Article about "CPEC as a Game Changer and its Likely Impact on the Future Regional

Scenario"

1. Introduction
Pakistan and China lie in a region which has historical and geographical significance for both
countries. They have been enjoying cordial and friendly relations since 1950 which have been
improving with each passing day from economic to strategic levels (Chaudhri, 1987). The most
recent development in these relations is the China Pakistan Economic Corridor (CPEC). Since
then CPEC has been termed as strategic game changer. Undoubtedly, the CPEC has tremendous
economic and strategic importance for Pakistan and China. It will be a game changer since it will
lead to strengthening geo-strategic bond between Pakistan and China through geo-economic
configuration, promote bilateral connectivity construction, explore potential bilateral investment,
economic and trade, logistic and people-to-people contacts. It promises to bring peace and
prosperity to Pakistan through a package of infrastructure and energy projects originally
projected at USD 46 billion, though recently the figure has increased to USD 51 billion after
China committed to fund the Karachi-Lahore rail line. CPEC is also termed as an extension of
Chinas One Belt, One Road Initiative, since it aims at upgrading and expansion of
Pakistans infrastructure, linking Chinas western province of Kashgar with Pakistans Gwadar
port on the Indian Ocean. (Ebrahim, 2016)

It is expected to benefit both countries as well as bring about regional economic integration. It is
likely to play an active and significant role in cooperation and strategic stability in South Asia
besides extending its linkages to geo-economic and geo-strategic spectrum across entire Asia.

2. Aim
The aim of this article is to analyse the CPEC and its impact on the regions future with special
emphasis on potential economic, political and social advantages as well as implications.

To realize the above aim the scope of the paper will encompass ascertaining the strategic
significance of the CPEC, the challenges and impediments, economic benefits, its future and the
implications for the region, including India and other extra-regional players. Based on the notion

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 of win-win situation, the strategic meaning of Pakistan-China economic corridor needs to be
defined and examined from four perspectives: historical, economic, cultural, and geopolitical.

3. Background and Historical Perspective

The history of Pak-China relations dates back to 1950. Sir Zafarullah Khan the then minister for
foreign affairs played a major role in shaping this initial relationship (Chaudhri, 1987). These
relations started growing after 1960 especially after the China-India war of 1962, and the 1965
Indo-Pak war. Pakistan supported Chinas election to the United Nations Security Council (Arif,
1984). The border demarcation agreement between both countries, signed in 1963 boosted these
relations. Chinas assistance to Pakistan during the 1965 war brought the two nations closer. The
relations between two countries have strengthened since 1970 in all sectors (Dixit, 1987). During
the sanctions imposed by the US in 90s the Chinese generously supported Pakistan in military,
missile and nuclear program, and even the economic sector. This enhanced the confidence
between Pakistani and Chinese policy makers and people. The CPEC is thus considered to be a
big achievement in the backdrop of this long-standing friendship.

The construction of Karakorum Highway in 1970s from the Pakistani town of Havalian in Hazara
division to Khunjerab Pass, the border of China and Pakistan can be rightly termed as the origin
of CPEC. In 2010, China decided to establish a Special Economic Zone (SEZ) in Kasghar, an
important transit point on the ancient Silk Route and a gateway between China and Pakistan. The
idea was to develop the Chinese western province of Xinjiang into a major trading hub leading to
energy and economic integration with South and Central Asia. The SEZs in the Pakistani port of
Gwadar and Kashgar and the rail and road connectivity between proposed SEZs would have
significant economic, political and strategic implications for the region. The two countries are
laying the strategic Havalian-Khunjerab railway track in the difficult terrain of Karakorum
connecting China and Pakistan from Gwadar in Balochistan (Fazl-e-Haider, 2016). A great
milestone in China-Pak relations occurred when the two countries agreed in 2013 to connect the
Chinese city of Kashgar with the Pakistani port of Gwadar through a network of roads and
railways. The concept of CPEC was formally presented by Pakistani Prime Minister Nawaz Sharif
during his visit to China in November 2014 and the CPEC project was formally launched when
the Chinese President Xi Jinping visited Islamabad in April 2015. The two countries have signed

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 19 agreements and Memorandum of Understanding (MoU) to boost the bilateral ties in various
fields including energy and basic infrastructure sectors.

