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.1 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.”2 During Xi’s visit, the two countries signed fifty-one agreements at an
estimated value of $46 billion.3

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 Pakistan’s Sindh Province, as construction began on a
section of highway between Sukkur and the city of Multan—it will be part of a network of
highways that will connect the cities of Peshawar and Karachi.4 This network is a major
component of the CPEC’s 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 Pakistan’s southwestern province of Balochistan.5

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
Pakistan’s internal stability, thus reinvigorating the latter’s 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 China’s western periphery,
particularly the province of Xinjiang.

More broadly, the CPEC has to be understood in the context of China’s 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 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 corridor—based 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
Pakistan’s Ministry of Planning, Development, and Reform—Pakistan aims to advance from
being a lower-middle-income nation to an upper-middle-income nation by 2025.6 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 Pakistan’s 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.

The first of these risks is terrorism, which has long affected Pakistan’s 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.7 Fortunately, no Chinese personnel were wounded or killed. Then
in September, Baloch rebels killed at least two Chinese engineers and injured many others.8
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.9

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.10 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 CPEC’s growing transportation networks, which will
require increasing investments of security personnel and material support. It will likely become
uncertain in the future whether Pakistan can maintain a strong enough military presence to
ensure the security of all these transportation routes.

Second, Pakistan’s domestic politics is also important to the CPEC’s success. The country’s
political system has never been particularly stable. Political power oscillates between military
and civilian leaders. General Pervez Musharraf’s 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 People’s 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 Pakistan’s history that a civilian government
was able to serve out its entire term. This was a sign of improvement for Pakistan’s democracy.
On the other hand, Pakistan’s 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
Pakistan’s political parties hopes the CPEC will pass through the region it represents, allowing
its local community to enjoy the corridor’s benefits. In fact, since the initiative was first
presented in 2013, the 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
Pakistan’s 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 B—the
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 Pakistan’s economic prospects.11 One was lowering barriers to
foreign investment.12 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 country’s GDP is growing at a stronger
rate, and the economy is improving.13 For the time being, however, it will still remain unclear
whether these economic advances can actually alleviate Pakistan’s serious security and stability
problems.

Cultural considerations and public relations should be also taken into account when evaluating
the CPEC’s 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.14 The council has opened
offices in Beijing and Islamabad respectively, and its purpose is to assist with the
implementation of CPEC projects.15

China and Pakistan have taken positive measures to help set up the CPEC for success.
Nevertheless, Pakistan’s domestic situation is still decisive. Until the country’s 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.

Lu Yang is a postdoctoral researcher in the Department of International Relations at Tsinghua

University, working on South Asian politics and China’s diplomatic relations with South Asian
countries.

2
By not just limiting my opinions based upon information dispensed via traditional Chinese,
Pakistani, Indian, Middle-Eastern, UK, Japan and US media outlets, and by carefully
extrapolating and analyzing data, and thoroughly studying reports available to top academic
sources, I have come to a conclusion that CPEC aka Gwadar Port project is a blessing in
disguise for Pakistan.

The benefits for Pakistan in the long run are not just limited to Energy and Military sector, but if
executed as proposed, it will have big impact on three of Pakistan’s least discussed sectors.

 Information and Communication

 Agriculture & Aquaculture
 Manufacturing

Information and Communication: CPEC is bound to have a major impact of Pakistan’s

Information and Communication landscape, it has potential to pit Pakistan directly against the
other Global Information Technology Power- namely, India as an alternative global TECH-
HUB. Thanks to the British, Pakistan shares a lot of common traits with India, and
ubiquitousness of English language is one of them.

As a matter of fact, though India sheerly due to its mammoth population holds numerical
advantage over Pakistan, a far larger percentage, 49% of Pakistani’s speak English compared
to measly 13% for India. List of countries by English-speaking population - Wikipedia
While China with 46% penetration leads the Region SAARC+China in internet accessibility,
Pakistan with 11% accessibility is not too far behind India at 15%. A major part of CPEC
initiative is, installation of fiber optics and satellite Internet connections. This will instantly
connect Pakistan’s remote areas and help boost its Internet user base. Moreover, once the project
is up and running the multi-national companies in technology and telecommunication space will
rush to use it as their regional base to serve the growing needs of the countries in the Middle-
East, Iran and Central Asia.

Agronomics : Today Pakistan has to route all its produce and catch to China via Dubai. China’s
appetite for fruits and vegetables is insatiable and once CPEC becomes a reality, fruits popular
amongst Chinese like Cherries and Apricots that grow in abundance in Pakistan and surrounding
regions (Iran, Uzbekistan etc.) will have an easy path to the markets in Beijing & Guangzhou.

Similarly Pakistan’s aquaculture industry is under explored. Since Pakistan’s water along the
Arabian Sea share similar characteristics to that of India’s leading fishing hub’s (Gujarat, Goa
and Maharashtra) the direct link to Chinese markets will kick-start this dormant industry as
Chinese appetite for seafood is World renowned.

Manufacturing : It is inevitable that with growing income Chinese society will get more and
more consumeristic. Just like the American’s are today, the burgeoning Chinese middle-class
will demand for wide range of products at affordable prices (read:Cheap).

