SUBIMITTED TO:

SIR ATIF ISHAQ

SUBMITTED BY:

Ubaid naveed MAF-16-29

Arif Nadeem MAF-16-43

Naeem-ud-din MAF-16-63

Adnan ayub MAF-16-45

Muhammad Mazhar MAF-16-52

PAGE 1
Jahanziab bhutta MAF-16-51

Hassan Sadiq perrhar MAF-16-59

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PAGE 3
PAGE 4
Contents

Background: ............................................................................................................................................12

Mr. Nawaz Sharif ......................................................................................................................................... 14

Mr. Xi Jinping .............................................................................................................................................. 16

Announcement of CPEC ...................................................................................................................... 18

Subsequent developments ................................................................................................................. 19

Projects in Gwadar Port and City ..........................................................................................................20

Gwadar Port Complex .......................................................................................................................... 23

Projects in Gwadar city ........................................................................................................................ 26

Roadway projects ......................................................................................................................................28

Karakoram Highway .............................................................................................................................. 29

Eastern Alignment ................................................................................................................................. 35

Western Alignment ................................................................................................................................ 38

Associated roadway projects ............................................................................................................. 41

Railway projects.........................................................................................................................................42

Main Line 1 .............................................................................................................................................. 43

Main Line 2 .............................................................................................................................................. 45

Main Line 3 .............................................................................................................................................. 45

Lahore Metro ........................................................................................................................................... 45

Khunjerab Railway ............................................................................................................................... 46

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 Energy sector projects ............................................................................................................................ 46

Renewable-energy .................................................................................................................................47

Coal .......................................................................................................................................................... 48

Liquified natural gas ..............................................................................................................................51

"Early Harvest" projects ...................................................................................................................... 52

Table of projects ............................................................................................................................................ 53

Hidden cost of CPEC ....................................................................................................................................54

Challenges for Pakistan ...............................................................................................................................58

First, ..............................................................................................................................................................62

Second: ........................................................................................................................................................ 63

CPEC and Balochistan Factor ....................................................................................................................65

Security concerns ......................................................................................................................................... 71

Indian Concerns ......................................................................................................................................... 72

Security ............................................................................................................................................................ 75

Economic Development ...............................................................................................................................78

Removal of poverty .......................................................................................................................................79

Peace and prosperity in Provinces ...........................................................................................................79

Assessing Strategic Rationales ................................................................................................................. 81

International Relations Theories ........................................................................................................... 81

Liberalist Motives .................................................................................................................................. 81

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 Realist Motives ....................................................................................................................................... 82

Pakistani Perspectives on CPEC ............................................................................................................... 83

Symbolism ................................................................................................................................................... 83

Energy Generation and Co-operation ..................................................................................................85

Transportation Infrastructure .....................................................................................................................87

Domestic Politics .......................................................................................................................................... 90

Surveying U.S. and Indian Perspectives .................................................................................................92

United States ..............................................................................................................................................92

Regional Stability and the U.S.-Chinese Strategic Rivalry ......................................................... 92

Skepticism about Chinas Ability to Deliver ................................................................................... 93

Regional Stability .................................................................................................................................. 94

India...............................................................................................................................................................97

Indian-Chinese Relations ....................................................................................................................97

Gilgit-Baltistan.............................................................................................................................................. 100

The Indian Ocean ......................................................................................................................................... 100

In the words of Sameer Patil: ................................................................................................................ 101

The Indian Strategic Communitys Views ............................................................................................. 102

A. Ranjan where he states that .................................................................................................... 103

India-Pakistan Economic Ties .................................................................................................................. 104

Chinas investment in Pakistan ............................................................................................................... 105

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CPEC as pivot to Chinas economic and energy security ................................................................ 109

Regional trade and economic integration .............................................................................................. 110

Can CPEC be Transformed into IICPEC? ............................................................................................... 113

Political Discontent in Pakistan ................................................................................................................ 117

Benefits and risk of CPEC .......................................................................................................................... 119

Recommendations .......................................................................................................................................127

Conclusion .................................................................................................................................................... 129

Abstract:

China-Pakistan economic corridor is a bilateral agreement

which would bring massive economic benefits to both
nations. One of its kind, the report comments on the future

PAGE 8
prospects for both Pakistan and China, and observe the
challenges faced by the project. The study would help
understanding CPEC, the obstacles in way and what
recommendations there are for its better and smoother
implementations. The China-Pakistan Economic Corridor
(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. Based on the
notion 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 geo-political. Hence, the
very concept of a corridor, which has been a cause of
enormous development in different parts of the world, will
take off in Pakistan with the building of a network of roads,
highways, railways and power generation plants all the
way from Khunjerab, the border of Pakistan and China, to
the Pakistani port of Gwadar.

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ChinaPakistan Economic Corridor

PEC is an under-construction $54 billion economic

C corridor in Pakistan that aims to connect Gwadar Port in

southwestern Pakistan with Xinjiang in far-western China. The project is
a collection of various infrastructure and energy projects, and includes
the establishment of special economic zones. On 13 November 2016,
CPEC became partly operational when Chinese cargo was transported
overland to Gwadar Port for onward maritime shipment
to Africa and West Asia.

The corridor comprises a vast network of highways and railways to be

built, spanning the length and breadth of Pakistan in order to link
seaports in Gwadar and Karachi with the Chinese region of Xinjiang.
Infrastructure projects are worth approximately $11 billion, and will be
financed by subsidized concessionary loans that will be dispersed by
the Exim Bank of China, China Development Bank, and the ICBC. As
part of the broad package of infrastructure projects under CPEC,
a 1,100 kilometer long motorway will be constructed between the cities
of Karachi and Lahore, while the Karakoram
Highway between Rawalpindi and the Chinese border will be completely
reconstructed and overhauled. The KarachiPeshawar main railway
line will also be upgraded to allow for train travel at up to 160KM per
hour by December 2019. Pakistan's railway network will also be
extended to eventually connect to China's Southern Xinjiang
Railway in Kashgar.

PAGE 10
Over $33 billion worth of energy infrastructure are to be constructed by
private consortia to help alleviate Pakistan's chronic energy
shortages, which regularly amount to over 4,500MW,and have shed an
estimated 22.5% off Pakistan's annual gross domestic product. Over
10,400MW of energy generating capacity is to be brought online by the
end of 2018, with the majority developed as part of CPEC's fast-
tracked "Early Harvest" projects. A network of pipelines to transport
liquified natural gas and oil will also be laid as part of the project,
including a $2.5 billion pipeline between Gwadar and Nawabshah to
eventually transport gas from Iran. Electricity from these projects will
primarily be generated from fossil fuels, though hydroelectric and wind-
power projects are also included, as is the construction of one of the
world's largest solar farms.

CPEC's potential impact on Pakistan has been likened to that of

the Marshall Plan undertaken by the United States in post-war
Europe. Pakistani officials predict that CPEC will result in the creation of
upwards of 2.3 million jobs between20152030, and add 2 to 2.5
percentage points to the country's annual economic growth. Were all the
planned projects to be implemented, the value of those projects would
be equal to all foreign direct investment in Pakistan since 1970, and
would be equivalent to 17% of Pakistan's 2015 gross domestic product.

Defining CPEC

What is CPEC?

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CPEC is a planned corridor constituting an array of different energy
projects, transportation/infrastructure networks, and economic free
zones within Pakistan.5 This investment is part of Chinas OBOR
strategy, which includes the Silk Road Economic Belt and the 21st
Century Maritime Silk Road.6 The investment constitutes a total sum of
$46 billion directed at upgrading Pakistans existing transportation
infrastructure, as well as boosting Pakistans energy generation
capacity. The proposed special economic zones (SEZs) would follow if
the energy and infrastructure projects prove successful.7 CPEC links the
strategically significant city of Kashgar in Chinas Xinjiang province to
the port of Gwadar in Pakistans Balochistan province. The proposed
route allows the passage of goods and services between China and
Pakistan. It also gives China access to the Middle East given Gwadars
proximity to the Arabian Sea.

Background:

Plans for a corridor stretching from the Chinese border to Pakistan's

deep water ports on the Arabian Sea date back to the 1950s, and
motivated construction of the Karakoram Highway beginning in
1959.Chinese interest in Pakistan's deep-water harbour at Gwadar had
been rekindled by 1998 and in 2002 China began construction at
Gwadar port which was completed in 2006. Expansion of Gwadar
Port then ceased thereafter owing to political instability in Pakistan
following the fall of General Pervez Musharraf and subsequent
conflict between the Pakistani state and Taliban militants.

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The current form of the project was first proposed by General Pervez
Musharraf however it was postponed owing to the political instability in
the country that followed Musharraf's step down. The subsequent
government of the Pakistan Peoples Party proposed it again when
President Asif Ali Zardari invited heads of all the political parties to a
Luncheon in honour of the Chinese Premier Li Keqiang at the Aiwan-e-
Sadr on 22 May 2013. Chinese Premier Li Keqiang and the Pakistani
President Asif Ali Zardari have agreed to build an economic corridor
between the two countries. Both sides have decided to further enhance
mutual connectivity and both sides are connected to develop the long
term plan for a China-Pakistan economic corridor.

In February 2014, Pakistani President Mamnoon Hussain visited China

to discuss the plans for an economic corridor in Pakistan. Two months
later, Pakistan Prime Minister Nawaz Sharif met with Premier Li
Kequiang in China to discuss further plans, resulting in the full scope of
the project to be devised under Sharif's tenure.In November 2014,
Chinese government announced its intention to finance Chinese
companies as part of its $45.6 billion energy and infrastructure projects
in Pakistan as part of CPEC.

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Official Message

Prime Minister of Pakistan

MR. NAWAZ SHARIF

I feel honored to host HE Mr. Xi Jinping President of the Peoples

Republic of China on his eagerly awaited state visit to Pakistan. I, on
behalf of the people of Pakistan and the government of PML N, sincerely
and wholeheartedly welcome our worthy friend and convey our good
wishes.I wish to reiterate that Sino-Pakistan friendship is a fraternal
reality that is much above considerations of formal alliances and pacts.
Pakistan and China are committed to each other irrespective of
established norms of interstate relations. In the annals of international
relations Sino-Pak relationship is unparalleled, reflecting consistent
harmony and goodwill. Both countries maintain ties that are all pervasive
in nature positively affecting our large citizenry. I am confident that the
visit of HE Mr. Xi Jinping augurs well for Pakistan and holds very special
significance in many ways. China wishes to share fruits of its high

PAGE 14
economic performance with Pakistan by entering into a host of joint
ventures aimed at enhancing Pakistans capability in the fields of power
generation, road infrastructure and ports. The multifaceted China
Pakistan Economic Corridor will take our relations to an entirely new
level and bring in a series of mutually beneficial economic advantages.

I acknowledge that the investment by major Chinese public and private

sector enterprises in Pakistan is one of the largest influxes of foreign
capital in Pakistan. It gives me great pleasure to note that majority of
these projects has been initiated during the tenure of the present
government that are now nearing implementation and commissioning
stages. These projects would not only hugely impact Pakistan economy
but would also boost confidence of international investors in the entire
region. I am sure that the projects under China Pakistan Economic
Corridor will create new job opportunities for our professional and skilled
workers. They will help boost our national confidence and instill a sense
of pride in all of us. In addition the Chinese groups and companies will
have long term benefits from investment in Pakistan which will also open
up new trade and investment opportunities for them at home and
abroad. I am glad to note that this spurt of healthy productive activity is
taking place in the year 2015 aptly titled as Year of Friendship between
both countries. The quantum leap in business relations will result in
stronger interaction between the people of both countries and result in
further strengthening of our relations. I look forward to the visit of our
worthy friend and wish him a very pleasant stay in Pakistan.

PAGE 15
Official Message

President of China

Mr. Xi Jinping

Friendship between China and Pakistan is based on trust and mutual

support, and we have been devoted friends through both good and hard
times. Our friendship is a pacesetter for amicable relations between
countries.

President Hussain, Prime Minister Sharif and I have agreed to elevate

China-Pakistan relations to an all-weather strategic cooperative
partnership. This description of China-Pakistan partnership is a most
appropriate one, as it aptly defines the all-weather friendship and all-
round cooperation between China and Pakistan.

First, we should strengthen mutual assistance and deepen strategic

cooperation. We should keep the good tradition of frequent high-level

PAGE 16
visits and meetings, work together on major strategic issues, and
support each other on issues involving our respective core interests and
major concerns.

Second, we should advance our shared interests and achieve common

development. We should use China-Pakistan Economic Corridor to drive
our practical cooperation with focus on Gwadar Port, energy,
infrastructure development and industrial cooperation so that the fruits of
its development will reach both all the people in Pakistan and the people
of other countries in our region.

Third, we should enhance close exchanges to build lasting friendship.

This year is the Year of China-Pakistan Friendly Exchanges. We should
conduct diverse and colorful events of celebration and encourage more
contacts and exchanges between young Chinese and Pakistanis. In the
next five years, China will provide 2,000 training opportunities for
Pakistan and train 1,000 Chinese language teachers for Pakistan.

Fourth, we should stick together in face of difficulty and jointly meet

security challenges. China will work with Pakistan to tackle non-
traditional security threats so as to provide a reliable security guarantee
for bilateral economic cooperation and common development. The
Chinese nation loves peace. China will continue to pursue win-win
cooperation and enhance friendship and cooperation with other
countries. It will stay committed to the policy of affinity, sincerity, mutual-
benefit and inclusiveness. It will deepen win-win cooperation with its
neighbors so as to deliver more benefits to them through its own
development. China will continue to pursue a win-win strategy for

PAGE 17
opening-up to build an open economy. This will create new development
opportunities and space to both Asia and the world. We will strengthen
cooperation with countries along the land and maritime Silk Roads, so
as to jointly build an open platform for cooperation and create new
impetus to achieve sustainable development in the related regions.

To build a China-Pakistan community of shared destiny is a strategic

decision made by our two governments and peoples. Let us work
together to create an even brighter future for China and Pakistan

Announcement of CPEC

During the state visit of Xi Jinping to Pakistan in April 2015, he wrote in

an open editorial stating: "This will be my first trip to Pakistan, but I feel
as if I am going to visit the home of my own brother." On 20 April 2015,
Pakistan and China signed an agreement to commence work on the $46
billion agreement, which is roughly 20% of Pakistan's annual GDP, with
approximately $28 billion worth of fast-tracked "Early Harvest" projects
to be developed by the end of 2018. As a gesture of friendship, the
Pakistani capital at that time was dotted with slogans and signboards
such as "Pakistan-China friendship is higher than the mountains, deeper
than the oceans, sweeter than honey, and stronger than steel an oft
repeated phrase coined by the Chinese to describe their deep ties to
Pakistan.

PAGE 18
Subsequent developments

On 12 August 2015 in the city of Karamay, China and Pakistan signed

20 more agreements worth $1.6 billion to further augment the scale and
scope of CPEC. Details of the plan are opaque, but are said to mainly
focus on increasing energy generation capacity. As part of the
agreement, Pakistan and China have agreed to co-operate in the field
of space research.

In September and October 2015, the government of the United Kingdom

announced two separate grants to the Government of Pakistan for
construction of roadways that are complementary to CPEC.In November
2015, China included the CPEC into its 13th five-year development
plan, while in December 2015, China and Pakistan agreed on a further
$1.5 billion investment to set up an information and technology park as
part of the CPEC project. On 8 April 2016, during the visit of Xinjiang's
Communist Party chief Zhang Chunxian companies from Xinjiang with
their Pakistan counterparts signed $2 billion of additional agreements
covering infrastructure, solar power and logistics.

The first convoy from China, carrying almost 250 containers meant for
export to ports in Bangladesh, Sri Lanka, the UAE and the EU arrived in
Gwadar on November 13, 2016, thereby formalizing operation of
CPEC. On December 2, 2016, the first cargo train, launching the direct
rail route and sea freight service between China and Pakistan, departed
from Yunnan. A cargo train loaded with 500 tonnes of commodities
left Kunming for the port city of Guangzhou from where the cargo will be
loaded on ships and transported to Karachi, marking the opening of the

PAGE 19
new route. The new rail, sea freight will cut logistics cost, including that
of transport, by 50 per cent.

