Strategic confines of CPEC

Published October 21, 2018
The writer is a security analyst.
The writer is a security analyst.

THE PTI-led government is still musing over how to deal with CPEC. It has yet to realise CPEC’s geo-economic value and strategise how this should figure in its grand policy narrative. Secondly, the policy community’s overemphasis on CPEC’s regional political and strategic dimensions is causing confusion here and abroad.

This is evident from the recent CPEC-related statements issued by government representatives, including on the project’s revision (the apparent Saudi inclusion) — without taking China on board — and CPEC’s ‘expansion’ to the farm sector, although agriculture figures in CPEC’s long-term plan had previously received a negative response from some stakeholders. However, a calculated response from China not only provided a means of face-saving to the government but also prevented the project from being mired in further controversy.

The government’s confused response and the strategic community’s overemphasis on CPEC’s strategic dimension are exerting pressure on the project’s long-term prospects. CPEC’s second and most important phase will start soon. It is expected that Prime Minister Imran Khan’s visit to China next month will pave the way for this.

Pakistan’s strategists have failed to calculate CPEC’s economic and commercial potential.

The first phase was focused on infrastructure building and addressing energy deficiency in Pakistan; these issues are hindering economic development here. The new phase will focus on development, moderation and expansion of our industrial base through the establishment of special economic zones. The idea is that the economic zones will attract foreign investment not only from China but also Pakistan’s other trading partners. However, foreign investors appear reluctant to invest in an economic and trade initiative which has been showcased as a strategic enterprise with a regional political purview.

This writer’s recent interactions with business community members in various capitals suggest that foreign investors view strategically emphasised projects as less transparent, politically influenced and vulnerable in the longer term. They believe that political risk adds to the vulnerability of the investment made in such projects. When more lucrative investment options are available elsewhere in the region and further off, why would someone invest in CPEC?

Apart from facing the concerns of global financial regimes, strategically oriented or promoted projects also require the support and endorsement of likely investors’ respective governments. In some cases, states allow such investments depending on the nature of bilateral ties with the country in question. For investors from Europe and North America, for instance, it is hard to invest in China-led strategically important projects. Japan and Korea may have fewer sensitivities regarding the strategic aspect but are reluctant to invest in ventures where Chinese investors will ultimately be given priority and more concessions during bidding and offered preferential treatment in special economic zones.

Interestingly, Chinese companies have their own reservations. Many companies have complained about red tape here and the poor market capacity to absorb surplus production. They are reluctant to invest in risky projects. As far as domestic investment is concerned, the local business community has largely been kept in the dark about the special economic zones; there is a perception that these would be exclusively for Chinese companies. China is also believed to be pursuing some Asian nations to invest in CPEC-related projects, mainly in the economic zones.

Strategic orientation also hurts efforts to create an investment-friendly environment. Apparently, although China encourages foreign investment in CPEC, it does not appear willing to extend exclusive partnership to any other nation. It is a big challenge for China to make CPEC inclusive without losing its control over the economic cooperation initiative.

China wants CPEC to be projected as a geo-economic and trade initiative with a view to addressing the concerns of foreign companies and winning the confidence of its own investors. It has compromised on certain perceptions about CPEC in Pakistan and has avoided controversy regarding these, but it does not want to give the impression that this is going to be a globally strategically important project, nor that it is going to aggravate regional tensions. The reports about Saudi Arabia’s involvement in CPEC were conceived in this perspective and China does not want to make CPEC hostage to Saudi-Iranian rivalry.

A lot has been written about Pakistan’s bailout plea to the IMF. Apart from some genuine concerns about the growing debt burden and lack of clear policy direction on how Pakistan will deal with it, it is the politicisation and overwhelming projection of CPEC as a game changer that has contributed to making the project controversial in corporate circles in the neighbouring region. Pakistan’s strategists have failed to calculate CPEC’s economic and commercial potential. They conceive and project CPEC as a vision of regional connectivity, which will provide a strategic edge to the country over its neighbours when resources will flow from one region to another, while Pakistan will also have a few economic advantages as a transit state. Seeing Pakistan from a narrow perspective of a transit state undermines the real economic potential of the country.

Ironically, the new government has come up with a more dangerous view on certain critical issues. The government thinks it has enough goodwill and political capital to attract donations and investments from overseas Pakistanis. Without yet having delivered anything significant, expecting huge inputs from people contributes to developing a negative image of the government and the country.

The government needs to focus on the depoliticisation of CPEC and bringing it out of the shadow of its strategic orientation. It can arrange expos to not only showcase CPEC but also to make known Pakistan’s potential in other economic, commercial areas. But this will need some serious effort.

The writer is a security analyst.

Published in Dawn, October 21st , 2018

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