CPEC: Pakistan's Gateway to Economic Growth or China's Gateway to Control?

Analysis

By Ruchika Sharma

China and Pakistan share an enduring relationship, describing themselves as all-weather friends. They define their relationship with conspicuous adjectives like iron-clad friendship. While congratulating Asif Ali Zardari on March 10, after being elected as Pakistan’s 14th president, their relation was called as ‘choice of history’ by Xi Jinping. The China-Pakistan Economic Corridor (CPEC) stands as a key component of the Belt and Road initiative, symbolizing the significant partnership between China and Pakistan. Islamabad's unwavering commitment to this crucial geo-strategic trade route underscores its paramount importance to China. Furthermore, the initiative is of great importance to China as it aims not only to fortify its sphere of influence beyond South Asia but also to enhance its global standing. Experts view this initiative as a cornerstone of China’s economic diplomacy and highlight its finance-capitalist nature to expand its footprint in the uncharted region of growing economic importance.

Historical Context and Financial Commitment

After the proposal of BRI by Chinese President XI Jinping in 2013, he visited Pakistan in April 2015 where both sides elevated their relationship to an all-weather strategic partnership. As per BBC report, during the visit, both China and Pakistan signed an agreement of $46 bn. CPEC comprises of network of roads, railways and pipelines stretching 3,000 km from Gwadar in Pakistan to China’s western Xinjiang region. Gwadar, located in the southwestern province of Balochistan, was chosen to host CPEC: a deep-sea port poised to transform the city into a thriving economic hub.

Political Aspirations

The political class of Pakistan viewed that this injecting of investment in Pakistan could pull off an economic miracle linked with former PM Nawaz Sharif's dream to make Pakistan an ‘Asian tiger’. He referred to CPEC as a game changer which will change the fate of Pakistan.

Security Issues and Militancy

There are several questions overshadowing Pakistan’s ability to fully capitalise on this Chineseproject.Firstly, there is scepticism about Pakistan’s ability to absorb this huge investment, coupled with chances of losing its strategic economic assets to China due to burgeoning debt. This is exemplified byChina’s control over Gwadar Port in Pakistan for next 40 years grants it direct to access the Arabian Sea. It is to be noted that Pakistan is the recipient of substantial Foreign Direct Investment (FDI) from China. Secondly, militant attacks targetedChinese workers working on the project.Additionally, issues of political instability, lack of political will, separatism, pervasive corruption etc,are continually eroding Pakistan’s economic progress.  China is particularly concerned about violence from ethnic Uighurs in its Xinjiang region whereas Pakistan faces a separatist insurgency in Balochistan province, where the economic corridor begins. Balochistanis a volatile region, home to ethnic nationalist insurgency as well as sectarian militants, including Lashkar-e-Jangvi. This complicates Islamabad'sefforts to achieve an economic miracle.

In 2016, Pakistan welcomed the first major shipment of Chinese goods through the Gwadar port, part of a trade link between western China and the Arabian Sea. However, the inaugural was overshadowed by a bomb blast by the Islamic State at a Muslim shrine in Balochistan which took place a day before, claiming at least 52 lives, underscoring the persistent instability in the region.

In the same year, as per a media report, at least two engineers working on the Dudher Zinc Project were killed in an attack in the WindarKinraag area of the hub district in Balochistan.The Baloch Liberation Army (BLA) claimed responsibility for the blast. In a series of tweets,BLA’s spokesperson Jeehand Baloch wrote that ‘‘we have continuously warned China to refrain from being part of any expansionist designs’’. In another media statement, Baloch criticised the China-Pakistan corridor describing it as an exploitative project on Baloch soil.