In November 2016, China announced an additional $8.5 billion

investment in Pakistan with $4.5 billion allocated to upgrade Pakistan's
main railway line from Karachi to Peshawar including tracks, speed and
signalling, and $4 billion toward an LNG terminal and transmission lines
to help alleviate energy shortages. In February 2017,
the Egyptian Ambassador to Pakistan expressed interested in CPEC
cooperation. In January 2017, the Chief Minister Pervez Khattak of
Khyber Pakthunkhuaha stated that he had received assurances from
Chinese investment companies that they would invest up to $20 billion
for projects. In March 2017, an agreement was signed for the projects
which include: a $1.5bn oil refinery, irrigation projects worth $2 billion, a
$2 billion motorway between Chitral and Dera Ismail Khan, and $7 billion
worth of hydro-electric projects.

PROJECTS IN GWADAR PORT AND CITY

Gwadar Port has been fully operational since 2007.

PAGE 20
A view of the Gwadar Promontory and isthmus.

Gwadar forms the crux of the CPEC project, as it is envisaged to be the

link between China's ambitious One Belt, One Road project, and
its Maritime Silk Road project. In total, more than $1 billion worth of
projects are to be developed around the port of Gwadar by December
2017.

PAGE 21
 One Belt and One Road, and CPEC

China has a plan of reviving the historic trade routes, as President Xi

Jinping looks forward to connect China once again with Caspian
region and European states on one hand and South Asia and Middle
East on the other. Having a plan of creating three corridors: central,
northern and southern which will pass through Xinjiang, it will connect
China to Russia and former soviet-states, Europe, and Pakistan.
CPEC is an integral and inevitable part of Chinas One Belt and One
Road plan. When the Chinese Premier, Li Keqiang, visited Pakistan in
2013, he initiated the CPEC project. Later on, when Prime Minister
Nawaz Shareef took the office, he paid a visit to Beijing to further
discuss the historical project. Last year, President Xi Jinping visited
Pakistan, and declared that China will make a foreign investment of
$46 billion in Pakistan for China-Pakistan Economic Corridor, focusing
on strengthening the energy sector of Pakistan, and it is expected that
these projects will be completed by 2018-2020. Energy sector is not
the only priority here, since there will be a construction of railway
tracks, and roads which will connect Chinas landlocked provinces to
the coastal area of Gwadar. It is believed that Gwadar sea-port and a
transport link between Gwadar and Kashgar is absolutely necessary
for CPEC, otherwise no other economic activity can be possible.

PAGE 22
Gwadar Port Complex

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Initial infrastructure works at Gwadar Port commenced in 2002 and were
completed in 2007, however plans to upgrade and expand Gwadar's
port stalled. Under CPEC agreement, Gwadar Port will initially be
expanded and upgraded to allow for docking of larger ships
with deadweight tonnage of up to 70,000. Improvement plans also
include construction of a $130 million breakwater around the port, as
well as the construction of a floating liquified natural gas facility that will
have a capacity of 500 million cubic feet of liquified natural gas per day
and will be connected to the Gwadar-Nawabshah segment of the Iran
Pakistan gas pipeline.

Karamay hubs, warehouses, and display centres. Businesses located in

the zone would be exempt from customs authorities as well as many
provincial and federal taxes. Business established in the special
economic zone will be exempt from Pakistani income, sales, and federal
excise taxes for 23 years. Contractors and subcontractors associated
with China Overseas Port Holding Company will be exempted from such
taxes for 20 years, while a 40-year tax holiday will be granted for imports
of equipment, materials, plant/machinery, appliances and accessories
that are to be for construction of Gwadar Port and special economic
zone.

The special economic zone will be completed in three phases. By 2025,

it is envisaged that manufacturing and processing industries will be
developed, while further expansion of the zone is intended to be
complete by 2030. On 10 April 2016, Zhang Baozhong, chairman of
China Overseas Port Holding Company said in a conversation with The
Washington Post that his company planned to spend $4.5 billion on

PAGE 24
roads, power, hotels and other infrastructure for the industrial zone as
well as other projects in Gwadar city.

Gwadar Factor

Gwadar is the most prominent piece of the puzzle, and it is

believed that CPEC will make Gwadar on the matrix of intense
geo-strategic competition. Without Gwadar, it is hard to imagine
China investing in Pakistan on such an extent and because of it;
China energy supply will be much faster since it will provide a
shorter route compared to a 12,900km route via sea. Access to
Arabian Sea through Pakistan will not just benefit China, but it will
be also a chance for landlocked countries in Central Asia to benefit
from the corridor as well. CPEC will boost the regional connectivity
in Pakistan since the route will pass through every province of
Pakistan, which also means the underdeveloped areas of Punjab,
Sindh, Khyber Pakthunhawa, Baluchistan, and FATA will have a
chance to be developed rapidly, and play vital role for the emerging
economy of the country. However, the main point here is that
Gwadar will be the one end of the Corridor, and will give Chinas
western provinces a gateway to the sea.

PAGE 25
Projects in Gwadar city

China will grant Pakistan $230 million to construct a new international

airport in Gwadar which is to be operational by December 2017. The
provincial government of Balochistan has set aside 4000 acres for the
construction of the new $230 million Gwadar International Airport which
will require an estimated 30 months for construction, the costs of which
are to be fully funded by grants from the Chinese government which
Pakistan will not be obliged to repay.

The city of Gwadar is further being developed by the construction of a

300MW coal power plant, a desalinization plant, and a new 300 bed
hospital. Plans for Gwadar city also include construction of the East Bay
Expressway a 19 kilometer controlled-access road that will connect

PAGE 26
Gwadar Port to the Makran Coastal Highway. These additional projects
are estimated to cost $800 million, and are to be financed by 0% interest
loans extended by the Exim Bank of China to Pakistan.

In addition to the aforementioned infrastructure works, the Pakistani

government announced in September 2015 its intention to establish a
training institute named Pak-China Technical and Vocational Institute at
Gwadar, which is to be developed by the Gwadar Port Authority. The
institute is to be completed by March 2016 at the cost of 943 million
rupees, and is designed to impart to local residents the skills required to
operate and work at the expanded Gwadar Port.

FIRST SHIP LANDING ON GAWADAR PORT

PAGE 27
ROADWAY PROJECTS

Western rout alignment of cpec

A map of the CPEC roadway network.

The CPEC project envisages major upgrades and overhauls to

Pakistan's transportation infrastructure. Under the CPEC project, China
has announced financing for $10.63 billion worth of transportation
infrastructure so far; $6.1 billion have been allocated for constructing
"Early Harvest" roadway projects at an interest rate of 1.6 percent. The

PAGE 28
remainder of funds will be allocated when the Pakistani government
awards contracts for construction of road segments which are still in the
planning phase.

Three corridors have been identified for cargo transport: the Eastern
Alignment though the heavily populated provinces of Sindh and Punjab
where most industries are located, the Western Alignment through the
less developed and more sparsely populated provinces of Khyber
Pakhtunkhwa and Balochistan, and the future Central Alignment which
will pass through Khyber Pakhtunkhwa, Punjab, and Balochistan.

Karakoram Highway

PAGE 29
Highlighted in red is the route of National Highway 35, which is to be
completely rebuilt and upgraded under the CPEC agreement.
Highlighted in blue is the 175 kilometer road
between Gilgit and Skardu which is to be upgraded to a 4-lane highway.

PAGE 30
Reconstruction of the Karakoram Highway

The CPEC projects call for reconstruction and upgrade works on

National Highway 35 (N-35), which forms the Pakistani portion of
the Karakoram Highway (KKH). The KKH spans the 887 kilometer long
distance between the China-Pakistan border and the town of Burhan,
near Hasan Abdal. At Burhan, the existing M1 motorway will intersect
the N-35 at the Shah Maqsood Interchange. From there, access
onwards to Islamabad and Lahore continues as part of the existing M1
and M2 motorways. Burhan will also be at intersection of the Eastern
Alignment, and Western Alignment.

Upgrades to the 487 kilometer long section between Burhan and Raikot
of the Karakoram Highway are officially referred to in Pakistan as the
Karakoram Highway Phase 2 project. At the southern end of the N-35,
works are already underway to construct a 59-kilometer-long, 4-

PAGE 31
lane controlled-access highway between Burhan and Havelian which
upon completion will be officially referred to as the E-35
expressway. North of Havelian, the next 66 kilometers of road will be
upgraded to a 4-lane dual carriageway between Havelian
and Shinkiari, Groundbreaking on this portion commenced in April 2016.

The entire 354 kilometers of roadway north of Shinkiari and ending in

Raikot, near Chilas will be constructed as a 2-lane
highway. Construction on the first section between Shinkiari
and Thakot commenced in April 2016 jointly with construction of the
Havelian to Shinkiari 4-lane dual carriageway further south. Construction
on both these sections is expected to be completed with 42 months at a
cost of approximately $1.26 billion with 90% of funding to come from
China's EXIM bank in the form of low interest rate concessional loans.

Between Thakot and Raikot spans an area in which the government of

Pakistan is currently either planning or actively constructing several
hydropower projects, most notably the Diamer-Bhash Dam and Dasu-
Dam. Sections of the N-35 around these projects will be completely
rebuilt in tandem with dam construction. In the interim, this section of the
N-35 is currently being upgraded from its current state until dam
construction commences in full force at a later date. Improvement
projects on this section are expected to be completed by January 2017
at a cost of approximately $72 million. The next 335 kilometers of
roadway connect Raikot to the China-Pakistan border. Reconstruction
works on this section of roadway preceded the CPEC, and were initiated
after severe damage to roadways in the area following the 2010

PAGE 32
Pakistan floods. Most of this section of roadway was completed in
September 2012 at a cost of $510 million.

A large earthquake rocked the region nearest to the China-Pakistan

border in 2010, triggering massive landslides which dammed the Indus
River, resulting in the formation of the Attabad Lake. Portions of the
Karakoram Highway were submerged in the lake, forcing all vehicular
traffic onto barges to traverse the new reservoir. Construction on a 24
kilometer series of bridges and tunnels to Attabad Lake began in 2012
and required 36 months for completion. The bypass consists of 2 large
bridges and 5 kilometers worth of tunnels that were inaugurated for
public use on 14 September 2015 at a cost of $275 million. The 175
kilometer road between Gilgit and Skardu will be upgraded to a 4-lane
road at a cost of $475 million to provide direct access to Skardu from the
N-35.

PAGE 33
PAGE 34
Eastern Alignment

The term Eastern Alignment of CPEC refers to roadway projects located

in Sindh and Punjab provinces - some of which were first

envisioned in 1991.As part of the Eastern Alignment, a 1,152 km long

motorway will connect Pakistan's two largest cities, Karachi and Lahore
with 4 to 6-lane controlled access highway designed for travel speeds up
to 120 kilometers per hour. The entire project will cost approximately
$6.6 billion, with the bulk of financing to be distributed by various
Chinese state-owned banks.

The entire Eastern Alignment motorway project is divided into four

sections: a 136 kilometer long section between Karachi and Hyderabad

PAGE 35
also known as the M9 motorway a 296 kilometer long section between
Hyderabad and Sukkur, a 387 kilometer long section between Sukkur
and Multan, and a 333 kilometer section between Multan and Lahore via
the town of Abdul Hakeem.

The first section of the project will provide high speed road access from
the Port of Karachi to the city of Hyderabad and interior Sindh. Upgrade
and construction works on this section currently known as Super
Highway between Karachi and Hyderabad began in March 2015, and
will convert the road into the 4-lane controlled access M9 Motorway
which will be completed in an estimated 30 months. In February 2017, a
completed 75 kilometer stretch of the motorway was opened for public
use by Prime Minister Nawaz Sharif.

At the terminus of the M9 motorway in Hyderabad, the Karachi-Lahore

Motorway will continue onwards to Sukkur as a six lane controlled-
access motorway known also as M6 motorway that will be 296
kilometers long, The planned cost for this project is $1.7 billion, and will
provide high speed road access to interior Sindh especially near the
towns of Matiari, Nawabshah, and Khairpur. The project will require the
construction of seven interchanges, and 25 bridges on the Indus River
and irrigation canals. The planned route of the motorway runs roughly
parallel to the existing National Highway and Indus Highway at various
portions. In July 2016, the Pakistani government announced that the
project would be open to international bidders on a build-operate-
transfer basis, with Chinese and South Korean companies expressing
interest in the project.

PAGE 36
The 392 kilometer Sukkur to Multan section of the motorway is
estimated to cost $2.89 billion, with construction works inaugurated on
this section of roadway on May 6, 2016.The road will be a six lane wide
controlled access highway, with 11 planned interchanges, 10 rest
facilities, 492 underpasses, and 54 bridges along its route. The Pakistani
government in January 2016 awarded the contract to build this section
to China State Construction Engineering but final approvals required for
disbursement of funds were not granted by the Government of the
People's Republic of China until May 2016. 90% of the project's cost is
to be financed by concessionary loans from China, with the remaining
10% to be financed by the government of Pakistan. Construction on this
segment is expected to last 36 months.

Construction of the portion between Multan and Lahore costing

approximately $1.5 billion was launched in November 2015 as a joint
venture between the China Railway Construction Corporation
Limited and Pakistan's Zahir Khan and Brothers Engineers The total
length of this motorway section is 333 kilometers; however, the first 102
kilometers of the road between Khanewal and Abdul Hakeem is
designed as part of the M4 Motorway, and is being funded by the Asian
Development Bank. The portion of motorway between Abdul Hakeem
and Lahore that is under construction as part of CPEC will consist of the
remaining 231 kilometers.

PAGE 37
Western Alignment

The Western Alignment of CPEC is depicted by the red line. The 1,153 kilometer route will link the Brahma
Bahtar Interchange of the M1 Motorway with the city of Gwadar in Balochistan province. The portion
depicted by the orange line between Basima and Shahdadkot is sometimes regarded as part of the
Western Alignment.

Brahma Bahtar-Yarik Motorway

The CPEC project envisages an expanded and upgraded road network

in the Pakistani provinces of Balochistan, Khyber Pakhtunkhwa, and
western Punjab Province as part of the Western Alignment. The
Western Alignment project will result in the upgrading of several hundred
kilometers worth of road into 2 and 4-lane divided highways by mid-

PAGE 38
2018, with land acquisition sufficient for upgrading parts of the road to a
6-lane motorway in the future. In total, the CPEC project envisages re-
construction of 870 kilometers of road in Balochistan province alone as
part of the Western Alignment. Of those 870 kilometers of road, 620
kilometers have already been rebuilt as of January 2016.

The Western Alignment roadway network will begin at the Barahma

Bahtar Interchange on the M1 Motorway near the towns
of Burhan and Hasan Abdal in northern Punjab province. The newly
reconstructed Karakoram Highway will connect to the Western
Alignment at Burhan, near where the new 285 kilometer long controlled-
access Brahma Bahtar-Yarik Motorway will commence. The motorway
will terminate near the town of Yarik, just north of Dera Ismail
Khan. Groundbreaking for the project took place on May 17, 2016. The
motorway will traverse the Sindh Sagar Doab region, and cross the
Indus River at Mianwali before entering into Khyber Pakhtunkhwa
province. It will consist of 11 interchanges, 74 culverts, and 3 major
bridges spanning the Indus, Soan, and Kurram Rivers. Total costs for
the project are expected to be $1.05 billion.

