CPEC: No free lunches for Pakistan

It’s like watching a very bad sequel to Star Wars. The announcement from the Pakistan’s Prime Minister’s Office on the forthcoming visit of Shehbaz Sharif to China for the ‘launch’ of the second phase of the China Pakistan Economic Corridor, (CPEC) was less than enthusiastic, mentioning June 4 as a possible date that could be ‘slightly changed’. In other words, Beijing hasn’t confirmed any dates yet. Plus these announcements of CPEC-II has been on since 2021. China is doing a lot elsewhere in terms of ‘corridors’ that should concern India – consider a road coming across Shaksgam in Pakistan Occupied Kashmir (POK) – but the CPEC itself seems to be sputtering, new phases notwithstanding.

Talk of a new phase was mystifying to say the least. In 2023, China’s Vice Premier He Lifeng was unveiled five new corridors proposed in a letter from President Xi Jinping, which according to Chinese sources called for jointly building a growth corridor, a livelihood-enhancing corridor, an innovation corridor, a green corridor and an open corridor. What that meant was anyone’s guess, especially since there is no sign of any innovation. More interesting is how Xinhua describes the corridor. It says “Launched in 2013, CPEC is a corridor linking the Gwadar port in southwestern Pakistan with Kashgar in northwest China's Xinjiang Uygur Autonomous Region, which highlights energy, transport and industrial cooperation”. In other words, it is a project that links these two nodes, that is of primary interest is to Beijing. He Lifeng during his visit last year, simply saw it as an “important pioneering project” of the Belt and Road Initiative (BRI). A great article by Khurram Hussain makes the same point, and adds further that in original documents what is mentioned is a Xinjiang-Pakistan economic corridor. And that refers to benefits for Xinjiang, and access to Gwadar for exports.

Now consider some of the concrete actions in the run-up to the visit. A desperate search for ‘deliverables’ led the government to announce a ‘sanction’ of $2 bn road project, which is the Thakot – Raikot 241 km section of the Karakorum Highway (KKH), the follow on to earlier construction like the Havelian Thakot road. A look at a seismic map shows severe landslide activity on this route. Details of the sanctions, however, shows that the sum is not just to be reduced, but that its actual delivery is doubtful, given that it will only follow due economic and financial diligence. China has handed over a joint feasibility study, but its contents are unknown. Pakistan can’t pay for the project, and the National Highways Authority is already over committed with requirements of some PKR 1.7 trillion which can’t be funded from public sector development funds. Besides, the problems besetting the KKH has been evident at least since 2017. This is a hugely environmentally sensitive zone, and any grand project is going to cost a lot.

Equally of longstanding discussion is the Mainline-1 railway project which Pakistan desperately wants Beijing to fund. As Hussain notes, the Chinese haven’t even bothered to do a feasibility study on it. When then PM Kakar went to the BRI meeting in October, all the joint statement referred to was a ‘common understanding’ on the project. That’s nothing. it was originally supposed to be a PSDP project, but eventually landed on the CPEC plate, as the most expensive of all at about $6.8 billion to upgrade the Karachi-Peshawar link. There is no reason to think that Beijing is going to step up at a time of an economic squeeze for itself, and a near catastrophic economy in Pakistan.

None of this is to downgrade what has been spent so far. Given the opacity, it is estimated that the real figure stands at somewhere around $62 bn, surging from an earlier assessment of $46 bn. That’s rather a lot. Unsurprisingly, elected representatives talk of Chinese annoyance with Pakistan’s ‘can do’ attitude, while the Pakistanis themselves worry that Chinese projects cost about three times more than international norms. Meanwhile the International Monetary Fund recently warned against using its funds to pay back PKR 493 billion owed to Chinese power plants, a full 77% more than last year. In short, the Chinese companies are not likely to get their money back anytime soon. That’s not likely to make other enthusiastic about investing in Pakistan. Though it is, as Pakistanis say, extremely profitable for Chinese companies in terms of the costs they charge per unit.

The mystery that is Gwadar continues. While the port itself continues to languish, a huge international airport has come up rather quickly, and is expected to be operational next year. This and the port were to be part of a Special Economic Zone, aimed at a status like Shenzen which in just four decades after a port was made, grew from 60,000 people to 17 million. But China has insisted that road and rail networks to the port should be Pakistan’s responsibility. Pakistan’s progress has been lackadaisical and worse, was a spate of attacks against the Chinese by Baloch rebels, fuelled by local disillusionment with the ‘promises’ of local development. To assuage local sentiment a Friendship Hospital has been set up (one of the rare grants that China has provided) and a desalination plant has come up. Yet, the airport is intriguing. Potentially it is a place from where China can provide all kinds of support for the Pakistani air force – and the Navy – in the event of a war with India. Gwadar is operational, and run entirely by the Chinese. It’s just not commercialised yet.

And lastly, of all the corridors named vaguely, one stands out. That is agriculture. That is likely to receive a fillip. Post-Covid and the Ukraine war, China has become more insecure about its dependency on food imports. In February 2023, government documents were focussing on the need for food security, while President Xi was implementing policies to increase the area under farming. Between 2000 and 2020, the country’s food self-sufficiency ratio decreased from 93.6% to 65.8%, according to a report released in January by the Council on Foreign Relations. Pakistan’s fertile valleys of POK are in the eye of Beijing, where it is easily accessed. That is not going to be easily accepted by local people, even as China faced a surge of attacks in March across the country, including at Besham, which according to social media handles were done by the Pakistanis themselves, to sour rapidly warming ties between China and Afghanistan. In fact, that is exactly what Taliban spokesman Zabiullah Mojahid told the media.

In Beijing, Sharif is going to face questions on all of these. Expect a joint statement to be full of ‘iron brothers’ and swearing of eternal friendship and little else. But watch out for the small print. Chinese ingress into Pakistan is not over. In fact, in an effort to get back its investments, it’s only likely to increase. After all, there is a solid defence relationship between the two, with Chinese built submarines being built in Karachi, among other projects. This is not over by a long shot. The money might come down, but the exploitation won’t. Remember that Chinese professor telling Pakistanis frankly that CPEC was not charity? Well, it’s time that lesson was learnt.

This article is authored by Tara Kartha, director, (R&A), Centre for Land Warfare Studies, New Delhi.