The BLA has carried out a string of attacks against the Chinese working on the project. In August 2023, asuicide attack aimed at Chinese individualson East Bay Road in Gwadar was thwarted by Pakistani security forces, who gunned down two militants. The BLA claimed responsibility for the attack. Earlier,in April 2022, 3 Chinese educators lost their lives in a suicide bomb attack carried out by the BLA’s Majeed Brigade. This brigade, active since 2011, is the BLA’s suicide squad

The Majeed Brigade's violent activities began with its first reported suicide attack in December 2011. Although it is estimated thatBLA's overall strength isat 1,000 to 1,500 fighters, the Majeed Brigade is a smaller, more exclusive faction with approximately 100 to 150 members, including women.

In July 2021, a bomb explosion in a bus claimed the lives of 9 Chinesenationals and two Pakistani soldiers. Earlier that year in April, militants targetedthe luxury Serena hotel in Quetta, the capital of Balochistan. In 2020, BLA attacked the Karachi stock exchange, retaliating against China’s exploitative plans in Balochistan. In 2018, a series of attacks occurred, including attacks on Chinese consulates in Karachi, where BLA referred to China as an oppressor. Additionally, a suicide bombing in Dalbandininjured three Chinese engineers.

The wave of terrorism in Pakistan can be attributed to its strategies and policies of providing a safe haven to the terrorists. Instead of addressing its historical mistakes while facing the repercussions of its own actions, Pakistan enjoys buck passing its failures onto India. This pattern was again evident with the surrender of Baloch Nationalist Army leader, Sarfaraz Bangulzai, who along with his associates, surrendered to the Pakistani state.

During a press briefing in Quetta, accompanied by Balochistan's Caretaker Minister of Information and Public Relations, Jan Achakzai, Bangulzai alleged that India has been providing financial support for violent activities in the province. Additionally, he claimed that India is exploiting women for illicit purposes in order to incite the youth to join the movement. Pakistan has been subject to persistent waves of intolerance and fundamentalism, often publicly accused at regional and international levels for providing support and shelter to terrorists. In several instances, Pakistan's own use of terrorism as a means to destabilize the region has been brought to light. As a host of militant groups, Pakistan suffers from security anxiety, particularly caused by the Tehreek e Taliban, famously known as Pakistani Taliban. The group has gained more muscle since the Afghan Taliban assumed power in Afghanistan following the hasty US withdrawal from the fractured territory in 2021.  

Corruption and Economic Challenges

As Pakistan's political machinery oscillates between military establishments and civilian leaders, corruption remains pervasive within the country. The huge investments pumped in the projects are often misappropriated by the corrupt officials of Pakistan to fill in their pockets. Both active and retired officials of the Pakistan army appointed to key positions in CPEC projects, have been allegedly accused of amassing considerable wealth through mismanagement of project funds. 

Former army official Lt. Gen. (Retd)Asim Saleem Bajwa,  chairman of the CPEC Authority, stepped down as special assistant to the Prime Minister on information and broadcasting in 2020 after protests. It was alleged that Bajwa had used his positions to establish multiple offshore businesses for his wife, sons and brothers.  One notable business linked to his younger brother is the Papa John’s pizza restaurant chain. According to media reports, the Bajwa family’s companies spent approx. USD 52.2 million on business development and USD 14.5 million to purchase properties in the United States. Chinese officials have expressed concerns that about 80 percent of investments in the CPEC are lost to corruption, highlighting the challenge of preventing this financial leakage.

The allocation of a billion dollars has been wielded as a political instrument by parties to serve their narrow self-interests. Notably, prior to coming into power, the Imran Khan-led PTI strongly opposed this corridor. The Imran Khan administration, which is perceived as having ties to the military, has abstained from probing the corruption accusations within the CPEC projects, despite this being part of the electoral manifesto of the Imran Khan party.

Beijing has leveraged corruption to its benefit, capitalising on the growing socio-economic faultiness and vulnerabilities of Pakistan and other participantnations.

WHY is China interested in Pakistan?

Pakistan serves as a gateway to three engines: Central Asia, South Asia and the Middle East. The security and stability of Pakistan formthe pivotal pillars that could enable China to expand its strategic depth in these regions. Similarly, Pakistan recognises that no other country places such high investment in acoup-prone country suffering from myriad internal challenges, as China does. Pakistan views this economic corridor as essential for its economic and political development. According to the Pakistan Vision of 2025, by the Ministry of Planning, Development and Special Initiatives, by 2025 Pakistan aims to graduate from lower middle-income to upper middle-incomecountries.   

