Home Digital Magazine April 2018 Issue CPEC and Great Power Rivalry

CPEC and Great Power Rivalry

CPEC
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Andrew Small |

“There have been real accomplishments in CPEC’s first phase – but the international context for the scheme still needs to be fixed”.In at least one important respect, the first phase of CPEC can be considered a success. Given the disappointing history of economic relations between China and Pakistan, and the difficulties the country faced in attracting investment, the fact that over $20 billion of projects is already moving ahead exceeds expectations. The ensuing problems regarding Pakistan’s debt and balance of payments are partly – though only partly – a function of the fact that this is proving to be a bigger investment package than either side privately expected.

CPEC in the making

The first phase has also seen Beijing and Islamabad learning lessons. China was overly eager to see a strong, centralized authority driving CPEC through, and has had to do a better job of building consent and adapting to provincial and local differences. For its part, Pakistan agreed terms for the early CPEC contracts that were clearly unfavorable, partly out of the perceived need to overcome Chinese reluctance and partly because of the hope that China will adjust the conditions later if its closest security partner runs into trouble.

The Pakistani government has realized that it has a stronger hand to play than it believed back in 2015 and is now a tougher negotiator. Both Pakistan and China have had to overcome their proclivity for opacity; here there has been some progress. There is still an unhealthy tendency by both sides to treat critical scrutiny of CPEC as badly motivated; here there has been less progress.

The trilateral meeting between China, Pakistan and Afghanistan last December also gave some of the most concrete indications to date that CPEC can be used as a framework for regional economic integration rather than an obstacle to it.

The second phase of CPEC will involve a very different set of challenges. The last three years were about consolidating elite consensus, getting projects in motion, putting long term plans in place, and having a few tangible things to show for it – completed road routes, power stations, and so on.

Read more: CPEC in the eyes of an economic guru

The next period, much of which is going to focus on industrial cooperation, will be judged by whether it actually delivers for the Pakistani economy – a higher growth rate, job generation, power supply and pricing, sustainable debt levels – and whether a broader public consensus can be maintained. But the success or otherwise of CPEC in the coming years will not only depend on internal and bilateral factors. The international environment too will have a critical impact on the future of the initiative.

The early years of CPEC saw it functioning as a relatively closed effort. While there were periodic announcements about other countries “endorsing” or “joining” CPEC, this is not the way the scheme was being executed in practice. It was also very hard to make a credible claim that CPEC did anything tangible to improve connectivity or the political conditions for connectivity with Pakistan’s immediate neighbors. While this may have been understandable during the teething phase, it is not sustainable over the longer term.

CPEC should be crowding in more investment, not acting as a perceived obstacle to the involvement of other companies, states and financial institutions. The Pakistani government is starting to make the pitch for greater international involvement in the new special economic zones. The trilateral meeting between China, Pakistan and Afghanistan last December also gave some of the most concrete indications to date that CPEC can be used as a framework for regional economic integration rather than an obstacle to it. But there are several obstacles that will need to be overcome if CPEC is to become an economic platform rather than a restricted bilateral scheme.

Complex dynamics CPEC faces

First, there needs to be a more concerted effort to fix the problematic regional political context for CPEC. In the case of India, this means a diplomatic effort from both China and Pakistan to turn New Delhi’s hostility into something that looks more like suspicious reservation of judgement.

In India, there are many who see CPEC as emboldening of Pakistan’s most concerning proclivities and any deepening of the Sino-Pakistani relationship as inherently threatening.

This will range from creative suggestions for allaying sovereignty concerns to consistent pitches for India’s ultimate involvement in CPEC or its offshoots, including the release of detailed analysis for the economic benefits to all sides of a “South Asian Economic Corridor” or “Grand Trunk Road Economic Corridor”. For now, there is little doubt that these suggestions and the pitches will be rejected. But it will help lay some long-term groundwork, as well as clearing the way for other countries’ involvement to be less politically controversial.

Read more: Ice-breaker visit of Modi to China; India still insecure about CPEC

Second, and related, Pakistan needs to dispel the perception that CPEC is a “securitized” initiative. Security cooperation between China and Pakistan is deep, longstanding and will most likely grow closer. Stronger economic ties are likely to provide an even more conducive backdrop to that.The projects themselves also evidently require effective protection measures. But the last couple of years have seen too many statements about external threats to CPEC and its military-strategic importance.

