Saeed Afridi |
China’s rise has been attributed to the successful implementation of its ‘Dual Track’ transition policy based on gradual, incremental and near-constant reform of its economic sector in conjunction with Five Year Plans. The is Dual Track policy emphasised on social and economic reform; without any corresponding political reform. It started under Deng Xiaoping post-1976, based on the Zhou Enlai’s “Four Modernisation Plan” and has seen additional changes with every Five Year Plan (FYP). The National Development and Reform Commission of the People’s Republic of China (NDRC) has played an instrumental role in China’s development through these Five Year Plans.
China’s Regions and Economic Development
Economic and social reforms proposed by the NDRC in its 5th and 6th FYPs, from 1978 till 1984, have formed the bedrock of subsequent economic development. China was divided into three zones, Coastal, Central and Western. The coastal zone became the immediate focus of economic reforms through “Special Economic Zones”, and an “Open Door” policy to attract foreign direct investment (FDI) and creating internal economic corridors.
An initiative that links CPEC, BCIMEC and CCWAEC with the Gulf Cooperation Council (GCC) should have been, and now must be, the crux of Pakistan’s regional economic goals, much like Kazakhstan’s efforts.
The 7th and 8th FYPs (1984-1993) built upon this success by introducing internal market reforms and began China’s transformation into a localised Socialist market economy while Jian Zemin’s subsequent 9th and 10th FYPs went further and introduced large-scale privatisation within provinces, an expansion of successful policies into the Central Region and laying the groundwork for future expansion within the Western Region.
By 2006, the rapid economic development of the Coastal and Central regions had created a huge disparity in the economic and social well being within China. The focus since the 11th and 12th FYPs has been the re-orientation of China’s “Dual Track” reform towards China’s Western region. The development of China’s Western Region as an economic zone required access to economically advantageous primary resources and the development of market access for the export of goods.
Western Region The 9th FYP’s Western Region taskforce emphasised the need to facilitate base industry and trade, the creation of the Central Asian Regional Cooperation (CAREC) was an instrumental feature of this policy, tying-in its Central Asian neighbours into the Western Region’s economic development. The 10th FYP saw the construction of the East-West Pipeline Project to subsequently import Central Asian Energy resources into the Western Region. The 11th FYP saw a revamping of CAREC to involve International Institutions (UNDP, IMF, World Bank, ADB, Europe’s EBRD, USAID, etc.). The resultant CAREC’s Comprehensive Action Plan’ 2006 proposed to finalise trade corridors between 2006-08.
Conception and Birth of CPEC
Pakistan’s hybrid-regime headed by General Pervez Musharraf had been engaged in Free Trade Agreement (FTA) negotiations with China and in 2005 made a formal offer to create a “Trade and Energy Corridor” linking the Arabian Sea port of Gwadar with Kashi in China’s Western Region. The focus was to link Pakistan’s existing National Trade Corridor (NTC) development program with CAREC’s trade corridors to be finalised by 2008. From November 2006 onwards the governments of Pakistan and China considered a series of core and periphery projects to form the “Trade and Energy Corridor”.
Sustainable economic and regional gains rather than transform CPEC into a project of political discourse focused on short-term election cycles delivering incremental benefits at unsustainable costs.
Categorised as either short (early harvest), medium and long term, the projects included bilateral Special Economic Zones, upgrading Pakistan’s NTC motorway program, utilising indigenous coal reserves to bridge Pakistan’s energy gap, creating a petrochemical complex at Gwadar, pipelines between Gwadar and Xinjiang to feed into the West-East Pipeline Project, Railway corridors between Pakistan, China, Central Asia and Europe.
In November 2008 NDRC’s 12th FYP task force proposed to bring Pakistan into the fold of CAREC. In 2010, Pakistan formally joined CAREC and its “National Trade Corridor Improvement Program” (NTCIP) was integrated into CAREC’s Corridors 5 & 6 with a view to complete integration by the 13th FYP’s Mid-Term review in August 2018. NDRC launched a formal study (2008- 2012) assisted by Pakistan’s Planning Commission and considerable assistance from China’s Tsinghua University and Pakistan’s National University of Science and Technology (NUST).
