CPEC moving into high gear

January 06, 2020

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THE inauguration of the 300-megawatt Gwadar coal-fired power plant in November was the first major sign in a long time, signifying that the multibillion-dollar China Pakistan Economic Corridor (CPEC) initiative was back on line.

The plant’s launch was preceded by the 9th Joint Cooperation Committee (JCC) meeting that had signalled renewed eagerness of both Beijing and Islamabad to reboot the project, which had otherwise been on a slowdown since early 2017.

The formation of the controversial CPEC Authority and the appointment of a retired general as its head, a decision some allege has effectively shifted the CPEC’s stewardship from civilians to the military, are also being seen in the same context. There is also a general expectation that the bilateral cooperation around the corridor initiative is going to get a new push in 2020, as it enters the second phase of its development and its focus shifts to the country’s troubled areas, especially in Balochistan.

The second phase focuses on industrialisation, socio-economic development, agriculture modernisation and tourism

With the military now in full control of the corridor initiative, Beijing’s influence on how the Imran Khan government, which didn’t appear much bullish on the project in the beginning, handles CPEC schemes in the future has also grown.

The two sides have also agreed to start or escalate work on different new or stalled transport and energy schemes, including the $9.2 billion railway line (ML-I) to upgrade the track from Peshawar to Karachi, the construction of highways for completing eastern and western corridor routes, securing borders with Afghanistan and Iran to protect CPEC projects, etc.

Both sides used the last JCC to broaden the scope of future collaboration around CPEC to industrial and agricultural development, copper/gold mining, oil and gas exploration, affordable housing, social sector, and poverty alleviation, moving away from the large energy and transport infrastructure schemes undertaken in the first phase.

Officials related to CPEC projects hope that the government would provide a new impetus to the project in 2020. Asad Umar, who was given charge of the planning and development ministry on Chinese insistence on his return to the cabinet, couldn’t be reached for comment. However, he recently said that the benefits of CPEC would start to trickle down to productive sectors of the economy, including industry and agriculture in 2020.

The second phase of the CPEC development would build on the success of the early harvest projects that had helped remove energy and road bottlenecks and focus towards generating greater economic activity and job creation, Mr Umar said. “The second phase focuses on industrialisation, socio-economic development, agriculture modernisation, and tourism promotion. Central to the second phase is the development of three special economic zones (SEZs) — Rashakai, Allama Iqbal Industrial City and Dhabeji — on a priority basis to attract large foreign direct investment and reverse the tide of deindustrialisation,” he added.

Hasan Daud Butt, the previous CPEC project director, expects the focus to shift towards upgrading the Peshawar-Karachi railway track, SEZs, fibre-optic connectivity and the development of Gwadar city in 2020, and hopes that the newly formed CPEC Authority (read military) is going to play a crucial role in the second phase of development.

But there are some who are not so optimistic, insisting that a combination of Pakistan’s ongoing economic and financial troubles and an adverse American narrative about the Belt and Road Initiative (BRI), of which CPEC is an important part, may likely hamper a faster movement on the corridor project in the near term.

“Growing American opposition to the BRI in the wake of ongoing tensions with China and Pakistan’s financial issues could frustrate the plans to put CPEC on a fast track in 2020,” said an Islamabad-based development consultant, who refused to give his name because of personal reasons.

In support of his argument, he pointed out that the IMF’s demand for greater scrutiny of the Chinese investments and loans along with US Secretary of State Mike Pompeo’s warning in August 2018 that any “potential IMF bailout for Pakistan should not provide funds to pay off Chinese lenders” were mainly responsible for the pause in the work on CPEC.

Others don’t buy this argument. “CPEC has pretty much been on a slowdown since late 2017, but it has been internal and bilateral economic and political dynamics that have been decisive rather than outside pressures,” Andrew Small, the author of The China-Pakistan Axis: Asia’s New Geopolitics, told Dawn.

“The US stance is significant largely in the context of the battle for international opinion over BRI. Unlike during the previous phase, when the US was fairly neutrally or even positively disposed towards CPEC, there is now greater interest in pointing out flaws and failings in BRI’s flagship initiative,” he said in reference to the remarks made last month by senior US diplomat Alice Wells.

But he does not expect the American stance to have much of an impact on the multibillion-dollar project. “CPEC’s fate will continue to be far more dependent on Pakistani and Chinese political choices and the economic dynamics in Pakistan; there will just be additional scrutiny and criticism of the whole thing coming from the US side,” he said.

Published in Dawn, The Business and Finance Weekly, January 6th, 2020