Whether it was the ancient Silk Route, Grand Trunk Road, RCD rail connection, Karakorum Highway, Eurasian land bridge or Trans-Siberian Rail, all have proved the efficacy of connectivity in the socio-economic development of civilizations. However, the visionary Belt and Road Initiative (BRI) of President Xi Jingpin, of which China-Pakistan Economic Corridor (CPEC) is the flagship project with Gwadar Port as the Jewel in the crown of CPEC, stands apart from all other previous initiatives for its scale and positive socio-economic developmental impact which has reached far and wide.
The Visionary Scope of BRI and CPEC: Beyond Traditional Connectivity
Connectivity in the 21st century is not sector specific but is envisaged as part of an integrated whole, encompassing the development of corridors of prosperity through networks of trade, transport, energy, flow of people, goods, services, communication, and technology that allow for greater efficiency in the distribution of resources. The concept comprises both hard and soft connectivity and is seen as an important pillar of economic development and regional integration.
Improving better access to larger markets increases trade and production, encouraging the growth of local economies. Ease of movement lowers transport costs and increases supply reliability, strengthens region’s comparative advantages. Reduced costs also encourage the creation of stronger production networks, which in turn, drive trade and investment. Improving connectivity is thus essential for the region’s prosperity, continued growth and most importantly, poverty reduction.
As a result of the development of BRI and CPEC it is being fast realized that in addition to the short-term impact of investments in connectivity infrastructure, there are also medium and long-term effects in strengthening the foundation for future economic growth, including making labour markets more efficient and productive. The growth of Global Value Chains (GVC) has been in tandem with improvements in transportation and communications technologies, which have allowed the fragmentation of production in different locations.
CPEC is therefore, high on the policy agenda of both China and Pakistan as it is contributing to the realization of Pakistan’s national developmental goals and is a practical manifestation of Pakistan’s pivot to geo-economics. It is a people-centric development project and represents a win-win proposition of international cooperation providing new opportunities for economic rejuvenation and prosperity of both countries and other regions. CPEC also aims to promote peace and security through compressive socio-economic development.
CPEC: A Catalyst for Pakistan’s Geo-Economic Transformation
Nurtured by generations of leadership on both sides for over seven decades Pakistan and China enjoy All-Weather Strategic Cooperative Partnership among Iron Brothers. CPEC is the distinctive symbol of this enduring friendship and a clear manifestation of the desire of leadership on both sides to take the economic and trade relations to new heights to commensurate with the political and strategic relationship. CPEC covers a vast array of short, medium and long-term projects. This model of development fully resonates with Pakistan’s own vision and firm belief that CPEC is a “game-changer” not only for Pakistan but the entire region and presents enormous opportunities to people from Gwadar to Kashgar and beyond.
Over the past one decade, this transformational project has become a tangible reality and has already helped improve the economic landscape of Pakistan. It has propelled Pakistan’s infrastructure development by laying a strong energy and road infrastructure for subsequent development of industry, agriculture and human resource. When fully operational Gwader port will be one of the largest deep-sea ports in the region located just before the entrance to the Strait of Harmoz, the busiest region for the flow of energy from Gulf States to rest of the world. By utilizing Gwader Port, China will be able to access energy resources directly from the Gulf States avoiding the long, busy and politically charged Malaka Straits and also save time. As CPEC connects China to the Indian Ocean by road and rail, it provides fast and easy access for Chinese exports to South Asia, Middle East, Africa and Europe.
Additionally Pakistan is situated at the nexus of the four most dynamic regions of the world-China, South and South-East Asia, the Middle East, and Central Asia making it crucial link in the peace, prosperity and economic integration of the entire region. The development of transit routes, customs harmonization and streamlining of trade regulations will create a conducive environment for regional economic cooperation and boost Pakistan’s trade volume.
