Analysis on CPEC

CPEC (China Pakistan Economic Corridor) is an infrastructural development project that mainly consists of building roads, provision of energy and constructions of tracks for trains. China showed its interest in Gawadar back in 2001 in General Musharaf’s era. China was willing to invest $45 billion in the beginning but now amount has exceeded to $51 billion. This project has different phases of completion but the entire project will complete till 2030. 

The route of this project starts from Xinjiang (China) and segregates when reaches to Pakistan. In Pakistan, this route has eastern and western part. Eastern route consists of 2781 Km. It starts from M2 (Lahore-Islamabad Motorway), M3 (Faisalabad Motorway) and M5 ( Lahore, Multan, Sukker, Hyderabad and Karachi). Western part starts from Attock and reaches to Gawadar and Makran Coastal Highway connects Karachi to Gawadar. 

This project is supposed to be the back bone of the economy in coming years. It will bring the multiplier effect in the region. The investment of $51 billion is an additional expenditure by business means that aggregate expenditure and real GDP increase. The increase in the real GDP increases disposable income and with no income taxes, real GDP and disposable income increase by the same amount. The increase in the disposable income brings an increase in consumption expenditure. And the increased consumption expenditure adds even more aggregate expenditure. Real GDP and disposable income increase further, and so does consumption expenditure. The initial increase in investment brings an even bigger increase in aggregate expenditure because it induces an increase in consumption expenditure. The magnitude of the increase in aggregate expenditure that results from an increase in autonomous expenditure is determined by the multiplier effect.

Every infrastructural or development project requires a sufficient amount of energy. So does in CPEC and for this purpose 60 to 70% of the total investment will be invested in energy sector and rest of the investment will be spent on transportation (trains and roads). Energy projects are FDI. Electricity generation is the first priority through coal and wind in the short run as this project requires energy in short period of time. Eastern route contains the major part of the investment because this route has many units for coal and wind especially in Sindh. Furthermore, it is more developed and secured than the western route. The big part of the energy in short-run will be obtained from Sindh and this will make Sindh to have the big chunk of the total investment. 10500 Mega-watt of electricity will be added to the economy (Current Shortage is 5000-6000 mega-watt). It is itself a positive sign for Pakistan. 

This project is initiated not to address internal economic phenomena of both of the countries but to deal with external political dilemmas too. There is no argument that through CPEC China wants to expend its economy and the execution of CPEC will make China to approach West Asia, Central Asia and South Asia. CPEC is a long term investment for China, it will reduce the 12000 Km distance that China has to bear while exporting its products and importing oil for its economy. But this is not the only concerns that brought China towards CPEC, it is Malacca Dilemma that has been a very serious concern for China. After Deng Xiaoping initiated reforms in China(1978); the country’s industrial and energy needs grew dramatically. The “Malacca Dilemma” is a term coined by their President Hu Jintao (2003) on the over-reliance on the Malacca Straits(sea-route) where 80% of their energy needs(oil imports) pass en-route from the Middle East, Angola etc(shipping lanes); through the Malacca Straits(between Malaysia and Indonesia). This area is also prone to piracy sometimes. Conflict in the region; and their effect on China’s geopolitical and energy strategies; and other issues that can crop up from time to time together constitute the “Malacca Dilemma”. 

CPEC is a 3D project for Pakistan. It has three obvious dimensions to observe. Firstly, Pakistan has been looking a huge investment in the country for many years. Businesses have lost confidence to invest in Pakistan because of the severe time we spent just after 9/11 in the war of terror. This huge investment will light up a green signal for further investment. Secondly, Pakistan will be no more in American’s “couch”. If it succeeds, we will feel an ease of dependency. This is very important for Pakistan to come out from the phase of “Do-more”. We have already sacrificed more than fifty thousand lives yet we are tagged as “the epic center of terrorism”. Pakistan hopes to have win-win game via CPEC. Thirdly, Pakistan has found new political partner to counter India. India has completely inclined towards the U.S especially when Modi’s government came into power. Now the political equation can be observed as Pakistan-China and US-India in South Asia.

The rivalry between India and Pakistan is crystal clear. India has started its campaign to counter the CPEC and bring an alternative project. For this purpose, India has reached to Iran and initiated Chabahar project. India has failed so far to counter CPEC through Chahbahar because of the two reasons:

1. Iran is not willing to rely on India completely through this project. Iran will not compromise to be dictated by India entirely. India cannot play its game on Iran’s zone.

2. Routes that lead to central Asia through Afghanistan are under the control of Taliban. Taliban know that India is a strong ally of America, and enemy’s friend is my enemy.

This project is definitely a positive sign for Pakistan. It will bring prosperity and economic growth to the country. Now the big issue that Pakistan will face is transparency and equal distribution of resources. We will not be able to get maximum benefit from it until we spread the benefits to the small provinces and local people of those provinces. For this purpose, government of Pakistan should start special courses in major universities of Pakistan related to this project and give chance to the local people to get admission in those courses. We have to create efficient and skillful local labors. Secondly, we should establish new universities and vocational centers in the provinces like Sindh and Baluchistan to produce labor and inject them in the project. If we fail to do so and disparity exists after the completion of the project, there is no other option but to call it a biggest failure of the authorities. This is the golden chance for Pakistan to get ultimate benefits from this project and be the part of self-reliant nations. (Imran Awan)