It is a foregone conclusion that in the near future China will make a move up the value chain in
manufacturing sector, so while cornering the high tech manufacturing services ( pharmaceuticals,
air and space craft and computer/electronic/optical) for itself, it will outsource medium to low-
technology manufacturing activities (Food, textile, paper, leather etc.) to countries like Pakistan
and Bangladesh. With CPEC it is but obvious Pakistan will be a big beneficiary of China’s
largesse.

So people who say Pakistan has nothing to gain from CPEC are living in the fools paradise.
Of course, in the short term (10–15 years) China will gain more than Pakistan from this
project. But, in the long term, Pakistan is going to reap quantum benefits in an incremental
fashion.

I sincerely hope India wakes up and wizens to this new reality and the current dispensation in
New Delhi does not feed fuel to this BAN CHINESE GOOD movement.

3
ESSAY: CPEC: Challenges and prospects

CPEC: Challenges and prospects

Outline:
1.0 Introduction
2.0 Background
2.1 vision behind CPEC
3.0 challenges
3.1 Domestic challenges
a) Law and order
b) Political instability
c) Civil-military relations
d) Inter-provincial issues regarding CPEC
e) Balochistan factor
3.2 International challenges
a) India’s hostile attitude towards CPEC
b) Indo Afghan nexus.
c) Iran (chabahar port v/s Gwadar)
d) Involvement of big powers.
4.0 Prospects
a) Economic growth
b) Meeting the energy shortfall challenges/requirements
c) Infrastructure development
d) Foreign direct investment
e) Employment generation
f) Promotion of tourism
g) Regional connectivity
5.0 Suggestions:
a) Security measures
b) Political stability
c) Reconciliation process with Afghanistan
d) Transparency and openness to public and accountability
e) Addressing grievances of provinces
f) Stability in balochistan
6.0 conclusions

Title: CPEC: Challenges and prospects

ESSAY
The China Pakistan economic corridor is an ambitious project that aims at changing the geo-
economic dynamics of Pak-China relations and augmenting the trading activity in the region. It
anticipates economic growth, meeting the energy shortfall requirements, employment generation,
foreign direct investment, infrastructure development, promotion of tourism and others. The
multi-billion project offers a long term investment in Pakistan involving the regional countries as
well. However, the project is being challenged by domestic controversies and external
opposition. In this scenario if these challenges are effectively tackled, it may lead to economic
interdependence that would be climacteric for peace and economic development for the region.

The vision behind CPEC is to improve the lives of people of Pakistan and China by building
economic cooperation, logistics and people to people contact for regional connectivity.
Moreover, it includes integrated transport and IT system, communication channels, agricultural
developments and poverty alleviation. Furthermore, it incorporates tourism, financial
cooperation, Human Resource Development and others.
After the completion of the corridor, it will become a primary gateway for trade among China,
Africa and the Middle East. It is expected that this corridor will help cut the 12000 kilometers
route. There are myriads of benefits of CPEC , that are stimulating the hope for bright future of
the corridor, the journey would not be without hurdles as there are several intrinsic and extrinsic
challenges that are an impediment to the churning out of CPEC.
The first and foremost challenge domestically is an absence of rule of law. The basic purpose of
rule of law is to provide security of life and free movement to people. "The World Justice
Project" (WJP) analyzed more 113 countries and Pakistan has been ranked 106th in terms of rule
of law experienced by the citizens, getting position on the above Afghanistan, Ethiopia,
Zimbabwe, Cameroon, Egypt, Cambodia and Venezuela. Without rule of law sustained
development remains an elusive goal; peace, investment, development are all linked with the
values of law. Moreover, law and order situation is so inadequate in Pakistan that international as
well as domestic investors are reluctant to invest in Pakistan.
“China Pakistan economic corridor (CPEC) only could become a game changer, if Pakistan
succeeded in
Overcoming its security challenges"
- The former Diplomat Riaz Muhammad Khan-
The second major threat to the CPEC project is political instability in the country that has
become a serious problem in Pakistan. Political firmness is Pre-requisite for the economic
growth and development of the country. Uncertainty is ahead of Pakistan political crisis. No
Prime Minister could hold the office for 5 years since, after the independence 1947. Nawaz
Sharif's disqualification could set up a spell of political instability in Pakistan. Resultantly
security issues and political instability arise in Pakistan leading to military interference in the
state affairs getting ground for a military coup. Thus political uncertainty unless not done away
with, would continue to remain a challenge for the CPEC projects' implementation progresses.
"CPEC all investment will be withdrawn if there is any Political turmoil in the country"
-Ahsan Iqbal-
The third major obstacle to implementation progress of CPEC is an institutional imbalance.
Pakistan is a country where the military has ruled for around 35 years out of 70 years of her life.
Throughout all the three martial law regimes, the constitution of Pakistan was abrogated,
suspended or held in abeyance. Presently, the CPEC is facing tremendous security challenges. In
order to guarantee a secure environment for the CPEC development, the military is expanding its
power. This phenomenon significantly affects the civil military relations and civilian control
over the military that is challenging the process of democratic transition. The need has arisen that
the military should be kept aside from the interfering in the political matters of the country. So
that the government might make policies for the in the way people want.
The fourth serious challenge which CPEC is facing is inter-provincial grievances. It is alleged
that Punjab gets lion's share in CPEC projects at the cost of other provinces. It fashioned rifts
between the federal government and the provinces. The major conflict was "The route change"
KPK government demurred that the Federal Government wants to build eastern route first which
passes through the central Punjab, despite the fact that eastern route is longer than western route
which would be more costlier. In this connection, Punjab province would get the most benefit,
depriving other provinces their due share. China urged Pakistani leaders to resolve issues over
CPEC project. Minister for inter-provincial co-ordination Riaz Pirzada said that CPEC is crucial
for the country, it should not be made controversial by saying that the entire country and all the
provinces would benefit from it, particularly backward areas of KPK and Baloachistan.
Fifth major challenge towards implementation of CPEC is the unrest in balochistan province.
Due to the fact that Gwadar port is located in province of balochistan the ongoing insurgency in
the provinces poses crucial challenges to the success of CPEC project. Consequently, the
benefits of CPEC investment can be accurately measured if its impact on terrorism can be
calculated.

