Making sense of the CPEC controversy

Published: January 21, 2016
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The writer is a Rhodes Scholar and an alumnus of the Blavatnik School of Government, University of Oxford

The writer is a Rhodes Scholar and an alumnus of the Blavatnik School of Government, University of Oxford

The controversy around the China-Pakistan Economic Corridor (CPEC) seems far from subsiding. In recent developments, political parties from Khyber-Pakhtunkhwa (K-P) and Balochistan have upped the ante and have accused the ruling party of ignoring the smaller provinces in the multi-billion dollar project. In an attempt to make sense of the concerns advanced by representatives from Balochistan and K-P, I am going to examine the position taken by the federal government in a series of articles.

The CPEC is a mutli-route corridor that will be completed in multiple phases over a period of 15 years. As per the decision of the May 28, 2015 APC, the western route of the corridor passing through the relatively lesser-developed provinces of Balochistan and K-P is being built on a priority basis. To judge whether the federal government has actually prioritised the building of the western route or not, let’s develop a simple test and check if its claims about having prioritised this route passes the test. According to the test, the western route shall be considered prioritised if it meets the following conditions:

1) The quality of infrastructure of the western route should be better or at least similar to that of the eastern route. For this to happen, the government must have allocated the required financial resources to the route.

2) Ideally, the western route should be constructed first so that it can become functional before the other two routes. If circumstances are not ideal, as is often the case, then it should become operational at least simultaneously with the other routes. Timing is central to economic planning and development. The question of ‘which-route-to-take-first’ is very important and is likely to play a key role in shaping the subsequent path of development.

3) At least half of the proposed industrial parks and economic zones and other supporting components of the corridor, including energy projects, railway tracks and gas pipelines should be located along the western route.

Now let’s examine if the western route fulfills the criteria enumerated above.

The western route is a two-lane road whereas the eastern route is a high-speed six-lane modern motorway with controlled-access design. The pavement design of the eastern route is markedly superior to that of the western route. The latter can’t withstand loaded trucks. The superiority of the eastern route is not surprising given the government’s preferential funding for it. The allocation pattern of federal development funding clearly suggests that the eastern route is the government’s priority. In the 2015-16 federal PSDP, the government has allocated only Rs20 billion to the western route while earmarking a handsome Rs110 billion to the eastern alignment. Out of the Rs20 billion, approximately Rs5 billion have been allocated for the Gwadar-Turbat-Hoshab (M8) and Hoshab-Panjgur-Besima (N85) sections, which constitute the common route shared by all three alignments. In strictly technical terms, therefore, the funds earmarked for the western route in the 2015-16 federal PSDP are approximately Rs15 billion, of which not even a penny comes from the approximately $11 billion CPEC loans taken on for infrastructure development. As of December 31, 2015, only Rs1.6 billion of the Rs15 billion have been released.

Coming to the second pillar of the test, the two-lane road along the western alignment is likely to be completed by the end of 2018 whereas the six-lane motorway along the eastern alignment will be completed by the end of 2017. Lastly, the eastern route passes through the relatively developed parts of the country and is in geographical proximity of major urban centres, energy production sites and growth zones. Railway tracks and LNG pipelines will run parallel to it. As far as industrial parks are concerned, let’s hope they will be equally distributed among the three routes.

Given the huge contrast in the infrastructural quality and spatial proximity of the two routes, the eastern route is destined to effectively become the primary route, the government rhetoric about having prioritised the western route notwithstanding. The two-lane western route, if completed by 2018, will remain an auxiliary route at best. The reality is that the government had decided to change the corridor route in late 2013 or early 2014. This is proven by the 2014-15 federal PSDP in which the government had earmarked Rs49 billion for the CPEC, all of which was to be spent on the eastern route. When confronted with mounting political pressure in 2015, the federal government allocated a nominal amount for the western route in the 2015-16 PSDP.

Now let us come to the government’s claims that the revenue generated from the motorway on the eastern route will be used to upgrade the western route to become a four-lane and ultimately a six-lane motorway. Railway tracks will be laid from Gwadar to Peshawar passing through Quetta and DI Khan.