At the southern terminus of the new Brahma Bahtar-Yarik motorway,

the N50 National Highway will also be upgraded between Dera Ismail
Khan in Khyber Pakhtunkhwa and Zhob in neighboring Balochistan
province, with eventual reconstruction between Zhob and Quetta. The
upgraded roadway will consist of a 4 lane dual-carriageway spanning
the 205 kilometer distance between the two cities. The first portion of the
N50 to be upgraded will be the 81 kilometer portion of the N50 between
Zhob and Mughal Kot, with construction works having begun in January

PAGE 39
2016.Construction on this portion is expected to be completed by 2018
at a cost of $86 million. While the project is considered a vital link in the
CPEC's Western Alignment, the project's cost will not be financed by
Chinese state-owned banks, but instead by Asian Development Bank
under a 2014 agreement which preceded CPEC, as well as by a grant
provided by the United Kingdom's Department for International
Development.

Heading south from Quetta, the Western Alignment of the CPEC will
continue to the town of Surab in central Balochistan as the N25 National
Highway. From Surab, a 470 kilometer long route known as the N85
National Highway will connect central Balochistan with the town of
Hoshab in southwestern Balochistan province near the city of Turbat.
The stretch of road between these cities was completed in December
2016, as per schedule.

Along the Western Alignment route, the towns of Hoshab and Gwadar
are connected by a newly-built 193 kilometer long portion of the M8
Motorway the Hoshab to Gwadar portion of the motorway was
completed and inaugurated in February 2016 by Prime Minister Nawaz
Sharif. The Western Alignment will be flanked by special economic
zones along its route, with at least seven special economic zones
planned to be established in Khyber Pakhtunkhwa.

PAGE 40
Associated roadway projects

ADB funded projects

The 184 kilometer long M-4 Motorway between Faisalabad and Multan
does not fall under the scope of CPEC projects, but is nevertheless
considered vital to the CPEC transportation project. It will instead be
financed by the Asian Development Bank and the Asian Infrastructure
Investment Bank, and will be the first project jointly financed by those
banks. Further funding comes from an additional $90.7 million grant
announced in October 2015 by the government of the United Kingdom
towards the construction of portion of the M4 Motorway project.

The Karakoram Highway south of the city of Mansehra will also be

upgrade into a controlled-access highway to officially be known as
the E-35 expressway. While it is considered to be a crucial part of the
route between Gwadar and China, the E35 will not be financed by CPEC
funds. The project will instead be financed by the Asian Development
Bank with a $121.6 million grant from the United Kingdom towards the
project. Once completed, the E-35 Expressway, the M4 Motorway, and
Karachi-Lahore Motorway will provide continuous high-speed road travel
on controlled-access motorways from Mansehra to Karachi 1,550
kilometers away.

Approximately halfway between Zhob and Quetta, the town of Qilla

Saifullah in Balochistan lies at the intersection of the N50 National
Highway and the N70 National Highway. The two roads form the 447
kilometer route between Quetta and Multan in southern Punjab. While

PAGE 41
the N70 project is not officially a part of CPEC, it will connect the
CPEC's Western Alignment to the Karachi-Lahore Motorway at Multan.
Reconstruction works on the 126 kilometer portion of the N70 between
Qilla Saifullah and Wagum are slated for completion by 2018, and are
financed as part of a $195 million package by the Asian Development
Bank, and by a $72.4 million grant from the United
Kingdom's Department for International Development.

Future Central Alignment

Long-term plans for a "Central Alignment" of the CPEC consist of a

network of roads which will commence in Gwadar and travel upcountry
via the cities of Basima, Khuzdar, Sukkur, Rajanpur, Layyah,
Muzaffargarh, and terminating in Dera Ismail Khan, with onward
connections to Karakoram Highway via the Brahma BahtarYarik
Motorway.

RAILWAY PROJECTS

The CPEC project emphasizes major upgrades to Pakistan's

ageing railway system, including rebuilding of the entire Main Line 1
railway between Karachi and Peshawar by 2020; this single railway
currently handles 70% of Pakistan Railways traffic. In addition to the
Main Line 1 railway, upgrades and expansions are slated for the Main
Line 2 railway, Main Line 3 railway. The CPEC plan also calls for
completion of a rail link over the 4,693-meter high Khunjerab Pass. The
railway will provide direct access for Chinese and East Asian goods to
Pakistani seaports at Karachi and Gwadar by 2030.

PAGE 42
Procurement of an initial 250 new passenger coaches, and
reconstruction of 21 train stations are also planned as part of the first
phase of the project bringing the total investment in Pakistan's railway
system to approximately $5 billion by the end of 2019. 180 of the
coaches are to be built at the Pakistan Railways Carriage Factory near
Islamabad, while the Government of Pakistan intends to procure an
additional 800 coaches at a later date, with the intention of building 595
of those coaches in Pakistan.

Main Line 1

The CPEC "Early Harvest" plan includes a complete overhaul of the

1,687 kilometer long Main Line 1 railway (ML-1) between Karachi and
Peshawar at a cost of $3.65 billion for the first phase of the project, with
the first phase expected to be completed by December 2017. In June
2016, China and Pakistan unveiled plans for the second phase of the
project, with a total cost of $8.2 billion for both phases of the project. The
second phase of the ML-1 overhaul project is expected to be completed
in 2021.

Upgrading of the railway line will permit train travel at speeds of 160
kilometers per hour, versus the average 60 to 105 km per hour speed
currently possible on existing track, and is expected to increase Pakistan
Railways' annual revenues by approximately $480 million. The upgrades
are also expected to cut transit times from Karachi to Peshawar by
half. Pakistani railways currently account for 4% of freight traffic in the
country, and upon completion of CPEC, Pakistani railways are expected
to transport 20% of the country's freight traffic by 2025.

PAGE 43
The first part of the expedited first phase of the project will focus on
upgrading the Multan to Peshawar section, which will then be followed
by the Hyderabad to Multan section, and finally by the Hyderabad to
Karachi section.

At the time of CPEC's announcement, the ML-1 consisted of mostly dual

track railway between Karachi, and the Lahore suburb of Shahdara, with
long stretches of single track. From Shahdara, the track mainly
consisted of a single track until the city Peshawar. Construction works to
dualize the entire track between Karachi to Shahdara were completed
and inaugurated in January 2016. As part of the first phase of the CPEC
railway project, the remaining stretch of track between Shahdara and
Peshawar is to upgraded to a dual track railway.

The 676 kilometer portion between Lalamoosa, north of Lahore, and

Peshawar will require complete reconstruction with the addition of
tunnels, culverts, and bridges, while over 900 kilometers south of
Lalamoosa towards Karachi will be upgraded to handle cars with a 25-
ton axle load capacity. A spur from Taxila to Havelian will also be
constructed, with a dry port to be established near the city of
Havelian. Further, the entire length of track will have computerised
signal systems, with stretches of track in urban areas to also be fenced
off to prevent pedestrians and vehicles from crossing tracks in
unauthorised areas.

PAGE 44
Main Line 2

In addition to upgrading the ML-1, the CPEC project also calls for similar
major upgrade on the 1,254 kilometer long Main Line 2 (ML-2) railway
between Kotri in Sindh province, and Attock in northern Punjab province
via the cities of Larkana and Dera Ghazi Khan. The route towards
northern Pakistan roughly parallels the Indus River, as opposed to the
ML-1 which takes a more eastward course towards Lahore. The project
also includes a plan to connect Gwadar, to the town
of Jacobabad, Sindh which lies at the intersection of the ML-2 and ML-3
railways.

Main Line 3

Medium term plans for the Main Line 3 (ML-3) railway line will also
include construction of a 560 kilometer long railway line
between Bostan near Quetta, to Kotla Jam in Bhakkar District near the
city of Dera Ismail Khan, which will provide access to
southern Afghanistan. The railway route will pass through the city
of Quetta and Zhob before terminating in Kotla Jam, and is expected to
be constructed by 2025.

Lahore Metro

The $1.6 billion Orange Line of the Lahore Metro is under construction
and is regarded as a commercial project under CPEC. Construction on
the line has already begun, with planned completion by Winter
2017. The line will be 27.1-kilometer (16.8 mi) long, of which 25.4

PAGE 45
kilometers (15.8 mi) will be elevated, with the remaining portion to be
underground between Jain Mandir and Lakshmi Chowk. When
complete, the project will have the capacity to transport 250,000
commuters per day, with plans to increase capacity to 500,000
commuters per day by 2025.

Khunjerab Railway

Longer term projects under CPEC also call for construction of the 682
kilometer long Khunjerab Railway line between the cities of havelian to
the Khunjerab Pass on the Chinese border, with extension to
China's Lanxin Railway in Kashgar, Xinjiang. The railway will roughly
parallel the Karakoram Highway, and is expected to be complete in
2030.

The cost of the entire project is estimated to be approximately

$12 billion, and will require 5 years for completion. A 300 million rupee
study to establish final feasibility of constructing the rail line between
Havelian and the Chinese border is already underway. A preliminary
feasibility study was completed in 2008 by the Austrian engineering firm
TBAC.

ENERGY SECTOR PROJECTS

Pakistan's current energy generating capacity is 24,830 MW, though the

country currently faces energy shortfalls of over 4,500MW on a regular
basis with routine power cuts of up to 5 hours per day, which has shed
an estimated 22.5% off its annual GDP. Energy generation will be a

PAGE 46
major focus of the CPEC project, with approximately $33 billion
expected to be invested in this sector. As part of the "Early Harvest"
scheme of the CPEC, an estimated 10,400 MW of electricity are slated
for generation by March 2018 as part of CPEC's "Early Harvest"
projects.

The energy projects under CPEC will be constructed by

private Independent Power Producers, rather than by the governments
of either China or Pakistan. The Exim Bank of China will finance these
private investments at 56% interest rates, while the government of
Pakistan will be contractually obliged to purchase electricity from those
firms at pre-negotiated rates.

Renewable-energy

Pakistan aims to produce 25% of its electricity requirements by

renewable energy resources by 2030. China's Zonergy company will
complete construction on the world's largest solar power plant the
6,500 acre Quaid-e-Azam Solar Park near the city of Bahawalpur with
an estimated capacity of 1000MW is expected to be completed in
December 2016. The first phase of the project has been completed by
Xinjiang SunOasis, and has a generating capacity of 100 MW. The
remaining 900 MW capacity will be installed by Zonergy under CPEC.

The Jhimpir Wind Power Plant, built by the Turkish company Zorlu Enerji
has already begun to sell 56.4 MW of electricity to the government of
Pakistan, though under CPEC, another 250MW of electricity are to be
produced by the Chinese-Pakistan consortium United Energy Pakistan

PAGE 47
and others at a cost of $659 million. Another wind farm, the Dawood
wind power project is under development by HydroChina at a cost of
$115 million, and will generate 50 MW of electricity by August 2016.

SK Hydro Consortium is constructing the 870 MW Suki Kinari

Hydropower Project in the Kaghan Valley of Pakistan's Khyber
Pakhtunkhwa province at a cost of $1.8 billion, SK Hydro will construct
the project with financing by China's EXIM bank.

The $1.6 billion 720 MW Karot Dam which is under construction is part
of the CPEC plan, but is to be financed separately by China's Silk Road
Fund.

Pakistan and China have also discussed the inclusion of the 4,500MW
$14 billion Diamer-Bhasha Dam as part of the CPEC project, though as
of December 2015, no firm decision has been made though Pakistani
officials remain optimistic at its eventual inclusion.

The $2.4 billion, 1,100 MW Kohala Hydropower Project being

constructed by China's Three Gorges Corporation predates the
announcement of CPEC, though funding for the project will now come
from CPEC fund.

Coal

Despite several renewable energy projects, the bulk of new energy

generation capacity under CPEC will be coal-based plants, with
$5.8 billion worth of coal power projects expected to be completed by
early 2019 as part of the CPEC's "Early Harvest" projects.

PAGE 48
Balochistan

In Balochistan province, a $970 million coal power plant at Hub, near

Karachi, with a capacity of 660MW to be built by a joint consortium of
China's China Power Investment Corporation and the Pakistani firm Hub
Power Company as part of a larger $2 billion project to produce
1,320MW from coal.

A 300MW coal power plant is also being developed in the city of

Gwadar, and is being financed by a 0% interest loan.

Punjab

The $1.8 billion Sahiwal Coal Power Project is an under construction

project in central Punjab that will have a capacity of 1,320MW. It is being
constructed by a joint venture of two Chinese firms: the Huaneng
Shandong compan and Shandong Ruyi Science & Technology Group,
who will jointly own and operate the plant. Pakistan will purchase
electricity from the consortium at a tariff of 8.36 US cents/KWH.

The $589 million project to establish a coal mine and a relatively small
300MW coal power plant to be built in the town of Pind Dadan Khan by
China Machinery Engineering Corporation in Punjab's Salt
Range. Pakistan's NEPRA has been criticized for considering a
relatively high tariff of 11.57 US cents/KWH proposed by the Chinese
firm, which had been initially agreed at 8.25 US cents/KWH in 2014. The
Chinese firm argued that coal transportation costs had greatly increased
due to the non-availability of coal from nearby mines which had initially

PAGE 49
been regarded as the primary coal source for the project. The company
argued that coal would instead have to be transported from distant
Sindh province, which along with inefficiencies in mining procedures,
increased the cost of fuel by 30.5%.

Sindh

The Shanghai Electric company of China will construct two 660MW

power plants as part of the "Thar-I" project in the Thar
coalfield of Sindh province, while "Thar-ll" will be developed by a
separate consortium. The facility will be powered by locally sourced
coal, and is expected to be put into commercial use in
2018. Pakistan's National Electric Power Regulatory Authority (NEPRA)
has agreed to purchase electricity from both Thar-l and Thar-ll at a tariff
of 8.50 US cents/KWH for the first 330 MW of electricity, 8.33 US
cents/KWH for the next 660 MW, and 7.99 US cents/KWH for the next
1,099 MW as further phases are developed.

Near the Thar-I Project, the China Machinery Engineering Corporation in

conjunction with Pakistan's Engro Corporation will construct two 330MW
power plants as part of the "Thar-ll Project" (having initially proposed the
simultaneous construction of two 660MW power plants) as well as
developing a coal mine capable of producing up to 3.8 million tons of
coal per year as part of the first phase of the project." The first phase is
expected to be complete by early 2019, at a cost of $1.95 billion.
Subsequent phases will eventually generate an additional 3,960MW of
electricity over the course of ten years. As part of infrastructure required
for electricity distribution from the Thar l and ll Projects, the

PAGE 50
$2.1 billion Matiari to Lahore Transmission Line, and $1.5 billion in
Matiari to Faisalabad transmission line are also to be built as part of the
CPEC project.

The 1,320MW $2.08 billion Pakistan Port Qasim Power

Project near Port Qasim will be a joint venture of Al-Mirqab Capital
from Qatar, and China's Power Construction Corporation a subsidiary
of Sino hydro Resources Limited. Pakistan's NEPRA and Sino Hydro
agreed to set the levelized tariff for electricity purchased from the
consortium at 8.12 US cents/KWH.

Liquified natural gas

Liquified natural gas power LNG projects are also considered vital to
CPEC. The Chinese government has announced its intention to build a
$2.5 billion 711 kilometer long liquid natural gas pipeline from Gwadar
to Nawabshah in province as part of CPEC. The pipeline is designed to
be a part of the 2,775 kilometer long IranPakistan gas pipeline, with
the 80 kilometer portion between Gwadar and the Iranian border to be
connected when sanctions against Tehran are eased; Iran has already
completed a 900 kilometer long portion of the pipeline on its side of the
border.

The Pakistani portion of the pipeline is to be constructed by the state-

owned China Petroleum Pipeline Bureau. It will be 42 inches in
diameter, and have the capacity to transport 1 billion cubic feet of
liquified natural gas every day, with an additional 500 million cubic feet
of additional capacity when the planned off-shore LNG terminal is also

PAGE 51
completed. The project will not only provide gas exporters with access to
the Pakistani market, but will also allow China to secure a route for its
own imports.

The project should not be confused with the $2 billion 1,100

kilometer North-South Pipeline liquified natural gas pipeline which is
to be constructed with Russian assistance between Karachi and Lahore
with anticipated completion by 2018. Nor should it be confused with the
planned $7.5 billion TAPI Pipeline which is a planned project involving
Turkmenistan, Afghanistan, Pakistan, and India.