Apart from domestic challenges, CPEC project implementation is facing several international
challenges as well.
The first and foremost external challenge to the corridor is India’s belligerent attitude towards
CPEC. Indian felonious demand is that Gilgit Baltistan is a disputed territory, therefore; route of
CPEC passing through that territory is unjustified (illegal). Another considerable concern within
India is that she sees Gwadar a deep-sea port as a part of China's “string of pearls” basis that
extends from its eastern coast to the Arabian Sea. China is also developing ports in Sri-Lanka
and Bangladesh.( that are considered a potential military challenge to India). India perceives that
in future China can block sea access to India by burgeoning such ports. Consequently, India is
unhappy with the development of CPEC and trying to sabotage CPEC by playing its card in
Balochistan. The Recent arrest of Indian agent Kulbhushan Jadev testifies the involvement of
India in Balochistan in particular and in Pakistan in general.
The second challenge to the success of CPEC is Indo-Afghan nexus. Internal instability in
Afghanistan remained unruly for Pakistan. The roots of almost all terrorist related activities are
traced back to Afghanistan. Besides, India is making military bases in Afghanistan from where it
carries out terrorist activities.
“RAW is operating from Afghanistan to sabotage CPEC”
General Zubair Hayat
This Indo-Afghan nexus is causing problems because of “Durand Line” that is a porous border.