With a planned portfolio of 36 projects totalling around $46 billion, the size of the investment
in CPEC over the next 15 years, if materialised will equal the cumulative gross foreign direct
investment inflows into Pakistan since 1970 (Sherani, 2016). Almost 20 percent of Pakistans
annual GDP that focus on building a network of roads, railways, and pipelines. This amount is
said to be three times more than the total FDI received by Pakistan since 2008. CPEC is a well-
thought out and well-crafted concept and project to unleash the process of meaningful cooperation
between the two neighbouring countries and for the benefit of China and West, Central and South
Asia.

4. The Chinese Factor

The growth in Chinese economy in the past few decades has been phenomenal resulting into
worlds second largest economy. China launched its economic reforms in 1978 when it ranked 9 th
in nominal gross domestic product (GDP) with USD 214 billion. After 35 years of economic
reform program China attained 2nd position with a nominal GDP of USD 9.2 trillion (Anon, 2016).
In view of these reforms, the worlds major manufacturing activity has shifted to China. The
industrial and construction (secondary sector) had the main share in GDP. As a result of
modernization in the recent past the tertiary sector gained importance and in 2013 it had a share of
46.1% in the GDP while the secondary sector still accounted for 45.0%. However, ever since
China opened to the world its primary sectors share in the GDP has reduced (Anon, 2016).

While maintaining a neutral stance, China remained engaged in its economic development
through economic corporation with various countries. During the economic and financial crisis of
1990s, Chinas economic relations with South East Asian countries were strengthened due to its
economic assistance to these countries (Vaughn and Morrison, 2006). During the tenures of
President Hu Jintao China developed close relations with Middle East, Central Asia and Africa.
4.1 Emergence of CPEC
For China, regional connectivity is the fundamental element to assume a global role. Besides
political advantages it needs secure and short trading routes opening in to the Indian Ocean. While
addressing Foreign Affairs committee at Communist Party meeting in 2014, according priority to
its neighbours was emphasised by President Xi as corner stone of Chinese diplomacy (Xi Jinping,
2014). This policy also caters for enhanced relations with developing countries as well as

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 countries rich in resources including energy. This is aimed at China being recognized as the
development partner and non-interfering ally (Godement, 2014).

4.2 One Belt One Road

In the recent past President Xi initiated a foreign policy of Constructive Engagement with a
focus on economic agenda. This concept is being pursued through the Silk Route, comprising
road Rail-networks and maritime routes. For the purpose of trade and financial initiatives this is
also termed as One Belt One Road. It comprises of three routes, Southern, Central and Northern
(Map 1). Besides the economic gains this would also enhance Chinas role in Asia (Wang,
2015). Other than its interest in developing naval basis in different countries, China has also
created Asia Infrastructure and Development Bank to counter USA in the international financial
sector (Xu, 2015).

(Map 1)

5. Importance of CPEC The Game Changer

CPEC is being termed as a game changer for China and Pakistan. While it will provide China
with an access to markets in Middle East, Africa, Central Asia and South Asia, it has tremendous
economic, political and socio cultural benefits for Pakistan. CPEC is not merely the name of

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one road but rather a broad development framework. It has been bilaterally decided by China and
Pakistan that the project will broadly follow a 1+4 cooperation structure with the Economic
Corridor at the centre and cooperation in four key areas built around it. The projects include
building Gwadar Port to international standards; $33.8 billion dollar and 16000 MW worth of
energy projects including the worlds largest one-time solar power plant; $11.8 billion in
infrastructure projects; and long term industrial cooperation (Reuters, 2016). CPEC spans 15
years, 4 phases, and 51 projects aligned along 3 routes.