However, political instability and turbulent security situation in Pakistan can sour its relationship with Beijing. The frequent attacks on Chinese engineers working on various CPEC projects have ruffled the feathers in Beijing. China has expressed concerns about the attacks urging Pakistan to enhance security measures to safeguard them.

China has committed to investing US$62 billion in infrastructure, energy projects and fostering bilateral ties, connectivity, exploring potential investment, economy and trade etc. China argues that these investments will contribute to political stability and economic resilience to Pakistan. As per Chinese officials, CPEC is expected to generate around 2.3 million employment opportunities by 2030 in Pakistan. CPECwill provide an alternate route for exports and energy imports from WestAsia to China, linking China’s western provinces through Gwadar port.

Gwadar plays a crucial role in the China-Pakistan Economic Corridor (CPEC), strategically positioned to address China's Malacca dilemma. Pakistan shoulders the responsibility of securing Chinese personnel working on CPEC projects and the associated transportation routes, despite facing challenges from militancy.

Federal Minister Professor Ahsan Iqbalchaired 10 out of 13 Joint Cooperation Committee (JCC) meetings in May 2024. He emphasised that CPEC represents a significant milestone in Pakistan-China friendship, laying a strong foundation for economic cooperation. Between 2013 and 2018, Pakistan received 25 billion dollars under CPEC. He noted that the CPEC journey was slowed after 2018 due to a change in government.

He also mentioned that to mark the completion of 10 years of CPEC, the Deputy Prime Minister of China paid a visit to Pakistan. During this visit,five new corridors for Phase 2 of CPEC were identified: the Growth Corridor, Economic Development Projects Corridor, Innovation Corridor, Green Corridor, and Regional Connectivity Corridor. These corridors gowith Pakistan's economic development framework known as the Five Es and Vision 2025, which the country aims to strive.

Minister Iqbal also added that the National Energy Administration of China will visit Pakistan to propose strategies to minimisepower losses during project construction and enhancing the efficiency of converting regular energy to green energy.He underscored Pakistan's economic progress hinges on steady growth in agricultural and industrial exports. Pakistan has already begun exporting wheat, livestock, beef and fruits to China.

Debt and counter-terrorism measures

Notably, Pakistan finds itself indebted to China for approx. 13% of its total debt, taken largely to fund infrastructure projects. Remarkably, Beijing’s loans to Islamabad surpass those of its two largest lenders combined- the World Bank and the Asian Development Bank, to which Pakistan owes $16.2 billion and $13.7 billion respectively. This makes China’s dominance clear in its lending practices.

On the security front, recurring attacks on Chinese nationals and China's calls for beefing up security highlight Pakistan’s failure to safeguard them. Pakistan has established a dedicated security force to protect CPEC projectsIn March this year, a suicide bomb attack resulted in the deaths of five Chinese engineers working on a dam project in Pakistan's northwest.

Pakistan initiated its counter-terrorism strategy called Operation Azm-Ishtehkam. In June 2024, Pakistan’s ambassador to the USappealed for small arms and modern equipment from the US to ensure the operation’s success. The decision to launch the operation was made by the apex 0-

China is keen to work on Pakistan’s turbulent internal stability and engage with multiple stakeholders, especially India and the US, to help successfully implement the CPEC. However,there is a concern that China’s potential involvement in Pakistan's internal affairs under the guise of assistance can erode Islamabad’s sovereignty and allow Beijing to dictate its own termson significant matters.

Also, the possible stationing of Chinesepersonnel in sensitive areas raises apprehensions for India.These strategic insights could provide Beijing an upper hand to study closely the geographical locations and terrains, potentially heightening security concerns for India.

