China’s New Venture in Pakistan Can Be a Game Changer or an Opinion Changer
by Abdur Rehman Shah
Except for their common rivalry with India and strong military cooperation, there are as many paradoxes to the Pakistan-China relationship as there are hyperbolic expressions used to described this bond. Pakistan is a country that owes its very creation to the ideology of Islam. Today, religion continues to play an unparalleled role in the country’s domestic and foreign policy. In contrast, China is an officially atheist state. As a post-colonial nation once ruled by the British empire, Pakistan’s state institutions and education system have the bearings of a Western polity. On the other hand, the People’s Republic of China has always been a communist entity standing distinctively apart from Western values, with the exception of its economic reforms. Post-World War II history demonstrates the disparities in viewpoints between the two. By joining the Southeast Asian Treaty Organization (SEATO) and the Central Treaty Organization (CENTO) in the 1950s, Pakistan chose to side with the West over the USSR and China. Even at cultural level, hardly anything binds together the two so-called “all-weather” friends.
In a major shift, China no longer supports Pakistan on the issue of Kashmir or in its open brinkmanship with India (e.g. Kargil war, 2002 crisis). Trade and aid are also indicators of this relationship. China’s trade of $15 billion with Pakistan seems insignificant compared with its $70 billion trade with India, though India is a bigger market than Pakistan. China’s economic support — aid and government-sponsored investment — for Pakistan from 2001 through 2011 stood at around $4 billion. Pakistan received approximately double that amount, $7.8 billion, from the United States from 2002 through 2012.
However, during the past several years, China has enjoyed strikingly favorable public opinion in Pakistan. According to research by Pew, since 2005, Pakistanis have held a consistently favorable opinion of China. Whereas the U.S., despite sending billions of dollars in military and economic aid, has failed to cultivate goodwill among Pakistanis, China has garnered generous approval in the country. This paradox can be partially explained by the India factor and the common goal of Pakistan and China to counter the Indian threat. There is another way of understanding this phenomenon.
These two countries, which have not previously been so close to each other, are now pulled together by the multi-billion dollar project known as the China-Pakistan Economic Corridor (CPEC). CPEC is a $46-51 billion investment projected to build road networks, railway lines, energy, and industrial infrastructure across Pakistan. Three ventures top the project agenda. First, energy-related projects, which have been allocated $34.8 billion, the largest portion of the funding. Second, a 3,000 kilometer long network of roads punctuated with railway lines to connect Pakistan with Xinjiang in northwest China. And third, a port in Gwadar. In addition to being the starting point for CPEC, this port is where both the road- and maritime-based silk routes into and out of China will merge. Indicating its key position as part of China’s “One Belt One Road” initiative, CPEC has been named the flagship project of the modern silk route.
That China has the financial and logistical capacity to deliver on its plans and that demand exists in Pakistan for development projects, especially in the energy sector, is without question. China has a knack for carrying out projects that would seem daunting and insurmountable to others. It has become something of a Chinese tradition to take on ventures of grand scale. In the case of CPEC, the stakes are high, the goals are lofty, and the challenges forbidding. The plans may yet prove to be unfeasible.
What will happen if the grand claims linked to CPEC can not be materialized? Both governments have presented this venture in rosy and inflated terms. Pakistani officials, including the Prime Minister, seem not to tire of calling CPEC a game changer, not only for the country but also for the entire region. Pakistan’s government asserts that the project will alleviate the country’s energy shortages by 2018. The country suffers chronically from energy shortfalls. Pakistan’s energy deficit has exceeded 6,000MW and consumes almost 2% of its annual GDP. The corridor is intended to bring some 400,000 jobs to Pakistan, but there is little evidence to substantiate this claim.
Skepticism as to where the corridor might lead in the future has been in the air for some time. Pakistan and China have yet to make public the terms and conditions of these investments. The head of Pakistan’s top national bank has called for transparency regarding the deals of the project. The IMF has warned about the unfavorable future impacts of these loans on Pakistan’s current accounts. Pakistan may be overstating the potential of the project to create domestic jobs. A fully-functional CPEC could lead to an influx of Chinese imports that could put local industries at disadvantage. The country’s trade deficit with China has already swelled to $6.2 billion. The Chinese remain tenacious when it comes to trade deals as exemplified by Pakistan’s successive but abortive efforts to extract concessions from Beijing regarding the Free Trade Agreement-II. There are some implications for state institutions, including the civil-military divide. Sustaining challenging projects can further strain the state machinery in the long run.
If the Chinese have proved too ambitious and inclined towards more obscure dealings, the Pakistani government has proved reckless in its attempts to oversell the potential of investment of and trade with China for domestic political gains. Regardless of the debate of how much one is to be blamed, both the parties will have to bear the brunt of these actions. Judging by the past experience, it may not concern the government in Pakistan if its expensive economic schemes turn out as white elephants. Ultimately, it is the country’s taxpayers who will pay for failed economic policies. But China may incur bigger costs from a failed plan. The goodwill that it has accumulated in Pakistan over the decades could be negatively altered. Economic debacles generally lead to recriminations and distrust between the parties involved in that arrangement. China is the central player in CPEC: the catalyst and executor-in-chief. In this sense, this attempted project will be a litmus test for the image of the “all-weather” friendship.
The situation requires a balancing of expectations and demands on the part of both sides. China should not expect from Pakistan what the latter is not yet ready to deliver. China must be considerate of the structural and institutional limitations of its neighbor. On the other hand, Pakistan will need to stop asking for more and instead focus on properly utilizing what it has so far received. Most importantly, all possible gains and losses from CPEC should be measured in terms of their potential impacts on Pakistani citizen’s lives and state institutions. The approach of both sides to this venture should be realistic and practical, rather than romantic and implausible.
Image "Construction Road" courtesy Sigurd Rage, CC BY-NC-ND 2.0
About the Author
Abdur Rehman Shah is Research Associate at the Center for Research and Security Studies (CRSS), Islamabad. He holds Master’s and M. Phil. in International Relations from Quaid-i-Azam University, Islamabad. He tweets @abdur_shah.
