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China-Pakistan Economic Corridor The Route Controversy

 FOREWORD

The China-Pakistan Economic Corridor is the most important mega project in Pakistan
after the Indus Water Works initiated in the 1960s. There is no doubt that the
Economic Corridor will be hugely beneficial to the people of Pakistan and China. The
route that the Corridor will pass through in Pakistan had, however, become a subject
of controversy, fuelled largely by lack of information. In mid-April, the Hon. Chief
Minister Dr. Abdul Malik Baloch asked CMPRU for a report on the Corridor issue. The
Report helped frame Balochistan governments position on the subject and the May
28, 2915 APC on the subject arrived at a unanimously approved decision and set all
controversy at rest.

This publication is based on the said report and is aimed at facilitating an informed
discussion by the public at large and proceedings of the relevant parliamentary
committee and working groups.

Dr. Kaiser Bengali

Consultant for Economic Affairs
& Head, Chief Ministers Policy Reform Unit
Government of Balochistan

May 2015

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The Team

Dr. Kaiser Bengali

Dr. Ishaque Baloch
Badar-ud-din Khan
Mahmood Tareen
Mehnaz Hafeez
Saeed Yousuf

Graphics and Designing

Muhammad Rizwanullah Khan

Printed at
The Times Press - Karachi

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Lack of access to markets and to

employment, educational, health and
socialization opportunities in some areas
defines as regional inequality and, in most
cases, constitutes the basis of disaffection and
insurgency, creating conditions for higher
security costs.

Security considerations are important, of

course; however, bombardment of disaffected
areas with jobs is a better option than
bombardment with drones.

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China-Pakistan Economic Corridor

The Route Controversy

INTRODUCTION

Plans for Pakistan-China economic cooperation in strategic spheres appears to have

developed in the mid-2000s, with the proposal to create an Economic Corridor from
Gwadar in Balochistan to Kashgar in the Western Chinese province of Sinkiang. Two
necessary conditions of the Corridor were and are development of the port at
Gwadar and creating surface transport connectivity between Gwadar and Kashgar.
They are absolutely necessary because without the port and without the transport
connectivity, no other economic activity with respect to the Corridor can be possible.
The main substance of the Corridor is the Gwadar port and the Gwadar-Kashgar
highway; the rest is icing on the cake.

One of the first overt manifestations of this strategic cooperation is the 84-slide
presentation in 2006 to the then leadership in Pakistan by the then Deputy Chairman of
the Planning Commission, Government of Pakistan. Slide 29 shows a map of the
proposed route of the Economic Corridor. The map, which carries the Planning
Commission logo, can be considered the first official identification of the route planned
for the Economic Corridor. The route on the map corresponds with the route now being
referred to by the federal government as the the Central Route1.

The Central Route is stipulated to pass through:

Gwadar-Turbat-Panjgur-Khuzdar2-Ratodero-Kashmore-Rajanpur-Dera Ghazi
Khan-Dera Ismail Khan-Bannu-Kohat-Peshawar-Hasanabdal-and onwards.

1
The map carries the NHA (National Highway Authority) logo.
2
Gwadar to Khuzdar is also part of the proposed M-8 and an earlier version routes the motorway from
Turbat to Khuzdar via Hoshab and Awaran

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Presentation to the
Hon. President and Hon. Prime Minister
ON

Presidents Initiative for Trade, Energy,

Transport and Industrial Corridor: Follow up of
Presidents China Visit

Engr. Dr. M. Akram Sheikh, H.I.

Minister of State / Deputy Chairman,
Planning Commission
Government of Pakistan
28 July, 2006

Development of Energy, Trade,

Transport and Industrial Corridor Khunjrab Pass

Tarbela Dam CHINA

HUBS CORRIDORS JALALABAD
Peshawar KASHMIR
Torkham

SEZ/SIZ/ EPZ Islamabad

Rawalpindi
DISPUTED
TERRITORY
KOHAT
Mangla Dam

D.I. Khan
Chaman Qila
Saifullah Faisala Lahore
Shorkotbad Wagah
Quetta
Okara

Taftan D.G.
Lakpass Multan Mian
Khan
Nok Channu
Kundi Baha-

IRAN Rahim Yar

walpur

Sukkur Khan
Rohri
Ratodero
Turbat

Gwadar Hala
Hyderabad
Major new Industrial
Hub
Karachi
Kotri Estates / Clusters will
be set up along the
ARABIAN SEA new Trade Corridors

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Subsequently, more than one version of the Corridor route has emerged. A second
route, referred to by the federal government as the Eastern Route, is stipulated to
pass through:

Gwadar-Turbat-Panjgur-Khuzdar-Ratodero-Kashmore-Rajanpur-Dera
Ghazi Khan-Multan-Faisalabad-Pindi Bhatian-Rawalpindi-Hasanabdal-
and onwards.