The study’s proposals were to be incorporated into the coming 13th FYP and in early 2013, the initial Feasibility Study and Preliminary Design for the Pakistan-China “Trade and Energy Corridor” was approved by NDRC and shared with Pakistan for approval with the aim to complete the corridor by the mid-term review of the 14th FYP in August 2023.
In 2013, the Trade and Energy Corridor was announced as the China-Pakistan Economic Corridor (CPEC). Before examining Pakistan’s handling of CPEC since 2013, it is important to consider that while institutions in China and Pakistan had been working to formalise what is now CPEC since 2008, similar initiatives were being studied along China’s borders as part of a comprehensive policy of greater economic development of China in the 21st century, formally announced in March 2015, as the Silk Road Economic Belt (SREB) and the 21st Century Maritime Silk Road (MSR). China identified six (6) distinct corridors with Eleven (11) separate nodes of trade within these corridors forming the linchpins of the SREB & MSR. The six (6) corridors were informally designated by the following names:
1.New Eurasian Land Bridge (NELB) 2.China-Mongolia-Russia Economic Corridor (CMREC) 3.China-Central & West Asia Economic Corridor (CCWAEC) 4.China-Indo-China Peninsula Economic Corridor (CICPEC) – Greater Mekong Sub-region 5.China Pakistan Economic Corridor (CPEC) 6.Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC)
CPEC since 2013
Pakistan’s Planning Commission needs to re-assert the institution driven emphasis of CPEC, working in conjunction with Pakistan’s Foreign Office and Ministry of Commerce to integrate CPEC into Pakistan’s Economic and Regional policies.
From 2005 till 2013, the development of the planned corridor had been institution driven, with Pakistan’s Planning Commission and China’s NDRC taking the lead to emphasise the infrastructure development required for economic growth. Since 2013, NDRC pursued a multi-faceted and multi-regional approach, evident from SREB, to develop all six neighbouring regions. NDRC concentrated on formalising the “Five Links” which formed the base for the development of China’s Western Region. This involved strategies for economic consolidation, industrial capacity, liberalising internal markets, financial institutional reform and human resource development in the Western Region and formed the core of NDRC’s work before SREB’s formal incorporation into the 13th FYP (2016-2020).
In Pakistan, the story since 2013 has been a sharp contrast. While NDRC concentrated on the institutional developments and internal reforms necessary to integrate both CPEC and CAREC into China’s wider plans for SREB, Pakistan’s priorities shift ed from institutional towards political goals. Pakistan’s new government launched a widely publicised marketing campaign to marry CPEC with the ‘vision’ of the Prime Minister who took office in June 2013.
CPEC transformed from a strategic ‘program’, that took years to develop and considerable institutional cooperation, to a ‘project’ of the new PM’s vision. Phrases like ‘game-changer’ and ‘gift to the nation’ were banded about while almost all CAREC projects, in various stages of completion, were re-branded as the brainchild of that vision. Between 2005 and 2012 Pakistan’s efforts in CAREC and with NDRC, though off – pace, had been largely institution driven. After 2013 CPEC became almost entirely discourse driven with little emphasis on the institutional work needed to build upon the preceding decade.
United States and India in order to ensure that Vietnamese counterparts do not get dwarfed by the industrial giants of China’s internal Pearl River Economic Corridor, which has a GDP almost equivalent to the entire GDP of India.
In a marked shift from strategic institutional planning towards political short-termism based on election cycles, much of CPEC’s impetus was lost. CPEC’s transparency was a clear casualty. In the years since 2013, Pakistan issued revised details of the routes and plans for CPEC. The re-orientation towards strategically unimportant but politically impactful schemes in the PM’s home province gave rise of severe criticism among other provinces and the Planning Commission’s minister dissuading voices of criticism from becoming voices of dissent.
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CPEC became subject to a political discourse campaign to serve political gains for the 2018 election cycle. Devolution of economic decision-making, consolidation of private industrial capacity, diversification of exports, liberalisation of internal markets, privatisation of state enterprises and bureaucratic reforms to improve ease of doing business were almost entirely ignored as was strategic planning required to increase Pakistan’s agricultural, industrial, service sector competitiveness. No concerted effort was undertaken to shift towards structured urban planning and city-district cluster development to form internal economic regions.
