Is CPEC the Road to the Future?
What exactly is the China–Pakistan Economic Corridor (CPEC)? Despite the vast numbers of articles, conferences, government statements, and – increasingly – projects on the ground, there are still major gaps in the perception and understanding about the initiative. Typically, this is attributed to a lack of transparency. Although many details have been released, there remain a number of unknown elements, not least about the aspects of financing. Journalists digging around individual projects do not always get much traction with the Chinese firms involved, and there is still a level of political sensitivity around the entire scheme that makes it difficult to conduct a full warts-and-all assessment of its economic merits. However, there are confusing elements about the entire framing of the initiative that will not be dispelled simply by opening the books.
The first is the headline figure attached to CPEC – $46 billion – a number that has seemingly been preserved in aspic since it was first touted during President Xi Jinping’s visit to Pakistan 18 months ago, save only for periodic suggestions of upward revisions by Pakistan’s Planning Commission. In practice, some of the calculations that fed into this were not too far from back-of-an-envelope estimates, with the bulk of the details to be worked out after the fact. Chinese officials have consistently been more cautious, tending to lay emphasis on the projects that are actually in the process of implementation – which appear to add up to between $10 billion and $14 billion – rather than totalling up those that are still in the process of negotiation. CPEC is a work-in-progress rather than a single mega-package, and many of the medium-term projects, such as industrial zones, will be contingent on making a success of the energy and infrastructure plans in its first phase.
The second is the very concept of a ‘corridor’. This inevitably evokes images of a transit route, and with it all manner of geopolitical speculation about Chinese access to the “warm waters of the Indian ocean”. In reality, the cross-border dimensions of the plans are a very modest part of the present scheme. There are some road upgrades and fibre optics, but pipelines and railways to Xinjiang and the like are still in the zone of speculation. Given the physical obstacles, it is entirely conceivable that land routes to China will never assume any great commercial significance. There is good reason that the bulk of the projects in each proposed phase are largely intra-Pakistan in nature. The value of CPEC for China will come from its impact on Pakistan’s economy as a whole, the strategic benefits that ensue from that, the commercial benefits its firms derive from the investments themselves and from the growth of the Pakistani market.
Photo by: J. Patrick Fischer