In an agreement with Pakistan, China will build China Pakistan Economic Corridor (CPEC) projects in accordance to international standards. CPEC, or the Chinese-Pakistan Economic Corridor, is one of the earliest projects of the Belt and Road initiative, a global development strategy devised by China to encourage and to participate in the infrastructure development of nearly 152 countries, including Pakistan.
CPEC is an extraordinarily ambitious goal for the entire country of Pakistan, encompassing railways, highways, airports, renewable energy, coal, liquefied natural gas, and agriculture. In 2017, it was valued at $62 billion dollars, although the initial investment by the Chinese was $8.5 billion.
For many observers, the CPEC is the main focus of Xi Jinpeng’s Belt and Road initiative and therefore, there is tremendous pressure for this endeavor to succeed. It is expected to create 2.3 million jobs by completion in 2030 and to increase Pakistan’s annual economic growth by 2.5%. The prevalence of Chinese workers in Pakistan also indicates that this is a boost to China’s economy, especially during the current trade war with the United States causing the economy to slow.
CPEC is Controversial
The CPEC is not without its criticisms and controversies, involving countries as diverse as Malaysia, India, Iran and the contested territory of Kashmir. Although it is the largest foreign investment that Pakistan has attracted since independence, some worry that this is part of China’s vision to rewrite the rules of globalization.
However, China has couched its true intentions by insisting that through infrastructure development, Pakistan might reject religious fundamentalism.
Other concerns include security risks and militant forces as China dismisses claims that they are trying to find easier and more convenient routes to Western China, circumventing Afghanistan and developing alternative routes to Central Asia. Some have suggested that the agreement will result in a trade imbalance in which less expensive Chinese goods will flood the market, leaving the more expensive Pakistani manufactured goods to be ignored.
An influx of cheap manufactured goods will impact any of the advances made in the growth of the Pakistani economy and may create issues for the Pakistani labor market.
The Debt Question
Some of the projects will be completed via loans, in which Pakistan must repay China at a 1.7% interest rate. There are multiple sources of finance, including interest-free loans, private investment, and involvement from the Asia Development Bank.
According to many published reports, Pakistan has suffered consistently from shortages of power. However, with the energy projects of the CPEC now functioning, electricity has been readily available to thousands of households. This is due to the full load operation of the hydro-power stations which have been hailed as “revolutionary”.
As expected, the accessible electrical power has improved the local economies, proving that infrastructure is truly the backbone of the state.
Massive New Projects
A large part of the CPECP involves the Sinohydro Group, which has constructed the necessary buildings and power plants, including the Gomal Zam Dam, Duber Khwar Hydropower Project and the Kohala Hydropower Project.
In a country as poor as Pakistan, riddle by terrorism, poverty, and corruption, there is slow economic growth. In the realms of hydrology and alternative energy sources, Pakistan has a difficult environment, one that is hot and arid. In these conditions, it is necessary for foreign investment to make basic utilities available to the masses, even when hydropower projects demand a great deal of time and money.
Often, the projects must be situated in crowded, poor areas, which contributes to the challenges of establishing the structure and the system.
Residents of the poorer areas are worried that they might be evicted to make room for the construction while others are skeptical that they actually will benefit from any of the promises. Nonetheless, according to Sinohydro, the eco-friendly “greening” of Pakistan is a serious global consideration, especially in light of climate change.
China’s Exports Extend to Design and Construction
Chinese engineers have been fortunate enough to receive years of design education and experience, particularly on overseas projects that must adhere to international rules and standards.
The Chinese companies are fully committed to bringing CPEC into alignment with European and American standards. In this way, Pakistan’s alternative energy sources fall under all standards, making them safe for both the country and the world.
According to Yang Haiyan, Deputy Chief Engineer Beifang Investigation, Design and Research Co, Ltd, a subsidiary of Sinohydro Group, “We are committed to promoting China’s standards for CPEC’s major hydropower projects. “
Official sentiments aside, pure altruism rarely exists in the business world, and therefore, CPEC should be seen as a financial investment by China in a poorer country that will become a brand-new market for their consumer goods.
In addition to this, China will be repaid with interest on their investment. Although they are providing much-needed infrastructure and basic utilities for Pakistan, perhaps they are hoping to cultivate loyalty in what is effectively a captive audience. Definitely a contemporary conundrum, Pakistan will be grateful for renewable sources and modern roads, as will the world, but the question remains, at what price?