Other LNG projects are currently under construction with Chinese

assistance and financing that will augment the scope of CPEC, but are
neither funded by nor officially considered a part of CPEC. The
1,223MW Balloki Power Plant is currently under construction
near Kasur, and is being constructed by China's Harbin Electric
Company with financing from the China's EXIM bank, is one such
example. In October 2015, Prime Minister Nawaz Sharif also
inaugurated construction of the 1,180MW Bhikhi Power Plant
near Sheikhupura, which is to be jointly constructed by China's Harbin
Electric Company and General Electric from the United States. It is
expected to be Pakistan's most efficient power plant, and will provide
enough power for an estimated 6 million homes.

"Early Harvest" projects

As part of the "Early Harvest" scheme of the CPEC, over 10,000

megawatts of electricity-generating capacity is to be developed between

PAGE 52
2018 and 2020. While some "Early Harvest" projects will not be
complete until 2020, the government of Pakistan plans to add
approximately 10,000 MW of energy-generating capacity to Pakistan's
electric grid by 2018 through the completion of projects which
complement CPEC. Although not officially under the scope of CPEC, the
1,223 MW Balloki Power Plant, and the 1,180 MW Bhakki
powerplants are also under construction, which along with the under-
construction 969 MW NeelumJehlum Hydropower Plant and 1,410
MW Tarbela IV Extension Project will result in an additional 10,000
MW being added to Pakistan's electricity grid by 2018 by a combination
of CPEC and non-CPEC projects. A further 1,000 MW of electricity will
be imported to Pakistan from Tajikistan and Kyrgyzstan as part of
the CASA-1000 project, which is expected to be completed in late 2018.

Table of projects

"Early Harvest" Energy

Project Capacity Location

Pakistan Port Qasim Power

1,320 MW (2 x 660 MW plants) Sindh
Project.

Thar-l Project 1,320 MW (4 x 330 MW plants) Sindh

Thar-ll Project and coal mine 1,320 MW (2 x 660 MW plants) Sindh

Sahiwal Coal Power Project 1,320 MW (2 x 660 MW plants) Punjab

Rahimyar Khan coal power

1,320 MW (2 x 660 MW plants) Punjab
project

Quaid-e-Azam Solar Park 1,000 MW Punjab

Suki Kinari Hydropower Project 870 MW (expected completion Khyber

PAGE 53
"Early Harvest" Energy
Project Capacity Location

in 2020) Pakhtunkhwa

720 MW (expected completion

Karot Hydropower Project Punjab
in 2020)

China Power Hub Generation

2X660 MW Balochistan
Company

Thar Engro Coal Power Project 660 MW (2 x 330 MW plants) Sindh

Gwadar coal power project 300 MW Balochistan

UEP Windfarm 100 MW Sindh

Dawood wind power project 50 MW Sindh

Sachal Windfarm 50 MW Sindh

Sunnec Windfarm 50 MW Sindh

Matiari to Faisalabad
660 kilovolt Sindh and Punjab
transmission line

Matiari to Lahore Transmission

660 kilovolt Sindh and Punjab
Line

Hidden cost of CPEC

AN important announcement from the government went relatively

unnoticed given the atmosphere that prevails, so let me reconstruct a
timeline here to give everybody a better idea of what is going on.

Last year on April 21, the day after Chinese President Xi Jinpings visit
to Pakistan, the military put out a press release announcing the creation
of a Special Security Division for Pak-China Economic Projects, which

PAGE 54
would consist of nine army battalions and six wings of civil armed forces,
to be commanded by a major general.

The force was supposed to be one of several being created for

protection of Chinese investment and personnel in the country. The fact
that the press release came the day after Xi Jinpings visit, during which
he also met the army high command, suggests that the matter was
discussed between them during the meeting.

In May, the finance minister told a Senate standing committee that

Rs136 billion would be required for completing the military operation in
North Waziristan, including the cost of rehabilitating the displaced
people, and other security-related expenditures, which according to at
least one report included the cost of raising the CPEC security force.
The funding was programmed into the budget in June, and a waiver was
obtained from the IMF from including this expense in the ceiling on the
fiscal deficit, since it was a one-off measure.

By September of that year, the fiscal deficit target had already been
blown by more than Rs100 billion, and the finance minister was busy
putting together a package of new, midyear revenue measures to help
plug the shortfall. This package became a prior action under the IMF
program, which said in its eighth review that the federal government took
measures to contain its expenditures despite unforeseen expenditures
of PRs 53 billion on account of Zarb-i-Azb military operations, hosting of
Temporarily Displaced People (TDPs).

PAGE 55
1 Security expenditure has been growing at an alarming rate
over the past couple of years, and all of it has been in the dark.

By December we had reports that the CPEC security force had already
been deployed, with 9,000 army personnel and 6,000 civil armed forces.
One of the reports, sourced to unnamed official sources had a little
more detail: [t]he Pakistan government had already placed two projects
under the Public Sector Development Program (PSDP) for 2015-16 for
raising 22 additional wings of the civil armed forces with an estimated
cost of Rs7.546 billion and through another project raising six additional
wings of the CAF with a cost of Rs2.350 billion so the total cost of
projects stood in the range of Rs10 billion. This cost might go up by 20
to 30 percent with the inclusion of escalated land cost.

Meanwhile, the Gwadar Security Task Force, another formation similar

to the force just raised, commanded by a brigadier, also became
operational at the same time, with its expenses to be borne by the
government of Balochistan and the federal government. Since almost
half of Balochistans revenue comes from federal transfers anyway,
clearly the bulk of the cost of creating and maintaining this force would
come from federal revenues.

In any case, in February of 2016, the COAS visited the headquarters of

the CPEC security force and vowed that the security forces are ready to
pay any price for realising the long-cherished dream of CPEC.

PAGE 56
By May, the finance minister said that the Rs100bn extraordinary
expenditure on security, which was included as a one-off item last year
and was to be outside the fiscal deficit ceiling, would be renewed again
this year. And it surely was.

In July, a number of parliamentary committees were given presentations

about the force. In one of these, the CPEC project director, retired Major
Gen Zahir Shah, reportedly told a Senate committee that one per cent
of the total Chinese investment for CPEC would be spent on the
security-related arrangements.

All along this timeline, there are repeated clues that the Chinese are not
happy with the security arrangements. The clues take the form of
repeated assurances from the Pakistani side, including at the highest
levels, that security of Chinese investment and workers is something
Pakistan attaches high priority to.

In August, a leading business daily carried a report which opened with

this sentence: China on Tuesday urged Pakistan to ensure foolproof
security to Chinese workers engaged in different projects under the
CPEC. This was conveyed by Vice Administrator of Chinese National
Energy Administration (NEA), Li Fanrong at a meeting with the Federal
Minister for Water and Power and Defence Khawaja Muhammad Asif to
review progress of CPEC energy projects.

On Sept 21, the military announced a meeting between Finance

Minister Ishaq Dar and the COAS Raheel Sharif, during which
financing matters related to capacity building for effective Pak-

PAGE 57
Afghan border management including raising of fresh 29 Civil
Armed Forces wings were discussed.

A few days later, in an ECC meeting, the federal government decided

that the capital cost of all CPEC power projects that are under
construction would be raised by 1pc to pay for the running cost of the
CPEC security force, and that Nepra should be given a policy directive
to include this cost escalation in the tariff given to these plants. The cost
of the force was now going to be bundled into the power tariff and
passed on to the consumers.

The regulator, Nepra, has objected, and rightly so. Security expenditure
has been growing at an alarming rate over the past couple of years, and
all of it has dddd aabeen in the dark. Having blown the fiscal framework,
they are now being offloaded directly onto the public through electricity
bills.

Nobody doubts that CPEC carries tremendous promise for Pakistan.

And nobody doubts that our security forces have made major sacrifices
in the war on terror, as well as facing the looming threat from a
belligerent India these days. But greater transparency is needed in the
financing of CPEC projects. Otherwise, hidden costs of all sorts will start
getting bundled into whatever recovery machinery there is, whether
power tariffs of gas surcharges or whatever else.

Challenges for Pakistan

CPEC is not without challenges and impediments because of four main

reasons. First, Pakistan must provide the required peace and stability for

PAGE 58
the successful completion of this project because in an environment
which is insecure and violent, it will be highly difficult for the Chinese
workers and technicians to involve themselves in projects on the
construction work. Second, if China is investing in Pakistan in mega-
projects, it is the responsibility on the part of Islamabad to build its
capacity building and professional skills to meet the deadlines for the
construction of roads, railways and power stations. Failure to meet
deadlines will have a negative impact on CPEC and Beijing may seek
other options to seek an outlet to the Arabian Sea via Iran. Third, as
repeatedly stated by various government officials of Pakistan, forces that
are deadly against CPEC will try their best to sabotage efforts aimed at
bringing foreign investments and putting the country on the track of
development. For that purpose, such forces will deepen their efforts to
covertly sponsor acts of sabotage, violence and terrorism. Fourth,
corruption, nepotism and inefficiency are major impediments to launch
successful mega-projects in Pakistan. Islamabad will have to make sure
that negative factors in Pakistani society which tend to discourage
foreign investments are effectively dealt with.

Finally, lack of consensus or undue criticism about the route of CPEC is

also a major source of concern both for China and Pakistan because if

such a mega-project becomes a victim of political wrangling between the

government and the opposition, it will have a very adverse impact on
foreign investment and Pakistan will lose a life time opportunity to

PAGE 59
transform its vision of emerging as an economically stable and
prosperous country. In order to dispel concerns about the safety of
Chinese workers and officials to be involved in CPEC, Director General
Inter-Services Public Relations (ISPR) in a statement issued on
April 22, 2015 said that,

a special force is being raised for Pakistan-China economic

projects. The new force named Special Security Division would be
of the size of a division consisting of nine army battalions and six
wings of para-military forces in Rangers and Frontier Corps.

Hence, the government of Pakistan is mindful of security threats which

may arise once the project takes off. Apart from security, there are other
major challenges related to CPEC.

As argued by a Pakistan writer:

Beyond governmental capacity, another daunting challenge

projects under CPEC will face is availability of local financing. Even
if external financing is fully arranged, the CPEC portfolio will have
a substantial local financial component. With the government
unable to credibly broaden the tax base, its ability to provide funds
for development spending is seriously constrained. In addition, the
failure to reform public finances also means that the government
borrows most of the available credit from the banking system,

PAGE 60
leaving little or no room for financing of private infrastructure
projects.

The government is trying to create a consensus on CPEC by arranging

several brainstorming sessions that include different stakeholders. The

Awami National Party (ANP) chief, Asfandyar Wali Khan, had expressed
his reservations about what he termed changing the map of CPEC and
excluding the province of Khyber Pakhtunkhwa (KPK) from the original
route of that project. But, Ahsan Iqbal dispelled any notion about
deviating from the map of CPEC and blames certain elements of making
the project controversial as was done in case of Kalabagh Dam.
Examining some of the fault lines in CPEC and its challenges, it is
argued that,

There are crucial issues related to our economic capacity, and our
ability to absorb the massive investment. In order to transfer any
sort term gains into long-term economic success, Pakistan needs
to increase its absorption capacity by investing in both vocational
training programmes, and by revitalising the education sector. This
will assist Pakistan in generating semi-skilled labor in the short run
to accommodate the Chinese investment, and skilled labour in the
long run to generate persistent economic prosperity in future
decades.

On May 28, 2015 on the occasion of All-Parties Conference held in

PAGE 61
Islamabad, participants belonging to the ruling and opposition parties

agreed to wholeheartedly support CPEC. Such a consensus emerged

when the government agreed to first build the western route linking
Gwadar to Kasghar passing through Balochistan and KPK. The
government has prudently looked into the reservations and concerns
raised by various sides, and ended the controversy on the route of
CPEC by agreeing to first construct the western route followed by work
on other routes.

Two perceptions which impact on the viability or unviability to shape the

discourse of CPEC are:

FIRST,

The project should not be suspected or made controversial because as

mentioned by Ahsan Iqbal, CPEC is a lifetime opportunity for the people
of Pakistan to move in the direction of development and progress.
Earlier, a mega-project called Kalabagh Dam for power generation and
irrigation on the Indus River was made controversial several decades
ago to an extent that the provincial assemblies of Balochistan, NWFP
and Sindh had passed resolutions against its construction. The
stakeholders in the province of Sindh particularly objected that the
proposed Dam would deprive Sindh, being the lower riparian, of its
share of water. As a result, Kalabagh Dam, which could have helped
reduce energy crisis and provide sufficient water for irrigation was not
allowed to be constructed. In case of CPEC, objections were raised by
various sides, particularly by those representing the provinces of

PAGE 62
Balochistan and KPK that the project would not benefit their provinces
as the key roads and railways from Khunjerab to Gwadar will not pass
from their provinces. Whereas, Ahsan Iqbal, in a briefing which was
arranged in the Prime Ministers House on CPEC on May 13, 2015
in

front of the leaders of various political parties, rejected the notion

that the project would bypass Balochistan and KPK and asserted
that it would not only benefit all the provinces of Pakistan, but also
Gilgit-Baltistan and Azad Jammu and Kashmir.

SECOND:

There is a perception that the security environment of Pakistan

is not conducive for foreign investments because of repeated acts of

violence and terrorism in different parts of Pakistan; and that the

government must first create a suitable environment before inviting

foreign investment like the enormous mega-project of CPEC. The

designs of internal and external forces trying to destabilise Pakistan by
patronizing terrorist and violent groups are often mentioned by
government officials of Pakistan. As remarked earlier, in order to provide
security to the Chinese workers and the staff who will be involved in
CPEC all the way from Khunjerab to Gwadar, a separate security plan
has been prepared so that the project can be completed smoothly. The

PAGE 63
governments of China and Pakistan have done homework before
embarking on CPEC. It would have been better if the briefing and
consultation process started in Pakistan had begun earlier. At the same
time, those political leaders who have their reservations against the
route of CPEC should get correct information and maps before
expressing their opinions to criticise the project. With better
transparency and planning in CPEC, it is expected that the project will
be a win-win enterprise for all stakeholders and it will unleash the
process of development which is badly needed in Pakistan.

Pakistan faces several challenges in the implementation of the China

Pakistan Economic Corridor (CPEC) project. These challenges can be
identified as external and internal. The Vice Director General of Policy
Research Office at the International Department of the Central
Committee Communist Party of China, Dr. Luan Jianzhang is of the

view that political unrest, security situation and administrative issues are
some of the greatest challenges in the way of successful completion of
the corridor. The construction of the corridor has been defined by many
as a strategic moment such that Pakistan has assumed the position of
economic pivot for the whole region. This paradigm shift in
circumstances is a cause of great worry for the enemies of Pakistan
both within and outside. India, Israel and the US are unhappy. For India,
CPEC is a thorn in its paw. They have put their heads together to work
out new strategies to block the project forward march. RAW has opened
a special office in Delhi and has been allotted $300 million to disrupt

PAGE 64
CPEC. Already one can notice sudden upsurge in the acts of terror in
the three restive regions and

activation of certain NGOs and think tanks all trying to air misgivings and
create fear psychosis. In Pakistan, some political parties like ANP,
Baloch nationalists, PkMAP raised serious objections to the CPEC
project. Even PTI and JUI (F) showed inclinations to climb

the bandwagon of anti-CPEC forces. Objections were being raised

despite assurances by the government that this project will provide
equal opportunities to all the provinces. There are numerous internal
and external challenges for Pakistan over Pakistan China One Belt One
Road Project. Here some very serious challenges have been described.

CPEC and Balochistan Factor

Balochistan is one of the most important areas of Pakistan a surprising

location for what officials hope will become one of the worlds great trade
routes, linking the deepwater port of Gwadar with the city of Kashgar.
This province has been dogged for over a decade by a bloody separatist
insurgency. Baloch insurgents, who oppose Balochistan specially
Gwadars development have blown up numerous gas pipelines and
trains and have attacked Chinese engineers. They do not want to see
Balochistan to develop as an economic and trade hub unless it becomes
independent. They fear that if Balochistan develops and Gwadar port
becomes a thriving port, then outsiders would move in. That could weigh
the provinces demographic balance even further against the Balochs.

