indian Prime Minister cemented his concern stating that,

“Only by respecting the sovereignty of countries

involved, can regional connectivity corridors fulfill their promise and avoid differences and

discord.” Chinese Foreign Ministry spokesperson Hua Chunying responded to the remarks saying,

“Regarding CPEC, this is a project that is devised for long-term development and

cooperation in various fields... It is for regional peace and development.”16 However, the lucid

response from Chinese foreign ministry did not hold the Indian Foreign Secretary Subrahmanyam

Jaishankar from saying that, “The CPEC passes through a territory that we see as our

territory. Surely people will understand what [the] Indian reaction is. There needs to be some

reflection and I am sorry to say that we have not seen signs of that.”17 Indian claim of CPEC

breaching its sovereignty rests on the fact that CPEC passes through Gilgit Baltistan in Pakistan, a

territory which India claims.India does not want a functioning CPEC through Gilgit Baltistan to

internationalize the Kashmir dispute, the dispute which India adheres as bilateral to the world.

Nafees Zakaria (then) spokesman rebutted Indian concerns stating that, “The project will

15https://www.aljazeera.com/indepth/features/2017/02/china-pakistan-economic-corridor-worry-india- 170208063418124.html 16https://www.dawn.com/news/1309370 17https://www.dawn.com/news/1309370

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contribute to [the] economic development of the entire region and not only for Pakistan and

China.”18 India did not stop at this and raised the issue at 39th session of United Nations Human

Rights Council in 2018. India’s permanent representative to UN in Geneva Ambassador Virander

Paul said the CPEC project was against the United Nations General Assembly (UNGA) Resolution

41/128. He said that, “Regarding the so-called 'China-Pakistan Economic Corridor', which is

being projected as the flagship project of the 'Belt

and Road Initiative' (BRI), the international

community is well aware of India's position. No country

can accept a project that ignores its core concerns

on sovereignty andterritorial integrity”. 19 In January

2020 during Raisina Dialogue India once again took a dig

at CPEC when Indian Naval Chief Admiral Karambir

Singh said that the project (CPEC) breaches Indian sovereignty.20 On diplomatic grounds India has

repeatedly portrayed that it is most reluctant to accept the CPEC and is willing to go to lengths

to stop it from establishing.

The second part of Indian concerns is related to the threat perception where it deems CPEC as part

of Chinese plan to disrupt Indian hegemony dream and enforce its own domination. Gwadar port

is the entry point of CPEC from Indian Ocean. For New Delhi Gwadar is part of China’s “String

of Pearls” plan and will serve as Chinese base in the Indian Ocean Region along with ports that

China is developing in Sri Lanka and Bangladesh. India cannot realize its ambition of regional

hegemony with Chinese navy in Indian Ocean having bases at strategic locations. India’s

opposition of CPEC is also inspired by the fear impinging its economic growth. CPEC has

helped the struggling economy of Pakistan

and through energy production and promises

further foreign investment. This perception is

cemented by the fact that

18https://www.aljazeera.com/indepth/features/2017/02/china-pakistan-economic-corridor-worry-india-

170208063418124.html 19https://www.indiatoday.in/india/story/china-pakistan-economic-corridor-violates-india-s-territorial-integrity- india-to-un-1340215-2018-09-15 20https://asiatimes.com/2020/04/indias-opposition-to-cpec-on-shaky-ground/

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India itself is part of China’s Bangladesh-China-India-

Myanmar Economic Corridor under OBOR, the very

same project whose one cog is CPEC.21

Apart from diplomatic efforts, India is not refraining

from efforts to undercut the CPEC on ground. For

instance, in 2016 a year after Pakistan and China

signed the agreement, India threw its weight behind Iran to develop the Chabahar port. Iranian

Chabahar port is on a mere distance of 175 kilometers from Pakistan’s Gwadar port and India

announced $500 million development project.22

The plan however has been doldrums because after Donald Trump assumed Oval Office in the US,

Iran once again came under crippling economic sanctions.

