In 2013, China and Pakistan announced plans to construct an economic corridor to connect Uygur Autonomous Region with the southwestern Pakistani port of Gwadar. Together with the proposed BCIM Economic Corridor (BCIM-EC), the China-Pakistan Economic Corridor (CPEC) extends to South Asia the broader trend of Asian regional economic integration through economic corridors.
The CPEC assumes crucial significance for India in the larger context of China’s regional/transnational initiative, known as ‘One Belt, One Road’.
New Delhi has opposed this corridor as it will pass through disputed territory.
However, in the continually evolving regional dynamics marked by a remarkable upsurge in bilateral trade between India and China, increasing bilateral cooperation on various other fronts, including the development of the BCIM-EC, and attempts to revive the India-Pakistan peace process, the proposed CPEC presents to India some interesting and promising choices which, if exercised innovatively, may open new vistas of regional cooperation, stability and economic growth in the region.
Imperatives/Implications for Pakistan
The proposed Economic Corridor could potentially be a blessing for the economic development of Pakistan. Pakistan has witnessed a sharp fall in FDI in recent years- from US $5.4 billion in 2007-8 to US $1.6 billion in 2013-14 (Government of Pakistan Board of Investment 2015) and the industrial sector is performing way below its potential due to the severe energy crises. The proposed oil and gas pipelines from Gwadar and Iran to Kashgara cross Pakistan would also be instrumental in easing the energy crises in Pakistan.
Situated at the crossroads of huge supplying and consuming markets of the Middle East, Central Asia and China, it is projected that the proposed corridor could virtually rewrite the economic revival of Pakistan by generating huge transit revenues. Together with the economic assistance for infrastructure development from China, the corridor can transform Pakistan into a regional trade hub and energy transit corridor. All these factors could have a huge impact on the industrial, agricultural and overall economic growth and development of Pakistan.
Imperatives/Implications for China
For China, the proposed economic corridor would be very useful in pursuit of the policy of opening up and developing its western regions because of its geographical proximity to these areas. Along with the process of regional economic integration, the CPEC can help in the development of closer relations and cooperation between China and the countries of southern, central and western Asia .
Given that the bulk of China’s oil imports passes through the Strait of Malacca which is vulnerable to piracy and geopolitical uncertainties, a pipeline from Gwadar to China over the Karakoram would provide an alternative for the supply of oil from the Middle East to China’s western and central provinces in particular.
CPEC and India
CPEC will also have consequences for India –Pakistan relations. The corridor runs through the region of Gilgit-Baltistan (GB)in northern Pakistan. This region belongs to Jammu and Kashmir, to which both India and Pakistan have asserted claims.
Given the political synergy between China and Pakistan, the CPEC will be a disguised political disturbance for India. Its strategic content is high and capable of restricting New Delhi’s maneuverability in the region. In an extreme scenario, Pakistan may act as a ‘rented house’ for Chinese Military.
China is aware of the risk that Pakistan’s internal instability could undermine the CPEC. The best-case scenario is one where Chinese investments in Pakistan would successfully transform Pakistan’s economic landscape and make it a more attractive destination for other international investments. In the worst case scenario, however, the initiative could crumble under multiple internal contradictions, pull China deeper into Pakistan’s domestic politics, and push the triangular relationship between Delhi, Islamabad, and Beijing towards greater turbulence.