Discuss Pakistan-China Relations, Highlighting the Economic and Strategic Importance of China-Pakistan Economic Corridor (CPEC).

PMS 2016 Solved Pakistan Affairs Past Papers | The Economic and Strategic Importance of CPEC

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Question Breakdown

In this question, the examiner has asked you to discuss the economic and strategic importance of CPEC. So, rationally, the question has two main parts. However, start with giving an overview of CPEC and then main focus on asked parts. End your question with a conclusion. Do not forget to add a diagrammatic presentation via the map.

Outline

1-Introduction

2-Understanding Pak-China Relation

3-China-Pakistan Economic Corridor: a bird’s eye view

4-Current Scenario of CPEC

5-Economic significance of CPEC

• Fostering Pakistan’s economy
  • Evidence: According to the World Bank, the 60 billion China -Pakistan Economic Corridor (CPEC) offers Pakistan enormous economic potential to boost its economy. 
    
• Rise in industrialization
  • Evidence: According to the CPEC document of the Long Term Plan (2017-30), the growth of industrialisation would also contribute to Pakistan’s transformation into a country that is extremely inclusive, globally competitive, and affluent.
    
• Foreign Direct Investment Opportunities
  • Evidence:  According to Pakistan Minister for Planning, Development and Special Initiatives, Ahsan Iqbal, the China-Pakistan Economic Corridor (CPEC) has been helping transform Pakistan to a land of foreign direct investment opportunities.
    
• Settling Debts
  • Evidence: According to CPEC analysts from Pakistan and China Government departments, CPEC is a debt reliever for Pakistan, as by 2030, it will boost the nation’s economy by up to one trillion.
     
• Rise in employment
  • Evidence: According to the Pakistan Minister for Planning, Development and Special Initiatives, Ahsan Iqbal can add 2 million jobs directly or indirectly, and it can increase the annual economic growth by around 2.5 % annually alone in Pakistan.
    
• Poverty Alleviation
  • Evidence: According to the Ministry of Planning Development and Reform of the Government of Pakistan, CPEC boosts the development of the local agricultural economy and helps local people get rid of poverty and become better off.
    
• Growth in the Construction Sector
  • Evidence:  According to research, the CPEC has the potential to open up new prospects for Pakistan’s construction sector via knowledge transfer, international investment, and infrastructure development.  
    

6-Strategic Significance of CPEC

• Security Cooperation
  • Evidence: According to the data on CPEC, one of the most significant geo-economic aspects of China-Pakistan military cooperation is the CPEC.
    
• Balance of Power in South Asia
  • Evidence: According to CPEC analysts, CPEC is a game changer in the balance of power in South Asia
    
• Regional Integration
  • Evidence: According to Peter Frankopan, the author of The Silk Roads, “A New History of the World, “Pakistan is the Crossroads between East and West and between North and South because trade and transportation routes that weave Asia together intersect in Pakistan”.
    
• Agricultural Development
  • Evidence: According to the Ministry of Planning Development and Reform of the Government of Pakistan, CPEC promotes the transition from traditional agriculture to modern agriculture in the regions along the CPEC.
    
• Rise in Urbanization
  • Evidence:  According to the Ministry of Planning Development and Reform Government of Pakistan, 50 per cent of the nation’s majority would be in cities.
    
• Strengthening Energy Sectors
  • Evidence: CPEC investment in electric power has helped Pakistan in easing the energy crisis and provided opportunities for economic activities. Book: Hali, 2020.

7-Conclusion

Answer to the question

Introduction

The China-Pakistan Economic Corridor, a game changer for Pakistan, plays significant economic and strategic role in South Asia, benefitting not Pakistan and China only but also the entire region socially, politically, and on security fronts. To elaborate, CPEC, a sub-part of Belt and Road Initiative_ holds a set of multi-dimensional projects that focus on mutual economic, political, and security interests of both Pakistan and China. However, since Pakistan is a weak economy country with regional instability, industrial incapability, and unstable energy sector, CPEC plays crucial role in saving the drowning boat of the nation’s economy through short, medium, and long term planned projects. Moreover, the CPEC under its projects enables Pakistan to transform its economy, rise employment, attract foreign investors, and develop its agriculture and energy sector by working on infrastructure constructions, industrialization, and urbanization objectives. Above all, CPEC allows Pakistan to be at the crossroads of South Asian countries, ensuring regional stability and integration, enhancing regional security, and maintaining balance of power in the region through collaborative trade, transit route, and commerce. Consequently, CPEC plays pivotal role in making Pakistan the tiger of the Asia. 