4. Global Skepticism: Insecurities and Counter-Strategies of the US Against

CPEC US-China conflict for global dominance has been brewing for years and after announcement of

CPEC Pakistan came into direct influence. China is making a push to become leading economic

power displacing the US, while the US is gearing to frustrate China from doing so. Many in the US

see Chinese BRI as a threat and CPEC as its centerpiece. The US has the largest Gross

Domestic Product (GDP) in the world ($20.54 trillion 2018)23 but China is following up and is

second only to the US ($13.61 trillion 2018).24 The US was the largest exporter of goods and

services till 2013 when China passed it and since then it has been a close competition.25 Chinese

BRI is seen by the US as economic parallel to match the country’s military stretch ambitions

(String of Pearls). Moreover, allegation leveled that China gives out huge loans to the countries

that are part of BRI for development while the recipient countries are not financially able to

pay back. For instance, China funded construction of seaport in Hambantota, Sri Lanka.

Latter was not able to pay back the loan and ultimately had to lease the port to China for 99 years.26

For US this interprets as “Dept-Trap Diplomacy”,

21https://asiatimes.com/2020/04/indias-opposition-to-cpec-on-shaky-ground/ 22https://www.aljazeera.com/indepth/features/2017/02/china-pakistan-economic-corridor-worry-india- 170208063418124.html 23https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US 24https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=CN 25https://www.youtube.com/watch?v=lVYdqoVJIeI 26https://nyujilp.org/wp-content/uploads/2019/09/NYI401.pdf

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as China is using it effectively to secure strategic ports at maritime trade route. Although China has

effective answer to these allegation yet US propaganda is there to manipulate the situation. US is

worried that Chinese access to Gwadar port through completion of CPEC could lead to a

crisis situation in India Ocean Region for US and allies. However, criticism of the US on

CPEC remained subtle till Pakistan appeared before the International Monetary Fund (IMF) for

bailout package. In July 2019 IMF granted $6 billion27 bailout package from Pakistan but not without

ample criticism from the US to open up and review the CPEC. The US Secretary of State Mike

Pompeo warned against IMF bailout that could be used to pay back loans to China. He said that,

“Make no mistake. We will be watching what the IMF does.” He added that, “There’s no

rationale for IMF tax dollars, and associated with that American dollars that are part of

the IMF funding, for those to go to bail out Chinese bondholders or China itself.”28

However, the White House administration did not stop at this and in November 2019 US Assistant

Secretary of State for the Bureau of South and Central Asia Affairs Alice Wells said that, “(CPEC)

is going to take a growing toll on the Pakistan economy, especially when the bulk of payments

start to come due in the next four to six years.” Shifting criticism on China she said that “CPEC

relies primarily on Chinese workers and supplies, even amid rising unemployment in

Pakistan.” She added that “It's clear, or it needs to be clear, that CPEC is not about aid.”29

Chinese Ambassador to Pakistan Yao Jing responded to comments made by Alice Wells stating

that he had been “shocked and surprised to see the remarks of Alice.” He further added

that, “If there is any sincerity… [the U.S. should] come forward to invest in Pakistan. We

[China] welcome U.S. investment in Pakistan.”30 Similarly administration in Pakistan turned

down the US concerns when Foreign Minister of Pakistan Shah Mahmood Qureshi said that stance

of the US on CPEC will have “no impact” on the project.31

5. Assessing Possibilities to Derail CPEC China and the US are engaged on a vast canvass for leadership of the global economy. If the US

becomes successful in disrupting the CPEC, it could blow a dent in China’s BRI and contain

27https://www.dawn.com/news/1491889 28https://www.reuters.com/article/us-imf-pakistan/us-pompeo-warns-against-imf-bailout-for-pakistan-that-aids- china-idUSKBN1KK2G5 29https://www.wionews.com/world/pak-china-cpec-project-will-hamstringing-pm-imran-khans-reform-agenda-us- 263755 30https://thediplomat.com/2020/01/cpec-and-beyond-china-and-the-us-fight-for-influence-in-pakistan/

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China’s economic expansion. Hence to disrupt China US would have to pressurize Pakistan with

limited options. Being the largest donor of IMF32, US could use that leverage to impose strict

conditions for Pakistan to roll back or slug the pace of CPEC project to frustrate China.33 Similarly

in an extreme scenario US could cut down its aid to Pakistan to press the latter to reconsider the

CPEC. US government has committed around $5 billion in assistance to Pakistan since 2009, while

another $1 billion in emergency humanitarian response. Moreover during 2019-2020 fiscal year of

Pakistan the US came out as top donor to Pakistan of on-budget, grant-based assistance.34 In this

way US’ treatment of Pakistan could serve as lesson to other countries in BRI and will be easy to

scare off. However, on the shallow side an extreme measure of such nature will leave Pakistan with

no option but to completely rely on China and it will cost the US its potential ally in the region.