These partly reflected the need to provide reassurance to China of the Pakistani army’s commitment to the initiative amid tensions with the civilian government. But the coming period should see clear and consistent commitments that CPEC, including Gwadar, will have no direct military application and a marked diminishing of the perception that this is part of a “competitive connectivity” effort.

Third, Pakistan and China should lay out some defining principles for the CPEC projects. Like the AIIB’s “lean, clean, green” pledge, spelling out criteria for local job creation, environmental protection, financial sustainability, and other areas will be valuable in their own right, help to build in additional international investment and support, and establish norms that the BRI’s “flagship” initiative adheres to the highest of standards. If there are projects that fail to fulfil these criteria, they can be shifted into another category of bilateral cooperation, preserving CPEC for “gold standard” projects, where the most exacting forms of scrutiny should be welcomed.

The trilateral meeting between China, Pakistan and Afghanistan last December also gave some of the most concrete indications to date that CPEC can be used as a framework for regional economic integration rather than an obstacle to it.

Some readers will consider these suggestions either delusional or actively deceptive. Inside Pakistan, there are many who see CPEC as part of the new alignment of blocks in the region – China and Pakistan versus India and the United States – and as a result, see western involvement and cooperation, let alone Indian involvement, as inimical to CPEC’s success.

Read more: Pakistan at crossroads & CPEC

In India, there are many who see CPEC as emboldening of Pakistan’s most concerning proclivities and any deepening of the Sino-Pakistani relationship as inherently threatening.Beyond the region, criticism about the Belt and Road have been growing, over issues ranging from debt traps to lack of transparency, with an increasing sense that people should be considering ways to counter it, not cooperate. And of course CPEC is “military-strategic in nature”.

Yet in principle there is still a version of CPEC that can reconcile the various competing views and interests. The United States has wanted to see these infrastructure projects in Pakistan move ahead for some time and actively encouraged China to support them. Even in this period of greater Sino-US and US-Pakistani tensions, US officials are still positively disposed towards CPEC in private and continue to see its constructive potential. India has a clear interest in an economically stable Pakistan, where trade, investment and commercial considerations start to assume greater weight in national decision-making.

China wants a success story with CPEC, a showcase for the BRI, and an economically thriving Pakistan; it does not need CPEC to gain influence or leverage, it does not need its military cooperation with Pakistan to be conjoined with its economic cooperation, and it does not need Gwadar for the purposes of Sino-Pakistani naval cooperation, which are adequately served by other ports. All sides can also yield economic benefits from a better integrated region, given the huge infrastructure deficits that still exist in that regard.

The trilateral meeting between China, Pakistan and Afghanistan last December also gave some of the most concrete indications to date that CPEC can be used as a framework for regional economic integration rather than an obstacle to it.

Other readers – including some government officials – will say: “this is what we have been doing anyway”; “we have made statements about Indian participation, we have signaled openness to greater international involvement, we have disavowed CPEC’s military use, and the projects do adhere to these high standards. The fault lies with others who treat CPEC unfairly or actively wish it ill”.

Read more: Can Pakistan’s policymakers respond to much-hailed CPEC?

Yet whether as a result of the substance of CPEC or the clarity of the political messaging, these efforts have not been enough. For every Pakistani general who has suggested that India should join CPEC, another has made excessive claims about India’s efforts to sabotage it. For every Pakistani government official who has enthused about building in other states inclusion in projects, another has quietly cut out financing and companies from certain countries.

Concluding remarks

Given the vexed state of the various international relationships in play, there is no doubt that it will extremely difficult to square the political circle with CPEC. But the coming years are probably the last chance to do so. What could be written off in the first phase while CPEC was still taking shape soon start to become endemic features of the initiative. For those who want to see it become part of a set of positive-sum economic dynamics rather than dragged into the zero-sum security conflicts of the region, the second phase
of CPEC is not just going to be a domestic implementation challenge but a challenge of international diplomacy around the whole scheme too.

Andrew Small is a senior transatlantic fellow with GMF’s Asia Program, which he established in 2006. He was a director of the foreign policy Centre’s Beijing office, as a visiting fellow at the Chinese Academy of Social Sciences, and as ESU scholar in the office of Senator Edward M. Kennedy. His articles and papers have been published in the New York Times, Foreign Affairs, Foreign Policy, the Washington Quarterly, as well as many other journals, magazines, and newspapers. He is the author of the book The China-Pakistan Axis: Asia’s New Geopolitics published by Hurst / Oxford University Press in 2015.


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