Following the emergence of the Eastern Route in the media, demand for a third route,
referred to as the Western Route has been put forth, particularly from north-eastern
Balochistan. This route is proposed to pass through:

Gwadar-Turbat-Panjgur-Khuzdar-Kalat-Quetta-Zhob-Dera Ismail Khan-

Bannu-Kohat-Peshawar-Hasanabdal-and onwards.

THE ROUTE CONTROVERSY

The route that the Economic Corridor is proposed to take within Pakistan has now
become controversial. And the controversy appears to have been fuelled by initial
silence and subsequent contradictory statements. Three main strands can be identified
with regard to federal government attempt at explanations.

Initially, the position the federal government took was that there was no
change in the route, but failed to specify what the government presumed
was the original route. This position was maintained for most of the year
since the controversy broke.

Subsequently, in 2015, the federal government took the position that there
were three routes and that all the routes would be built. This explanation
cannot be accepted as plausible; as the resources to build all three routes
are not available and China would certainly not allocate resources to
pander to political disagreements in Pakistan.

One variant, among others, of the above explanation is that the three
routes would be built in stages and that the Central and Western routes

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would also be built at a later stage. Clearly, there can be no certainty as

to when that later stage will arrive. And if the routes are to be built in
stages, a clear rationale needs to be provided for the route that is to be
built first.

The latest explanation an acknowledgement that the federal government

is prioritizing the Eastern Route is that it is cheaper and faster to route
the Corridor through areas with pre-existing road connections. This
implies that the Corridor will be routed through areas of the country that
are already relatively developed.

However, if the reasoning for the Corridor route is to be based on the

availability of pre-existing roads and facilities, then the logical route
appears to be Karachi-Lahore-Rawalpindi-Hasanabdal-Khunjrab; with two
already developed ports (Karachi and Bin Qasim), two national highways
(N-5 and N-55) and several economic centres along the way. In the
event, the entire rationale and justification for development of Gwadar port
disappears, as far as the China-Pakistan Economic Corridor is concerned.

Two possible conclusions emerge from the perusal of the Corridor case.
One, despite denials and statements to the contrary, the route has been
changed to pass through Central Punjab. And two, given that it is now
claimed that there are three routes, the priority has changed.

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What does the PSDP say?

Perusal of the federal Public Sector Development Programme (PSDP) 2014-15 adopted in
June 2014 is indicative of the governments priority with respect to the corridor route.

There are five Communications Division schemes (Serial Nos. 100-104) under the caption
China-Pak Economic Corridor (CPEC) at a total cost of Rs. 49 billion and includes the
following:
1. Karachi-Lahore Motorway
2. Lahore-Abdul Hakeem-Khanewal section
3. Multan-Sukkur section
4. Sukkur-Hyderabad section
5. Railkot-Havelian-Islamabad section

Although, all the above schemes are listed as Un-Approved, their very inclusion is indicative
of the possibility that the Eastern Route was decided upon as far back as early 2014.

However, the PSDP 2014-15 also includes the following On-going schemes as follows:
1. Gwadar-Turbat-Hoshab section
2. Hoshab-Nag-Besima-Surab section
3. Kalat-Quetta-Chaman section

Additionally, external financing has also been arranged for the Zhob-Dera Ismail Khan
section.

SOME BASIC PERCEPTS OF NEW ROAD CONSTRUCTION

There are some basic guidelines for new road construction, i.e., distance, cost and
political economy.
Distance:
A new route is justified if it reduces the distance, subject to physical features, i.e.,
a water body, mountain, etc. In the present case, this principle would justify the
shortest possible route, with no weight accorded to the economics of the area in
between; and can be called a transit passageway.