The third major challenge in CPEC implementation is Chabahar port. Iran in cooperation with
India is developing chabahar port. India is investing billions of dollars in this project so as to
neutralize the potential of Gwadar port and curtail CPEC. It is in completion to Gwadar. But
President Ruhani said, “Chabahar is not in competition to Gwadar rather both will complement
each other.”
Fourth major obstacle is involvement of big powers. Two major powers United States and Japan
appear to be excessively uneasy with the fruition of multi-billion dollar project. The US is
making different policies to contain China. America considers rising China threat to its global
dominance. Thus America is creating hurdles for Gwadar port, besides America perceives that
Gwadar port could be used for the military purpose in future. As a part of the containment
policy, America signed “strategic and economic partnership” with India. American support to
India for the nuclear supplier Group (NSG) is also part of that partnership. Their cooperation is
not the only challenge for China but for also for Pakistan. On the other hand, Japan is stressed
because with the consumption of CPEC the distance amongst China and its trading countries
would reduce by as much as 9000 kilometers that will have deep impact on Japan’s exports.
Despite formidable municipal and international challenges the benefits and prospects of CPEC
are extensive that are likely to come to fruition. If CPEC is appropriately coped, it from all
counts will prove a game changer; this project has potential to transform economic growth.
Besides, it gives hope of having regional cooperation, transit, trade, energy transformation and
others.
Firstly, the Pak-China economic corridor will boost the economy of Pakistan. Pakistan is under
heavy debt. According to Finance Minister Ishaq Dar, “current debt on Pakistan is 73 billion
dollars.” A report released by a think-tank of South Asian Investors says, that the multi-billion
dollar project is expected to boost the country’s GDP growth rate to 7.5% during the period
2015–2030. According to International ratings institution Moody’s report China-Pakistan
Economic Corridor (CPEC), will increase industrial production and surge development work.
CPEC is a 3,218-kilometer long route; the completion of the route will take several years,
consisting of highways, railways and pipeline. Once China Pakistan Economic corridor is
completed; it will open doors to immense economic opportunities not only to Pakistan but will
physically connect China to its markets in Asia, Europe and beyond.
Secondly, the project will encounter the energy shortage necessities of Pakistan. An acute
ongoing energy crisis is posing a serious dilemma for Pakistan. Available data of National
Transmission and Despatch Company NTDC and K-Electric Limited (KEL) say that total
installed electricity production capacity is 23,234 megawatts (MW). And the shortfall lies -
between 5,000 MW and 6,000 MW. Secretary of Water and Power, Mohammad Younis Dagha
said that under the China Pakistan economic corridor (CPEC) project, the Chinese companies
will be investing $35 billion in 19 power projects which will produce 12,134 MW of electricity.
According to K-Electric KEL and National Transmission and Despatch Company NTDC, by
2020 Pakistan will be able to produce 34,785MW of electricity.
Thirdly, CPEC is major driver of Foreign Direct Investment (FDI) in Pakistan. It has been a dry
spell for Foreign Direct Investment (FDI) in Pakistan. Our country did not attract FDI in the
wake of recent years. The country had received a meagre amount in 2015. Nonetheless, China
Pakistan Economic Corridor (CPEC) became the major driving force in bringing FDI to
Pakistan. According to the World Investment Report (WIR) 2017, the foreign direct investment
in Pakistan has increased by 56 percent to over $2 billion. The confidence of investors has much
improved, that resulted in a large amount of foreign investment in infrastructure industries,
especially electricity generation and transport. Many examples can be quoted here for instance;
Power Construction Corporation (China) and Al-Mirqab Capital (Qatar) have started to jointly
invest in a power plant at Port Qasim, which is the second largest port in Pakistan.
Fourthly, the China Pakistan Economic Corridor (CPEC) will help Pakistan improve its
infrastructure. Under the China Pakistan Economic Corridor (CPEC) banner, the work on several
infrastructure and development projects is in progress. Besides Industrial zones, several power
plants and road infrastructures are initiated in Pakistan. Moreover, motorway between Karachi
and Lahore which is eleven hundred kilometers long, the Karachi-Peshawar main railway line
which is one hundred and sixty kilometers long, Karakoram Highway between Rawalpindi and
Chinese border would be reconstructed and pipelines which would transport oil and gas would
help to boost the economy on a whole new level and would also help in controlling
unemployment.
Fifthly, CPEC initiative would immensely help in growing employment opportunities. CPEC
through employment generation would greatly help in addressing the grievances of unemployed
youth. As stated by the associated press of Pakistan report Workforce grew by 2.0 per cent in
2016-17. According to the international labour organization, CPEC would bring 400000 jobs to
the country. While the Applied Economic Research Centre has estimated that the mega initiative
would provide around 700000 direct jobs between 2015 and 2030.
Sixthly, besides creating job opportunities China Pakistan Economic Corridor (CPEC) will have
a huge impact on tourism. The investment in Gwadar port and other infrastructure projects
through the China Pakistan economic corridor, tourism in the country is likely to increase in the
coming years. CPEC will greatly help in increasing tourism especially in Gilgit Baltistan which
would ultimately be favourable for the local public. Moreover, World Bank has pledged to
sponsor tourism in Pakistan.
Seventhly, CPEC would act as a catalyst in regional connectivity. China imports 80% of oil and
does more than 70 percent of trade through the South China Sea and the United States. CPEC
would provide a land route to China. As these two countries are the primary beneficiaries of the
project. Besides CPEC will most certainly benefit the entire region connected to Pakistan and
China. Moreover, the CPEC will give China access to the Arabian Sea through Gwadar which
will significantly promote Chinese trade with countries in the Middle East, Africa and many
countries in Europe. Furthermore, CPEC will offer transit trade facility to the landlocked
Afghanistan and the Central Asian States.
Unequivocally this project will economically integrate the region and create interdependence.
CPEC has a great potential to bring progress prosperity and stability in the region. The China-
Pakistan Economic Corridor CPEC is harvesting greater attention around the world where more
and more state leaders are inclined to be part of this multi-billion dollar project. Despite
Inevitable prospects of the corridor, there are certainly formidable threats and challenges to
suppress the success of the CPEC. But some carefully adopted steps would guarantee the
promising success of the CPEC.
First, China Pakistan economic corridor is facing several security related threats. As stated by
official militants are trying to disrupt the construction of an “economic corridor” and have killed
44 workers since 2014. Pakistan launched different operations to curb the terrorist activities.
Overall security in pakistan has improved in past few years. Despite the fact terrorists still
manage to carry out attacks. The recent spate of terrorist bomb blasts in quetta, balochistan and
sehwan are evident to that. Hence to provide security to workers along CPEC pakistan needs
more vibarant security measures to ensure Peace for smooth operationalization of CPEC.
Moreover Political stability is imperative for the success of CPEC. Political stability is a must for
the development and progress. It is political decision making which impacts the behavior of the
institutions. Hence, all the institutions may work within their domain. So that political instability
could be curtailed. Considerable research suggests that political events and economic growth are
interconnected.
Additionally, despite an avalanche of data available on CPEC initiative Government officials as
claimed by Government officials, Lack of transparency and accountability still remained one of a
greater issue for CPEC completion. Economists and diplomats said that the nation could not reap
benefits associated with the corridor by hiding information from the public. Fairness and
straightforwardness demand a standing of neutrality on CPEC till the terms and conditions are
disclosed, without which one cannot arrive at an objective assessment of whether it could be
possibly beneficial for the country. Many economists have questioned the CPEC project’s lack of
transparency and accountability. Secrecy and the lack of information have severely impeded a
proper cost-benefit analysis of the project. Moreover, there is no transparency on issues such as
cost efficiency, economic feasibility and viability. Environmental concerns are likely to be
ignored that could lead to serious economic and environmental issues later on. Greater
transparency will lead to lesser suspicions and greater interest on the part of local and foreign
investors.
“CPEC agreement is sensitive and cannot be disclosed.”
Ahsan Iqbal.
Moreover, for Pakistan peace and stability in Afghanistan is in its best interest as the success of
economic corridor project of China and Pakistan is greatly dependent on the peace and stability
in Afghanistan. Secretary Ministry of Defence Production Lieutenant General Syed Mohammad
Owais said that that the unrest in Afghanistan was deliberate, adding Afghanistan is regarded as
"the heart of South Asia" and if there is peace in that country, there will be peace in the entire
region. Furthermore, the Porous border with Afghanistan has always been a trouble for Pakistan.
Terrorists often find sanctuaries in Afghanistan by crossing Durand line region. Therefore
Pakistan needs to take Afghanistan into confidence and affective steps can be be taken to manage
border so that terrorists’ infiltration could be stopped inside the country.
Subsequently, for CPEC to thrive, addressing grievances of provinces is crucial. Balochistan
National Party (BNP) chief Akhtar Mengal has called the China-Pakistan Economic Corridor
CPEC exploitative if it does not equally benefit all the provinces, particularly Balochistan.
Political experts and economists have unanimously asked the federal government to address the
grievances and concerns of smaller provinces regarding CPEC on a priority basis as delay might
give room to anti-state elements to exploit the situation to their advantage. Consequently
addressing concerns and grievances of all the provinces is essential. Their reservations must be
understood since they are some of the greater challenges standing in the way for the
implementation of the highly-celebrated CPEC.
Lastly, peaceful Balochistan is very much important for the success of CPEC. Balochistan, after
a perturbed peace of almost three decades, is constantly witnessing the violent insurgency. The
province has been in turmoil for the past several years. Under development of the province had
resulted in creating internal and external fault lines which were further exploited by the dissident
nationalists as well as external powers. The Baloch nationalists are very much against to the
development of Gwadar Sea Port. Consequently, Government can address the grievances of
Balochistan residents
CPEC is the framework of regional connectivity which is a well thought out framework that will
escort great economic/trade activity in the region and will reshape many economic policies in the
coming years. For Pakistan, it is a catalyst for change and for China, it is meant to showcase its
comprehensive economic reach to the regions for its successful culmination of ‘One Belt, One
Road’ policy.
Even though the project faces many challenges, which include, the absence of rule of law,
political instability, western interference in domestic affairs, perpetual political instability, and
lack of impartial accountability institutions. However, the prospects it presents are also massive
which include, economic boost, energy transformation, infrastructure development, employment
generation, regional connectivity and others. Moreover, coupled with these opportunities
Pakistan and China will get the maximum extract of this joint step of China Pakistan economic
corridor.