According to the deal, the Chinese government and banks, including China Development Bank,
and the Industrial and Commercial Bank of China Ltd, one of China's 'Big Four' state-owned
commercial banks, will loan funds to Chinese companies, who will invest in the projects as
commercial ventures (DAWN.COM, 2016). Prime Minister Nawaz Sharif has also said that the
funding is "neither a loan, nor a grant" but an investment. So far, China has committed an amount
of $45.6 billion for various energy and infrastructure projects over the next six years. Major
Chinese companies investing in Pakistans energy sector will include Chinas Three Gorges
Corporation and the China Power International Development Ltd (Finance.gov.pk, 2016).

5.1 Importance for China

The present shipping distance from China to Persian Gulf is about 13,000 Km besides being a
lengthy shipping time of about 45 days (Gilani, 2016). With the advent of CPEC this distance will
be reduced significantly by 80%, to approximately 2500 Km. Likewise, the shipping time will
drop to 10 days (78% reduction) (Gilani, 2016). It is worthwhile to note that the major Chinese
trade passes through the Strait of Malacca. In the opinion of security analysts the United States
Navy can effect a naval blockade of this route in the event of outbreak of hostilities in the region,
suffocating Chinese trade. CPEC will provide dual advantage to China in terms of an alternate
route and reduction in the shipping time, from China to Europe.

5.2 Importance for Pakistan

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 For Pakistan, CPEC has potentially huge socio-economic benefits besides geo-strategic
advantages. It provides an opportunity to Pakistan to link three major economic regions China,
Central Asia and South Asia. The likely creation of more jobs is expected to render economic
stability to Pakistan besides combating extremist tendencies.

Pakistan is badly affected by shortage of power, needed for domestic and industrial consumption.
The project would benefit Pakistan by way of providing much needed electricity through
building, new coal-fired power plants. The planned power generation is expected to add 10,400
megawatts of electricity at a cost of $15.5 billion by 2018. Subsequently it is expected to double
Pakistans existing electricity output within an additional increase of 6,600 megawatts, with a
further cost of $18.3 billion (Gilani, 2016).

5.3 Region
There are potential economic benefits for Pakistan and China in particular, and the region in
general. It is estimated to benefit three billion people, almost 50% of the global population
(Gilani, 2016). Besides upgrading Pakistans economy and development of Chinas far west
region, the CPEC is expected to benefit the South Asian region. It is expected to contribute
towards regional stability and economic integration (China Daily, 2013).

6. Conclusions
The CPEC is promising project which aims at enhanced economic, political and social benefits
for Pakistan and China besides forging regional integration and cooperation. It is expected to
reduce future political tensions in the region through creation of deeper regional
interdependencies. However, the project is currently threatened by interference by regional states
due to their vested interests.

The routes and development activities are vulnerable to terrorist threat. However, the successful
movement of 1st trade convoy from Kashgar and sailing off of 1st cargo ship from Gwadar without
any untoward incident reflects on effectiveness of security measures.

Successful completion of projects is dependent on political stability and continuation of policies.

There exists some lack of political consensus in Pakistan which the government is countering
through dialogue.

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 Upon completion of power projects, unless carefully negotiated, the electricity tariffs are likely to
be higher.

7. Recommendations
The CPEC would be completed over a period of ten to fifteen years. In order to gain dividends,
timely completion of projects to be ensured. Moreover, there is a need that both governments
remain committed to their respective obligations and continuation of policies. Availability and
allocation of requisite funds would have to be ensured as per identified priorities.

The Pakistan government would have to provide fool-proof and meticulous security arrangements
for workforce and trade convoys. Besides, round the clock vigil would have to be ensured.

In order to ensure regional integration, effective diplomatic and confidence building measures
would be needed.

Removal of bottlenecks and bureaucratic hurdles in planning needs to be ensured. Effective

measures need to be in place to curb corruption, nepotism and inefficiency.

To gain from the CPEC, Pakistan needs to have effective measures to enhance its export volume.
Moreover, bilateral trade to be ensured.

Political consensus among provinces be ensured with regard to likely benefits from the project.

Reasonable electricity tariff to be negotiated after completion of electricity projects.

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