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CPEC: It's China's Gain, Pakistan's Loss and India's Headache

The CPEC will run from the Karakoram Mountains and end at Gwadar port. The transportation networks, energy projects and special economic zones will use plenty of steel. It remains to be seen if the relations between the two nations will be as smooth as honey.

Tushar Dhara, Aishwarya Kumar

Updated:May 21, 2017, 12:12 PM IST
CPEC: It's China's Gain, Pakistan's Loss and India's Headache
Pakistan Prime Minister Nawaz Sharif arrives to speak at the inauguration of the China Pakistan Economic Corridor port in Gwadar, Pakistan on November 13, 2016. (Getty Images)

News18 Sunday Feature“Higher than the Himalayas, deeper than the ocean, stronger than steel and sweeter than honey”

That, in a nutshell, is how successive Pakistani prime ministers have described the country’s ‘all weather’ friendship with China. This was before the China-Pakistan Economic Corridor (CPEC), one of the key projects in China’s massive ‘One Belt One Road’ infrastructure project spanning Eurasia, came into being.

The metaphor is apt: The CPEC will run from the Karakoram Mountains and end at Gwadar port. The transportation networks, energy projects and special economic zones will use plenty of steel. It remains to be seen if the relations between the two nations will be as smooth as honey.

Source: The Times of Islamabad
Source: The Times of Islamabad

Last weekend, 29 heads of states attended the Belt and Road Forum in Beijing. Pakistan’s Prime Minister Nawaz Sharif attended while India decided to skip, citing concerns about sovereignty, as the CPEC runs through Pakistan-occupied Kashmir.

However, New Delhi is also uneasy about the strategic implications of the project that will increase Chinese presence in Pakistan.

There is no one clear view about the CPEC in either India or Pakistan. News18 spoke to two Indian analysts and two Pakistani analysts to understand the implications of the project for both countries.

First, some bare numbers.

The only figures available for the CPEC in the public domain is that the aggregate amount of Chinese investment, which was earlier pegged at $48 billion, has now increased to nearly $57 billion. Crucial details are missing: what are the terms of the loan; what is the level of equity and debt; would debt be convertible to equity, thus laying the ground for Chinese ownership of Pakistani assets; what are the terms of repayment or penalties for default? How were bids evaluated, and by whom? Were tax incentives provided?

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In short, there is lack of transparency, notwithstanding Dawn newspapers investigative report on the CPEC master plan. Within Pakistan, there is “euphoria” about the CPEC. Radio stations broadcast advertisements and jingles on China-Pakistan friendship, the metaphorical ‘higher than the Himalayas, deeper than the oceans,’ according to Dr. Pervez Hoodbhoy, a professor of physics and mathematics, and commentator on Pakistani politics.

“Urdu newspapers generally go along with every establishment view, including this one. Common people and businesspersons also have huge expectations of future growth. Only some English language newspapers — which are much less read — occasionally raise questions of what CPEC may cost Pakistan in the long run,” Dr. Hoodbhoy told News18 in an email interview.

That Pakistan needs the investment is not in dispute. The economy is stagnant and desperately in need of cash, according to Anjum Altaf, a fellow at the Consortium for Development Policy Research in Lahore.

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On the other hand, China’s industries have overgrown domestic markets and are still producing an excess of steel, cement, electronics and power. On paper, CPEC seems like a win-win situation for both countries.

But the devil lies in the details. There are fears that Pakistan’s CPEC committee has allowed only Chinese companies to set up units in the seven economic zones along the corridor.

“I am also worried about the low level of environmental standards. Even within China these are poor as well as poorly implemented. In Pakistan, these could be dropped altogether,” Dr. Hoodbhoy said.

Then there is the question of repayment of loans. Will the OBOR projects, including CPEC, leave behind a trail of “unsustainable debt burden” for participating countries, as India alleges?

The paucity of data about what is being negotiated makes this difficult to verify. Anjum Altaf is of the opinion that this will not be the case, though it depends on what exactly is being negotiated between the countries, which is not clear.

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Dr. Hoodbhoy though says that at some point the relationship between the two countries will become “quite a bit less sweet than honey,” because of China’s dislike for Islam. “By law, newborns in Xinjiang province cannot be named Muhammad or have names that identify them as Muslims, fasting is forbidden as are burqas,” Dr. Hoodbhoy said, adding, “If Chinese presence in specially created enclaves grows, and if the relationship becomes asymmetrical beyond a point — such as Chinese entering Pakistan without visas but Pakistanis being required to have Chinese visas — then sweet will turn sour.”

Dr. Hoodbhoy also added that there is no cultural contiguity between China and Pakistan, but Pakistan and India shared a common cultural heritage. He said that he doubted if Pakistan would become a client state of China’s.

On the Indian side, strategic thinker Brahma Chellaney thinks the lack of transparency in CPEC is a matter of concern to India. He thinks the boycotting of the Belt and Road Forum by India was not wrong.

“Three years ago, we had asked China to come clean on the policy. They never gave us a transparent idea, and now they have suddenly come up with CPEC. The lack of transparency is definitely a cause of concern for India,” Chellaney told News18.

However, Jabin Jacob, a senior researcher at the Institute for Chinese Studies, Delhi, has a slightly different position. Jacob thinks that although stressing the violation of sovereignty by New Delhi was correct, India also has potential benefits from joining the CPEC. “It is an opportunity for us to shape and influence events there, to ensure we have a hand in directing South Asia’s economic integration,” Jacob told News18.

Jacob opined that India’s non-participation in the Belt and Road Forum sent out a message that needed to go out, but having skipped it, now what?

“Skipping the conference was the easy part. Now the question is — what next? The Chinese will go ahead with it anyway. And this is going to be the major geopolitical initiative in the coming decade. In that time you can’t sit still, you have to engage, you have to be open to ideas and approaches. That’s where the challenge is,” he said.

Chellaney, on the other hand, said the CPEC is simply unacceptable to Indian strategic interests. “China has created issues on Dalai Lama coming to Arunachal, which is not even embroiled in major dispute. And now, China decides to run a corridor via one of the most widely disputed lands. How is that acceptable?”

(More Sunday Features)

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| Edited by: Nitya Thirumalai
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