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TWO years ago, President Xi Jinping had first proposed the “One Belt, One Road”, essentially a breakout economic vision for China. In an editorial this month, Hong Kong’s South China Morning Post has described it as the most significant and far-reaching project the nation has ever put forward.
It seeks to expand the Chinese economy by first creating mega project construction opportunities for Chinese firms and then by spreading out markets for its manufactured goods. The plan is to accelerate growth in China’s western regions and then integrate China’s markets with Eurasia, the Middle East and Africa. Its one component, the Silk Road Economic Belt would connect Western China to Central Asia and Europe overland, while the other, the 21st-Century Maritime Silk Road would substantiate the link between Chinese seaports and the Middle East, Africa and the Mediterranean.
The Chinese then developed a blueprint to translate this vision into an action plan.
The CPEC is a trunk passageway connecting the ‘Belt’ with the ‘Road’.
Days before President Xi’s arrival in Pakistan the striking blueprint was revealed. “The Belt and Road run through the continents of Asia, Europe and Africa, connecting the vibrant East Asia economic circle at one end and the developed European economic circle at the other, and encompassing countries with huge potential for economic development.” The editorial succinctly captured its essence: “Chinese companies [helping] to build the roads, railway lines, ports and power grids that are sorely needed in many parts of Asia, Africa and the Middle East. That, in turn, will involve loans and swap deals aimed at making the yuan a global currency.” Long term it aims for “financial integration with the 65 Belt and Road countries across three continents”. A Silk Road Fund and an Asian Infrastructure Investment Bank have been established to help finance these mega project initiatives.
That China has chosen to begin the implementation of this big bang template with Pakistan, one of its closest allies, is not surprising. It is being described as a significant opening move on the ‘Belt and Road initiative’ chessboard. The China Pakistan Economic Corridor (CPEC) is in fact a trunk passageway connecting the Silk Road Economic Belt in the north with the 21st-Century Maritime Silk Road in the south.
Additionally, branches from this trunk are also expected to connect Afghanistan, India and Iran with the Chinese ‘Belt and Road’ system. The blueprint document urges that “on the basis of respecting each other’s sovereignty and security concerns, countries along the Belt and Road should improve the connectivity of their infrastructure … and form an infrastructure network connecting all sub-regions in Asia, and between Asia, Europe and Africa step by step”.
One can expect to see China urging Pakistan, India, Afghanistan and Iran to interconnect their road, grid and pipeline infrastructures with the CPEC trunk. The possible network effects this would create could conceivably be an even bigger economic bonanza for the region than the CPEC itself as the blueprint document contemplates removal of “investment and trade barriers for the creation of a sound business environment within the region and in all related countries”. The Iran-Pakistan-India pipeline could be just one small example of this.
Explaining the modalities for execution, the document states that “China will work with countries along the Belt and Road to steadily advance demonstration projects, jointly identify programmes that … are agreed upon by parties and ready for implementation, so as to ensure early harvest”.
That for now most of the money has been allocated to coal-fired power plants reflects China’s assessment of Pakistan’s growth bottleneck — shortage of affordable energy. It is also where Chinese companies could provide the quickest assistance with financing options. Most of the rest of the money is to ease Pakistan’s transport and logistics bottlenecks for regional connectivity.
Still other components include integrating industrial chains, clusters and parks so regional countries can build on their comparative advantage and entire industrial sectors can develop in concert. The document contemplates other forms of collaboration such as policy coordination and removal of non-tariff barriers among the countries. Most importantly, the Chinese cannot afford for the CPEC to flounder because most of the future success of the Belt and Road initiative may be predicated on its successful demonstration.
People have asked me what the catch is. Frankly, on combing the document I could not find one except to say that China may be projecting its soft (economic) power. On the other hand, there are two likely hazards on our side. One is the route controversy and the need is to urgently build political consensus and transparency. The other is bureaucratic incapacity and lethargy to execute the Pakistani side of the bargain. Islamabad needs to address both of these on a war footing.
The writer is a business strategist and entrepreneur.
Published in Dawn, April 26th, 2015
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