Pakistan and the Politics of CPEC: A Rethink on the Anvil?

A new debate on the China-Pakistan Economic Corridor (CPEC) is brewing in Pakistan’s political circles–is it time to reassess the project and the benefits it brings to the country? That seems to be the Imran Khan government’s strategy, with Khan having set up a nine-member committee to do a cost-benefit analysis of CPEC. “The previous government did a bad job negotiating with China on CPEC–they didn’t do their homework correctly and didn’t negotiate correctly so they gave away a lot,” said Abdul Razak Dawood, Minister for Commerce, Textiles, Industry and Investment, recently. Arguing that Chinese companies received an “undue advantage” in Pakistan with regard to CPEC in the form of tax breaks and other concessions, Dawood suggested that “[Pakistan] should keep everything on hold for a year so we can get our act together.” Since its inception, CPEC has been portrayed as a “game changer” for Pakistan that will improve Pakistan’s infrastructure, create job opportunities, boost its ailing economy, and turn it into an economic hub in South Asia. However, since CPEC’s long-term plan was revealed publicly for the first time in June 2017 and after the recent experience of states in the region such as Sri Lanka facing serious consequences for being unable to repay Chinese debt, analysts in Pakistan have raised concerns over the lack of transparency on CPEC’s pros and cons.  But why is the Pakistani government considering renegotiating CPEC now? The timing needs to be delved into further.

One of the reasons for renewed debate over CPEC might be an effort by the new government in Pakistan to accommodate Khan’s vision of bringing transparency to the whole process. Khan has in the past raised concerns over the secrecy surrounding CPEC and the potentially unequitable distribution of the benefits of the project among Pakistan’s provinces. In fact, a member of his party once called CPEC the “China-Punjab Economic Corridor,” making the point that Punjab was getting the lion’s share of CPEC projects, to the detriment of other provinces. More importantly, Khan and his party Pakistan Tehreek-e-Insaf (PTI) repeatedly criticized the previous federal government led by Nawaz Sharif for their lack of accountability and openness, and Khan primarily ran on an anti-corruption and nationalistic platform. Thus, it now becomes a political imperative for Khan to ensure that his government is open about their dealings with China and that there is no compromise on Pakistan’s interests with regard to CPEC.

Another reason could be mounting American pressure linked to an expected bailout by the International Monetary Fund (IMF). The United States has explicitly warned Pakistan that Washington will not allow an IMF loan to be granted to Islamabad if there are any fears that money paid as loans to Pakistan might be used to pay the Chinese debt associated with CPEC. Pakistan cannot afford to exasperate the United States at this crucial juncture when it urgently needs an IMF bailout to stabilize its economy, and there is a sense that deferring or delaying payments to Beijing and renegotiating the terms of CPEC to reduce its dependence on China might help the Pakistani government receive the IMF bailout.

In this regard, it is also interesting to consider the recent inclusion of human development and social welfare projects such as to provide clean water, health, education, and technical training under the umbrella of CPEC, at the behest of the Khan government. PTI’s election manifesto had articulated an ambitious vision for rolling out social services as well as promised that the party would make CPEC work for Pakistan. Through the inclusion of these new projects, Khan and PTI are marrying these two objectives. By adding a humanitarian development angle to CPEC, not only is Khan fulfilling his electoral promises regarding providing social schemes but also pacifying his voter base, especially those in Khyber Pakhtunkhwa that do not believe CPEC benefits them, that this Chinese project can truly improve Pakistani lives.

The new debate on CPEC not only brings China’s ‘debt-trap diplomacy’ to the forefront but also emphasizes Pakistan’s dilemma of being between the dragon and the dollar. The recent visit of Chinese Foreign Minister Wang Yi to Pakistan immediately after U.S. Secretary of State Mike Pompeo was in Islamabad hints at the tug of war between China and the United States to influence Pakistan on CPEC. If Pakistan continues the CPEC project without transparency, it risks losing U.S. support for an IMF bailout and a further deterioration of relations with Washington. On the other hand, if Pakistan tries to renegotiate CPEC with China, it may become an irritant in Islamabad’s all-weather friendship with Beijing and compromise its future economic growth. How the Captain strikes a balance between the two remains to be seen.

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Image 1: Moign Khwaja via Flickr

Image 2: Banaras Khan/AFP via Getty Images

Posted in , China, Economy, Pakistan, Politics, United States, US

Zainab Akhter

Zainab Akhter

Dr. Zainab Akhter is a Research Analyst in the South Asia Centre at the Institute for Defence Studies and Analyses (IDSA) in New Delhi, India. She holds a PhD in International Studies from Jawaharlal Nehru University, New Delhi. Her research interests include soft power in international relations, cultural diplomacy, India-Pakistan relations, CBMs, people-to-people diplomacy, and Jammu and Kashmir (with a special focus on Ladakh). Previously, she worked as a Research Officer with the Institute of Peace and Conflict Studies (IPCS), the Indian Institute of Public Administration (IIPA) as a Research Associate, and at India Institute as a researcher. She has interned with India's leading English daily Hindustan Times, and has been awarded the Ladakh Women Writers Award for the year 2008 by Charkha, a Delhi-based NGO.

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2 thoughts on “Pakistan and the Politics of CPEC: A Rethink on the Anvil?

  1. Zainab:
    Thanks for contributing to SAV.
    Those who feel most aggrieved and perpetually victimized by US policies toward Pakistan cannot see how criticism in the US over CPEC can help Pakistan. I acknowledge that some criticism does not have Pakistan’s best interests at heart. But views toward CPEC in the US vary. If US criticism helps Pakistanis to reassess projects to maximize their value and to lower debt burdens, that would be good for Pakistan, no? This may — or may not — be a consequence of another bailout by the IMF. In any event, more transparency about the terms of CPEC projects can only be good for Pakistan.
    MK

  2. Dear Sir,
    Thank you so much for the comment. Your feedback matters. I agree to your point that criticism, especially by the US is good for CPEC and Pakistan because somewhere it has given a nudge that has lead to the current discussion on the significance of transparency in the transactions between China and Pakistan. But given the competition between China ( BRI) and the US (Indo-Pacific Policy) to gain global dominance and increase the sphere of influence in South Asia, the pressure tactics by the US comes across more as a strategy to cut China out of the race. Pakistan has to realize and seriously come clean on the debts as suggested by IMF, that will pressure the Chinese to re-think and re-look the CPEC.

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