First, there are no credible guarantees that these commitments will be duly honoured, especially given the long time horizon — 15 years — it involves. If history is any indication, complacency will creep in and the urgency and motivation, if any, to upgrade the western route will wane once the eastern route becomes functional. The federal government will keep fabricating excuses to delay the upgradation of the western route. Fiscal constraints and political crisis of one or the other type will continue giving it plausible cover. Protesting voices from smaller provinces will be coerced into silence by appeals to ‘patriotism’ and ‘India’s malicious designs over the project’.

Secondly, even if the credible commitment problem is somehow resolved, the upgradation of the western route at a later stage is unlikely to alter the position of the eastern route as the primary route of the corridor. The western route will at best play second fiddle to the eastern one. Once the eastern route with its superior infrastructure and geographical proximity to the developed and prosperous urban centres takes the lead as a result of the initial preferential treatment it has received from the federal government, it is likely to stay ahead of the competing routes because of positive feedbacks and increasing returns to scale. Over time, development choices will be constrained within a progressively narrower range of possibilities that will tend to preserve the status quo. This is known as path-dependence, which among other things, partially explains the persistence of regional disparities. Nevertheless, the concept does not rule out the possibility of breaking out and establishing new paths, especially in the beginning of a process. The CPEC offered the government the formative moment to break out and create new paths of economic development by prioritising its under-developed regions. Unfortunately, the ruling elite have not taken advantage of this opportunity.

Published in The Express Tribune, January 22nd,  2016.

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Reader Comments (25)

  • Hady
    Jan 21, 2016 - 10:46PM

    Whatever you said doesn’t make any sense just because money is coming from China so beggars can’t be choosers. China is not pumping money to develop your underprivileged areas but for their own vested interests.Recommend

  • Ismail
    Jan 22, 2016 - 2:55AM

    Is there a source to back your claims about the designs of the two routes? And it would be helpful to share the author’s demographic background so put his conjectures in context. Recommend

  • Alam
    Jan 22, 2016 - 3:48AM

    Tall poppy syndrome…Recommend

  • FMALIk
    Jan 22, 2016 - 5:30AM

    I do not agree to the assessment of the author as it is biased. Security conditions and major population center are located on Eastern Route. Now if few people or very little population that reside along the western path wants all the benefits from the project and possibly jeopardize it then who is being selfish?

    We want multiple path but I do not think that western path should be given a priority over eastern for security and other issues. The corridor cannot just be passed away from major or bigger cities and away from major population centers.

    The western path proponents wants preferential treatment at the cost of national interest or majority of the population. Recommend

  • Woz ahmed
    Jan 22, 2016 - 6:08AM

    Well argued,we all know this as the China Punjab Economc Corridor and the whole nation will pay the inflated cost.

    Karachi is several times the size of Lahore yet they get subsisted over engineered bus route and now orange line,paid for by all Pakistanis.Recommend

  • Humza
    Jan 22, 2016 - 6:20AM

    @Ismail: I think the author has started out trying to undermine the CPEC Eastern route and then found excuses to back his argument. The reality is that CPEC is a Chinese sponsored investment made for trade and transport of goods. What investor would want a route going close to Afghanistan knowing all the instability that lurks across the border. Any investor would want security. The Eastern route will be completed faster since there is already existing infrastructure including roads. Upgrading and expanding an existing Eastern route makes sense to anyone. I for one think the Eastern route will validate the importance of CPEC and provide greater impetus for an improved Western route in time when they is greater stability in KPK and Baluchistan. What also makes sense is the Western route because it is geographically shorter and in time it will take precedence. “Path dependence” means nothing when transporters stand to shave hours and money off transit times by using the Western route when it is safe and fully operational. Playing provincial politics when there is a project of national importance is pointless. The nation needs to see the bigger picture of economic development and not delay.Recommend

  • raider
    Jan 22, 2016 - 8:46AM

    @Ismail:
    your comments are not less a representation of demographic background, i think you mean if author hails from some pakhtun or baloch demographics, it would be worthless to say that design of CPEC is based on biased identification of routs and economic zones.Recommend

  • Anticorruption
    Jan 22, 2016 - 9:13AM

    Well argued piece. CPEC offers an opportunity for the socio-economic uplift of less developed regions and it seems that the federal government’s priorities are differentRecommend

  • Ahtisham Jan Butt
    Jan 22, 2016 - 12:48PM

    Please grow up Rafi. Wasn’t expecting this from you. You know it well that how Chinese invest in other countries. Can you tell me any single example whereby a Chinese investment plan has been carried out by recipient country single handedly? Or has it happened anywhere that Chinese revealed blueprints of their projects in detail? They do it by themselves. They want it the way it is going. Come up with a credible source my dear…

