During the second week of November 2016, the China-Pakistan Economic Corridor (CPEC) became operational. The Prime Minister, Chief of Army Staff and other senior officials along with few Chinese were in Gwadar, witnessing the first shipment from the port leaving, after reaching the town through different routes from Kashgar and within Pakistan.
Game changer – is the phrase often being used by many within Pakistan to describe the USD 45 billion CPEC. Given the pace in which the project progressed despite the political controversies, one should admire the Chinese and Pakistanis for going ahead with the Corridor, within a period of two years.
Though a section within Pakistan, especially Punjab, considers the CPEC as a game changer, there are serious challenges to the project. Though the political opposition by non-Punjabi provinces – especially Balochistan and Khyber Paktunkwa are projected as a major issue, there are serious economic, environmental and fiscal concerns relating to the CPEC. Of course, there are concerns from Gilgit-Baltistan as well, but they are not considered even by their mainstream media.
First and foremost, the CPEC is not just a “corridor” or a “route” comprised of road and rail networks. It is much more than that; in fact, only around USD 12 billion is allocated to build the “corridor”; rest – around USD 34 billion will go into investing in energy projects – coal and hydel, creating economic zones and related projects from Gilgit-Baltistan to Gwadar.
The nature of these investments – especially hydel and coal projects leading to the generation of power is a source of friction – for where they are situated. KP and Balochistan complain that the CPEC investments benefit Punjab more than rest of the provinces in terms of economic and power projects outside the investments on building infrastructure. The PTI and the KP government has been repeatedly blaming the federal government for not providing the provincial “share” of the CPEC.
Second, KP and Balochistan also complain about the routes and the pace in which they are being built. The CPEC foresees two routes primarily – eastern and western; the former running primarily through Punjab and Sindh and the latter primarily through Balochistan and KP linking Gwadar with Gilgit through the Karakoram Highway (KKH). Especially KP (led by the PTI) complain, that the eastern route is being given priority by the Sharif brothers, over the western. Though the government has been attempting to address the issue of eastern and western corridors through Parliament and outside, there are deep suspicions, that Punjab is a larger beneficiary. In short, these provinces feel CPEC is more of a China-Punjab Economic Corridor!
Over and above, the Balochis feel, that the development will “pass through” them rather than benefitting, and Gwadar will become a Punjabi town soon. Balochis fear is historical starting from the British. Investment in Balochistan’s infrastructure and resources hardly benefited the locals, but those who make the investments – earlier the British and recently the Punjabis. And now they fear, the CPEC will continue the same trend and make the Balochis an onlooker, seeing his province being “robbed” in the name of development.
Third, there have been few concerns from the financial and environmental perspectives as well, especially relating to power projects. While some of the projects are hydel, there is a substantial investment in coal in producing energy. The environmentalists fear, when the entire world is going slow in burning coal for energy production and investing in the Renewables, the idea of investing more in coal may become counter-productive in the long run.
A larger concern on the power projects also is fiscal - related to the pricing and payments. Pakistan’s power sector has been known for its bad governance; besides the State owned production, there have been independent power producers (IPPs) and there has been a long running controversy over the pricing – in terms of the cost of electricity produced per unit. There have already been reports that the Chinese projects are expected to sell electricity at a higher cost and the State will have to buy. South Asia is known for its power debt, by State run companies and Pakistan is no exception. Though the new projects are based on build, operate and transfer, the cost for the initial years will have to be borne by the State for the purchases. At a later stage, even if the Chinese are willing to transfer, how many will be willing to buy coal plants then?
The pricing policy has been a mess for Pakistan, and if the State is willing to pay more for the Chinese power, other producers (IPPs) are likely to get upset and may even pursue a legal course. While at this stage, the investments in power projects look good, much would depend when it yields result, and how Pakistan is going to buy electricity from these projects.
Fourth, a concern that is raised recently in the Parliament is interesting. What if the Chinese would want to use the CPEC to trade with India? A section is aware that the Corridor will not serve narrowly a north-south link – connecting Kashgar with Gwadar, but also enable feeder roads. For Pakistan, as long as these feeders are on the west of CPEC – meaning linking Afghanistan, Iran and Central Asia, it would not be an issue. But, if the Chinese show interest in using it for the substantial Sino-Indian trade, there would be serious questions internally.
Finally, from an Indian perspective, few issues. First, the CPEC as a corridor runs through Gilgit Baltistan; besides the investments on the Karakoram Highway (KKH), the Chinese are also investing in hydel projects in a region, that our Parliamentary resolution considers it as ours. Second, perhaps, there is something for New Delhi to learn from the pace in which the CPEC got operationalised. Despite all the above mentioned problems and issues, Chinese have succeeded in getting goods from Kashgar into Gwadar within two years. A regional comparison with Chahbahar and Sittwe would highlight the Chinese pace, which is widely admired in our neighbourhood.
The above was published earlier as a commentary in the Hindu BusinessLine