While NDRC consolidated industrial and economic capacity of its internal regions, Pakistan was busy re-issuing updated maps to end political speculation over CPEC’s route manipulation. Rather than transparently emphasise the level of credit undertaken to facilitate CPEC and create internal capital markets to fund and sustain provincial and district level projects, Pakistan has been busy obscuring CPEC’s costs through inventive redefinitions of FDI, Debt and Foreign Portfolio Investments (FPI).
The key to power sector development is “competitiveness”. Pakistan has both supply issues and serious problems with regional competitiveness. Power projects must bridge supply issues at a price that is competitive within the region while using an energy mix that can withstand temporary jolts to one or more sources of energy. The is requires planning that emphasizes on the total cost of ownership of the power projects and the security of raw material supply.
The development of the planned corridor had been institution driven, with Pakistan’s Planning Commission and China’s NDRC taking the lead to emphasise the infrastructure development required for economic growth.
Pakistan undertook Energy projects at unsustainable unit costs, such as Gadani Power Park and Power plants in Punjab far from raw material availability, that may assist the incumbent government to win votes in the 2018 election cycle rather than undertake power sector reforms, conducted at breakneck speed by NDRC in China. Iran, part of CCWAEC, pushed China to fund rapid reform of Iran’s Energy Sector. Bangladesh, part of BCIMEC, emphasised reforming its state regulatory mechanism and consolidating Bangladesh’s textile industry to face future competition from larger and more integrated Chinese counterparts. Mongolia, part of CMREC, ensured Chinese grants formed the mainstay of vocational training institutes for human resource development in mining and primary industry.
Vietnam, part of CICPEC, negotiated multi-lateral industrial initiatives to create Special Economic Zones to favour joint ventures with countries such as Japan, United States and India in order to ensure that Vietnamese counterparts do not get dwarfed by the industrial giants of China’s internal Pearl River Economic Corridor, which has a GDP almost equivalent to the entire GDP of India. Kazakhstan, fearful of a return to the time of a single market dependency of its Soviet days, ensured it pursued bilateral initiatives with Russia and Iran so that Kazakhstan becomes the key transit conduit that links SREB’s three corridors; NLEB, CCWAEC and CMREC.
Read more: Why is India doing propaganda against CPEC?
In essence, countries in almost every other economic corridor being pursued under SREB understood China’s need for these corridors for its sustainable continued growth. Most embarked on tough diplomatic and institutional negotiations with China to ensure they reap the maximum amount of benefit from SREB. China’s gains must feature quid-pro-quo benefits and do so where the countries concerned wish to concentrate their regional competitiveness.
China’s rise has been attributed to the successful implementation of its ‘Dual Track’ transition policy based on gradual, incremental and near-constant reform of its economic sector in conjunction with Five Year Plans.
In Pakistan’s great failing since 2013 has been the absence of such corresponding efforts and this emphasises the detrimental loss to Pakistan’s internal and regional economic development. Much like NDRC worked in conjunction with the Chinese Ministry of Foreign Affairs and Ministry of Commerce to ensure SREB integrated all aspects of China’s regional ambitions, Pakistan’s Planning Commission needs to re-assert the institution driven emphasis of CPEC, working in conjunction with Pakistan’s Foreign Office and Ministry of Commerce to integrate CPEC into Pakistan’s Economic and Regional policies.
An initiative that links CPEC, BCIMEC and CCWAEC with the Gulf Cooperation Council (GCC) should have been, and now must be, the crux of Pakistan’s regional economic goals, much like Kazakhstan’s efforts. For that Pakistan would have to pursue bilateral negotiations to involve Afghanistan, Iran, India and the GCC in CPEC to focus on their intended exports into China’s Western and adjoining Central region markets which have a collective GDP at present of almost One Trillion US dollars.
To reap the maximum benefits available to it through CPEC and SREB, Pakistan will have to return CPEC to an institution driven long-term program emphasising strategic and sustainable economic and regional gains rather than transform CPEC into a project of political discourse focused on short-term election cycles delivering incremental benefits at unsustainable costs.
The original article was published in the December issue of the Global Village Space Magazine. The writer is a former management consultant focusing on the Energy Industry and writes on Energy Security and the Politics of Energy Resources. He is conducting research related to the role of Central Asia’s energy resources in China’s Energy Security at the University of Westminster, UK. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.