Impact of cpec on pakistan’s gdp

1. 1. IMPACT OF CPEC ON PAKISTAN’S GDP; ANALYSIS OF BENEFITS AND CHALLENGES

2. 2. Introduction to CPEC:  Pakistan and China have agreed to construct One Belt One Road
project which is commonly branded as China-Pakistan Economic Corridor.  It is an economic
 corridor comprising a collection of projects currently under construction at a cost of $51 billion.
 CPEC aims to facilitate trade along an overland route that connects Kashgar and Gwadar,
through the construction of a network of highways, railways, and pipelines.  There are many
external and internal confronts for Pakistani government to execute this multi-dollars project.
3. 3. Impact of CPEC:  The impact of CPEC is highly fruitful for both the involved countries.  The
China-Pakistan Economic Corridor (CPEC) was initially intended to promote mutual development
of China and Pakistan by enhancing bilateral exchanges and cooperation in transportation,
energy and marine sector.  The corridor is envisioned to rapidly expand and upgrade Pakistani
infrastructure, as well as deepen and broaden economic links between Pakistan and the
People's Republic of China.  It is considered to be an extension of China's ambitious One Belt,
One Road initiative, and the importance of CPEC to China is reflected by its inclusion as part of
China's 13th five-year development plan.
4. 4. Benefits of CPEC:  The corridor not only funds and supports the construction and
connectivity of transportation infrastructures, but more importantly aims to promote bilateral
cooperation in multiple areas of major projects, as well as information and communication
technology, and to set up more industrial parks and FTAs.  Pakistani officials predict that the
project will result in the creation of upwards of 700,000 direct jobs between 2015–2030, and
add 2 to 2.5 percentage points to the country's annual economic growth.
5. 5. Challenges to CPEC:  Political unrest, security situation and administrative issues are some of
the greatest challenges in the way of successful completion of the corridor.  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. Likewise Israel and the US are also unhappy with this economic pivot for
Pakistan.  In Pakistan, some political parties like ANP, Baloch nationalists, PkMAP and some
others raised serious objections to the CPEC project.
6. 6. Recommendations:  Government must make decision on the basis of economic gains and
multiplier impact on the economy.  Route prioritization must decide on the basis of population
density (directly relates to population displacement), productive land under the route, loss of
production.  Strategic importance for Pakistan in short and long run must give due importance.
7. 7. Recommendations (cont..)  Transparency must be ensured for smooth functioning and equal
distribution of benefits.  Government must use the existing institutions (Council for Common
Interest) for resolving all controversies related to CPEC Last, but the most important aspect, all
stake-holders must have good understanding of Chinese needs, as China is investor of the
project.
8. 8. Conclusion: Earlier, Pakistan has gone through stages of political unpredictability and turmoil
that enfeebled the country’s progress roadmap and also affected policy geographic stability. The
CPEC appears to be a very critical project for Pakistan. The construction of CPEC is an important
agreement for the country which has boundless benefits for its economic betterment.
1. Huge Loan - The CPEC is based on a $46 Billion loan (now it $55 Billion) that
Pakistan has taken from China under Sovereign Guarantee. From the original
allocation the $11-billion amount for infrastructure purposes is a Chinese loan
whereas the $35-billion investment for the power sector. Infrastructure
investments offered by China for CPEC is to be paid back as equity (ROE) which
is guaranteed at either 17% or 20%.