PAGE 65
Ethno-sectarian is another important cause of insurgency in Balochistan
as if this was not enough for keeping Balochistan tense, controversy
over China Pakistan Economic Corridor project (CPEC) has added more
fuel to the blaze. Going by the history of the earlier Balochistan related
mega projects, the CPEC is likely to become increasingly contentious.

PAGE 66
Muhammad Ali Talpur in an article under the caption A few questions
answered wrote:

The China Pakistan Economic Corridor is the center of interest for

China, Pakistan and, naturally the world, as all perceive it
according to the strategic and economic advantages and
disadvantages it holds for them, whatever importance it may hold
for others, it is extremely important for the Baloch whose lives it
will destroy in the name of development.

Various separatist leaders of the Balochistan province are opposing the

China-Pakistan Economic Corridor (CPEC). In this respect, Brahamdagh
Bugti, the leader of the outlawed Baloch Republican Party (BRP),
criticized the CPEC and Gwadar port projects and called for an
unsponsored referendum in Balochistan to decide its future. He alleged
the military equipment and funds obtained by Pakistan from the US and
other western countries for combating terrorists and extremist groups
were also being used against the democratic and political struggle of the
Baloch people. There have been occasional kidnappings and killings of
Chinese workers in Balochistan. Baloch separatists attacked tankers
carrying fuel to a Chinese company working on a mining project.
Gwadar port, which was recently put under the management of a
Chinese state-owned company, is a particular target. Militants do not
want to see it developed. Siddiq Baloch, editor of the Balochistan
Express newspaper, said the rebels want to scare off investors and
developers who are working with the Pakistani government such as the
Chinese. He further said that there is the thinking that by doing this, they
want to disrupt the working

PAGE 67
of the economy, disrupt the administration and challenge the
administration in the area. It is high time that concerns of Balochistan
are addressed prudently. For a project as big as the CPEC, which is
potentially a game-changer for the economy of all the provinces, the
nation cannot afford to fall in the trap of spoilers. CPEC and Khyber
Pakhtunkhwa Factor Some political parties in Khyber Pakhtunkhwa are
also opposed to China Pakistan Economic Corridor which is a

big challenge for this multibillion dollars project. The reason behind this
opposition is changes being made in the original plan of this corridor by
the federal government which will divert economic benefits to Punjab
only. The Western route as the original route would be followed by
building a road from Khunjerab to Gwadar via Mianwali, Dera Ismail
Khan, Dera Ghazi Khan, Khuzdar and Turbat. However, China is most
interested to work on Eastern route first because of some security
concerns. It is in fact a long term plan and will cover some parts of
interior Sindh, and southern, central and northern regions of Punjab. The
political parties of Khyber Pakhtunkhwa are against changing the
original Gwadar-Kashgar route and demanded that government should
desist from modifying the project, warning that the move would divide
the nation on the issue. The Qaumi Waten Party parliamentary leader
Sikander Sherpao tabled the resolution in the provincial assembly which
was supported by all parties. According to the resolution, any change in
original plan of the project will be sheer injustice with the people of
Khyber Pakhtunkhwa who have already been adversely affected due to
terrorism.33 They believe that the original route will connect the under
developed areas of Khyber Pakhtunkhwa and Fata to the Corridor and

PAGE 68
will generate economic activities in the entire region but with adoption of
new the alignment, these areas would remain ignored. The lack of
political harmony would be the major challenge towards the
implementation of the China Pakistan Economic Corridor (CPEC) project
in Pakistan. Some subnationalist parties in all the provinces have
expressed deep

reservations about the CPEC, claiming there a change in the routes by

the Federal Government would only favor the eastern provinces of
Pakistan and deprive the western provinces. Since these allegations fail
to meet the facts on the ground, the Pakistani and Chinese governments
have tried to allay the fears, by interacting with the political parties that
are making the allegations. The 18th Amendment to Pakistan's
Constitution has delegated numerous powers to the provinces, which
has strengthened the provinces but at times is detrimental to evolving
consensus on vital national issues such as the CPEC. Both the
underdeveloped provinces of Balochistan and Khyber Pakhtunkhwa
have expressed reservations over the proposed new route of the
corridor, which may hamper the completion of the project. Moreover,
security situation in these provinces is another impediment towards the
smooth construction of the corridor. Additionally, Pakistan's unstable
political system carries the potential to delay the implementation of the
CPEC. Failure to address these irritants will continue to affect Pakistan
China Economic Corridor project. There is a need to bring political
harmony in all the provinces of Pakistan because it is important at
present, when Pakistan is going to join the race for economic
development and regional connectivity.

PAGE 69
PAGE 70
Security concerns

Security concerns have been the most critical challenge to the CPEC
and both Pakistan and China have been trying to meet these. An arc of
militancy stretches from Xinjiang to Gwadar consisting of groups like the
East Turkestan Islamic Movement (ETIM), Tehreek-e-Taliban Pakistan
(TTP), Lashkar-e-Jhangvi (LeJ), Daesh (ISIS),Balochistan

Liberation Army (BLA), Balochistan Liberation Front (BLF) and the

militant wings of some political parties. Most of these groups may not
have an enmity with China itself but rather intend to attacks the Chinese
interests like the CPEC as a means to deal with the Pakistani state.
Gwadar is the tail of the Silk belt, which will connect at Kashgar through
different communication networks. The security of the whole corridor
and Gwadar is a real concern for China. After the military operation in
different parts of Pakistan, the terrorist infrastructure still exists inside
and outside of the borders which will continue to pose a threat. The
support of American CIA, Israeli Mossad and Indian RAW has
continuously been assisting the militant groups and Sub-Nationalists in
all the provinces to conduct subversive acts-and using terrorist elements
in the whole country to threaten the Pak-Chinese plans of developing
the CPEC. In the past few years, they kidnapped and killed many
Chinese nationals in Pakistan despite Pakistans efforts to provide best
possible security. The army has announced the creation of 10,000 man
special force for protecting the development projects. The new force,
named the Special Security Division, will comprise nine army battalion
and six

PAGE 71
wings of paramilitary forces, the Rangers and the Frontier

Corps. There are major concerns about the Kunar and Nuristan
provinces of Afghanistan, where multiple terrorist groups

including Al Qaeda, the self-styled Islamic State, the Tehreek-i-Taliban

Pakistan, the Movement of Islamic Uzbekistan and the Turkmenistan
Islamic Party, etc are concentrated. These groups can pose a direct
threat to the CPEC in Pakistans northern region. A better understanding
between Islamabad and Kabul is imperative to achieve border security.

INDIAN CONCERNS

The dice of connectivity loaded by China has left India confused and
bewildered. India is also concerned about Chinas huge investment in
Pakistan, particularly its recent decision to fund for China Pakistan
Economic Corridor. China is also helping Pakistan in producing
plutonium at the Chinese built Kyushu reactor and will also sell 8
submarines worth $5 billion, which will give a quantum jump to Pak

Navys sea capability. After the completion of CPEC, Pakistan may

become a trade hub in the region after Gwadar Port starts functioning

fully and duty-free economic zones are set up. Many Central Asian
states have also expressed interest in becoming part of the corridor.
This strategic partnership between Pakistan and China has upset India
that openly voiced its opposition and even premier Narendra Modi

PAGE 72
pressed the president of China during his visit to Beijing to drop the plan
of developing the corridor. However, China did not cave in to

the pressure and vowed to push ahead with work on the project. India is
also not happy with the handing over of Gwadar Port development and
its operations to China. There have long been reports that Delhi is
fueling insurgency in Balochistan, which is rich in oil and gas resources,
but poor law and order conditions have halted work on exploration
activities there. Experts believe the India-UAE nexus will try to fail the
Gwadar Port development project and create hurdles in the way of
exploration activities in Balochistan. With Chinese clout growing and
Russia flexing muscles to regain control over Central Asia, India is
struggling to make some headway and spread its sphere of influence in
the region. Delhi has bet on Iran and Afghanistan to reach the Central
Asian states via land route as Pakistan and China have control over
many land links that provide access to the resource-rich region. India
hopes it will be able to reach Central Asia through the Iranian port of
Chabahar and build a north-south corridor that will run to Afghanistan
and eventually stretch to Central Asia. The question that is usually
raised is that is there any benefit for Pakistan in this whole project, or
China is just using Pakistan here for its own economic success? People
who are raising these questions are certainly lacking research on CPEC
project. Even though, as said before, it might be more beneficial for
China, but that does not mean Pakistan will have no advantage in it
whatsoever. Anyone who knows the history and struggle of Pakistan
knows that what a big opportunity this is for Pakistan. Pakistans
economy is primarily based on its agriculture sector, and relies on few

PAGE 73
other factors. Since the rise of terrorism in Pakistan, this posed a huge
threat to the security of Pakistan and along with it, the failing energy
sector of Pakistan which became a huge issue for the industrial
development of Pakistan. This led to a decrease in foreign direct
investment as well, but with CPEC, a huge increase of 38.8% was
witnessed in Net FDI. With $46 billion, it is the biggest FDI ever in
Pakistan, and it has a potential to change the future of Pakistan for
good. Most of the investment from CPEC will go to the energy sector of
Pakistan, which is discussed in detail below, commenting on where the
money will be invested. The graph below gives an illustration of the
Chinese interest in Pakistan, and how the current investment is the
largest ever made. If Pakistan wishes to be an economic success, it is
important for it to realize its geo-strategic potential, which was
mentioned earlier regarding Gwadar being the most important piece of
the puzzle. For instance, Port of Jebel Ali is the busiest port in Middle
East, expecting to deliver around 22.1 million TEU by 2018. Dubai, like
its neighbouring state Abu Dhabi, is not rich with natural resource like
oil. Dubais success obviously lies in tourism, but it benefits a lot from its
Port of Jebel Ali which has made Dubai the gateway to Middle East and
beyond. Hence, Gwadars real strength lies in being a transit route or a
corridor which is something Jebel Ali is not. How Pakistan will further
benefit from its strategic location, it can be started by looking into the
benefits that will be awarded by the route.

PAGE 74
Security

Over the 69yrs history of Pakistan, the thing that damaged the nation
the most on almost every ground is terrorism. After 9/11, a total of 438
suicide attacks took place in Pakistan, killing more than 6,500 people all
over the country. This figure may look easy on eyes, but it is the major
destabilizing factor behind Pakistan. Balochistan plays a major role for
CPEC since Gwadar is situated there, but a separatist factor has been
noted in Balochistan. Recently, an agent of Indian intelligence agency
RAW was arrested in Balochistan, who revealed that RAW supports the
separatist movement in Balochistan.

The Home Minister of Balochistan, Sarfaraz Bugti said that:

Kul Yadav Bhoshan, a commander-ranked officer in Indian

Navy was working for RAW and was in contact with Baloch
separatists and terrorists fuelling sectarian violence in Pakistan
and Balochistan.The recent speech of Indian prime minister
Narendra Modi on Indian independence day where he said he
was receiving thanking phone calls from Baloch separatist
leaders speak volumes of the heinous role of RAW in the
province. Pakistani analysts believe that Indias growing
diplomatic initiatives in Afghanistan in the same period as a
cover for RAW agents working to destabilise Pakistan by
training and arming separatists in Balochistan.

RAW has been involved before as well for being the mastermind
behind the unrest in Balochistan, and also funding and training the

PAGE 75
Baloch Nationalists as well. Recently, India showed a keen interest in
Afghanistan as they will be providing them with military assistance,
and it is believed that this is a beginning of a proxy war.32 Last year,
Pakistan also submitted evidence to United Nations regarding the
Indian involvement in Pakistan; however no response has been seen
so far. A few weeks ago, a deadly suicide attack took place in Quetta,
which is the provincial capital of Balochistan, killing at least 70 people
and injuring many more. The Chief Minister of Balochistan and the
ISPR held RAW responsible for the massacre. But on the other hand
ISIS and a faction of TTP claimed the responsibility for the attack.35 If
it was TTP, then there is every possibility of RAW being behind the
attack.

Analyst Khurram Husain criticized such actions of the government,

even though there might be proof of Indian intelligence interfering in
Pakistan, blaming RAW like this is rather unprofessional, and the
officials should work on solving the issue rather than pointing fingers.
What can be understood is that from years, the terrorists and the
Baloch insurgents have been working to destabilize the province,
with a motive of separating the province from Pakistan, keeping in
mind that Pakistan once lost East Pakistan which is today known as
Bangladesh. However, the current Chief Minister claimed that it
cannot be separated and will remain as a part of Pakistan.37 Hence,
the bottom-line is that the Balochistan situation is very delicate and
the government needs to handle this issue with full care, since the
Baloch have always felt that they have been ignored. With CPEC, a

PAGE 76
bunch of opportunities will take birth in Balochistan, creating
employment opportunities and bringing an economic and social
revolution for the province. Khyber Pakhtunkhawa has been under
the threat of terrorism for a long time but with the efforts of Pakistan
Army through successively successful military operations like Rah-e-
Raast, Rah e- Nijat, Khyber I & II and Zarb-e-Azb etc, the KP
province is finally coming out of the trauma and now focused on its
development. One of the reasons behind it is that KP shares its
border with FATA and Afghanistan, and terrorists could easily
infiltrate into the province and beyond. However, the parts of KP
through which the CPEC route will pass is becoming safer from the
terrorist attacks, since out of 4,732 attacks in KP, only 52 or 1% of
them were in the areas, mostly concentrated in Mansehra Also,
Sindh faces security related issues as well, Karachi to be precise.
Other parts of Sindh are considered to be more peaceful and having
a low level of threat, where as it is pretty high in Karachi. A report
says that out of 962, 889 terrorist attacks took place in Karachi, and
all these attacks are on the area through which the CPEC and the
new Motorway will pass. Target killings and sectarian killings are
common in Karachi, just recently the renowned singer Amjad Fareed
Sabri was gunned down in broad daylight on a highway, and TTP
claimed its responsibility by giving the reason of assassination as
blasphemy. These killings may not be directly linked with CPEC, but
if the security situation is not strengthened, there is a chance it will
spread out. Punjab is comparatively stayed pre-dominantly peaceful
but no doubt that it was also a target of terroristic agendas in the past

PAGE 77
and there is a continued of sectarian violence and the presence of
non-state actors which need to be tackled once for all.

Economic Development

China Pakistan Economic Corridor will help build a robust and stable
economy in Pakistan and will create a significant opportunity for
Pakistan to revive its industry and advance its economic interests. It will
also help in overcoming the psychological barriers to flows of foreign

investment from other sources. Despite its restrictive economic regime,

over 150 private equity funds, foreign and domestic, are active in India.
Only three or four such funds are dedicated to investing government,
with the participation of the private sector, to encourage foreign direct
investment in Pakistan is indispensable. Finance Minister Ishaq Dar

said war phobia can also be defeated through economic

development. Peace and prosperity can be achieved with economic
advancement.

This project will go beyond regional ambits to bring about enormous

changes not only to the national economies of the benefiting states but
also to the economics of the people at the grassroots level. Balanced
environment in South Asiais the crown jewel in the new Pakistan
economic paradigm because Pakistan has the opportunity to act
independently of the western influence especially the US influence as it
has proved of late, an irritant factor. CPEC Project will also bring an
opportunity to Pakistan for normalization of ties with India, Iran and

PAGE 78
Afghanistan which will keep balance, strengthen prospects of peace and
improve socio-economic status of the people of the region.

Removal of poverty

CPEC is a game changer project which will lift millions of Pakistanis out
of poverty and misery. The project embraces the construction of textile
garment, industrial park projects, construction of dams, the installation of
nuclear reactors and creating networks of road, railway line which

will generate employment and people will also take ownership of these
projects. Fully equipped hospitals, technical and vocational training
institutes, water supply and distribution in undeveloped areas will also
improve the quality of life of people.

