Contestations over CPEC – the China-Pakistan Economic Corridor

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By P.K.Balachandran/Daily News

Colombo, June 18: The US$ 62 billion China-funded China-Pakistan Economic Corridor (CPEC), launched in 2015, was meant to be the lynchpin of Pakistan’s economic development. It was also of great strategic value to China as it would provide a road and rail link between Xinjiang in China and Gwadar port in Baluchistan on the Arabian Sea.  

But CPEC project touched a raw nerve in India because it passes through Gilgit-Baltistan, territory that New Delhi considers part of its province of Kashmir. Pakistan had seized Gilgit-Baltistan during the 1948-1949 India-Pakistan war over Kashmir.

CPEC envisaged the building of roads, industrial zones and power plants all along the route between Gilgit-Baltistan in Pakistan’s far north bordering China, to Gwadar in the deep south across 2000 plus kilometres. Nine years down the line, a number of power projects under CPEC had been completed, but others have languished creating friction between Pakistan and China.

The drawbacks are reportedly due to the following reasons:

(a) Pakistan’s financial and administrative deficiencies typical of developing South Asian countries; (b) Public resentment in the less developed Gilgit-Baltistan and Baluchistan areas over CPEC projects not bringing, or not promising to bring, tangible benefits to the local population; (c) Killing of Chinese personnel by separatists in Baluchistan and Islamic militants in the North Western areas.These  groups see CPEC as a project meant only to boost the prospects of their adversaries, namely, the Pakistan government and its collaborator, China. Only last month, five Chinese engineers were killed by an Islamic militant suicide bomber in North-West Pakistan.  

Another factor has been India’s objection to CPEC projects being located in Gilgit-Baltistan, an area which it maintains, is a slice of Kashmir, which is a part of India. Top Indian ruling party leaders  have threatened to take back, by force, areas in Kashmir which Pakistan had seized in 1948-49.

Such declarations by top Indian politicians have driven Pakistan deeper into the arms of China, which itself has a long-standing border dispute with India. The growing Pakistan-China equation has made Indian army chiefs talk about preparing to fight a two-front war, against China and Pakistan, at the same time.

Pak PM’s Beijing Visit       

Pakistan’s Prime Minister Shehbaz Sharif flew to China on June 4 for a five-day trip to get Beijing’s help to reinvigorate CPEC and thereby arrest the decline of Pakistan’s economy.

He reportedly was hoping to secure a US$ 15 billion rollover facility for five years. The Chinese have already rolled over Pakistan’s loan repayment deadlines in the past, including the US$ 2 billion due earlier this year.

Prime Minister Shehbaz Sharif also hopes to persuade China to fund certain ‘big-ticket’ critical projects that Pakistan needs but currently cannot afford. But this would mean an increase in indebtedness to China. Pakistan already owes U$ 27 billion to China according to the World Bank. Almost 13% of Pakistan’s total debt is to China.

Simultaneously, Pakistan is seeking US$ 6 billion from the IMF to tide over the on-going crisis. But it is common knowledge that the IMF has demanded further increases in energy rates to arrest the mounting debt, cuts in development spending, and the broadening of the tax net to include retail/wholesale, real estate and agriculture sectors. But these demands are hard to meet as the population are likely to turn against the government.  

With nearly 40% of Pakistan’s 241 million people living below the poverty line and with inflation being 20%, the country desperately needs investments from across the world. Further investment and better management of CPEC projects are also urgent.

CPEC Projects

According to Al Jazeera CPEC has 95 projects. US$ 33 billion have been spent on projects in the energy sector. Of the 21 power projects, 14 with a combined capacity of 8500 megawatts have been completed. Two others are under construction and five are yet to start.

Of the 24 proposed projects in the transport sector, only six have been completed and 13 are yet to see any work on them, the news agency says.

CPEC was to include nine Special Economic Zones (SEZs) that are designated areas with lenient trade laws to promote growth. But none of the SEZs have been completed so far. CPEC was estimated to generate more than two million jobs for Pakistanis, but government data says less than 250,000 jobs have been created so far, Al Jazeera says.

Chinese firms have individually invested US$ 14 billion in Pakistan as part of CPEC. Most of the investments have been made by Chinese state-owned energy companies financing fossil-fuel and nuclear power plants, as well as logistics routes connecting Xinjiang with Gwadar.

Issues Chinese Face  

China’s friendship with Pakistan is strong, and has stood the test of time. And yet, China has concerns about Pakistan. Apart from security, there are governance issues. The Chinese complain that the kind of support they seek from the government has not been given to them. It is pointed out that companies need to be able to run viable businesses if they are to relocate to Pakistani SEZs or even to  Pakistan in general. But many Chinese entrepreneurs are reportedly frustrated by the difficulties of getting things done in Pakistan.


CPEC has been facing difficulties in Gilgit-Baltistan, the point where CPEC enters Pakistan from China. Since 1948-49, and till recently, the constitutional status of Gilgit-Baltistan had been uncertain. It has been a de facto part of Pakistan since the partition of British-ruled India into India and Pakistan. But its de jure status has been uncertain because of the India-Pakistan dispute over Kashmir.

Gilgit-Baltistan was part of the erstwhile Princely State of Kashmir. During the partition of British India, between India and Pakistan, both the new countries claimed Kashmir in its entirety. In the war over it in 1948-49, Pakistan took Gilgit-Baltistan and some other parts of Kashmir and also claimed the rest of Kashmir. India took parts of Kashmir and also claimed the rest of it, including Gilgit-Baltistan.

After the formation of Pakistan, the governments there decided not to give Gilgit-Baltistan de jure status of a province of Pakistan until the Kashmir dispute was settled with India in Pakistan’s favour. However, its nebulous status was irksome to the people of Gilgit-Baltistan as the area did not enjoy the rights enjoyed by other provinces of Pakistan.

In the meanwhile, China had been pushing Pakistan to give full provincial status to Gilgit-Baltistan so that its investments there would be protected. If Gilgit-Baltistan is ever handed over to India as part of a settlement over Kashmir, China will be the loser given its hostility to India.

According to a paper written by Hamna Tariq published on October 8, 2020 in, Pakistan had to yield to China’s pressure on Gilgit-Baltistan. In September 2020, Pakistan decided to give provincial status to Gilgit-Baltistan.

The other factor contributing to Pakistan’s decision on Gilgit-Baltistan was India’s decision in August 2019 to fully integrate that part of Kashmir in its possession into India by abrogating Art 370 of the Indian constitution which had given greater autonomy to Kashmir than what was accorded to other Indian States.

Hamna Tariq’s paper warns that China’s concerns about Gilgit-Baltistan will continue because India will continue to claim sovereignty over Gilgit-Baltistan on the plea that it was a part of Kashmir, the entirety of which had been handed over to India by Maharajah Hari Singh, the ruler of Kashmir, when he signed the Instrument of Accession to India on October 27, 1947. The geo-political tussle over CPEC may, therefore, turn out to be never-ending.


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