Check this example which shows actual malpractice in CPEC Projects. With a
substantial portion of the Chinese investments focused on power projects, the
viability of the projects has been closely examined, based on interest rates
charged by the China Development Bank and the China EXIM Bank. Official
documents have revealed that with an estimated debt-equity ratio of 80%-20%,
and these investments guaranteed a 17% to 20% rate of return in dollar terms on
their equity (only the equity portion, and not the entire project cost). China will
recover its investment in less than 26 months, and bleed Pakistan for the 25 year
contract period. Not only that, such hugely expensive electricity will cripple their
economy, making them a wheelchair case.

If you check some historical facts, Sri Lanka is one of the Prime Example. Unable
to repay its debts to China, Sri Lanka is handing over the power plant,
Hambantota port and possibly the airport to Chinese control in a debt/equity
swap. China would then achieve a major objective in its ‘One Belt One Road’
project, of having a strategic presence on Sri Lankan soil by professing to offer
‘economic aid’ with no strings attached. Thanks largely to such Chinese ‘aid’, Sri
Lanka now spends 90 per cent of all government revenues to service debts.

In fact, the example of Venezuela, a politically and financially high-risk country in

which China has invested over $52 billion from 2008 up till 2014, the another
biggest Chinese investment in any single country so far, may hold some of the
answers. It created a win-win scenario for the Chinese government by marrying
off low-wage Chinese labour to long-term infrastructure projects in exchange for
secure and continuous supply of oil and commodities. All the Chinese loans to
Venezuela were commodities-backed, under which Venezuela was obliged to
keep supplying to China millions of barrels of oil to feed the Chinese
economic boom.

As well as Pakistan has nearly (in 2017) $72 Billion debt all together which is
nearly 70% of their GDP which are not part of CPEC and Current Account Deficit
is now raised to 120%. Even currently Pakistan has raised loans at 8.75%
interest rate from I.M.F. by mortgaging Motor Ways, Air Ports, Radio & TV
stations. To pay interest Pakistan is taking other loans to cover it and will reach
alarming levels of Bankruptcy.

Major details about this deal kept very secretive as Governor of State Bank of
Pakistan Ashraf Mahmood Wathra, in December 2015, had said: I don’t know
out of the $46 billion, how much is debt, how much is equity and how much is
 in kind.

Pakistan also has a history of fudging information and false propaganda. Recently,
it was announced with much fanfare that the IMF and World bank had declared
Mr Ishaq Dar as the best finance minister in the world. That was promptly
rubbished by the two institutions. Again, Pakistan had claimed GDP growth of
4.7%, after IMF corrections it was found to be closer to 3.1%.

With CPEC if you assume that the interest will be in the range of 7 % p.a, payable
in 25 to 40 years, it would and mean China will have to be paid back
approximately 7 to 8 billion dollars as EMI for next 43 years from 2018
onwards. Pakistan will never've in a position to pay back even the interest, forget
the principal amount.
2. One sided bids for Chinese Companies - The contracts for investments in CPEC
are all one sided, no bid contracts against Chinese companies. There will be no
Global Tenders and contracts are confined to Chinese companies with Pakistani
sub contractors are the only ones who are getting the after meal leftovers that the
Chinese would leave on their plates. There are also report that some of the
projects are awarded to black listed companies in China, and substandard
construction of Chinese Companies never sure the quality. Khanpur and
Nandipur hydroelectricity Power Plants are prime examples.
3. Preference for Chinese Workforce - China is now having huge under-utilised
capacity of industrial production and workforce. In CPEC majority of workers,
goods & materials are all Chinese. China is constructing quarters for their own
work force in Pakistan. No assurances could be given that Pakistani labour would
be recruited to work. So the money China is investing comes back to China and
with interest.
4. No Toll for Chinese - Chinese trucks are exempted from paying toll tax. As
Pakistan has very less to export to China, Pakistan will get very less profit from
this arrangement. Under CPEC, Pakistan has to take care of maintenance and
security of the road. The expenses Govt. of Pakistan has to bear from its own
pocket. Pakistan plans to train 15,000 security personnel to protect Chinese
workers on the corridor. Presently, 8,000 Pakistani security officials are deployed
for the protection of over 8,100 Chinese workers in Pakistan. So Govt of Pakistan
has to do without a single penny worth benefit getting out of it.
5. CPEC is Plan B - In practical, China’s major manufacturing is located in her
east, bordering the South China Sea. It is crazy enough to imagine Chinese would
like to ship goods through an at heavy risk CPEC, when they can ship the same
goods by sea for a fraction of the cost, the ports being next door and the sea
lanes much better secured.