Peace and prosperity in Provinces

CPEC is not only the name of road, port and railway system but a multi-
dollars mega project which will bring peace and prosperity in all the
provinces of Pakistan.

The chairman of the Gwadar port,

Dostain Khan Jamaldini said that

PAGE 79
The CPEC would not only benefit Balochistan but also prove
beneficial for the countrys three other provinces

Economist Dr Shahid Hassan said

CPEC would bring more prosperity in the whole country and

would reduce unemployment in the country. Functioning of
Gwadar port will bring an economic revolution and business
activities will get a much needed boost.

According to an Asia Development Bank (ADB) report:

Economic corridors connect economic agents along a defined

geography. They provide important connections between economic
nodes or hubs that are usually centered in urban landscapes. They do
not stand alone, as their role in regional economic development can be
comprehended only in terms of the network effects that they induce. As
the case studies in this paper show, there is no standard picture of what
economic corridor development is and what it can achieve. What
economic corridors can achieve for regional economic integration
depends first on what characteristics the specific existing economic
networks in which the economic corridors are embedded personify, and
second on which characteristics corridor development are intended to
introduce or strengthen. Corridor characteristics interact dynamically to
create patterns of regional economic development. Models that make
this interaction explicit have combined elements of the New Economic

PAGE 80
Geography (non-linear and General Equilibrium elements). With the
surge of urbanization, industrialization and technological innovation, the
phenomenon of the corridor, whether it is composed of highways,
railways or sea lanes has assumed much significance in the recent era.
Economic corridor is established particularly for states which are
landlocked or dependent on seeking a short connection to sea ports.

Assessing Strategic Rationales

INTERNATIONAL RELATIONS THEORIES

For China, CPEC is an integral component of its 21st-century OBOR

initiative promoting economic expansion and regional connectivity while
reinforcing its status as a global player in international affairs. CPECs
motivations can be explained through the prism of realist and

liberal internationalist theories of geopolitics, as there are elements of

both competition and cooperation driving state behavior.

Liberalist Motives

PAGE 81
The liberalist argument holds that CPEC is based upon Chinas
relationship with Pakistan and its foreign policy principles of non-
interference and non-aggression in line with Zhou En Lais Five
Principles of Peaceful Coexistence. One of the five principles is
equality and cooperation for mutual benefit.

In line with this principle, mutual benefits and the degree of utility for

Pakistans economy are likely key considerations while carrying out

investments. In addition to establishing its status as a great power
globally, investing in countries such as Pakistan could

also reinforce Chinas image as a country that cooperates with states by

investing in human capital, businesses, and infrastructure without
violating a states sovereignty.

Realist Motives

Realism suggests that economic interests also explain Chinas

motivations. Given the proposed route of the corridor linking Kashgar

to Gwadar, it is fair to envision that China would be able to secure the

shortest access to the Arabian Sea through Pakistan. In

geographic and political terms, other routes are untenable since China
lacks geographical contiguity with states that are willing to facilitate safe
passage of its goods and services. Neighboring states in Southeast Asia
are not viable because they do not facilitate Chinas access

PAGE 82
to the Arabian Sea. India is unlikely to be cooperating because of
ongoing territorial disputes with China. Pakistan thus offers the most
promising profile given its strong relationship with China and its

proximity to the Arabian Sea. Attaining access to the Middle East with its
massive oil reserves provides China with opportunities to import
petroleum and export its goods and services to new

markets. Development of the port of Gwadar as a SEZ allows for greater

connectivity with key financial centers in the region such as Dubai, which
China would certainly find attractive as it

seeks its own footprint in the Persian Gulf. The Arabian Sea acts as a
component of the Maritime Silk Route under the OBOR umbrella,
allowing China to connect economically and politically

with the Middle East through Pakistan.

Pakistani Perspectives on CPEC

SYMBOLISM

Pakistans close relationship with China dates back to 1951 when

diplomatic relations were formally established between the two
countries. Economic growth in the country however, has historically

PAGE 83
been stifled due to decades of conflict, macro-management issues, and
an energystarved economy.34 To capitalize on its shortcomings and
tackle its crippled energy sector, significant foreign direct investment is
required to open up numerous opportunities for the state and
investors.35 In light of the closeness of Sino-Pak ties, China is
considered to be the most reliable investor, especially since
relationships with other regional and global powers have proven difficult.
While Pakistan views the United States as largely a demanding and
transactional partner principally interested in counterterrorism, it views
China as a benign power and a reliable investor that could potentially
boost its economy, upgrade its infrastructure, and allay its energy
concerns without engaging in diplomatic coercion.36 For example, while
China has expressed its confidence in the Pakistan Armys efforts to
curb militancy, the United States has continued to demand more action
against the Haqqani Network and other terrorist groups residing within
Pakistan. The 2011 Bin Laden raid and continuing demands from the
United States for further action by Pakistan against extremist groups has
further eroded trust between Pakistan and the United States in favor of
China.

In the current geopolitical environment, Pakistan has also had a difficult

relationship with each of its neighbors. There are hostilities with India,
trust deficits with Afghanistan, and disagreements with Iran on the
subject of internal security. In addition, frictions with the

United States have also increased over time on the issue of

counterterrorism, which has not been the case with China. Hence,
depositing confidence in the countrys ability to curb terrorist threats

PAGE 84
such as the ETIP as well as the trust and mutual respect that
characterizes the Sino-Pak relationship makes CPEC the more
important option for Pakistan instead of investment from the United
States or Iran.

ENERGY GENERATION AND CO-OPERATION

CPEC could simultaneously address Pakistans energy-starved

economy and bolster Pakistans relations with neighboring Iran, who has
expressed interest in being a part of CPEC, through

cross-border energy cooperation. The construction of an array of

different pipelines with the potential of transporting liquefied natural gas
to Pakistan from Iran reflects the importance the corridor places on
energy cooperation and generation. These pipelines are especially
important for Pakistan because energy shortages have historically

hampered Pakistans economic development, especially in the form of

chronic load shedding, which limits the potential of domestic industries
across the country. In light of this, Chinas decision to allocate a hefty
71.7 percent of the aggregate $46 billion towards energy generation

acts as an incentive for Pakistan to avail, as other sources of energy

generation have been held hostage to trust deficits and suspicions.
Chinese energy investment is also particularly beneficial for Pakistan in

PAGE 85
that it will utilize Pakistans untapped hydrocarbon reserves in the district
of Tharparkar (Sindh), which could generate employment for low-skilled
labor and generate much needed electricity for Pakistans domestic
industries.

PAGE 86
Transportation Infrastructure

Upgrading Pakistans existing transportation infrastructure through

investments is a salient feature of CPEC. Transportation of goods and
services to different provinces and financial centers both opens up
Pakistan to the Chinese market and allows China to export its products
to Pakistans domestic consumers. Aspects of the transport
infrastructure that have lagged behind, such as railways and roads, are
proposed to be revamped under the CPEC arrangement. The $11

billion investment (or 23.91 percent of the $46 billion total) will allow both
Pakistan and China to glean benefits from an improved transportation
infrastructure with Pakistan. Regional Connectivity and Crowding In
Benefits One of the stated goals of the OBOR initiative is to promote
greater regional connectivity. CPEC gains relevance given that Pakistan
has not been made part of other arrangements aimed at

promoting greater regional connectivity such as the Transport Corridor

(TC) agreed upon by Iran, Afghanistan, and India.40 In addition, SEZs
are an integral component of CPEC, which would allow Pakistan to
develop its domestic industries and promote greater exports in the

region, which partially mitigates the negative consequences of being

excluded from other regional arrangements such as the TC.

It is important to consider that CPEC includes crowding in benefits, as

well. In investment terminology, crowding in relates to debt-financed

PAGE 87
government spending on the private sector spurring additional
economic opportunities. If CPEC materializes and the relevant

infrastructure is in place with the promotion of SEZs, the Pakistani

private sector could benefit considerably as a result of increased
government spending. Specifically, the investment activity

surrounding CPEC could boost demand for domestic goods as well as

increasing demand for newer output sources and industries. This could
promote greater prosperity for the country through increased
employment and wealth creation for the local population. This increased
spending scenario by the government seems plausible with the current
Pakistan Muslim League- Nawaz (PML-N) government placing great
political stakes on the success of the CPEC investments in bolstering
Pakistani economic growth.

PAGE 88
PAGE 89
Domestic Politics

Alongside security related challenges to the corridor, Pakistan has

witnessed considerable provincial discord regarding CPECs proposed
route. Given that each of Pakistans four provinces is ruled by distinct
political parties with diverse views on economic prosperity, provincial
disagreements are common. Much of the discontent has been directed
at the central PML-N government for diverting much of the infrastructure
to Punjab, the industrial heartland of Pakistan. The PML-Ns staunchest
critic, Tehreek-I-Insaaf, a centrist political party that leads a coalition
government in the Khyber Pakhtunkhwa, has repeatedly asserted that
the central government since being elected into power had gone back
on many of its promises. The calling of All Party Conferences by the PTI
and its coalition partners highlights how serious and divisive CPECs
proposed route is for different political parties. The Pakistan Peoples
Party (PPP), the PML-Ns main opposition in the National Assembly, has
also voiced its concerns over CPEC. Many of the reservations center on
the central government

neglecting a Western route through Sindh. The PPP leadership accuses

the PML-N of neglecting smaller provinces while catering to the interests
of the business community in the

Punjab hinterlands. In addition, the administrative territory of Gilgit-

Baltistan has had the PPP voice its concerns over being neglected in the
decisionmaking process at the federal level is

PAGE 90
concerned. Similarly, the PPP has voiced reservations over not including
infrastructure projects that have the potential to benefit the Gilgit-
Baltistan region, such as hydroelectric projects. Given that Gilgit-
Baltistan has the status of a disputed territory as per the Pakistani
constitution and the local population has harbored negative sentiment
against the Pakistani government for not granting the territory a formal
provincial status, the PPP argues that a focus on infrastructure projects
here could counter allegations of neglect by the central government. As
a political party that has championed policies such as the devolution of
power to the provincial governments, the PPP has also voiced concerns
over the protection of the rights of the Baloch population during the
implementation of the CPEC investments. As of November 2016, the
Gwadar Port in Balochistan has become fully operational and both
China and Pakistan have managed to successfully establish sea and
road links. A Chinese ship, the Tianfu had docked in the port with more
than a 100 Chinese trucks completing their road journey from along the
Western flank of the corridor. This achievement is hailed by the ruling
government and acts as evidence that a portion of the Western flank of
the project which runs through Balochistan has been successfully
completed. Gwadars success notwithstanding, the statements by
various political parties such as the PTI and the PPP regarding CPECs
routes and the policies of the central government indicate an alarming
trend. These developments have been noticed by China, which has
firmly urged coordination and communication amongst Pakistani political
parties to bridge their differences over CPEC. Given that Chinas foreign
policy principles are based upon non-interference and positive relations
with Pakistan, such statements highlight how seriously they view the

PAGE 91
danger of domestic disagreements over CPEC. Specifically, a lack of
domestic cohesion inside Pakistan has the potential to stall progress on
a corridor that forms an integral part of Chinas OBOR initiative and
derail an

important initiative for Chinese interests. Hence, in summation, domestic

politics over CPECs proposed routes is every bit as much of a
challenge for CPECs implementation as the security situation inside
Pakistan.

Surveying U.S. and Indian Perspectives

UNITED STATES

Regional Stability and the U.S.-Chinese Strategic Rivalry

The United States has a stake in South Asias regional stability and
economic prosperity. Its interest center on a stable Afghanistan and
peaceful India-Pakistan relations for which Pakistans economic
prosperity is important. This seems to be the consensus view of the
strategic community in the United States, despite U.S.-Pakistani
disagreements on such issues as peace with India, its nuclear program,
and counterterrorism. On the subject of investments in Pakistan, the
United States appears to view any initiative that could curb extremism in
the country and simultaneously alleviate its energy concerns as a
positive development. However, in the tradition of realpolitik, the United
States has also been historically wary of an expansionist China in Asia,

PAGE 92
which it views as a global rival both economically and militarily. American
skepticism centers on Chinas ability to complete the wide range of
deliverables as well as the lack of transparency surrounding the project.
Whether such investments have an impact on curbing extremism as the
United States desires is another point of concern, with Washington
repeatedly asserting that Pakistan has not employed indiscriminate use
of force against all militants. Despite the frictions with Pakistan and
China, however, the overriding view is that this is an important
investment which could create more opportunities of regional integration.
If CPEC, through its deliverables, manages to ensure a more
economically developed Pakistan, this could strongly serve U.S.
interests.

Skepticism about Chinas Ability to Deliver

Skepticism amongst American academic circles center on the fact that Chinese
investments in places such as Africa have historically not been as successful and
hence the same can also be said about CPEC. However, there is a visible difference
between the amount dedicated towards this corridor and other Chinese investments
in Africa. Throughout Africa, China has prioritized the extraction natural resources
and the seizure of African industries. CPEC, on the other hand, is a multifaceted
initiative that involves the development of infrastructure, special economic zones,
and Pakistans energy generation capacity, as opposed to only resource extraction.
Pakistans ability to carry out a return on investments (ROIs) for CPEC is another
point that promotes skepticism in the United States. Pakistans history of failing to
return loans granted by international institutions such as the International Monetary
Fund and the World Bank is noted when considering CPEC, as well. In addition,
given that the project is still in its nascent stages, several factors and variables will

PAGE 93
dictate the outcome of CPEC as a successful investment project, of which ROIs is
one variable. While skepticism over Chinese investments is not completely
unwarranted, a few key points could ameliorate some of these concerns. First,
CPEC is a conscious attempt on the part of the Chinese leadership to inject $46
billion into the Pakistan economy, which simultaneously secures

its economic objectives as part of the OBOR initiative. 65 Second, while outsourcing
capacity is undoubtedly a key consideration for China, CPEC differs considerably
from other Chinese investments in countries in Africa, where development
assistance and counterfeit goods have often fomented anti- Chinese sentiment.66
Such sentiment towards investments does not exist in Pakistan, which has so far
benefitted from Chinese assistance in a diverse range of fields such as the countrys
nuclear program to energy projects.67 CPEC is also less about Chinese donations to
Pakistan and more a part of a multipronged OBOR strategy. On the subject of
security, Chinas rationale is also more about investing as a strategy to allay its
security concerns.

Regional Stability

The United States views Chinese investments as a threat if economic

investments are complimented with an increased military presence in
Pakistan, which would be viewed as threatening to its interests as well
as the interests of its allies, such as India. This apprehension has been
expressed by the Pentagon in its annual report of 2016, where it is
presumed that China will most likely establish additional naval logistics
in the port of Gwadar. Apprehensions over whether the port of Gwadar
can be used as a naval port against India, a long-term strategic ally of

PAGE 94
the United States, and whether the military rivalry with China in key
regions such as the South China translates into something similar in the
Pakistani context, are also areas of concern voiced by the strategic
community in the United States. Another school of thought is that China
capitalized on the vacuum provided by the U.S.-Pakistan relationship,
which has been fraught with complexities.70 For example, China and
Pakistan have jointly funded the production of the JF-17B fighter jet.
This stands in stark contrast to the defense relationship with the United
States in which schisms have emerged in the U.S. Congress regarding
support for Pakistan over the provision of F-16 fighter jets. China being
able to capitalize on the differences in the U.S.-Pakistan relationship is
also in part due to the difficult nature of the relationship, which has
ranged from close cooperation to trust deficits. The Pressler Amendment
fiasco in the 1990s resulted in the suspension of U.S. aid after Pakistan
violated guarantees that it did not possess nuclear weapons,
underscoring to Pakistan that the United States was not a reliable ally.
China, on the other hand, has invested significantly in Pakistan since
diplomatic relations were established and provided invaluable
assistance to the countrys nuclear program during the 1970s, when the
program was viewed a symbol of national pride across the country. U.S.
views on CPEC can hence be considered as a mixture of skepticism and
optimism based upon Chinas OBOR strategy and Pakistans role in
curbing extremism in the region. Skepticism mainly centers on ROIs and
Chinas ability to deliver on the various deliverables initially envisioned in
the corridor, as well as the strategic implications of the development of
Gwadar into a naval port. Optimists in the U.S. strategic community, on
the other hand, cite any investments into Pakistan as a positive

PAGE 95
development as the economic development of Pakistan could improve
the stability of the region.