Regional and Global Impact of CPEC: Expanding Horizons
CPEC through Gwadar port will not only provide better access to the Middle East, which is an important market for Pakistani exports but will also but will also provide Middle East a route to Central Asia and beyond. Similarly Africa’s economic potential is huge with trillions of untapped natural resources and high youth percentage. Africa has rightly earned the title of the Continent of the future. Pakistan with its Look Africa policy is keenly interested in enhancing trade and investment relations with Africa. CEPEC thus provides a massive and critical platform for achieving this objective which will be mutually beneficial for both Pakistan and Africa. Therefore, once completed CPEC is expected to bring prosperity to around 3 billion people of the region, including China, South Asia, Central Asia, Africa and the Middle East.
Simultaneously, the world is in a flux and is witnessing significant political, strategic and economic transformation. The end of cold war heralded the emergence of numerous fast developing economies in Asia, South America and Africa. However, the most seminal development is the phenomenal rise of China, strengthening the expectation of the establishment of a multipolar world by the middle of the 21st Century. In the current changing world scenario and shifting of the political and economic power from the Atlantic to the Pacific.
China has assumed great importance and influence through BRI and the region where Pakistan is a close partner of China through CPEC to pursue peace and stability in the region. CPEC therefore, has to be understood in the context of Pakistan and China’s strategic interests in Asia-particularly South and East Asia and the way the US and the West in general has challenged them. Faced with such difficulties, china hopes to expand its strategic space by heading west and for Pakistan strategic relationship and connectivity is seen as essential for socio-economic development. In this regard the statement of President Xi Jingpin is of great strategic importance. He said that, “Given that the world is seeing more sources of instability and risk, the two countries should stand together more firmly, promote their all-weather strategic cooperative partnership and build a closer China-Pakistan community of shared future in the new ear.”
CPEC’s Tangible Progress and Future Trajectory (Phase I & II)
The first phase of CPEC which is almost complete, has had a positive impact on the lives of millions of Pakistanis by providing better access to resources, modern infrastructure, addressing the critical energy deficit, creating employment opportunities and enhancing the country’s capacity for transit and industrialization. This collaboration has not only bolstered economic and financial cooperation, but has also facilitated people-to-people exchanges and cultural ties, promoting mutual understanding and friendship between the two nations. Today there are over 30,000 Pakistanis getting higher education in the prestigious Chinese universities, hundreds of Chinese traditional medicine hospitals are opening across Pakistan and tens of thousands of people are traveling to and from China for tourism, business, investment and other purposes. Thousands of Chinese state owned and private sector enterprises have their country offices in Pakistan helping to improve economic and trade relations between the countries
So far China has invested almost $25.4 billion, primarily in energy and infrastructure projects. Another 36 projects worth USD 28.4 billion are in the pipeline. Thus far, CPEC projects have directly or indirectly generated approximately 200,000 jobs in Pakistan, added over 8,000 MW of electricity to the national grid, built about 809 km road infrastructure and installed 886 km power transmission lines. Thus, CPEC has made substantial progress as numerous projects have been completed across Pakistan, including the first metro line in Lahore, Pakistan’s second most populous city. China’s investment in Pakistan has been instrumental in boosting the country’s foreign direct investment and attracting other international investors to the region. CPEC’s success has positioned Pakistan as an attractive destination for businesses seeking to capitalize on the opportunities offered by this strategic corridor.
In Gwadar China has completed several major projects under CPEC that, in addition to Gwadar Port, include the Gwadar Power Plant, the distribution of 2,000 boat engines to the fishermen of Gwadar, the Khuzdar-Panjgur transmission line that connects Makran with the national grid, the new Gwadar International Airport, the Pak-China Friendship Hospital, the Pak-China Technical and Vocational Institute in Gwadar, the Gwadar East Bay Expressway project and the Gwadar Free Zone.
Chinese vice Prime Minister He Lifeng visited Pakistan for the 10th anniversary commemorative ceremony in July 2023. On this occasion both China and Pakistan strongly reaffirmed their commitment to CPEC “high quality development” which envisages the building of growth corridor, livelihood enhancing corridor, a green corridor, a health corridor, knowledge corridor and an open corridor. They also emphasized the speedy completion of the remaining projects, particularly the industrialization of Pakistan through SEZs and revolutionizing the agriculture sector.