However, if the objective is to boost economic activity along the route, shortest
possible distance is redefined as shortest feasible distance and can be called
an economic passageway

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Cost:
Cost is determined by:

Opportunity cost of land: Land acquisition costs are likely to be higher, if the land
to be acquired for the road is productive (for example, in terms of agricultural
produce) and there is likely to be loss of output from conversion of land to the
right of way. Conversely, costs are likely to be lower in the case of barren,
unproductive land, as loss of output from conversion to right of way is likely to be
minimal.

Dislocation costs (social and monetary) are likely to be higher in the former, as
productive land is invariably more populated and a greater number of households
and businesses would require to be compensated.

Nature of terrain: The cost of constructing the road is likely to be lower if the road
runs through plains and higher if there is extensive land leveling to be carried out
and numerous bridges, culverts, tunnels, etc., are to be constructed.

Pre-existence of part of the road: Overall costs are likely to be lower if the road
alignment includes a pre-existing road, as the costs for that section would be
saved. However, the width, quality, etc., of the pre-existing road matters. If the
road is not of the width and/or quality required to carry heavy traffic, additional
lanes will need to be built and the pre-existing sections will need to be re-laid.

Environmental considerations: Costs are likely to be higher if a diversion to the

road alignment is needed on account of the presence of a protected area, e.g., a
national park.

Military considerations: Costs are likely to be higher if a diversion to the road

alignment is needed on account of the presence of a military area.

Security conditions: If the area is insecure and subject to lawlessness and

criminal/insurgent attacks, the costs of providing security during construction and,
subsequently, for traffic to move will increase the cost of the project.

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Political economy:
A road creates connectivity and opens up markets for local produce and provides
access for education, medical care and socialization. As such, the route that a
road alignment takes confers benefits upon the people of the area to the
exclusion of those away from the alignment. Pulls and pressures with regard to
the alignment are, therefore, understandable.
Lack of access to markets and to employment, educational, health and
socialization opportunities in some areas defines as regional inequality and, in
most cases, constitutes the basis of disaffection and insurgency; creating
conditions for higher security costs.

Comparative opportunity cost

Comparative opportunity cost of the three routes is presented in terms of three
variables: population density, total area under cultivation, and total production of four
major crops (wheat, rice, cotton and sugar-cane). Larger area under cultivation and
higher output is an indication of extensive economic activity. Higher Population
density is an indication of higher economic potential of the area.
Comparative examination of the above variables shows that average population
density is highest in districts along the Eastern Route (264) and lowest in districts
along the Western Route (98). Area under cultivation is highest in districts along the
Eastern Route (10.3 million hectares) and lowest in districts along the Western Route
(2.9 million hectares). Total production of the four above stated crops is the highest
in districts along the Eastern Route (30.9 million tonnes) and lowest in districts along
the Western Route (7.4 million tonnes).

Central Eastern Western

Route Route Route
Average population density 156 264 98
Total area under cultivation (000 ha) 5,829 10,322 2,933
Production of 4 major crops (000 tonnes) 13,754 30,928 7,430

The above comparative statistics are indicative of higher value of land and higher
population densities implying higher cost of land acquisition and higher dislocation
compensation cost with respect to the Eastern Route relative to the Western Route
and even the Central Route.

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China-Pakistan Economic Corridor The Route Controversy