The only province that can send freight down CPEC is the Xinjiang Province. The
population of that province is at this moment attacking the native Han Chinese
population and and want to secede from China. The Chinese PLA is fighting
running battle in the province and has been doing that for many years. Therefore
Xinjiang has very less manufacturing goods to ship to anywhere make CPEC
 very under utilized.

In my view point that it is the alternate route like Plan B and it only works if Plan
A fails. I think it is unlikely situation. So it strategically good for China but from
view point of Pakistan i can’t see any win win situation.
6. Security Conditions for FDI - Pakistan is facing lot of internal security problems
because of internal instability and terrorism, thats why Foreign Direct Investment
besides China is very low.
7. Impact on Pakistan Industry - China has an established track record of arriving
much like a horde of locusts and completely wiping out the local indigenous
industry. The floodgates to Pakistan have been opened to the Chinese and it is just
a matter of time before Cheap Chinese goods do the Walmart-effect on
Pakistani industry and destroy what is left of it.

Because of high taxation and high Electricity rates Industries in Pakistan

cannot compete with products of other countries. For example Cotton Industries
in Pakistan which has major share in its exports are shutting down because they
cannot compete with competing industries in China, India and Bangladesh which
are providing concessions to decrease their production cost. Another big reason is
China to whom Pakistan is providing favourable terms like Free Trade and Low
Tariff on products imported from China makes them cheaper is the other
major reason behind falling Industries in Pakistan.

Also Pakistan has much less to offer China for trade, on the flip side Pakistani
markets are flooded by Cheap Chinese goods which may actually kill their
traditional businesses.
8. Lack of resources to payback loans - Pakistani goods and services that they can
offer to the world are not growing. This is well evident by their trade deficient
where exports are much lower compared to their imports. Pakistan’s exports
have fallen by 15.4% in the last three years from $ 24.58 billion in 2012-13 to
20.8 billion in 2015-16 which is compared to $44.8 billion imports causing $24
billion trade deficit which is very huge as 215% more than its exports.

In recent years Foreign Remittences are fell sharply as decline of manpower

because of weakened Oil Economy and ideological tussle with OPEC countries.
These incomes are vital for Pakistan Economy but they are now on downside. As
there is no major industrial growth, these loans are becoming major downsides
for Pakistani people.

Pakistan also fudging information about increase in Foreign Exchange Reserve

which is actually happened because of borrowing from loans from foreign
commercial banks. Total foreign exchange reserves are $22 billion that include
$4.8 billion of the commercial banks as well. And out of these $4.8 billion, the
government has borrowed $3.3 billion from the commercial banks, called as
“forward buying from the market” to be returned to them.
 In Pakistan only 1% of the population is registered in the Tax System, and the
Government collects just 9% countries wealth in taxes, which is lowest in the
world. This is the major cause why Pakistan Government is highly depended on
debt.

As competing for military supremacy with with India, Pakistan is spending 7 to 8

billion dollars on its defence budget which also hurts the economy. Due to the
constant pressure of Pakistan Military institutions, the elected government are
not intervening on this amount. So after paying interests on loans and defence
budget, there is very less amount left for development work.
9. Environmental Destruction - Through CPEC China is installing Coal Based
Power Plants in Pakistan which has adverse effects on human health, do
major disregard for the environment and utter destruction of ecological systems.
In one side China is trying to close their own coal based power plants and they are
transferring same on the Pakistani sides. Though the Hydroelectricity is cheaper
but it need lot of time to build. To solve Power Generation problem as fast as
possible, Pakistan don’t have any choice to accept Coal based plants which later
becomes major problems for Pakistani Environment.
10. Falling Education System - Pakistan is spending 2.68% of the GDP on
Education, an embarrassingly low amount when compared to other countries in
the region. The overall literacy rate has gone down to 58% which was
estimated at 60% in 2012-13, shows falling Social and Living Standards as
Pakistan stands at 160th in the world when it comes to literacy. Because of
Islamic and Political Radicalisation in education during Jia Ul Haq military rule,
the routes of quality education are shattered. The education administration is
slack, corrupt and rather helpless against the student community. There are no
proper checks on the functioning of the educational institutions and
accountability is missing at all levels. The centuries old syllabus and foreign
adopted material is another reason for degradation of whole system. Pakistani
text books and syllabus still contain the old boring lessons that were adopted by
text book boards a few decade back. Not acquirement of knowledge but easy
questions papers and fake degrees are the aim of education for most Pakistani
people. Enrolment at primary level is very low in Pakistan and most of the
students, after passing primary classes, are dropped and adopt different low-
grade jobs like electrician, plumber, motor mechanic etc. Currently in Pakistan
there are more than 25 million of children between the ages of 5 to 16 who
are not in schools and around 70% of children out-of-school have never been
to a school. As regards to schools’ infrastructure, 40% public sector primary
schools were operating without electricity, 28% did not have toilets, 25%
were without boundary walls and 29% had no access to drinking water.
While 7% schools did not have any building and 43% had unsatisfactory
buildings. Pakistan’s 6% graduation rate is very low in comparison with
developed countries.

