World / Fri, 07 Jun 2024 The Indian Express

As Shehbaz visits China, the hope and unfulfilled promise of CPEC

Pakistan’s Prime Minister Shehbaz Sharif is on a five-day visit to China, his country’s biggest and most important ally. According to the official Chinese news agency Xinhua, CPEC had brought direct investment of $25.4 billion to Pakistan until 2022. At least five Chinese working on various CPEC projects have been killed in attacks by Baloch militants this year so far. This means rescheduling some of the maturities in the slew of Chinese debt instruments maturing in the next three years,” Husain wrote. This is what lies at the heart of Sharif’s visit to China, not CPEC, several commentators including Husain believe.

Pakistan’s Prime Minister Shehbaz Sharif is on a five-day visit to China, his country’s biggest and most important ally. The second phase of the China-Pakistan Economic Corridor (CPEC) is expected to be formally announced during the visit.

The $62-billion CPEC, which was launched in 2015, is part of President Xi Jinping’s Belt and Road Initiative (BRI), aimed at expanding China’s geopolitical influence through billions of dollars of investments in infrastructure projects in around 100 countries.

The CPEC would facilitate the construction of power plants, road and rail networks, and the deep-sea port of Gwadar in Pakistan. For China, the project is of strategic significance, and will provide it direct access to the Indian Ocean through highways in Pakistan-Occupied Kashmir and down the length of Pakistan.

CPEC story so far

The first phase of CPEC focused on infrastructure, energy, and port development projects. Progress has been patchy.

Data from the CPEC website show that of the 21 proposed power projects, 14 have been completed, two are under construction, and five are yet to start. Of the 24 proposed transport-related projects (rail and road), six have been completed, but no work has started on 13. Only four of the nine proposed Special Economic Zones (SEZs) — designated areas with lenient trade laws to promote growth — have seen any progress, and no SEZ is complete.

Not much is happening in Gwadar. Andrew Small, a leading expert on Chinese foreign policy, had told The Indian Express in 2022 that most of the projects around the port were “far from completion”. According to the official Chinese news agency Xinhua, CPEC had brought direct investment of $25.4 billion to Pakistan until 2022.

Behind stalled progress

CPEC has been hobbled by Chinese concerns about corruption and red tape in Pakistan, the political tumult that the country has been going through, and the poor security situation in Balochistan province where Gwadar is located.

The project has triggered violence in the restive province, and tens of Chinese nationals have been killed in terrorist attacks since 2018. At least five Chinese working on various CPEC projects have been killed in attacks by Baloch militants this year so far.

To the historically marginalised Baloch people, Gwadar appears as a symbol of continued economic injustice. CPEC-related infrastructure has not generated quality jobs for local people in the province, and has failed to bring any economic dividends to the impoverished population.

“The developers from Punjab and Sindh, who had made a fortune from trading land in Balochistan, did not build schools and other social infrastructures as they had agreed,” Ruoshui Jiao of Lanzhou University wrote in a 2023 paper (‘Implications of Pakistani Dynastic Politics for the Construction of China-Pakistan Economic Corridor’). “The government [too] did not fulfil its promise to promote the economic and social development of Balochistan, and the rural areas of Balochistan were getting even poorer,” he wrote.

Stella Hong, a China Public Policy Postdoctoral Fellow at Harvard, told Al Jazeera that Pakistan’s security situation “remains the most immediate concern” for China and may impact future Chinese investments in the country. “Companies need to be able to run viable businesses if they were to relocate to Pakistani SEZs or even in Pakistan in general. But many seem to have been frustrated by the difficulties of getting things done in Pakistan,” she said.

Also Read | Pakistan PM Shebaz Sharif to visit China June 4-8: Foreign ministry

Prime Minister Sharif has assured the Chinese that his government has started on structural changes to weed out corruption, and that he will “spare no effort to protect the lives of Chinese workers”, Dawn reported on Thursday.

Hopes and questions

Bringing CPEC back on track is a priority for the crisis-hit Pakistani economy.

Ahsan Iqbal, Pakistan’s Minister for Planning and Development, told Dawn that the second phase of CPEC will “envisage deeper cooperation in the fields of energy, agriculture, infrastructure and projects related to the cross-country rail line, Main Line-1” — all sectors in need of major investments.

But while Sharif hopes that big-ticket Chinese infrastructure investment could pump life into Pakistan’s stalled economy, the CPEC’s limited track record does not inspire confidence. “CPEC has certainly improved sectors such as transportation or energy…but one has to translate these benefits into economic productivity and economic growth, which has not happened,” economist Ammar Malik of the US-based research lab AidData, told Al Jazeera.

For instance, while CPEC was estimated to generate more than 2 million employment opportunities for Pakistanis, government data say less than 250,000 jobs have been created so far.

“The Chinese approach of not partnering with local companies is not going to help create new job opportunities for millions of Pakistani youth. Since Chinese companies are tax-exempt, they bring everything from China, including labour, and hence they will have no reliance on Pakistani businesses to fulfil their demands,” economist Abdul Khaliq wrote for the international advocacy The Committee for Abolition of Illegitimate Debt.

According to the International Monetary Fund, China holds roughly $30 billion of Pakistan’s $126 billion external debt, up from just $4 billion in 2013, prior to the announcement of the CPEC. An IMF report also found that between July 2021 and March 2022, more than 80% of Pakistan’s bilateral debt service went to Beijing.

Many in Pakistan and outside fear that this debt burden is not just unviable, it also effectively makes Pakistan a Chinese client state. “From the start, many in Pakistan worried that CPEC was a neo-colonial project that would give China control over Pakistan, like the British East India Company through which the British colonized the Indian Subcontinent,” Osama Ahmad, an Islamabad-based researcher at the Stimson Center wrote in 2023 (‘Ten Years of CPEC: A Decade of Disappointments’).

The ‘mirage’ of CPEC

Ahead of Sharif’s visit, the Pakistani government has been talking up the anticipated revival of CPEC. China, however, has issued only a vague statement.

“Under the guidance of the leaders of the two countries, China and Pakistan have in recent years had close high-level exchanges, steadily advanced practical cooperation…on the CPEC, and maintained sound communication and coordination in international and regional affairs,” Dawn reported Chinese foreign ministry spokeswoman Mao Ning as saying.

The “noise around a revival of the CPEC is either wishful thinking (at best) or a way to camouflage what really is going on”, Khurram Husain, a leading Pakistani commentator on business and economy, wrote in an article titled ‘The great CPEC mirage’ in Dawn.

In March, the IMF agreed to release a $1.1 billion tranche of its $3 billion bailout package to Pakistan. The government is currently negotiating for a fresh package of $6-8 billion, but a sticking point has been Pakistan’s standing debt obligations, especially to China.

“The IMF does not want its resources being used to service Chinese debt obligations, and has told the government that an agreement will only be possible if there is no positive net outflow from Pakistan to China during the programme period. This means rescheduling some of the maturities in the slew of Chinese debt instruments maturing in the next three years,” Husain wrote.

This is what lies at the heart of Sharif’s visit to China, not CPEC, several commentators including Husain believe.