    Dont make I another Kalabagh….Recommend

  • Safyan Jabbar
    Jan 22, 2016 - 1:17PM

    Lets test another diemension. Influx of chinease goods vs Making existing industries competitive via CPEC. Would you prefer to connect 120 million population and existing indistrial cities to Gwader first or would you like to stay ailien and build road for chinease goods. Easter route will shify some kind of chinease advantage to Pakistani industries being at the shortest distance from Gwader. Secondly it may attract chinease invester to invest along western route to stay at advatage against Pakistani industrial base created by Gwader port. Thirdly, western route is important as its gives chance to shift focus from eastern side to western but it can be exploited in phased manner keeping in mind the limited resources of Govt. Of Pakistan. Fourthly, eastern route gives some advantage to Karachi based industries having market in urban Punjab. Fifthly, PAKISTAN should take railway infrastructure to its advantage by upgrading it through CPEC, since our 80% freight is being moved via road which is expensive than Railway frieght which put quite some burden on current account in the shape of oil bill.

    In short, we should think of using CPEC as employment creation for Pakistani base instead of route for chinease goods only. We should move to Western route in phased manner.Recommend

  • Rafiullah Kakar
    Jan 22, 2016 - 2:09PM

    @Ismail:
    My sources are: Minsitry of Planning and Development Website, Federal PSDP documents, NHA internal documents plus interviews withe relevant people!Recommend

  • Rafiullah Kakar
    Jan 22, 2016 - 2:15PM

    @Ahtisham Jan Butt:
    Dear Ahtisham sb, Thank you for your feedback. Lets not get into emotional and rhetorical stuff. Will deal with the Chinese investment bit and their preferences in the next article. Please challenge and correct me if any of the facts I have mentioned is wrong. As far my data sources are concerned, I have consulted the following sources: Federal PSDPs, Ministry of Planning and Development website, Senate Committee Report, NHA internal documents plus interviews with econ experts and senators. You can verify some of this information yourself.
    The federal govt is bent upon making it another Kalabagh. Recommend

  • Rafiullah Kakar
    Jan 22, 2016 - 2:15PM

    @Ahtisham Jan Butt:
    I am willing to learn and correct my facts if you prove them wrong!
    ThanksRecommend

  • Alam
    Jan 22, 2016 - 4:52PM

    @Rafiullah Kakar:
    Dear you are wrong at so many levels. The bottom line that you want to make 100 million people living in Punjab to suffer, only because you are worried on why they get progressed. This is unfortunate fact as difference between progress in Punjab vs other areas will increase, people like you will keep pulling the leg rather than focusing on real issues hindering progress in your regions. I don’t know by what logic, multan-mianwali road section is more progressed than other sections. Anyway, I wish I have chance to sit with you and explain how destructive is the narrative you are propagating….Recommend

  • Jeiy CM Shah
    Jan 22, 2016 - 5:06PM

    @Woz Ahmed: Mr Ahmed, developing Karachi or Lahore is provincial subject. There in no point in mixing up things.It only creates bias and anxiety among less informed or casual readers.
    The point you made make no sense. Recommend

  • Jeiy CM Shah
    Jan 22, 2016 - 5:17PM

    @Anticorruption:

    CPEC is ” backbone infrastructure” development project. It will provide ‘connectivity’ between china and Pakistan and ‘preferential investment in ‘ energy production.

    It is up to industry, businesses, investors ( local and foreign) and over and above provincial governments to make use of ‘connectivity/ road infrastructure and link it up with local economic opportunities. Like KPK government is setting up 5 economic zones which it should align and connect with CEPEc infrastructure.

    Why are we expecting anything other or more than from this project. Recommend

  • Asif
    Jan 22, 2016 - 8:50PM

    Disappointing stuff, and hard to believe you graduated from Oxford.

    Investment does not work like that. Your numbers might be correct, but the story you are telling is based on mental biases and propaganda driven by nationalist lobbies.

    The routes are being developed based on the expected usage and ROI for Chinese.