In a message on the 10th anniversary of CPEC President Xi Jingpin expressing strong support for CPEC, stated that, “China and Pakistan have been advancing CPEC under the principle of extensive consultation, joint contribution and shared benefits and have achieved a number of early harvests…..China and Pakistan will continue to improve overall planning and expand and deepen cooperation. No matter how the international landscape may change. China will always stand firmly with Pakistan.” This clear and unambiguous declaration of support by China should not only silence the critics of CPEC but also encourages both governments to work with greater zeal and fervor to complete the remaining projects and expedite the construction and operationalization of the prioritized SEZs.
Unleashing Pakistan’s Economic Potential: SEZs and the Blue Economy
The real fruits of CPEC will only accrue with the speedy development of SEZs which will enhance production of diversified products and value added merchandise to China, Africa, Middle East, and Central Asia and even to other South Asian countries making Pakistan the economic hub of the region. The nine SEZs under CPEC would be a lifetime opportunity for Pakistani companies to collaborate with Chinese companies for the development of export-oriented manufacturing sectors. It will also enable firms to cluster and tap the benefits of external economies, and will thus provide an opportunity to put domestic industries on a higher learning curve.
Proper establishment and successful running of SEZs are of critical importance for the second phase of CPEC to take off. SEZs under CPEC have the potential to enhance productivity, integrate Pakistan with global value chains and revive its manufacturing industry in the long run. The development of SEZs must be aimed at improving the overall business climate in the country. This can be done through improved infrastructure and trade facilitation to attract investment from foreign and domestic firms in the zones. It is therefore, important to remember that in order to make SEZs a Success Story Pakistan must take some necessary and urgent steps: a. strengthening the Regulatory and Administrative Framework b. Addressing Land-Related Issues c. providing the Right Incentives to SEZs d. Encourage Backward and Forward Linkages.
It is heartening to see that some of the SEZs already inaugurated are rapidly beginning to establish themselves and with the passage of time will emerge as powerful drivers of industrial growth and modernization in Pakistan. It is therefore, important to urgently focus on the issues facing SEZs in Pakistan and with targeted policy interventions resolve them. Fourth industrial revolution and high-tech manufacturing should form a key component of the industrial cooperation in SEZ’s under CPEC. Development of technologies and high-end innovation capabilities should be the major goals of China-Pakistan industrial cooperation.
The maritime industry is more than a single industry; it is a parallel economy that connects all other industries. CPEC can serves as a womb for the birth of Pakistan’s blue economy. CPEC offers immense opportunity to explore and exploit the untapped blue economy of Pakistan. With CPEC and robust Gwadar port, the dream to capitalize on the country’s blue economy for a sustainable growth can be realized. Presently Pakistan’s fish export is between $ 250-300 million per annum. The industry has the potential to grow to $2 billion annually due to the positive impact of CPEC and Gwadar port. An enhanced maritime partnership between China and Pakistan under CPEC can ensure a sustained economic growth for Pakistan in particular and the region in general.
According to Director General of Gwadar Development Authority (CDA), after the execution of the master plan of Gwadar city under CPEC, the city would become the Singapore of Pakistan with a GDP of $30 billion by 2050 with the production of 1.2 million jobs for the locals. So, the success of CPEC and the development of Gwadar will give a great impetus to Pakistan’s Blue economy. Gwadar development will pave the way for many subsidiary industries like ship-making, ship- breaking, shipyards construction, tourism and hoteling etc.
Pakistan’s Blue economy also offers great potential in the marine transportation sector. Presently Pakistan has only 12 ships and one ship breaking yard at Gaddani. Pakistan’s freight bill is $5 billion per annum. The construction of a new shipyard at Gwadar and the regular shipping service by the China Ocean Shipping Company (COSCO) from Gwadar port and the development of Kati Bandar port in Sindh under CPEC will usher a new beginning for our marine transportation sector. It will also make a feasible ground for the development of other related industries like ship-making, ship-breaking, seafaring, aquaculture, minerals and offshore basins which will not only value-add to our ports and marine transportation but will also generate millions of employment opportunities.
