CPEC: the new economic corridor

Irfan Chaudhary

THE China-Pakistan Economic Corridor (CPEC) is the game-changing package of Chinese capital and engineering worth $54 billion in investment and lending, has raised apprehensions in neighbouring India. But the ultimate aim is to bring together China, India and Pakistan as a part of a Eurasian market formed by Chinese president Xi Jinping’s One Belt One Road policy. Perceiving the CPEC to be a threat, India’s nefarious thinking has kept India away from the project, as this was the joint endeavour by Pakistan and China. The exclusive impression was that the communication line would bridge the gap between the Indian Ocean and China.

In conceiving support for another infrastructure project like Chabahar to be a competitor, Delhi’s strategic thinking narrowly construes the CPEC, exaggerates the standing gained from geopolitical trophies, and lacks appreciation for the tangibles and breadth of an initiative that holds power to transform Pakistan. The multi spinoffs are more than transit routes. Over $27 billion worth of CPEC resources are, in fact, allocated to undertake 18 power projects. The other half of the total $54 billion goes far beyond support for the Gwadar port complex and will include the engineering of four national trunk highways, construction of three main railway lines, the start of a metro system in Lahore, cross country pipeline, hydropower plants and other development projects. The corridor, which came into operation last November, passes through Gilgit Baltistan in Pakistan-administered Kashmir — a territory claimed by India.

On January 17, 2017, speaking at a seminar in New Delhi, Indian Prime Minister Narendra Modi said: “Only by respecting the sovereignty of countries involved can regional connectivity corridors fulfil their promise and avoid differences and discord.”

The PM was referring to the economic corridor, which was confirmed by his foreign secretary, Subrahmanyam Jaishankar two days later. He said, “We expect they respect other people’s sovereignty.”

Pakistan Foreign Office spokesman Nafees Zakaria had dismissed New Delhi’s concerns. He told media that the economic corridor is a “comprehensive and broad-based economic cooperation project. The project will contribute to the economic development of the entire region and not only for the Pakistan and China.”

The fact that the route passes through the disputed Kashmir region seems to have worried India, which has about half a million troops stationed there to quell more than two decades of armed rebellion. “China is using land area illegally occupied by Pakistan, “said Seshadri Chari, a national executive member of the ruling Hindu nationalist Bharatiya Janata Party. But Beijing is willing to address India’s concerns. China’s foreign ministry spokesperson, Hua Chunying told media that Beijing is committed to developing friendly and cooperative relations with others and that CPEC would not affect the Beijing’s position on Kashmir. Recently, China defended the strategic CPEC passing through Pakistan-administered Kashmir, over which India has lodged a strong protest. Seeking to allay India’s concerns, China also said New Delhi was welcome to participate in the OBOR project actively.

In shunning CPEC, If proportionately scaled, India is missing out on around $400-500 billion in financing and investment

Last year while formally opening the two-day Belt and Road forum in Beijing, Chinese president Xi Jinping said the OBOR is the ‘Project of the century’. India didn’t participate in the forum citing sovereignty issues. In the opening address, the Chinese president without referring to India or CPEC said, “All countries should respect each other’s sovereignty, dignity and territorial integrity, and each other’s development paths and other’s core interests and major concerns”.

Former Prime Minister of Pakistan Mian Nawaz Sharif while in his address made veiled references to India, as he spoke about CPEC. “CPEC is an economic undertaking which is open to all countries in the region and has no geographical boundaries and not to be politicised. In implementing this corridor, we are not striving to merely leverage geography for economic prosperity; we are also trying to transcend our differences, resolve conflicts through dialogue and diplomacy, and leave a legacy of peace for future generations,” he said.

The CPEC can be a catalyst for economic connectivity and integration in Central, South and West Asia. Objections by India or any other country to such an economic project are, therefore, beyond comprehension. CPEC is anticipated to boost Pakistan’s economy, where the GDP is expected to grow by more than five percent by 2020. The 3,200 km-long corridor is intended to connect the world’s second-largest economy, China, with the Middle East and Central Asia, reducing the alternative sea route distance via the Malacca Straits by 10,000km.

Unbeknown to strategists in Delhi, the CPEC’s real competitor is ‘Made in India’. The long-term economic calculation for India and Pakistan is the same. Due to the doubling of blue-collar ages every seven years in China, factories will either move to other Asian countries or stay in China in highly automated factories.

For India, Pakistan and other Asian countries aiming for middle-income status, capturing relocated manufacturing is pivotal. In textiles alone, China has the giant lead, shipping $274 billion in exports annually compared to $40 billion by India, the second-largest exporter. If ‘Made in India’ takes the lion’s share of textile exports, that alone creates more direct jobs than the 3.7 million current jobs in the Indian IT and BPO industries. However, despite continued revenue growth, IT companies and factories alike are adopting rapid automation, a phenomenon that will, in the next five years, shrink the already small BPO and IT workforce in India by 500,000 jobs. India has one million people reaching working age every month and needs to see through ‘Made in India’, just as the CPEC is critical to Pakistan’s stable future.

On the other hand, India isn’t making as much progress as it has sought. While the NDA government has paved more kilometers of roads per day than its predecessor and reached coal production targets made from the outset, inadequacies are clear in the momentum of this government’s infrastructure ambitions.

Due to fiscal exhaustion, a short-lived railway construction boom will likely peter out, and frequent power cuts will persist even with a power production surplus unless the inefficient transmission is overhauled. ‘Made in India’ can’t go far with PM Modi’s infrastructure predicament. But Pakistani manufacturing growth will be powered by Chinese logistical performance.

Delhi’s strategic community doesn’t see the true competition. The basic blunder is that India is turning away from an opportunity. The actual daunting challenge for India is in the CPEC’s commercial success enabling as a successor in labour-intensive export manufacturing.

But there’s something India is already losing in its posture to ‘Belt and Road’. If proportionately scaled, India is missing out on $400-500 billion in financing and investment with rail and electricity likely missing out on most. Perhaps, the inaptly named CPEC should have been called ‘Made in Pakistan’. That would make clear the opportunity and challenge from China for ‘Made in India’.

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