 Understanding Pak-China Relation

Before moving towards identifying the CPEC, it is pertinent to understand the Pakistan-China relation. Notably, the narrative of Pakistan _ and China’s brotherly relationship has gained high fame among nations, and it has been further deepened after the initiation of CPEC in 2015. Further, owing to major shared factors, including geographic proximity, common strategic and economic interests, common rivals, and mutual benefits in security and defence capabilities, both nations have been friends during tough times for decades. Also, in the realm of international relations, both countries emphasise their relation by using the notions of “all-weather friendship”, “iron brotherhood”, “strategic partnership”, and “a comprehensive partnership of cooperation”, broadening communication. As stated by first Premier of China, Zhou Enlai, in 1964, ‘higher than the mountains, deeper than the seas, and sweeter than honey”. To highlight, the relation till now remained firm and deepened after the initiation of CPEC project. To sum up, China and Pakistan, owning to major common factors, have been brothers in arms for decades.

China-Pakistan Economic Corridor: a bird’s eye view

Following that, the Pakistan-China Economic Corridor (CPEC), a project of the Belt and Road Initiative, is a set of enormous short-, medium-, and long-term projects planned by China and Pakistan in regional contexts. Comprehensively, the CPEC under its projects, emphasises on regional connectivity, industrialization and urbanization, information network infrastructure, energy and military cooperation, agricultural development and poverty alleviation along with multiple socioeconomic, political, and security objectives aimed at regional stability and integration, benefitting not only China and Pakistan but the entire region of South Asia at large. To unzip, CPEC holds three specific phases; first, short-term phase (2015-2022) focuses on infrastructure, energy, and port development; second, medium-term phase (2021-5) aims at establishing thirty three special economic zones (SZEs) along with nine zones; finally, the third phase (2022-50) aims at overall economic transformation, including economic cooperation, transportation, infrastructure, and industrial cooperation, having multidimensional effects in the development of both the countries and lives of millions.

Current Scenario of CPEC

At present, since the CPEC holds projects relating to power, highways, and special economic zones, the following paragraph just describes the major projects being implemented under the CPEC.

• Power Projects include Coal Fired Power plants: six projects are completed and one project is under construction.
• Hydro Projects include five hydro projects: 3 projects are completed, and 2 projects are under construction.
• Solar projects include one constructed solar project.
• Special Economic Zones include nine projects: four under-construction projects and five In-Pipeline Projects. 

However, challenges, including regional instability due to U.S – Taliban tensions, COVID-19, insurgencies and terrorism, and disastrous climate change effects have hampered the progress and development of the projects under CPEC, making the nation confront an intense economic crisis. Notwithstanding, as of 2022 CPEC has enhanced the nation’s export and development capacity. Also, countries including Saudi Arabia, the United Kingdom, Japan, and South Korea have noted their investments in Pakistan. In short, the CPEC is still in its operational phase, ensuring better future for both the nations and civilians.  

Economic significance of CPEC

Additionally, CPEC has multidimensional economic benefits for Pakistan, including rise in employment, poverty alleviation, and foreign investments. In this regard, the following paragraphs highlight the economic significance of the CPEC.

• Fostering Pakistan’s economy

To begin with, CPEC has wider economic benefits for Pakistan in terms of commerce, trade, investments, infrastructure, and poverty alleviation. It is, however, a game changer for Pakistan’s economy. To elaborate, CPEC withholds major projects, including roads, railways, ports, pipelines, and energy that are expected to foster the nation’s logistic capabilities. According to the World Bank, the 60 billion China _Pakistan Economic Corridor (CPEC) offers Pakistan enormous economic potential to boost its economy. However, till 2024 there are around 50 projects have been completed in Pakistan that have added about $25 billion to the nation’s economy, also paving the way for a major number of employments. Therefore, CPEC, if constructed by 2030, has the potential to transform the nation’s economy, altering and developing major cities and the lives of millions.

• Rise in industrialization

Following that, the industrialization of Pakistan is one of the main objectives of CPEC that enables Pakistan to shift its economy from agriculture to industrialization. As a part of Industrial cooperation or Special Economic Zones (SEZs) projects, the nation is given an opportunity to initiate their industrial projects in the fields of automotive manufacturing, steel, chemical-based industry, foundries and fabrications, pharmaceutical, garments, warehousing, etc. As an illustration, Faislabad, one of the most industrialized cities in Pakistan, is a glaring example of the projects worked on under the CPEC. According to the CPEC document of Long Term Plan (2017-30), the growth of industrialisation would also contribute to Pakistan’s transformation into a country that is extremely inclusive, globally competitive, and affluent. However, there are remaining projects of the SEZS that need to be completed. By completing them, the state can move faster towards development and overcome its dependency on imports. Therefore, CPEC plays a pivotal role in the industrialization of Pakistan, contributing to the nation’s economic development.