CPEC in the Context of Sustainable Development and Regional Integration
China’s strengths will help to develop Pakistan to eradicate absolute poverty. As part of the philosophy of a “community of shared future for mankind”, China makes strong links to the UN SDGs and uses the 2030 Agenda to frame its development efforts. China is now exploring and focusing on sectors and expanding investments in areas strongly linked to the Sustainable Development Goals (SDGs). The recently announced Global Development Initiative of China squarely focuses on socio-economic development and mitigating the effects of climate change menacing venerable countries like Pakistan. Pakistan has already chosen the route of Blue development by adopting Agenda 2030 and is following different targets of Sustainable Development Goals (SDG-14) to attain the desired objectives. China has also dedicated a large amount to support the developing countries meet their climate related requirements and also to meet the SDGs. Pakistan under CPEC can request funds under GDI of China development of its poorest regions.
CPEC provides Pakistan with an opportunity to focus on benefiting from the extraordinary Chinese experience of poverty alleviation by formalizing China-Pakistan poverty alleviation partnership for eradicating poverty in Pakistan. In this regard, major poverty alleviation demonstration zones should be created across Pakistan. Agricultural modernization and proposed integrated city cluster and functional zone development under CPEC should create positive externalities for poverty alleviation in Pakistan.
CPEC will promote green development. In this regard, Pakistan’s membership of the Belt and Road International Green Development Coalition (BRIGC) should appropriately leveraged. Diverse public and private institutions and organizations should utilize the benefits to be derived from participation in the 10 thematic partnerships of BRIGO to utilize financing, investment, technological, legal, regulatory, research and communication, and capacity building opportunities of such participation.
Multilateral cooperation for CPEC development is a key priority. The integration of CPEC with Economic Cooperation Organization (ECO) should be promoted and new development realities like the recent China-Iran 25-year partnership deal should be utilized for the regionalization of CPEC. CPEC has now been connected to Afghanistan. Under a trilateral Agreement China, Pakistan and Afghanistan will identify feasible projects to help Afghanistan meet infrastructure and development deficit. CPEC has the potential to transform Pakistan to geo-economic hub and its regional extension to Afghanistan and Central Asia will help expedite regional integration and development leading peace and prosperity.
With the improvements in connectivity infrastructure, bilateral trade between China and Pakistan is growing and stood at $17.49 billion in 2020. Pakistan recorded nearly 70% increase in exports to China in the first quarter of 2021 with $888 million as compared to $526 million in the same period. The projected potential of bi-lateral trade between the two countries is $100 billion.
Of all the regions benefitting from CPEC projects, Balochistan, Sindh, and Punjab are expected to experience the greatest positive changes, including significant reductions in poverty and unemployment rates and improvements in overall quality of life. However, it is important to note that restructuring the education sector and ensuring regional stability represent major challenges that must be addressed to ensure the success of the project on the Pakistani side. Specifically, economic growth and stability and the restructuring of education are necessary prerequisites for achieving the desired outcomes.
The success of the CPEC project is conditional to the economic and political stability of the country. If there is continuity in Pakistan’s economic policies, along with political stability, then investment in CPEC and other projects will continue to grow. China–Pakistan Economic Corridor (CPEC) is a geo-strategically significant project for both China and Pakistan. It will enable China to get out of the Malacca dilemma and provide an alternative trade route to China. For Pakistan, CPEC is a ray of hope in the prevailing tough economic and geopolitical environment, where it has limited foreign policy options.
Ambassador Naghmana Hashmi, a retired diplomat with over 37 years in Pakistan's Foreign Service, held key ambassadorial roles and advisory positions. She's a prolific writer, authoring books like "Magnificent Pakistan" and "Pakistan-China-All Weather Friendship." On X, she can be found @AmbNaghmanaHash
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