Without proper skilled workforce you don’t have the capacity to run and
execute similar kind of project. Nandipur Hydro Power Plant is one of the
 prime example where after lot of operational failures Pakistan handed over the
operations to Chinese Company.
11. Falling Social Conditions in Pakistan : The indifference of Pakistan’s
government to health is reflected in the fact that Pakistan spends a mere 0.9%
of its GDP on health. Only two countries, the Democratic Republic of Congo and
Bangladesh, have a lower ratio of GDP to health spending. Because of the poor
quality of government provided health services in Pakistan, Pakistan’s citizens
rely heavily on private healthcare, which they avail primarily through out-of-
pocket payments. The infant mortality rate in Pakistan is 66 per 1,000 births
which is one of highest in the world. Life expectancy in Pakistan is 66 years, as
compared to 68 in India.

More than 40 million people in Pakistan do not have access to a toilet and
nearly 52% of the population (94 million people) in the country has no access to
improved sanitation facilities, forcing them to defecate in the open and these open
defecation has significant health and nutritional consequences.

Around 7 million people in Pakistan are drug addicts, while 700 people die
every day in the country due to drug-related complications. More than three
million Pakistanis between the ages of 15 and 64 use heroin regularly and there
are almost five million cannabis users addicted to smoking high-grade hashish
called ‘charas’.

Unemployment in Pakistan is closer to 8.5% and 5.3 million people still

unemployed. Theres are lot of problem for this conditions. In recent years
Pakistan economy creates significantly lesser jobs than required as result of
failing industries and services sector. According to economists eight out of 10 new
businesses in Pakistan fail within the first 18 months due to various reasons.

With these are the worst conditions, Pakistan has hardly very less space for
Development.
12. Internal Instability - Pakistan has facing lot oppositions with its provinces like
Baluchistan, Sindh, and KPK. Baluchistan has history of number of uprisings for its
Freedom Movement as it is lacking major share in development and
infrastructure. Sindh is the major economic powerhouse in Pakistan but it is
getting less amount of resources from Federal Government which is dominated by
Punjab Province. KPK and Gilgit Baltistan are also facing lack of infrastructure
problems. The dominated nature of Punjab province kept all its provinces its envy
and they never actually united as a nation which would make them powerful.
Failure of Kalabag Dam is a prime example of lack of unity in Pakistan’s
Provinces. The same thing is happening with CPEC, where every state is fighting
for getting maximum benefit.
13. Military Tussle with it’s neighbours - Pakistan is spending more than 3% of
GDP on it’s military. Pakistan’s military ambitions are mainly India centric and
to match the defence capabilities it has spend more on its Military than its
development works. It also has difference with Afghanistan as it supports
 extremest elements who are destabilising Afghanistan. And as a Sunni
background and close relations with Saudi Arabia, Iran is also keeping distance
from Pakistan on key relations. Only China has maintained good friendship but
Power is always come with prosperous relations with neighbours. Without
participation of neighbouring countries CPEC will never be successful as expected.
14. Corruption - This is the number one reason of Pakistan’s Economic
Backwardness. From Military Establishments to small bodies in Government
everywhere corruption is massively involved in every development activities.
The Pakistani Generals and their politician underlings who will squirrel away
every dollar they could steal and invest it wisely in Dubai, UK, USA and Panama.
They should not surprise anyone it is a kind of selloff like politicians did in
Venezuela and Sri Lanka.
15. No other choice to protect from India. - Pakistan is having following the
Security State Policy and believe India as their number one existential threat.
As India is becomes Economic Powerhouse, India is also increasing military
capabilities. And in the military might, there is no comparison between India and
Pakistan. Defence spendings in India is $50 Billions in comparison to
Pakistan’s $8 Billion Military budget. To balance it Pakistan always take help
from other powerful nations. Like they took help from United States till 2008 till
they started tilting towards India. They have no choice other than to involve China
though it will not benefit them in long term.
China cares only about itself no matter who it hurts. It's the same with CPEC. China will
take back its loan amount one way or another. It is very much possible that Pakistan will
end up giving control of the Gwadar Port to China. Their military's sovereignty is at risk.
China has already put up its naval ship and military in Pakistan to safeguard its investment.
Pakistan signed CPEC with good intentions but failed to get a fair deal.

Success of CPEC is also lies in hands of Chinese people because Pakistan sold your
prospects to them. So if Chinese people think they push Pakistan in loss making
business like Sri Lanka to gain full control, there is nothing Pakistan can do to stop
them. China also made similar offer CPEC like loan offer to India, but India’s
Politicians turned down their offer by taking wise decision instead of trusting Chinese
speculative intensions. With smarter decision India got similar investment on 1% interest
from Japan which shows their diplomatic correctness.

Pakistan cannot do anything as Chinese state owned army is in Pakistan, that means
Pakistan is already submitted to China. It is in favour of India as Chinese Regime is
neutralising Pakistan. Actions like arrest of Masood Azar and Chinese Navel presence in
Gwadar are indications that Pakistan is obeying Chinese Orders.

As well as China has to keep in mind that Pakistan is in the habit of dumping the
benefactors and working against their interests. Their duplicity are experienced and
suffered by US. China need to be cautious. The tail is capable of wagging the body.
Only time will tell, whether CPEC will be a way for Pakistan to move towards the path of
development or another burden to deal with and Like Sri Lanka, will Pakistan submitted to
China, but looking conditions in Pakistan there is very little hope.