• Foreign Direct Investment Opportunities

Over and above, Unfortunately, Pakistan faces low inflows of Foreign Direct Investments (FDI) year-on-year, standing down by only 1.9 billion dollars which has been, exceptionally, a little higher than previous years. Nevertheless, to combat low FDI, CPEC, through construction and industrialization projects, gives a path to higher Foreign Direct Investment in the country, further ensuring not only the nation’s economic growth but also its independence from foreign loans. For instance, Saudi Arabia signed a memorandum of $10 billion to invest in one of the CPEC projects, the Gwadar oil refinery. According to Pakistani Minister for Planning, Development and Special Initiatives Ahsan Iqbal, the China-Pakistan Economic Corridor (CPEC) has been helping transform Pakistan into a land of foreign direct investment opportunities. Therefore, CPEC is pivotal for moving Pakistan from an investment-dry to an investment-friendly country.  

• Settling Foreign Debts

In spite of that, since the CPEC promises opportunities for economic growth, industrialization, and urbanization in Pakistan, the nation would be able to come out of IMF bills and external debts. To illustrate, as stated by Ehsan Iqbal, Minister for Planning, Development and Special Initiatives, the CPEC is significant for Pakistan’s roadmap to achieving a trillion-dollar economy by 2030. With respect to this statement, if the CPEC successfully achieve its objectives of investments, construction, and economic transformation, the nation would witness substantial economic strength that might help Pakistan manage its foreign bills and loans, positioning CPEC as a debt reliever. Consequently, Pakistani government departments regard the CPEC’s enormous project as a debt alleviator for Pakistan.  

• Rise in employment

 In addition to that, CPEC is a candle of hope for the Pakistani youth, grappled with unemployment. Through its infrastructure constructions, bilateral trades and commerce expansion, and industrialization schemes, CPEC provides opportunities for employment with better pay and conditions for millions of people.  According to Pakistani Minister for Planning, Development and Special Initiatives, Ahsan Iqbal can add 2 million jobs directly or indirectly, and it can increase the annual economic growth by around 2.5 % annually alone in Pakistan. Therefore, CPEC plays a crucial role in mitigating unemployment.

• Poverty Alleviation

Withal, Poverty alleviation is one of the main drawbacks that makes CPEC mandatory and crucial. To describe, a majority population of Pakistan lives in rural areas where people are highly dependent on agriculture, which is already in a vulnerable condition, making people lose wealth and suffer poverty. However, CPEC has a broad vision of developing and modernizing the agriculture sector and industrializing Pakistan, opening the doors to economic prosperity for people. According to the Ministry of Planning, Development and Reform Government of Pakistan, CPEC boosts the development of the local agricultural economy and helps local people get rid of poverty and become better off. Therefore, poverty alleviation is one of the other main objectives that make CPEC highly crucial.

• Growth in Construction Sector

Last but not least, the Construction sector contributes to 8.34 per cent of the nation’s GDP, which tends to be a key driver of Pakistan’s economic expansion. In this regard, CPEC gives Pakistan an opportunity to foster its construction industry by providing 100 construction firms in Pakistan. Moreover, under CPEC, a vast network of highways, roads, pipelines, and railways are to be built across Pakistan, which will have a great impact on Pakistan’s economy. For example, since 2000, the nation witnessed large number of constructions, some including JF-17 technical building in Kamra, the Islamabad International Passenger Terminal Building, and many embassies and consulates. Also, under the umbrella of CPEC, high-standard and high-level construction projects, including Sukkur Multan Motorway and Peshawar _Karachi Motorway, have been completed till 2020. According to CPEC research, the CPEC has the potential to open up new prospects for Pakistan’s construction sector via knowledge transfer, international investment, and infrastructure development.

Strategic Significance of CPEC

Apart from its economic significance, CPEC plays a mandatory role in developing and transforming Pakistan in terms of urbanization and modernization. Also, it is crucial for regional security, stability, and integration in South Asia and effective in counterbalancing Pakistan-China’s common rivalry nation, India. Thus, the paragraphs below highlight the strategic importance of CPEC.

• Security Cooperation

Initially, Pakistan grappled with security issues due to its strategic relation with neighbouring countries, the rise in terrorism and insurgencies, and climate change miseries, questioning the nation’s security policy. To overcome such issues, CPEC plays a pivotal role in the nation’s security policy as it has led Pakistan and China towards mutual benefits in security and defence capabilities. Both nations, by military cooperation, encounter terrorism, seditions from rival nations, and insurgencies threatening constructions, ensuring communal efforts. According to the data on CPEC, one of the most significant geo-economic aspects of China-Pakistan military cooperation is the CPEC. Thus, CPEC is crucial as it links the military cooperation of both nations.