PAGE 96
INDIA

Indian-Chinese Relations

India as a major regional player in Asia and a large global economy has
a direct stake in CPEC given its geographical proximity to both Pakistan
and China. If one were to look at the Sino-Indian relationship in the past
two decades, the discourse is no longer limited to the Sino-India war of
1962 or territorial disputes. For instance, trade between both countries is
estimated at $70 billion.74 However, in spite of the spurt in economic
relations between both countries and cooperation on issues like climate
change, Chinas close proximity to Pakistan is one of the thorny issues
in an otherwise cooperative relationship. There is also a feeling among
Indian leaders that Beijing is not sensitive to Indias concerns regarding
terrorism emanating from Pakistani soil. Two strong reiterations of this
point are some recent developments. First, China refused to back Indias
appeal to the United Nations to ban Jaish-e-Mohammad chief Masood
Azhar while other members of the UN supported Indias demands.

Sushma Swaraj, Indias Minister of External Affairs, while speaking

at the 14th Russia-India-China Foreign Ministers meeting in
Moscow, criticized this decision in a veiled manner. For example,
she said,

PAGE 97
If we continue to adopt double standards in dealing with
terrorism, it will have serious consequences not just for our own
countries, but the international community as a whole.

Second, China continued to create hurdles to Indias membership into

the Nuclear Suppliers

Group (NSG) even though it had broad support from a variety of

countries, including the United States. Interestingly, China argued that
that it would only support Indias membership if Pakistan its ally was
also given entry. China supported this logic by noting that there should
be a nondiscriminatory approach towards countries that have not signed
the NPT. In turn, India has argued that while it is not a signatory to the
NPT, its nonproliferation record is exemplary. Regarding CPEC, India
has already conveyed its displeasure with the project to China. Initially,
with the announcement of CPEC, the Indian government lodged its
protest on the eve of Prime Minister Narendra Modis visit to China in
May 2015.

While addressing a press conference, Foreign Minister Swaraj

clarified this position further by stating that,

the Prime Minister during his visit took up the issue very firmly
and spoke very strongly that the CPEC going through POK
(Pakistan-occupied Kashmir) is unacceptable.

PAGE 98
Swaraj also said that the Chinese envoy in India had been summoned
by the government to register its protest. During the 19th round of
Border Talks in April 2016, Ajit Doval, Indias representative National
Security Advisor, further raised Indias apprehensions vis--vis CPEC
during his talks with China's State Councilor Yang Jiechi.

PAGE 99
Gilgit-Baltistan

India is strongly opposed to CPECs involvement in Gilgit-Baltistan

region because India

considers it to be a disputed territory. For example, in June 2015, India

had criticized Pakistans decision to hold elections in Gilgit-Baltistan. As
Ministry of External Affairs (MEA) spokesman Vikas Swarup further
explained, The entire state of Jammu and Kashmir, which includes
regions of Gilgit-Baltistan, is an integral part of India. The election is an
attempt by Pakistan to camouflage its forcible and illegal occupation [of
Gilgit-Baltistan].China has persuaded Pakistan to change the
constitutional status of Gilgit-Baltistan, but Islamabad has refrained from
doing so, since it would weaken Pakistans stand on Kashmir.

The Indian Ocean

Chinas growing presence in South Asia over the past decade has also
been a cause of concern, with many arguing that Chinese activities in
the Sri Lankan port of Hambantota, the Bangladeshi port of Chittagong,
and the Pakistani port of Gwadar is part of an encirclement strategy
which is dictated by geopolitical considerations and not economics.

PAGE 100
IN THE WORDS OF SAMEER PATIL:

Indias concerns about the CPEC and China-Pakistan ties are

combined with

Beijings growing presence and influence in South Asia and the

Indian Ocean

Region. In the last decade, China has systematically engaged with

countries in

Indias neighborhoodsuch as Nepal, Sri Lanka, Bangladesh, and

the

Maldivesthrough economic and military aid. Although Indias

poorly-executed

neighborhood policy may be partially responsible, India sees

Chinas growing

profile in the region as an encirclement.

There is a lso a view that while the Indian government may have
publicly protested the project, especially in recent months with tensions
between both countries growing, those in the security agencies are more
skeptical with regard to the project than the Indian Foreign Service and
the political class. There is a considerable difference between various

PAGE 101
schools of thought with members of the security establishment viewing
the project more strictly from a security lens. It is important to consider
with the recent cooling of ties between China and India in recent
months, more Indian leaders outside of the security establishment could
take a more adversarial stance against CPEC.

The Indian Strategic Communitys Views

The approach of the Indian strategic community towards the China-

Pakistan-Economic corridor is not monolithic. Some prominent points of
concern include the project passing through the disputed Gilgit-Baltistan
territory and the potential presence of Chinese troops in what India
considers illegally occupied territory.83 The fact that the development of
corridors and connectivity would provide improved access and
connectivity to a number of Pakistan based terrorist groups operating
against India is another concern with groups such as the Lashkar-e-
Taiba having an active presence in Punjab, one of the main areas
through which the corridor passes.

There is also a strong belief amongst circles that India should do more
than simply oppose

CPEC. Instead, they argue that India should try to develop its own
version of the New Silk Road.

PAGE 102
P. Stobdan, a Senior Fellow at Institute for Defence Studies and
Analyses (IDSA), argues:

India needs to work on its own counter strategy by offering a plan

for a direct India-China Silk Route Corridor (ICSRC) that could run
along the traditional Ladakh-Xinjiang axis. The ICSRC could
provide an alternate transport, energy, trade, fiber optics and
communication highway that could originate from a port in

Gujarat run across northern India to connect with Kashgar in

western China through the Indus Valley in Ladakh.

In contrast to these more adversarial perspectives, however, some

strategic analysts believe that if the CPEC helps in stabilizing Pakistan,
this would be a welcome development. Similar to some Americ an
perspectives, they argue that a stable, prosperous, and economically
progressive Pakistan could improve regional stability. While India and
Pakistan are embroiled in a strategic rivalry, India does not really have
the capability of preventing the project from taking place. Any attempt to
thwart it would not be worth the disruption caused in the broader
geopolitical environment. This view is best articulated best

By

A. Ranjan where he states that

PAGE 103
 India can continue to grumble and lodge protests which may
delay or obstruct the construction of the corridor, but cannot
ultimately stop it.

India-Pakistan Economic Ties

Another view is of particular relevance given Chinas integration

rationale for CPEC. That view centers on the possibility of finding
common economic ground between India and Pakistan, given that
bilateral trade, through the Wagah-Attari border has remained well
above the $2 billion mark (except for 2011-2012), even during cross-
border skirmishes, terrorist attacks, and aggressive rhetoric from either
side.89 Hence, the increase in trade continuing unabated can potentially
act as a stabilizing factor given that CPEC materializes on the ground,
China would be interested and could gain access to the Indian market
through this route, which fits into Chinas integrated rationale for
investment. A number of top Chinese officials, including Le Yucheng, the
Chinese Ambassador to India, have already alluded to the participation
of India in the project. Ranjan makes an important point: if trade routes
are opened between Punjab (Ferozpur-Kasur and Fazilka-Sahiwal) and
Rajasthan-Sind (Munabao-Khokhrapar), corridors can be built bilaterally
between India and Pakistan, prior to being utilized by

China.

PAGE 104
Chinas investment in Pakistan

Improving security situation, successful completion of IMF loan program,

and most significantly, the implementation of China-Pakistan Economic
Corridor (CPEC), have become the driving force of foreign investment
inflows to Pakistan. China recognizes CPEC as a strategic trade route
from its Xinjiang province to import markets in South Asia, Middle East,
and Africa; and Pakistan considers CPEC as an opportunity for

PAGE 105
economic turnaround that promises transport infrastructure overhaul,
industrial development, and energy sufficiency, that will strengthen the
country's growth. While there are concerns of CPEC converting into a
liability for Pakistan with rising debt obligations to China, unregulated
competition for locally industry, and low employability of locals, China
has put its confidence in a previously undesirable economy, and
transformed its desirability as numerous states and institutions now wish
to cooperate in CPEC. Pakistan is steadily moving past its ill-repute of
terrorism and corruption, and emerging on the global map with inclusive
development and multilateral cooperation as its defining agenda.

However, some in Pakistan are concerned about the massive expansion

and penetration of Chinese enterprises into local industries. Recently,
for instance, a Chinese-led consortium decided to take a 40% strategic
stake in the Pakistan Stock Exchange, and Shanghai Electric Power
acquired a controlling stake in Pakistani utility K-Electric. A Chinese
company is said to have expressed interest in buying the defunct state-
run Pakistan Steel Mills. Such initiatives have also raised serious
concern from India and other neighbors, which are worried that China
may use Gwadar Port as a military base in the future. According to a
local newspaper, $700 million of the $1.1 billion spent on CPEC-related
projects in the July-September period last year was financed by loans
from the China Development Bank. The amount is mainly earmarked for
importing materials and equipment from China, which are needed to
complete the projects. Many in Pakistan have voiced concern over the
country's rising debt obligations to China. Also, Chinese companies

PAGE 106
typically bring their own engineers and workers in large numbers to do
work in Pakistan.

"Surging imports from China will damage local companies," said Ehsan
A. Malik, CEO of the Pakistan Business Council, which represents 62
major companies and organizations. "Tax revenue and employment will
not increase." He added, "CPEC may be a Trojan horse."

However, the logic of companies participating in CPEC is very simple.

"We asked China, because nobody in the world finances coal projects,"
said Hussain Dawood, chairman of Dawood Hercules, a large Pakistani
conglomerate that includes the Engro group, which is involved in the
production of energy and chemicals.

"Investment in CPEC is not only from China," said Arif Habib, CEO of
the Arif Habib group. "Companies from Germany, Denmark and Saudi
Arabia are also showing interest."

Despite widespread concern about the health of China's economy,

Ahsan Iqbal, Pakistan's minister of planning and development, said
confidently: "The CPEC projects are a high priority for Chinese
companies because they can expect good returns. Even though the
Chinese economy is slowing down, the companies still have huge cash
reserves."

Many Japanese companies also think the best thing to do now is to take
advantage of Chinese-built infrastructure in Pakistan to expand their
own business. No matter who invested, if energy and infrastructure
investment gains momentum, it could stimulate Pakistan's economy.

PAGE 107
Amid all the speculation, Pakistan is moving toward its goal of becoming
the next big emerging market by gradually shaking off its reputation for
terrorism, corruption and political blunders.

PAGE 108
CPEC as pivot to Chinas economic and energy security

The CPEC connects China directly to the Indian Ocean and the region
of the Middle East from the deep Gawadar Port reducing its existing
dependence on the South China See as the latter is becoming a
contested territory between various regional and global actors and can
be choked any time by the competing powers in the Asia Pacific region.
The Gawadar port in Balochistan under the Chinese control is only 400
KM away from the Strait of Hormuz and is strategically pivot for China in
transporting its energy and oil needs from the West Asia reducing its
current maritime transportation distance from 12000 km to 3000 km.
Accessing the Indian Ocean from the Gwadar Port is inevitable for China
as it makes China less vulnerable to its existing Malacca Dilemma and
provides the economic security to China to access the West Asia at a
time when the Strait of Malacca is increasingly becoming a contested
territory among various players including China.

China currently transports 80% of its oil and energy needs through the
Malacca Strait and increasingly feels that its economic and energy
security interest in the region are under serious threats due to the
escalation of tensions between China and the region and global players
in South and East China Sea. This is why China is looking for alternative
viable transit routes both economically and security wise; the CPEC is
the best choice for China linking it directly to the Indian Ocean via
Gwadar Port. Under the US policy of rebalance to Asia the region of
Asia-Pacific has got an unprecedented strategic importance for the

PAGE 109
Obama administration and the recently signed Trans Pacific Treaty
between US and its allies testifies it. This rebalance policyof the US in
the region of Asia-Pacific involves military, economic and strategic focus
to the countries of South East Asia including India in shaping its
rebalance of the region including South China Sea and the Indian Ocean
causing discomfort for China vis--vis its economic interests in the
region.

Regional trade and economic integration

Geopolitically Pakistan is the most suitable economic corridor for trade

and transit activities providing a gateway to Central Asia, South Asia,
East Asia and West Asia. Its role has remained important both during
the cold-war and post-cold war era due to its geostrategic location and is
neighbor to the rising economies of the region namely China and India.
It can act as an important economic geography for regional trade.
However, Pakistan failed miserably to take economic advantage of its
strategic location and geography in the region. The existing bilateral
trade volume between China and Pakistan is miserably low. The CPEC
if extended to India will further enhance trade between China, India and
Pakistan. Inclusion of India to the CPEC will further enhance the bilateral
trade between China and India to new heights.

The CPEC passing through the regions of China and Pakistan bordering
many states could be extended to the countries Central Asia,
Afghanistan and West Asia and India. The landlocked and resource rich
countries of Central Asia have always set their eyes to access regional
markets including Pakistan, China, India and the countries of West Asia.

PAGE 110
Both Afghanistan and Tajikistan have transit agreements; CPEC will
provide them the opportunity to transport their goods and market them
more competitively to the regional and global market fostering regional
economic and trade connectivity.

Similarly, Pakistan has the desire to access the resource rich region of
Central Asia via Afghanistan to meet its energy needs and transports
goods to Central Asia. The area through which the PCEC passes is at
the crossroad of Asia, South Asian and Central Asia. For the greater
benefit of the region and regional integration, the CPEC could be
extended to Central Asia including Afghanistan and India opening them
to the regional and global market. President Xi Jinping has already
made a reference to such an arrangement in future during his address to
the Pakistani parliament on his first visit to Pakistan in April, 2015. The
changing geopolitical environment demands Pakistan to reorient its
trade policy to more export oriented and must search for new markets in
its neighborhood including India to boost its economy [9] and the CPEC
seems to be the best opportunity for Pakistan to expand its trade with
the region of South and Central Asia including China and India.

India has had always desired to have transit route to Afghanistan and
Central Asia via Pakistan. However, given the political rivalry between
India and Pakistan, the later has denied transit route to India through
Pakistan. India as an alternative has focused on Chahbahr Port in Iran
to access Afghanistan and Central Asia via Iran reducing its long lasting
dependence on Pakistan to access Central Asia. India, Iran and
Afghanistan have recently inaugurated the Chabahar Port under the
trilateral frame work signaling bypassing Pakistan for a regional trade

PAGE 111
connection between the three countries. However, the Chahbahar Port
is not likely to be a zero-sum game for Pakistan, Pakistan can also be
part of Chabahar trilateral arrangement and both Gwadar and Chabahar
ports could be linked as regional ports fostering regional trades. The
Iranian side has already offered Pakistan to be part of the Chabahar
Port trilateral arrangement and not to consider the port as rival to
Gwadar Port.

PAGE 112
Can CPEC be Transformed into IICPEC?

Can China Pakistan Economic Corridor be transformed into India/ Iran

China Pakistan Economic Corridor (IICPEC)? To address this question
one has to understand the recent geopolitical and economic
developments in the region of South and Central Asia that could foster
the regional environment to transform the CPEC into the IICPEC. The
TAPI (Turkmenistan, Afghanistan, Pakistan, and India) gas pipeline
agreement signed in December 2015 between India, Pakistan,
Turkmenistan and Afghanistan signifies the melting of the long existing
cold attitude and trust deficit between India and Pakistan and Pakistan
and Afghanistan. The concept of TAPI was an old one but did not get
materialize due to the political rivalry between the aforementioned
states. Under the TAPI framework gas will be transported from
Turkmenistan to Afghanistan to Pakistan and further to India. The TAPI
agreement is the harbinger that a similar arrangement can be formed to
extend the CPEC to Afghanistan, Central Asia and India.

