The sudden announcement in November that Pakistan had withdrawn its proposal to include the long-stalled Bhasha-Diamer Dam as part of the Chinese-financed China Pakistan Economic Corridor (CPEC) caused quite a stir in Pakistan. Both the World Bank and the ADB had refused to fund this project without a ‘No Objection Certificate’ from India. Of course, Pakistan would not approach India for this. Assuming that their all-weather friend would agree to help, Pakistan approached China in May and Beijing agreed to get this project off the ground after it had languished for 15 years. There were preconditions about ownership, maintenance costs and collateral security. Apparently, these were unacceptable to Pakistan. This perhaps marks the first chink in the CPEC, a far cry from the euphoria seen two years ago.
Pakistani leaders were in awe of Chinese President Xi Jinping when he visited Islamabad on April 20, 2015, and received him with full honours. There was delirious frenzy about the gifts the beloved leader was bringing. Xi had described his visit as a “second home coming,” reaffirming that the bilateral friendship remained higher than the mountains. In addition to this, Xi brought with him a magnificent deal of the kind Pakistan could not refuse — a $46 billion proposal for a CPEC fully paid for by the Chinese, a total which was later increased. It was a mega-project that covered energy and infrastructure projects and designed to lift Pakistan’s underperforming economy.
The Chinese investment plan for an economic corridor from Kashgar through Gilgit-Baltistan to Gwadar promised twice as much FDI that Pakistan had received since 2008. There was a military-political consensus on the CPEC. In their euphoria, and with eyes constantly fixed on India, the Pakistani establishment failed to neither read the fine print nor do their math. They did not factor in that the billions the Chinese were going to invest was about 20% of Pakistan’s $270 billion economy. In addition, by 2030 Pakistan would have to pay back $90 billion and this would be an additional burden.
The China Development Bank and the National Development Reform Commission of the Chinese government had prepared the full project. For the Chinese the project is an important link to their grandiose Belt Road Initiative and there are at least three major interests for China in the CPEC.
The first is access to Gwadar for obvious geostrategic and economic reasons. The development of Gwadar and the infrastructure projects of road and rail linkages across the country are the glamorous aspects of the projects. The second is establishing a security and communication grid all over Pakistan. A fibre optic link between Pakistan and China that covers the entire country and reaches Gwadar is now part of the CPEC. In addition to the security aspects, the Chinese see this is as a transmission carrier, which would enable the Chinese to popularise their culture. The corridor has to go through the restive Balochistan and the Khyber-Pakhtunkhwa provinces. There are security issues and the Pakistan Army has raised two special security divisions to guard the Chinese labour deployed there and the equipment all the way from Gwadar to Rawalpindi and Khunjerab.
When the plan speaks of joint efforts against terrorists the Chinese have the Uyghurs in mind, not just protection of their own enterprises and labour in Pakistan. The project also includes a system of monitoring and surveillance across Pakistan. The third is establishing control over Pakistan’s agriculture for feeding its impoverished Kashgar district of Xinjiang. Thousands of acres of agricultural land will be leased out to Chinese companies for agricultural projects. The plan is to provide assistance for mechanisation and scientific techniques in various aspects such as livestock breeding, hybrid varieties and precision irrigation.
However, in March, the Nawaz Sharif government informed the Pakistan National Assembly that Chinese firms were given a number of tax concessions across the entire CPEC projects as incentive for working in troubled zones. The Chinese will have industrial parks or special exclusive economic zones that should meet specific conditions with a perfect infrastructure for their investment and projects, with Chinese employees.
The Chinese plan could be to manage a very dependent nation that provides access to a deep-water port in the Arabian Sea and an opportunity to outflank a rival in south Asia. Some Pakistani parliamentarians fear that the CPEC could mark the arrival of another East India Company.