• Balance of Power in South Asia

Notably, the CPEC is also considered to be a game changer in the balance of power in South Asia. Particularly, it empowers Pakistan and China in South Asia, triggering increasing tensions for India- an emerging economic power and influential in the region. However, to encounter India’s influence, CPEC, under its positive–sum geo-economic and geo-political policies, plays a significant role in balancing the regional power by creating economic integration, establishing a more stable geo-political environment, and assuaging India’s uncertainty, thus, leading to alleviating the longstanding enmity between India and Pakistan. Consequently, CPEC plays a vital role in the growth and influence of Pakistan and the balance of power in the region, making the nation the tiger of Asia.

• Regional and Intra-regional Integration

More significantly, the CPEC provides an outlet to the landlocked regions of Central Asia and Western China to the Arabian Sea and beyond. To analyze, there are multiple vulnerabilities, including socio-economic, political, and security challenges in South Asia that make Pakistan lack regional integration and become economically weak. However, by filling such gaps through infrastructures of highways, railways, pipelines and ports, as well as, by promoting regional cooperation, CPEC offers stakes and economic benefits for all the states, ensuring regional and intra-regional connectivity. Also, the connectivity makes the economy of Pakistan_ economically prosperous and a regional pivot. According to Peter Frankopan, author of „The Silk Roads: A New History of the World‟, writes that “Pakistan is at the Crossroads between East and West and between North and South because trade and transportation routes that weave Asia together intersect in Pakistan”. Therefore, CPEC promotes regional connectivity and translates Pakistan’s dream of becoming a regional transit hub into reality.

• Agricultural Development

Unfortunately, the agriculture sector is in a worse situation; farmers use traditional agriculture methods and old equipment and tools. Also, the nation is failed to provide fundamental facilities, including modern agricultural technologies and irrigation sources, making people face losses. However, CPEC aims to improve the agriculture sector by working in key construction areas, such as biological breeding, storage and transportation, disease prevention, water resources utilization, conservation and production, and land development. Furthermore, CPEC, under its projects, also concentrates on the water-saving modern agricultural zones and increment in the development and remediation of medium—and low-yielding land to achieve efficient use of resources. According to the Ministry of Planning Development and Reform, the Government of Pakistan promotes the transition from traditional agriculture to modern agriculture in the regions along the CPEC. Consequently, CPEC focuses on the overall transformation of agriculture sectors.

• Agricultural Development

Furthermore, one of the important perspectives of CPEC is that it plays a pivotal role in urbanizing Pakistan. To elaborate, by ameliorating public governance, augmenting infrastructure construction, growing industrialization, and increasing opportunities for foreign investment, CPEC paves the way for urbanization and development of Pakistan. According to the Ministry of Planning, Development and Reform Government of Pakistan, 50 per cent of the nation’s majority would be in cities. Also, via the completion of CPEC projects, Pakistan can not only speed up its industrialization and urbanization but also provide high-quality life to its citizens, emerging as a prosperous and globally competitive country. Therefore, the projects under CPEC play a crucial role in urbanizing Pakistan when completed successfully.  

• Strengthening Energy Sectors

Finally, CPEC enables Pakistan to meet the needs of its energy sector, ensuring energy for overall requirements, households and industries. With respect to that, $34.7 billion from $60 billion of CPEC is invested in the energy sector, ensuring a constant and uninterrupted energy supply in the nation. In general, there are twenty-one projects working in the energy sector; among them, fifteen projects have been successfully completed. The projects include coal, solar, wind, and hydropower plants, alleviating the energy crisis to some extent. According to CPEC researcher, Hali, CPEC investment in electric power has helped Pakistan in easing the energy crisis and provided opportunities for economic activities. Therefore, the energy sector is one of the major and most profound parts of the CPEC’s projects, given intense attention and concentration.

Conclusion

In a nutshell, CPEC, a game changer for Pakistan, plays a crucial role in developing the nation socially, economically, politically, and above all, on security fronts. However, as Pakistan is an economically vulnerable country and lacks energy capabilities, CPEC, under its multidimensional projects, enables Pakistan to transform its economy from an economic crisis to an economic giant nation. Apart from that, through industrialization, modernization, and urbanization, which are possible under CPEC’s projects, Pakistan can raise employment opportunities, pay foreign debts, encounter regional insecurity, alleviate poverty, and give a prosperous life to its civilians. Importantly, the country can be a hub for regional trades, foreign investors, and crossroads for Asian countries, making it the tiger of Asia. To conclude, the CPEC serves as a gold mine for a nation’s overall prosperity.

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