Despite its strategic location and favorable economic geography,

Pakistan has very limited trading activity with both its eastern and north-
western neighbors- namely India and Afghanistan. India needs a transit
route to trade with Afghanistan and Central Asia via Pakistan and
Pakistan desires access to the markets of Central Asian States for its
energy needs. Pakistans access to Central Asia is unlikely unless
Pakistan allows Afghanistan the transit route to access India. The CPEC
seems to be an opportunity for India, Pakistan, Afghanistan and Central

PAGE 113
Asian States to have North South regional trade connectivity in addition
to creating economic avenues for Pakistan.

Currently the anathema between India and Pakistan could prevent India
to be part of the CPEC. However, Indias inclusion to CPEC can be
mutually beneficial move for regional cooperation and trust building that
could ultimately be stimulating in resolving political disputes between
India, China and Pakistan amicably. Making Indias inclusion to the
CPEC will be helpful to allay the doubts between the two neighbors
namely India and China toward each others move in the region. The
joint security of the CPEC between China, Pakistan and India can usher
a new economic beginning in the region and can bring the countries
more closely. China has already indicated that CPEC is not a bilateral
move, rather a regional and cross regional move.

The lift of the international sanction on Iran has provided yet another
opportunity to trade with Iran and to revive the Iran Pakistan India (IPI)
gas pipeline- also known as the peace pipeline. India had left the IPI
owing to the US pressure and Pakistan faced similar pressure from the
US no to go ahead with the IPI. In his recent visit to Pakistan the Iranian
President has stated to revive the IPI gas pipeline and India can again
join the IPI as the sanctions on Iran have been lifted for international
trade. Both IPI and TAPI are important for regional cooperation and trust
building between India, Pakistan, Iran and Afghanistan Extending the
CPEC to both India and Iran in addition to the IPI and TAPI will further
boost the regional economic integration and allay any mistrust toward
the CPEC both by Iran and India.

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The connectivity between the Chabahr Port of Iran and the Gawadar
Port and CPEC and Bangladesh China India Myanmar (BCIM) can
foster a new economic and trade beginning between the South, West,
Central and East Asia. Iran has already shown its interest for such an
arrangement between Gawadar Port and Chahbar Port. The connectivity
between Gawadar Port and Chahabar Port will further allay the existing
feelings of ambivalence between Iran, India and Pakistan vis--vis
Chahabar Port supported by India and Gawader Port supported and run
by China. In addition to this, the Indian inclusion to CPEC will not
provide a justification for India to oppose the project unwarrantedly as
India claims that it passes through the disputed territory of Pakistan
administered Gilgit-Baltistan.

The region of South Asia has remained the least integrated one in the
world despite having potential for accelerating economic growth and is
rich in natural resources yet faces the energy crises that affect its
economy badly. The regional economic cooperation through CPEC and
related regional moves could pave the way for cross border electricity
and trade cooperation harnessing complementariness in electricity
demand patterns and gains from larger market access by removing the
regional trade barriers between India, Pakistan and other states of the
region including China.

In the lately hosted fifth ministerial conference of Hear of Asia- Istanbul

Process (HOA-IP) hosted by Pakistan the participation of the top leaders
from Kabul, India, Tehran have vowed to regional security situation
particularly Afghanistan and its war torn-economy and ways to
strengthen cooperation, security challenges and regional economic ties.

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The participation of top leadership of Afghanistan in the HOA-IP signals
a shift in the region from geopolitics to geo-economics. This conference
is a fresh start for greater economic links between Central, South Asia
and Iran. By changing the transit route policies between Islamabad and
Afghanistan, economic development could be brought not only to these
two countries but can also foster trade between Central and South Asia
in bringing the electricity and gas from Tajikistan, Uzbekistan and
Turkmenistan to the region of South Asia (Wayand, 2016). The HOA-IP
shows a commitment of the member countries for a broader economic
engagement and CPEC could pave the way for such an engagement.

The CPEC could be catalyst for a regional economic integration if India

and Iran also become part of it and that is likely to happen soon as
China also desires the Indian and Iranian inclusion in the CPEC for a
greater peaceful environment in the region. This is why Chinas entire
trade and commerce policy is based on the peace in its neighborhoods
and any quarrels between its neighbors would displease China for its
trade and commerce initiative in the region. For this reason China is
pleading both India and Pakistan to live peacefully and come closer for
trade and economic ventures in the region setting aside their political
differences. The recent trilateral agreement between India, Iran and
Afghanistan vis--vis Chabahar port is yet another harbinger for regional
and cross region trade connectivity given the condition that these
developments are not taken a zero-sum game in the region of South
Asia and West Asia.With the opening of Chabahar port there are strong
prospects that the two ports namely Gwadar and Chabahar could be
linked to each other to forge regional and cross regional trade among

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the countries of South, Central, West and East Asia narrowing the
existing gap of regional connectivity between these regions.

Political Discontent in Pakistan

The political controversy among various political parties is yet another

challenge to overcome for the smooth functioning of the CPEC in
Pakistan. The discontentment is mainly for route selection, dividends
and allocations of funds for projects under the CPEC. Although the
ruling regime through the APCs (All Party Conferences) has tried to ally
the grievances of the provinces mainly of KPK and Balochistan, yet it
seems the issue has not been resolved. The political differences over
the CPEC among various political parties are deep rooted in the history
of political economy of Pakistan where the allocation of resources has
always been politicized for political gains. The smaller provinces have
concerns over the policies of the federal government where the
resources including the federal budget are allocated on the bases of
population rather than the backwardness and poverty conditions in the
respective federating units. Given the magnitude and scope of the
CPEC, Pakistan needs more highly skilled labor to execute various
projects of the CPEC. The existing labor skills are not enough to pursue
the CPEC and its related projects in Pakistan. The issues pertaining to
transparency about CPEC related projects are also on rise. The political
parties and other stakeholders have shown their concerns over the lack
of transparency and have demanded that all agreements related to
CPEC be made public. However, the concerned ministries are reluctant

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to make it public which further increases the doubts about the
transparency of the project.

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Benefits and risk of CPEC

Traditionally, China and Pakistan have cooperated closely at the

strategic and political levels. Now the two nations are making efforts to
expand their bilateral collaboration economically as well. The
construction of the China-Pakistan Economic Corridor (CPEC) is a
milestone that signifies this shift.

At its core, the CPEC is a large-scale initiative to build energy, highway,

and port infrastructure to deepen economic connections between China
and Pakistan. This initiative has been well-received in both countries,
although it is not without its problems. Nevertheless, China and Pakistan
regard the CPEC as a new source of potential synergy between their
respective national development strategies, which may help the two
countries translate their close political cooperation into multifaceted
economic cooperation, attain mutual benefits, and achieve win-win
outcomes. For the economic corridor to reach its potential, however,
there are security and political challenges in Pakistan that must be
addressed.

China first proposed the corridor project in May 2013. Chinese President
Xi Jinping then visited Pakistan in April 2015, and both sides agreed to
elevate their relationship to an all-weather strategic partnership. During
Xis visit, the two countries signed fifty-one agreements at an estimated
value of $46 billion.

The CPEC is now moving into the implementation phase. On May 6,

2016, there was an opening ceremony held in the city of Sukkur in

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Pakistans Sindh Province, as construction began on a section of
highway between Sukkur and the city of Multanit will be part of a
network of highways that will connect the cities of Peshawar and
Karachi. This network is a major component of the CPECs plans for
infrastructure expansion, which highlights the progress the two nations
have achieved thus far in the area of transportation. In addition, on
November 13, 2016, the first large shipment of Chinese goods went
through the port of Gwadar, a flagship CPEC project in Pakistans
southwestern province of Balochistan.

China considers these development initiatives a potential source of

stability and prosperity for both countries. From a Chinese perspective,
cooperation in the areas of security and economics are closely
intertwined, and improvements on one side can improve the other. It is
almost as though security and economics are two separate wheels on
the same vehicle, and both need to be spinning to move things forward.
China believes economic development can strengthen Pakistans
internal stability, thus reinvigorating the latters economy through
investment in infrastructure projects as well as the construction of oil and
gas pipelines. China hopes this will create a certain level of stability
within Pakistan and in turn stabilize Chinas western periphery,
particularly the province of Xinjiang.

More broadly, the CPEC has to be understood in the context of Chinas

strategic interests in East Asia and the way the United States has
challenged them. Faced with such difficulties, China hopes it can
expand its strategic space by heading west. Pakistan serves as a crucial
bridge between China and Central Asia, South Asia, and the Middle

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East. Security and stability in Pakistan will make it possible for China to
exercise greater influence in these regions and to ensure security at
home. This is why China is willing to pour vast amounts of resources
into the economic corridorbased on the logic of improving security
through economic development.

Likewise, Pakistan has realized that no other country places such high
strategic importance in its economic relationship with Pakistan as China
does. Pakistan also greatly values the economic corridor and views it as
mutually beneficial in terms of politics and economic development.
According to Pakistan 2025 a blueprint for economic development
published in 2014 by Pakistans Ministry of Planning, Development, and
ReformPakistan aims to advance from being a lower-middle-income
nation to an upper-middle-income nation by 2025.To achieve this goal,
Pakistan hopes to attract increasing amounts of foreign investment. The
country is working to improve its overall economy by constructing energy
projects and other forms of infrastructure, to create employment
opportunities for its populace, and to improve its governance.

The logic behind this strategy is that fundamentally improving Pakistans

economy will help alleviate the challenges posed by political extremists,
radicals, and jihadists. China and Pakistan share the belief that
economic development can help stabilize Pakistan and improve its
domestic security situation. However, China also recognizes that the
security, political, and cultural risks and uncertainties facing the
economic corridor cannot be overlooked.

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The first of these risks is terrorism, which has long affected Pakistans
internal security and stability. Although Pakistan has worked hard to
strike at religious extremism and terrorist activities, its problems with
terrorism have not substantially improved in recent years. Because the
CPEC is so important to the Pakistani government, these projects
construction sites and engineering personnel may become targets for
religious as well as nationalist extremists. Indeed, there already have
been numerous occasions when Chinese engineers working in Pakistan
have been attacked or even lost their lives. In May 2016, for instance,
engineers in Karachi were attacked by Sindh separatists. Fortunately, no
Chinese personnel were wounded or killed. Then in September, Baloch
rebels killed at least two Chinese engineers and injured many
others. Moreover, several large-scale terrorist attacks in
Balochistan have killed dozens of people, which shows that the security
situation in this province where China has key projects is far from ideal.

The security threat posed by terrorism remains ongoing, despite the

economic benefits that the CPEC can offer Pakistan. The corridor aims
to enhance the well-being of people throughout the country and bring
long-term prosperity and stability. The Pakistani authorities, meanwhile,
have promised China they will do everything possible to ensure the
safety of Chinese workers. This is a feasible commitment in the short
term. However, over time, it will become more difficult for Pakistan to
guarantee the security of the CPECs growing transportation networks,
which will require increasing investments of security personnel and
material support. It will likely become uncertain in the future whether

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Pakistan can maintain a strong enough military presence to ensure the
security of all these transportation routes.

Second, Pakistans domestic politics is also important to the CPECs

success. The countrys political system has never been particularly
stable. Political power oscillates between military and civilian leaders.
General Pervez Musharrafs resignation as president in 2008 ended the
latest period of military rule, and from that point onward, the military has
been pushed from center stage. In the 2013 election, the Pakistan
Peoples Party lost power after the Pakistan Muslim League
Nawaz defeated it. The successful completion of this election, as well as
the smooth transition of power that ensued, was the first time in
Pakistans history that a civilian government was able to serve out its
entire term. This was a sign of improvement for Pakistans democracy.

On the other hand, Pakistans traditional political culture, which is almost

feudal in nature, also continues to play an important role. Powerful
families based in different provinces, such as the Bhuttos and the
Sharifs, have typically held political power. Behind the party politics are
local interests groups associated with these families.

Various parties within Pakistan have disagreed a lot about how CPEC
transportation routes should be mapped out. The competing parties are
primarily interested in how the cake should be divided, so to speak. To
strengthen its respective standing among the electorate, each of
Pakistans political parties hopes the CPEC will pass through the region
it represents, allowing its local community to enjoy the corridors
benefits. In fact, since the initiative was first presented in 2013, the

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debate over which route the CPEC would follow has caused substantial
delays. The construction of the corridor has just begun. It is expected
that competition among Pakistans domestic political groups will
continue to affect its future implementation.

Yet the CPEC will not only serve as a roadway that simply connects
point A to point Bthe initiative is designed to do more. The corridor
also aims to facilitate multisectoral economic cooperation in finance,
trade, energy, and industry.

Amid a market slowdown and high unemployment rates, Pakistani Prime

Minister Nawaz Sharif came back into office in 2013 with the intent of
reinvigorating the economy, and he undertook a series of measures to
improve Pakistans economic prospects. One was lowering barriers to
foreign investment. As for addressing energy shortages, Pakistan has
been making efforts to restructure its energy industry and increase its
electricity production. At the same time, the government has worked
hard to strengthen investment in infrastructure, has moved forward with
tax reforms, and has focused on increasing revenue and reducing
expenditures. In addition, the government has adopted other measures
to develop its market economy. It has overseen reforms for state-run
enterprises and encouraged market privatization.

These measures are already starting to take effect. The countrys GDP
is growing at a stronger rate, and the economy is improving. For the time
being, however, it will still remain unclear whether these economic
advances can actually alleviate Pakistans serious security and stability
problems.

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Cultural considerations and public relations should be also taken into
account when evaluating the CPECs prospects for economic success.
Ordinary citizens in China and Pakistan are not very familiar with each
other. The countries leaders have built an all-weather friendship and
close political relationship over the years, but this is not yet true of the
two societies at large.

As China and Pakistan gradually expand cooperation, there will be an

increasing number of Chinese corporations investing in Pakistan.
Different cultural practices and ways of thinking could cause
misunderstandings, and this could negatively affect CPEC projects. For
these corporations to be successful, they will need to understand local
cultures, norms, and rules. Having information about and services for
doing business in Pakistan is also crucial for Chinese corporations.

China should abandon its traditional way of dealing only with the
Pakistani government and instead get in contact with local communities
to better accommodate local interests so that more Pakistani people can
benefit from the CPEC. China and Pakistan need to strengthen their
cultural ties and increase people-to-people interactions. This has already
begun, due to the increasing economic activity between the two
countries, forcing China to become more informed about the
complexities of Pakistani society. The China-Pakistan Economic
Corridor Council was founded in 2015 to jointly address the challenges
arising in the CPEC projects. The council has opened offices in Beijing
and Islamabad respectively, and its purpose is to assist with
the implementation of CPEC projects.

PAGE 125
China and Pakistan have taken positive measures to help set up the
CPEC for success. Nevertheless, Pakistans domestic situation is still
decisive. Until the countrys political and security conditions turn a
corner, it will be difficult to judge the corridor's future prospects. For
China, this means neutrality, strategic patience, and caution are needed
as the construction of this grand initiative continues.

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Recommendations

All political parties should express full support

for the implementation of China Pakistan

Economic Corridor.

All political parties should be united and resolve

their political issues and act for their mutual

benefits.

The government and all the provinces should

work jointly for the commercial, economic and

cultural development as well as peaceful

environment in the country.

The government should share all details of

CPEC project with all the political parties of all

the provinces.

The government should discuss the benefits and

challenges of this multi- dollar project with all the

provinces.

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The Pakistani government should provide full

support and assistance to foreign workers of

different CPEC projects.

The government should provide security to the

foreign workers on different projects of CPEC.

The government should not delay work on

CPEC because it can provide space to the

terrorists and militants to create hurdles in the

smooth construction of this project.

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Conclusion

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