COMPARATIVE ANALYSIS
A comparative analysis of the three routes with respect to the above precepts indicates
that:
Central Route
The Central Route is likely to be
longer than the Western Route, but
shorter than the Eastern Route.
The alignment will open up Except for backward areas of
economic opportunities for a vast
swathe of abjectly backward regions
of the country.
The area covered by the alignment
is relatively unproductive and
population density is low. The cost
of land acquisition and population
dislocation compensation is likely to
be lower.
The terrain along the alignment is
arid and hilly and would entail higher
land leveling costs. The alignment
will cross the River Indus between
Peshawar and Hasanabdal and will
require a major bridge.
Except for the Gwadar-Ratodero
section, a road pre-exists, but is
narrow and low quality, and will
need to be re-laid in its entirety.
The alignment is not likely to require The alignment will cross the
diversion on account of
environmental or military reasons.
Security costs will be higher on
account of insurgencies in
Balochistan and FATA.
The alignment passes through all
the provinces of Pakistan and likely
to command broad political support.
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Eastern Route Western Route
The Eastern Route is likely to be The Western Route is likely to
longer than the Central Route be shorter than the Central
and the Eastern Route. Route and the Eastern Route.
The alignment will open up
south and central Balochistan, economic opportunities for a
northern Sindh and southern vast swathe of abjectly
Punjab, more than half the backward regions of the country.
distance will pass through
relatively developed areas of
Central Punjab.
The area from Multan to The area covered by the
Rawalpindi is highly productive alignment is relatively
and densely populated. The unproductive and population
cost of land acquisition and density is low. The cost of land
population dislocation acquisition and population
compensation is likely to be dislocation compensation is
higher. likely to be lower.
The alignment will cross the The terrain along the alignment
River Indus between Dera Ghazi is arid and hilly and would entail
Khan and Multan and require a higher land leveling costs. The
major bridge. The area is alignment will cross the River
traversed by a number of Indus between Peshawar and
irrigation canals and will require Hasanabdal and will require a
a number of bridges. major bridge.
Except for the Gwadar-Ratodero Except for the Gwadar-Khuzdar
section, a road pre-exists, but section, a road pre-exists, but is
most sections will need to be narrow and low quality, and will
widened and re-laid to cater to need to be re-laid in its entirety.
the heavy traffic in terms of
volume and load.
The alignment is not likely to
Margalla Hills a national park require diversion on account of
and a tunnel underneath is environmental or military
being considered. Recourse to reasons.
the courts on environmental
grounds is certain and likely to
delay the project.
The Ratodero-Hasanabdal Security costs will be higher on
section is relatively secure; as account of insurgencies in
such, the alignment is likely to Balochistan and FATA.
entail lower security costs.
The alignment completely The alignment passes through
bypasses the province of only two provinces of Pakistan.
Khyber-Pakhtunkhwa and is
likely to emerge as a new
source of inter-provincial
discord.
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CONCLUSION & RECOMMENDATION

The Western Route is likely to be the shortest and least cost in terms of opportunity cost
and dislocation compensation cost. By comparison, the Eastern Route is likely to be
the most expensive in terms of land acquisition and dislocation compensation.
Arguments that pre-existing sections therein are likely to save time and costs are not
tenable, as most sections will have to be widened and re-laid to cater to the volume and
load of the traffic that is likely to be generated.

The Eastern Route is also likely to be politically divisive and emerge as a source of
political instability and carries the danger of imperiling the entire Corridor plan. If
selection of the Eastern Route is made on grounds that the Western and Central
routes carry security risks, then security considerations today will be traded for inter-
provincial discord and political instability in the future. Security considerations are
important, of course; however, bombardment of disaffected areas with jobs is a better
option than bombardment with drones.

The importance of the project demands that the controversy be resolved at the earliest
and a compromise solution that meets the aspirations of all the provinces is called for.
One way forward could be to adopt:

1. The Western Route, with two loops:

- Dera Ismail Khan-Sarghoda-Lahore to connect with the
Lahore-Karachi Motorway.

- Khuzdar-Ratodero-Sukkur to connect with the Lahore-

Karachi Motorway.

A combination of routes, traversing all the provinces of the country can lead to a
highway of national integration and stability.

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Postscript
The APC decision

The All Party Conference of May 28, 2015 unanimously decided to adopt a modified
Western Route that would pass through:

Gwadar-Turbat-Hoshab-Panjgur-Besima-Kalat-Quetta-Qila Saifullah-Zhob-Dera
Ismail Khan-Mianwali-Attock-Hasanabdal-and onwards

This route is superior to all other options in terms of opportunity cost of land and
dislocation compensation costs, as shown below.

Economics of alternative routes

Central Eastern Western Western2
Route Route Route Route*
Cultivated Area (000 ha) 156 264 98 76
Production** (000 tonnes) 5,829 10,322 2,938 1,838
Population Density 13,754 30,928 7,430 1,485
* Route decided at the APC
** Production of wheat, rice, sugar-cane and cotton

The Western2 Route passes through some of the most inaccessible and
underdeveloped areas of the country and is likely to prove critical to the development of
the area, particularly in terms of opening up to market centres, and generation of
employment opportunities.

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China-Pakistan Economic Corridor The Route Controversy