Naghmana A. Hashmi Former Ambassador of Pakistan to China
Inspired by President Xi’s vision of regional connectivity and people-centric development model, the China-Pakistan Economic Corridor (CPEC) is an important part of the Belt and Road Initiative (BRI) and its flagship project with Gwadar Port as the Jewel in the crown of CPEC.
2. CPEC is a long-term bilateral economic project encompassing a vast array of short, medium and long-term projects. As a flagship project of the BRI, China-Pakistan Economic Corridor (CPEC) has already achieved phenomenal success by laying a solid foundation of infrastructure in energy and transport sectors. Building upon this foundation, Phase II of CPEC would now focus on socio-economic development and poverty alleviation for a robust, sustainable and inclusive growth for Pakistan and the whole region at large. The ever-increasing economic and trade integration between Pakistan and China has made our two economies increasingly inter-dependent especially in the context of CPEC.
3. Traditionally, China and Pakistan have cooperated closely at the strategic and political levels. With CPEC the strategic partners are making efforts to expand their bilateral collaboration economically as well. The construction of the CPEC is a milestone that signifies this shift. CPEC is undoubtedly a “game-changer” not only for Pakistan but the entire region. Connecting Gwadar Port to China’s Xinjiang Uygur Autonomous Region, through a network of highways, railways, pipelines to transport goods, technology, oil and gas and fiber optic cable for flow of knowledge, presents enormous opportunities to people from Gwadar to Kashgar and beyond.
4. The strategic concept of connectivity between Pakistan and China originated with the decision to build the Karakoram Highway (KKH) to link the two countries through an all-weather highway. Thus the concept has been in the works for decades however, the two sides inched towards translating the concept into concrete reality with another strategic decision in 2001 to construct deep sea port at Gwadar. The vision and the financial package for linking KKH to Gwadar port with a network of roads and bridges and reviving the energy sector of Pakistan and project layout of CPEC was agreed during the visit of Chinese Premier Li Keqiang to Pakistan in May 2013.
5. Today CPEC has become the unambiguous symbol of the enduring friendship between Pakistan and China and holds a pivotal position in the development agenda of Pakistan. CPEC has huge strategic significance for Pakistan and the completion of its first phase has already helped Pakistan lay a strong energy and road infrastructure for subsequent development of industry, agriculture and human resource. So far the implementation of the first phase has provided over a hundred thousand jobs to local population. In the future, with the completion and full operationalization of the second phase involving the setting up of SEZ’s, it is expected to bring prosperity to around 3 billion people of the region, including China, South Asia, Central Asia and Middle East.
6. Pakistan and China consider these development initiatives a potential source of stability and prosperity for both countries. From a Chinese perspective, cooperation in the areas of security and economics are closely intertwined, and improvements on one side can improve the other. It is almost as though security and economics are two separate wheels on the same vehicle, and both need to be spinning to move things forward. We believes economic development can strengthen Pakistan’s internal stability, thus reinvigorating the economy through investment in infrastructure projects as well as the construction of oil and gas pipelines. We hope this will create a certain level of stability within Pakistan and in turn stabilize China’s western periphery, particularly the province of Xinjiang.
7. More broadly, the CPEC has to be understood in the context of Pakistan and China’s strategic interests in East Asia and the way the United States has challenged them. Faced with such difficulties, China hopes it can expand its strategic space by heading west and for Pakistan a strategic relationship and connectivity is seen as essential for the socio-economic development of Pakistan. Pakistan serves as a crucial bridge between China and Central Asia, South Asia, and the Middle East. This is why China is willing to pour vast amounts of resources into the economic corridor—based on the logic of improving security through economic development.
8. Likewise, Pakistan has realized that no other country places such high strategic importance in its economic relationship with Pakistan as China does. According to Pakistan’s development agenda 2025—a blueprint for economic development published in 2014 by Pakistan’s Ministry of Planning, Development, and Reform—Pakistan aims to advance from being a lower-middle-income nation to an upper-middle-income nation by 2025-6. To achieve this goal, Pakistan hopes to attract increasing amounts of foreign investment and is working to improve its overall economy and governance system.
9. CPEC acts as a game-changing opportunity for Pakistan’s development and its future role in the region. With the implementation of CPEC and the emerging commercial attractiveness of Pakistan and the South Asia region, Chinese and US economic and security interests in Pakistan and the region are converging. China’s logic behind this strategy is that fundamentally improving Pakistan’s economy will help alleviate the challenges posed by political extremists, radicals, and jihadists. China and Pakistan share the belief that economic development can help stabilize Pakistan and improve its domestic security situation.
10. China and Pakistan regard the CPEC as a new source of potential synergy between their respective national development strategies, which may help the two countries translate their close political cooperation into multifaceted economic cooperation, attain mutual benefits, and achieve win-win outcomes. For the economic corridor to reach its potential, however, there are security and political challenges in Pakistan that must be addressed.
11. With the first phase of CPEC comprising of major infrastructure and energy projects nearing completion, the focus has rightly shifted to the second phase. This includes the development of Special Economic Zones, Sustainable development, poverty elevation, agriculture, health care and knowledge. Proper establishment and successful running of the SEZs are of critical importance for the second phase of CPEC to take off and contribute to the long awaited socio economic development of Pakistan.
12. The benefits of a successful SEZ programme include employment generation, infrastructure development and the development of allied industries through backward linkages, which are not generally covered under Regional Trade Agreements. If the RTA and SEZ policies are synchronized, it can lead to cross-country linkages and the establishment of regional manufacturing and services networks that use SEZs as hubs. The upcoming SEZs in Pakistan like Rashakai SEZ need to attract investments and relocation of industry in sectors like engineering; pharmaceutics, IT, manufacturing， food processing, energy, jewelry, leather footwear, textile apparel etc.
13. The government needs to take a proactive role to ensure that SEZs are developed to attract the best enterprises from China and foreign countries. Badly developed SEZs will only attract substandard enterprises. Improving the business environment is essential to maintain the attractiveness of SEZs. There is an urgent need to streamline the single-window systems, which would require broader consensus with the state governments and various line ministries
14. SEZs in Pakistan face several challenges that are easily manageable if a central, clear and uniform policy is adopted for SEZs throughout the country. Presently the barriers faced by SEZs include; Institutional Mechanism and Its Implications; Challenges Related to Land Acquisition; location; Sharing of Infrastructure and the Business Model; Barriers Related to Fiscal Incentives; Challenges Related to Shifting of Existing Units from DTA to SEZ; Challenges Related to Backward and Forward Linkages; It is therefore, important to remember that in order to make SEZs a Success Story Pakistan must address these impediments on war footing.
15. In short CPEC offers a number of opportunities, the first of which is economic development. The large influx of investments will work as a strong economic incentive for Pakistan’s government and social sectors to improve the business environment and enhance commercial attractiveness for more foreign investments, which will not only benefit Chinese investors engaged in CPEC, but will also benefit all foreign investors in Pakistan, including the United States. Industrialization in Pakistan will also help to create jobs for the country’s large, under-employed population, turning a social and fiscal burden into an economic and developmental driver.
16. CPEC could provide enhanced and improved security by stabilization of economic development. With planned infrastructure, energy, and manufacturing investments, CPEC will create more private-sector opportunities and offer a realistic pathway out of poverty for Pakistan’s people, especially those extremely poor who otherwise may be tempted to fight as mercenaries for the Taliban and other extremist organizations. Economic development will help to maintain domestic stability and enhance security in Pakistan for the medium to long term. Combined with strengthened governance and improved capacity, Pakistan will have greater political willingness and capability to fulfill its security commitment and responsibilities for global counterterrorism.
