Rethinking CPEC

The China Pakistan Economic Corridor (CPEC) has been under implementation for nearly a decade now. CPEC was meant to draw much-needed investments in Pakistan’s infrastructure and energy sectors at a time when the security situation in the country was uncertain, and American largess had begun to wither. Despite implementation delays, Chinese investments in CPEC are entering a second phase, so this is a useful time to examine how the first phase has fared, and to draw lessons from it.

The Pak-China Joint Cooperation Committee (JCC) met recently to take stock of where things stand. In addition to further beefing up security for Chinese workers, the JCC reiterated the need for CPEC to deliver more growth, improve livelihood, enable innovation and catalyse a green transition. Despite building infrastructure and power plants, CPEC’s record on these latter fronts is not very encouraging.

Thus far, CPEC has lacked local participation and transparency, which has worsened friction in sensitive places, such as Gwadar. China showed some largess by building a hospital, making sporadic relief contributions, and even announcing plans to provide a desalination plant for Gwadar. However, due to China’s reliance on its own firms to provide managerial and technical skills and other inputs, and its inability to make the Gwadar port a hub for economic activity, we saw the emergence of a major protest movement ‘Gwadar ko haq do tehreek’ in 2022.

Whether CPEC’s second phase projects — including building more roads and tunnels, another damn and a long-delayed railroad line linking Karachi to Peshawar — will offer more opportunities for the local populace remains to be seen.

Skeptics point to Chinese investments in ‘white elephant’ projects, such as the EXIM Bank funded Lahore metro rail project, as illustrations of ‘debt diplomacy’. However, other donor funded reforms and development projects have also been susceptible to elite capture and often produced lackluster results. Pakistan’s top-heavy Special Investment Facilitation Council (SIFC) has highlighted the need to expedite foreign investments in farming, mining, IT and defence production. Yet, unless existing project design and implementation mechanisms are modified, Chinese or other foreign investments in these sectors may do no more than produce low paying jobs and exacerbate environmental damage.

Pakistan must make greater efforts to align any incoming investments with compliance to labour and environmental safeguards to continue to avail preferential access to international markets (via the EU’s GSP Plus, for example).

Pakistan also needs to make CPEC greener. The Pakistan-China Institute, in collaboration with the Sustainable Development Institute and Fudan University, has made useful suggestions in this regard. These recommendations call for shelving ‘bad’ projects and making environmental and social standards disclosure related to CPEC projects more robust. This research has also highlighted the need for turning CPEC planned Special Economic Zones (SEZs) into ‘Eco-SEZs’, which should encourage the use of renewables, ensure energy audits and emphasise recycling, which is also a good suggestion.

While Pakistan scrapped plans to install two more coal plants via Chinese financing, the government still seems keen on using its Thar coal reserves to produce dirty energy, which will worsen the air pollution problem. Instead of asking China to finance the conversion of imported coal projects to use local coal to lessen costs and enable loan repayments, Chinese input should be requested to help reduce power losses and improve energy efficiency instead.

Pakistan should invite China to pilot-test efforts to green the broader BRI via CPEC as well. The need to contend with climate change may also enable a green détente between China and the US, and Pakistan is well placed to enable such great power collaboration. However, Pakistani academic and research institutions need to proactively conduct research to identify and formulate measures to further investigate and test such possibilities.