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Opportunities and Challenges for CPEC to Promote Regional Stability and Development

CIIS Time:07 12, 2017 Writer:Li Qingyan Editor:Wang Jiapei

 

The China-Pakistan Economic Corridor (CPEC) is a major and pilot project of the Belt and Road Initiative (BRI), which has become the framework and platform for comprehensive and substantive cooperation between China and Pakistan. Through collaboration on the Gwadar port, energy, transportation and industrial infrastructure, CPEC will be a long-term and systematic project to promote economic integration and interconnection both at the national level and regional level.

 

Background: the present condition of economic convergence and infrastructure connectivity of South Asia lags far behind that of the world. For a long time, the heartland of Asia, which includes West, Central and South Asia, situated between the developed and prosperous “European Economic Circle” and “East Asia Economic Circle”, has been considered an “Economic Depression Zone.” Meanwhile, the strategic position of South Asia is rising and attracting more attention. Since the beginning of the21st century, this region has become increasingly important with the fast and astounding adjustments in international power structure. Big powers promoted disparity of plans or initiatives like the U.S. “New Silk Road Initiative”, Russian “Eurasian Economic Union”, Japan’s numerous investments in India, etc. The economic development and connectivity of this region has gained more and more attention. Moreover, the demands for economic integration and interconnection of regional countries are increasing rapidly. Most countries in the region are undergoing political and economic transition. In spite of different domestic situation, new visions or national development plans of most regional countries highlight the importance of economic integration and energy cooperation, while infrastructure construction and trade flows have become the priorities of their national strategies.

Opportunities: role of CPEC to promote regional stability and development

First, CPEC serves as a new platform for regional integration complementary to China’s Opening to the West. As reform deepens, China has a desire to bring more benefits to its neighbours and contribute to common development through its own development. China is actively planning six economic corridors, namely China-Mongolia-Russia, China-Central Asia-West Asia, China-Indochina Peninsula, China-Pakistan, Bangladesh-China-India-Myanmar Economic Corridors and New Eurasian Land Bridge under the Belt and Road Initiative, most of which are located in or passed through most of South Asian and Central Asian countries. New mechanisms bring new channels for regional cooperation.

Second, CPEC will provide new impetus to help Pakistan and other regional countries achieve sustainable development. China is upgrading its industrial structure and optimizing the constructions of key projects, while the regional countries are eager to develop the manufacturing industry and speed up its infrastructure construction. China has advantages in experience, technology, financing and industrial capacity while regional countries enjoy favourable conditions in resources, labour force and market. Besides the huge potential of the integration between Chinese and Pakistani economies, the package of projects contained in CPEC offers an exceptional opportunity to regional countries for tackling some of the main barriers hindering its economic development such as energy bottlenecks, poor connectivity and limited attraction for foreign investors. Some international organizations like the World Bank commended CPEC as an important engine for the economic growth of the region.

Third, CPEC will provide a new route for regional countries to connecting with the world. CPEC will considerably shorten the current sea routes from the Middle East and Africa to East Asia, meanwhile the cost will be significantly reduced. The Gwadar port is the flagship project along CPEC route and will provide a crucial link for the region to integrate into global market and trade especially can realize the full potential of Afghanistan and Pakistan’s advantage of unique geographic location as the gateway of the regional market. For Afghanistan, CPEC will integrate it with other regions and allow it to enhance its commercial activities with the Indian Ocean, and bring together the western and eastern alignments of the corridor through improved connectivity between Afghanistan and Pakistan.

Fourth, CPEC will contribute to improving regional security through development dividends. In addition to share the growth dividend of China’s economic development, the projects under CPEC will enable Pakistan to increase employment, alleviate poverty and improve the socioeconomic outlook and indicators such as education, health and basic amenities as well as contribute to improving regional security through development dividends. So far more than 13,000 jobs have been created to local people directly. Chinese companies provide vocational training to Pakistani employees and sponsor them to get trained in China. Local schools and hospitals have been integrated into surrounding facilities of many of these projects.

Challenges: Since CPEC will be a “Game Changer” for the region, it faces the resistance and competition from concerned stakeholders.