From security perspective CPEC is slightly vulnerable from both Pakistan and China. China’s

western region (Xinjiang province) has shown that it can be of problematic nature and for

its measures China has earned bitter criticism from the US and its allies. If the US becomes

successful in highlighting, or in an extreme scenario, internationalizing the issue, it will

eventually cast shadows of discrepancy on the CPEC.35 On the other hand Pakistan also has had

some serious security problems in its western region, especially Baluchistan province (where

Gwadar port is located). Though last year the US enlisted the notorious Baluchistan Liberation

Army (BLA) as terrorist outfit36 and buried the doubts of enemies of Pakistan in the region,

but the security environment is still not ideal. These two regions in Pakistan and China can turn

out to be the Achilles heel of CPEC.37 Even though the two countries are successfully dealing with

the security concerns as of now, the issue still poses threat to CPEC. On the positive side Pakistan

and China have displayed their zero tolerance policy towards terrorism and are both members of

Shanghai

Cooperation Organization (SCO) which has the promising potential against regional terrorism.38

32 https://www.americanactionforum.org/insight/u-s-participation-in-the-international-monetary-fund-imf-a- primer/ 33 https://www.reuters.com/article/us-imf-pakistan/us-pompeo-warns-against-imf-bailout-for-pakistan-that-aids- china-idUSKBN1KK2G5 34 https://pk.usembassy.gov/our-relationship/policy-history/us-assistance-to-pakistan/ 35 https://www.orfonline.org/wp-content/uploads/2018/01/ORF_Issue_Brief_225_CPEC.pdf 36 https://www.dawn.com/news/1491688 37 https://www.orfonline.org/wp-content/uploads/2018/01/ORF_Issue_Brief_225_CPEC.pdf 38 https://www.worldscientific.com/doi/pdf/10.1142/S2377740019500027

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However, these security threats are related to the mainland of the two countries (Pakistan and

China). There is another security threat to CPEC (directly or indirectly) not highlighted. The US

has started its withdrawal from Afghanistan after a complex series of talks and eventually peace

deal39 with the Taliban and the latter hail the withdrawal of foreign troops as victory. Meanwhile

Afghan government in Kabul loses its credibility by day where two presidential candidates

Abdullah Abdullah and former president Ashraf Ghani have both “assumed” the president’s office

after a much controversial election,40 all while Afghan security forces and Taliban are engaged in

deadly combat.41 It is apparent that crisis will further deepen in the future if an intra-Afghan peace

deal is not concluded. However, before that another stakeholder has entered the play in

Afghanistan. Most recently Afghan intelligence captured the leader (Abdullah Orokzai) of Islamic

State of Iraq and Syria (ISIS) affiliated Islamic State of the Khorasan Province (ISKP).42

The region (Khorasan) which ISKP refers to the joint area of Afghanistan-Pakistan-Iran and

the presence indicates that if the organization gets a foothold in post-war Afghanistan, it will be

able to lure the region into conflict once again. History has shown that armed conflict in

Afghanistan has always brought severe security crisis for Pakistan. Now that there is a ray of hope

in the US withdrawal, the arrival of ISKP should be an alarm for the region. In short the fragile

security environment of the region is an indirect threat to CPEC.

Having assessed the threats to the CPEC, possibility of covert threats or strategies aimed

at disrupting CPEC cannot be ignored. For instance, it is no hidden fact that India is against CPEC

and has time and again voiced its concerns and went as far as naming the project illegal. In this

situation Pakistan and China cannot shy away from the possibility that India could make its move

against CPEC.43 For instance, as mentioned above India enjoys close relations with Afghan

government in Kabul. In 2016 the US special envoy rebutted Pakistan’s concerns of Indian

presence and involvement in Afghanistan as “overestimated” when the latter said 24 Indian

consulates were working in Afghanistan with some close to the Pakistani border.44 It is clear that

fragile security environment in Afghanistan provides suitable cover for any cross-border activity.