    Its business for them, and not a donation.Recommend

  • sterry
    Jan 22, 2016 - 10:38PM

    @Rafiullah Kakar: Doesn’t sound like the Federal government is making the issue into another Kalabagh. It seems short sighted political leaders and some media types are making CPEC into a Kalabagh. Don’t you remember, Imran Khan saying CPEC is just a hoax created by Nawaz Sharif. Now that it’s real, he wants more input ! What a joke. Who in their right mind would want a strategic route close to an insurgency plagued area?Recommend

  • Sajid Ullah
    Jan 23, 2016 - 5:37AM

    Well phrased. The center has already made it the reason for people of KP and Balochistan to retaliate. There is a need of treating the smaller provinces with Justice and not Equality. Throughout these decades, Punjab has always dominated the country because of its greater population and things have always been bent towards it. Recommend

  • Dr Abid Shah Mashwani
    Jan 23, 2016 - 9:05PM

    Criteria outlined by the author does make sense. It may not have 100% accurate data but along the lines one can evaluate credibility of the federal government claims and smaller provinces concern.

    It is common sense, when you strike investment agreements with anyone, you will safeguard your interests. One important aspect of development activities from foreign investment is to maximize development of whole country not just a select group of constituents. Foreign investment or loans are in the name of whole nation and every child, be a Punjabi, Pakhtoon, Baluch or Sindhi, will have safe responsibility to pay it back. Therefore, it makes sense:
    1) Maximize the use of such investments by selecting a shorter route which is western route
    2) Maximize development of the country by investing in less developed areas which is western route
    3) Maximize upgrading of the less fortunate and less economically developed people, they are more on western route
    4) Most importantly people on Western route suffered the most due to Afghan war and terrorists activities, and by developing Western route and economic zones along the Western route will develop and improve livelihood of those people, and economic prosperity of these people will make them less vulnerable to bate of terrorists, thus will bring peace to the nation. And most importantly, will stop migration of people from those areas to big metropolitans like Karachi, Lahore, Faisalabad etc thus will take load off of such cities.

    Lets think of Pakistan and People of Pakistan not just Punjab and voters of PMLN.Recommend

  • Mudassir Khan
    Jan 24, 2016 - 12:30PM

    Its disappointing to see people defending eastern route over western route and disrespecting the author without any proofs/sources of their own. Base on the comments I would like to know a few things: (1) Why would china want a longer eastern route instead of a shorter western one. (2) If the government want to connect existing industry to the network then can still do so, use the orange train money to build a connecting route from Lahore to western route. (3) If its about facilitating population then developing a non developed area would automatically attract people from over crowded areas like Lahore. Would not that benefit Pakistan as a whole.Recommend

  • Md Tahir Shah
    Jan 29, 2016 - 9:39AM

    @Rafiullah Kakar: Dear Mr. Kakar, Your article began with facts however the last two paragraphs are pure speculation. Here is my opinion:

    Western route is shorter and offers lower transportation costs.
    Business Parks in KPK will benefit from lower labor costs compare to Punjab and Sindh.
    KPK also offers close proximity to Central Asia, a potential source for cheap raw materials.
    Businesses push supply-chain as close to final transit point as possible. Gawadr being the final transit point will turn Balochistan into the industrial hub of Pakistan just like Guangdong.

    No business leaves money on the table and when you add all the advantages, the future is bright for KPK. However, the biggest concern for potential KPK investors will be security and that needs to be addressed by the KPK government. For starters, initiate programs like Safe City to allay investor concerns, build current security capacity and add multiple layers to it.

    Best Regards,
    Md. Tahir Shah
    Business Development Consultant (22 years of experience)Recommend

  • Anonymous
    Jan 29, 2016 - 10:47PM

    Nice piece dear sir Rafi ullah kakarRecommend

  • Mateen kakar
    Feb 13, 2016 - 11:49AM

    If we talk about the security of Eastern and Western route so Eastern route is more vulnerable to Security issues, As we have fought two wars against India and she inflicted many damages to us, on the other hand western route has security issues of insurgents, but by constructing route here might there grievances be redressed. Secondly if we look over the demographic circle of the country it is residing in the center,neither at Eastern side nor weatern so better to prioritize the central one. in a nutshell it is CPunjabECRecommend

  • mir
    Apr 26, 2016 - 12:43AM

    ismail and Fmalik. its not the problem of security its problem of mind set . who is responsible for the destabilty in KPK and balochistan .we need no enemy .. Recommend

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