Pakistan, China set to reinvigorate economic corridor project connecting Xinjiang to Gwadar

Ahead of Prime Minister Shehbaz Sharif’s visit to China from June 4, hopes are high in Islamabad that the flagging multibillion-dollar China-Pakistan Economic Corridor (CPEC) will be revived.

This is after a successful visit in mid-May by Deputy Prime Minister Ishaq Dar to Beijing, at which pledges were made by both sides to put the massive investment plan back on track after it has languished in recent years because of project delays, financial problems and a spate of deadly terrorist attacks on Chinese nationals working on the projects.

“We have achieved much of what we wished for from this visit,” Dar declared at a press conference on his return to Islamabad.

Earlier in Beijing, Chinese Foreign Minister Wang Yi at his joint press conference with Dar had said: “The two sides agreed to strengthen the docking of development strategies and build an upgraded version of CPEC.”

Muneeb Salman, a research associate at the Institute of Strategic Studies, said: “Dar has set the stage now and we expect to see meaningful developments in the CPEC during the upcoming visit of Prime Minister Shehbaz Sharif to Beijing.”

PM Shehbaz is expected to follow up on the recent progress made during Dar’s visit and seal further agreements when he travels to Beijing.

Apart from meeting Chinese President Xi Jinping, PM Shehbaz will be holding talks with Premier Li Qiang on topics such as upgrading the CPEC, advancing trade and investment and enhancing cooperation in security and defence, energy, space, science and technology, and education. He will also meet executives of Chinese companies in the fields of oil and gas, energy, information and communications technology, and emerging technologies, according to a statement from the Ministry of Foreign Affairs.

Reinvigorating the CPEC is important to Pakistan’s struggling economy, which is beset by high inflation rates, trade deficits and massive debt, with the problems exacerbated by the Covid-19 pandemic, Russia-Ukraine war, catastrophic floods and political instability.

High inflation rates — which hit a record 38 per cent in May 2023 before easing to 17.3pc in April 2024 after the government raised interest rates — are gruelling for the 240 million population, 40pc of which live below the poverty line.

CPEC is a central component of China’s Belt and Road Initiative (BRI) to construct infrastructure, including energy and transport links, across continents.

Formally launched in 2013, CPEC aims to link China’s western region of Xinjiang to Gwadar port on the shores of the Arabian Sea, effectively connecting China with the Middle East, Africa and Europe and shortening its trade routes.

For Pakistan, it means being part of the regional and global trade links through the BRI and getting much-needed communication and energy infrastructure.

Even before the BRI’s launch, the Chinese had helped to build the deep sea port at Gwadar, a small fishing village in western Balochistan, in 2002.

As part of CPEC, the port was to be further developed to include a special economic zone and a floating liquefied natural gas facility among other things.

The $46 billion project also included road and rail links and energy infrastructure development.

At the time, many analysts saw CPEC as a game-changer for the Pakistani economy, bringing much-needed investment and infrastructure development that would boost economic growth, create millions of jobs and reduce poverty.

But implementation has slowed down in recent years for various reasons that are a combination of economic and security factors.

China, which has invested $26bn in CPEC so far, has shown reluctance recently to fund fresh projects in part because of its own economic slowdown but also because of delays in existing CPEC projects caused by bureaucratic corruption, the recent political instability in Pakistan, and the security threats in Balochistan, Khyber Pakhtunkhwa and Sindh.

Pakistan’s own economic crisis has not helped matters.

At the end-2022, of the nine approved special economic zones, four were still under construction and five yet to be launched. As for transport infrastructure, only six projects were completed, five were under construction and 13 were yet to start.

However, about a dozen coal-fired power plants have been installed in addition to over half a dozen motorways and mass transit projects under the first phase. More road projects and a railway line are planned for the second phase.

The security concerns plaguing the CPEC projects were underscored on March 25, when a Baloch millitant the Majid bregaid attack targeting a vehicle ferrying workers to the Chinese-built Dasu Hydropower Project in KP left five Chinese nationals and one Pakistani dead.

“The attack raised troubling questions whether it was simply targeting Chinese nationals or an attempt to undermine Sino-Pakistan relations and sabotage progress on the crucial second phase of the CPEC,” Salman said.

The brazen assault, which drew strong condemnation from the Chinese authorities, highlighted the persistent threats faced by Beijing’s infrastructure investment in Pakistan despite Islamabad’s assurances of foolproof security measures for CPEC personnel and assets.

In 2022, a suicide bomber killed Chinese teachers in Karachi and in 2021, nine Chinese workers were killed in what was seen as a “bomb attack” on a bus in northern Pakistan.

Such attacks have come about as ethnic Baloch communities see China as collaborating with Islamabad to exploit the abundant mineral and energy resources of Balochistan and worry that development spurred by CPEC will marginalise them.

Still, Beijing now appears keen to revitalise the CPEC at a time when other countries have appeared interested in investing in Pakistan after the current government of PM Shehbaz took power following the February elections.

For example, in April, Saudi Arabia committed to investing $5bn in Pakistan’s mining and energy sector with a long-term investment plan of $25bn. The government of the United Arab Emirates has also committed $10bn in investment for different projects in the country, Islamabad said on May 23.

While the CPEC faces economic, security and political challenges, China views it as a strategically vital project that advances its economic, political and security interests in the region and beyond.

“There are many long-term interests attached with the project,” remarked Haris Zarnir, business editor at a local news channel, Dunya News.

Not only can Chinese companies reach the Middle Eastern and African markets in cost-effective ways, but CPEC can also be a counterbalance to India by strengthening China’s ties with Pakistan as a key ally in the region, he told The Straits Times.

Overall, while CPEC has brought much-needed investment and infrastructure development to Pakistan, the expectations of significant economic growth, job creation and regional connectivity have not been fully met yet.

There are ongoing concerns about debt sustainability, transparency, security and geopolitical tensions that Pakistan needs to address to capitalise fully on the potential of the CPEC, analysts observe.

By arrangement with the ANN/The Straits Times.