39 https://www.bbc.com/news/world-asia-51689443 40 https://www.bbc.com/news/world-asia-51689443 41 https://www.bbc.com/news/world-asia-51706126 42 https://www.aljazeera.com/news/2020/04/afghan-forces-announce-arrest-local-isil-leader- 200404171431866.html 43 https://www.dawn.com/news/1370463 44 https://www.dawn.com/news/1266465

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Hence, Pakistan and China need to be on their toes for any diplomatic or otherwise effort from

India through Afghanistan to disturb the CPEC.45

6. Assessing the Strength of Pak-China Relations for Continuity of CPEC Pak-China has emerged even stronger every time it was put to test. Continuity and establishment

of the CPEC is just another challenge for the two, only this time including the regional prosperity

at stake. Both Pakistan and China have reiterated time and again that CPEC will continue towards

accomplishment. By far the gravest moment of vulnerability was when Pakistan had to appear

before the IMF for financial bailout package. Meanwhile India and the US continue to take digs at

the project but to no avail so far. Pakistan and China share a unique relationship based

on multilayered ties. Pakistan was among the first countries to recognize People’s Republic of

China in 1950. The relationship has developed into “All-Weather Strategic Cooperative

Partnership” and while Pakistan considers China as one of its closest friends and partner, the latter

dubs Pakistan as its “Iron Brother”.46 Moreover, China is the largest trading partner of Pakistan

(while Pakistan is China’s second largest trading partner in South Asia) as well as a major investor,

particularly in infrastructure and energy sector. Bilateral trade between the two countries reached

the volume of

$18 billion in 2018.47 Regarding military relations, the cooperation includes joint ventures,

production of military equipment, aircraft, submarines and tanks. Also China is recipient of the

largest number of military training officials from Pakistan.48 As mentioned in earlier paragraphs

Pakistan has been and still is under pressure from the administration in White House to reconsider

the CPEC while China has been accused of using development projects in BRI as debt trap. The

two countries (Pakistan and China) have shown that their relationship is flexible and strong enough

to take CPEC towards accomplishment.

7. Critical Analysis It is clear that CPEC holds central importance in China’s BRI and promises a prospering

economic

future for Pakistan. While Pakistan and China are focusing their energies to take up the project,

rivals (mainly India and the US) are going lengths to disrupt it from success. There is a plethora

45 http://prdb.pk/uploads/publications/1539244593803.pdf 46 http://mofa.gov.pk/pakistan-and-china-diplomatic-relations/ 47 http://mofa.gov.pk/pakistan-and-china-diplomatic-relations/ 48 http://mofa.gov.pk/pakistan-and-china-diplomatic-relations/

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of hurdles in the way of CPEC which the two countries have overcome with success so

far. However still, the challenges to CPEC continue to grow with its progress. CPEC will be able

to connect three regions (Middle East, South Asia and Central Asia) and has the potential to bind

the region in economic prosperity. For its success Pakistan and China will have to remain vigilant

because its rolling back will be a huge blow to either side. China needs the push to take over the

global economy and Pakistan needs ample economic opportunity to come out of its economic

grievances and years of security dilemma. CPEC is providing the required opportunity to both

Pakistan and China. Given the circumstances of regional and global opposition, completion of

CPEC will not be an easy task but Pakistan and China will need to adhere to their much celebrated

friendship and relation of mutual trust and goodwill.

8. Conclusion It is true that CPEC is the flagship and most important project of Chinese BRI. On one hand it

provides China with great facility in maritime trade routes with distance and cost, while on the

other hand it promises uplift to the economy of Pakistan. Interests of Pakistan and China

are intertwined at CPEC and fate of region is bonded with it. While Pakistan and China struggle to

realize the CPEC, the rivals continue their efforts to bring it down. There are a number

of possibilities that could realize in favor of either side. However, Pakistan and China can make

this project a success through proactive policy measures at home and at diplomatic grounds.

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