India vehemently opposes China’s BRI initiative as a strand of it-CPEC- passes through Gilgit and Baltistan, a region that is the Indian territory of Kashmir, illegally occupied by Pakistan. Additionally, joint exercises between China and Pakistan compound India’s concerns, highlighting regional tensions and strategic concerns in the Indian Ocean and beyond.

CPEC had a bumpy ride in Pakistan leading to a halt. Now, newly elected Shahbaz Sharif government in cash-strapped Pakistan is making a renewed effort to revitalize CPEC.

A recent world bank report sheds light on struggling Pakistan, revealing that 40 percent of its 241 million people live below the poverty line. Pakistan has grappled with massive power outages when it embarked on CPEC with China,impacting industrial growth. CPEC became a mean by Islamabad to develop numerous power projects, despite warnings about accumulating more debt.

As per the 2015 plan, nine Special Economic Zones (SEZs) in Pakistan were intended to be included in CPEC. However, none of these zones has been completed yet, with construction underway at four of them. The heavy debt and dwindling foreign reserves are contributing to economic crisis. Pakistan’s debt, including loans from China and bailout packages from the International Monetary Fund (IMF), is challenging efforts to stabilize the shambled economy. Pakistan’s another bailout package from IMF is 24th since 1958.

As per media report of July 2024, Pakistan has clinched a staff-level agreement with IMF for a new 7 billion dollars loan deal. However, the agreement is subject to approval by the IMF’s executive board. 

While China has not overtly criticised Pakistan over its security lapses, the iron clad friendship could be rusted if the militant activities persist. After the attack of 26 March 2024, China’s state-owned construction cooperation suspended work on the Tarbela Dam extension and halted operations at the Dasu Dam.  The project employed approx. 741 Chinese and 6,000 locals

Work on the Diamer Bhasha Dam was also discontinued due to security concerns.

Way Ahead

China should re consider its traditional way of dealing only with the Pakistani government and instead engage with local communities to better accommodate local interests so that more Pakistani people can benefit from the CPEC. The investments made should be more inclusive and beneficial to the local communities. Both China and Pakistan need to strengthen their cultural ties and increase people-to-people interactions.

On the other hand, Pakistan should not crush the voices of its own people and should display good governance by listening to them and understanding their raised concerns. Exploiting resources and allowing foreign power to make in roads further fan the flames of fire. As Pakistan walks on a tightrope of peace and conflict, it must seize opportunities to engage with its populace. Balochistan through which corridor passes, is a sparsely populatedand a sensitive region.The fault lines are compounded when legitimate authorities fail to address the grievance of local population. This neglect creates a vacuum often filled by non-state actors, exacerbating the already existing vulnerabilities. Despite being endowed with natural resources, especially oil,Balochistan remains the poorest province of Pakistan.

The marginalisation of the Baloch ethnic group coupled with sustained armed resistance makes the landscape more complex to navigate.  It also underlines the issues with government policy towards them. Instead of only looking their matter from a security prism, the Pakistani government must investigate and address the grievances and demands of the people on the ground. A hard-line approach perpetuates the vicious cycle of violence, militancy, and systematic violations of human, political, social and economic rights.

The distorted security landscape is not only detrimental for Pakistan or China but for India as well. India as a responsible emerging power has voiced concerns about the terrorism emanating from Pakistan. It has also taken a principled stand on human rights and human development. In 2017, India expressed its concerns and raised Balochistan issue at the United Nations Human Rights Council (UNHCR) highlighting Pakistan’s systematic violation of human rights of its own citizens. In 2022 as well India urged Pakistan to stop human rights violations in Balochistan. Voicing concerns about repeated violence and Pakistan’s support for terrorism not only aligns with India's strategic interests but also promotes regional peace and cooperation, benefiting all parties involved.

Disclaimer: The paper is the author’s individual scholastic articulation and the facts and figures quoted are duly referenced, as needed, and are believed to be correct.

Ruchika Sharma is pursuing MA in Diplomacy Law and Business from O.P Jindal Global University.  She is interested in the evolving dynamics in the world of international politics.