India has not accepted CPEC and is carrying out countermeasures to exclude Pakistan from the process of regional economic integration. India is the largest economy in South Asia and has a significant impact on regional peace and stability. Due to the hostility between India and Pakistan, India expects to remain in a more favourable situation in South Asia. India also worries about the increasing influence of China in the region politically and economically. Therefore, New Delhi takes measure to counter the potential impact of CPEC on the region through “SAARC-1(Pakistan)”. For instance, India has advanced the “Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation” (BIMSTEC) as well as the “Bangladesh, Bhutan, India and Nepal Initiative” (BBIN) along the east border of Pakistan. Meanwhile, India is building “South-North Strategic Channel” with the hub of Chabahar port in the west border of Pakistan. All the projects in India’s regional economic cooperation and connectivity exclude Pakistan.

Actually, India would gain obvious economic advantages if it could abandon the mindset of a zero-sum game and support CPEC. India’s demand for energy can be largely satisfied through the facilities of CPEC, and its reach to Central Asian and Middle Eastern markets would become easier and less costly. More importantly, the promotion of economic interdependence between India and Pakistan might bring the two rival countries toward negotiation while regional cooperation in South Asia might also be improved.

The United States also has its own plan regarding this region’s integration and is still highly suspicious of the success of CPEC. Although Washington has reason to welcome the economic dimension of CPEC to help promote Pakistan and even Afghanistan’s stability and security, China’s growing strategic weight in the pivotal region of South Asia and the Indian Ocean has generated considerable political concern in Washington. The US is more sceptical of the success of CPEC since Washington ever tried to help develop Pakistan’s economy through expanding civil assistance but failed. Some U.S. scholars consider that CPEC will pull China deeper into Pakistan’s domestic politics, and create greater turbulence in the triangular relationship Delhi-Islamabad-Beijing.

    Although the Trump administration’s policy towards South Asia is not clear, the strategic partnership between the United States and India which has been dramatically improved by former president Obama is expected to stay the same. Trump probably take the same view that helping India expand in power and prosperity served the highest geopolitical interests of the United States in the region and globally. But at the same time, Trump administration will shift towards transactionalism under the principle of “American First”. It will retard the further cooperation between US and India, especially in areas such as trade openness; and it will increase the U.S.’ possibility of participation in CPEC.

In addition, other regional powers like Iran and Bangladesh have different concerns about CPEC. Although Iran initially worried about the competition from CPEC, particularly the Gwadar port, which will become a threat to its Chabahar port which Teheran heavily relies on for the conduct of trade, it has now shown interest in CPEC. Iran realizes that Pakistan can become the transit point within the interconnection of CPEC, and therefore Iranian mega oil and gas resources would have a more convenient route for reaching to China and other places in the region. For Bangladesh, which has similar advantages of rich labour resources and a textile industry as Pakistan, the competition between these two South Asian developing countries may be inevitable in absorbing relocated capacity, attracting foreign investment and promoting market share. Over the past several years, 40% of Pakistan’s textile plants have been transferred to Bangladesh and one of the major reasons is the rising costs caused by Pakistan’s energy crisis.

Suggestion: 1. Try to get support from India, and at the same time push forward the construction of CPEC steadily with the result of promotion of the regional economic integration and connection that makes India have to be integrated. After all, China has the will and the capability to provide public goods and service for the region, which fundamentally is conducive to the wellbeing of the people. 2. Give full play to the demonstration and leading role of CPEC, and drive a group of South Asian countries such as Afghanistan, Nepal, Bangladesh and Sri Lanka for economic boom. China welcomes all regional countries to take free ride on its express train of development. 3. On the basis of bilateral cooperation, it is very important to explore trilateral and multilateral cooperation like China, Pakistan and Afghanistan trilateral cooperation and China, Bangladesh, Sri Lanka and Maldive maritime economic cooperation, etc. Such diverse cooperation can invigorate the regional economic integration and connectivity from points to surface gradually.

 

Li Qingyan, Associate Researcher at the Department for International and Strategic Studies of CIIS, her major research fields are South Asia, China’s Neighbouring Diplomacy, CPEC and Afghan Issue.

 

 

Source: The Diplomatic Insight, May 2017.