Another 'East India Company' or 'Transformational Paradigm'? What Does the Future Hold for the CPEC?

The China-Pakistan Economic Corridor, or CPEC, begins in China’s Xinjiang province and goes all the way through Pakistan to the port of Gwadar located in the southern province of Balochistan, which opens into the Arabian Sea.

Originally valued at $47 billion, the cumulative value of all CPEC projects has currently amplified considerably, with an estimated worth of $62 billion in 2020.

Since its official launch in 2015, the CPEC has completed many major projects across Pakistan, including coal-fired plants, such as that in Port Qasim Karachi, solar parks, including the Quaid-e-Azam Solar Park, wind farms, and many more, while at least a dozen more similar energy projects that are under construction at the moment.

According to some, the CPEC's potential impact on Pakistan has been compared to that of the Marshall Plan undertaken by the United States in post-war Europe, with Pakistani officials predicting that CPEC will result in the creation of more than 2.3 million jobs between 2015 and 2030, and add 2 to 2.5 % points to the country's annual economic growth.

Is CPEC Becoming Another East India Company?

Most vigorous critics have compared CPEC to the exploitative London-based East India Company. The latter was probably the most powerful corporation in history, originating in 1600 and operational up until 1874. At its height, it dominated global trade between Europe, South Asia and the Far East, conquering and colonizing modern-day India, Pakistan, Bangladesh and Burma.

Looking at the CPEC, however, there are major distinctions between the two projects.

Pakistan and China are geographical neighbors that have enjoyed good relations for decades. The philosophy of CPEC is a fusion of Vision 2025 and China's Belt and Road (BRI) initiative and this is not the first time that the two countries have partnered up, they have enjoyed strategic partnership for decades.

The roots for the CPEC were first laid back in the 1990s, as friendly and mutually beneficial relations existed.

Looking at it from a historical point of view, it can be seen that in the 18th century, Indo-Pak's gross domestic product (GDP) share was much higher than Britain’s share in global GDP. This was the main attraction to East India Company to exploit the region's wealth and seize a higher share of the prosperous Indo-Pak continent.

However, in 2021, China's gross domestic product (GDP) amounted to around $17.46 trillion, whereas Pakistan's GDP is $0.3 trillion. Hence, it can be seen that CPEC is essentially quite the opposite of East India Company.

China has claimed that in order to understand how it operates in other regions, one can look at Beijing's involvement in Africa.

'Debt Trap'?

Another point that has been raised by some critics is that CPEC projects can potentially become a debt trap for Pakistan. In 2015, the Governor of the Central Bank in Pakistan Ashraf Mahmood Wathra publicly said, "I don't know out of $46 billion, how much is debt, how much is equity and how much is in kind."

He allegedly also said that he did not know what the debt implications of CPEC actually were.

However, official statistics suggest that 20% of CPEC is debt-based finance, while 80% are investments in joint ventures (JV) between Pakistan and China. Furthermore, local reports have mentioned that some of the biggest projects contribute to 40,000 jobs for local Pakistanis and 80,000 jobs for the Chinese.

According to Dr. Manzoor Ali Isran, “With CPEC, China will save almost $2 billion annually in trade expenses as the Kashgar-Gwadar route with its 2,395 kilometers length make the shortest track for transport of goods. Pakistan, on the other hand, can earn a windfall in the form of transit fees - the justification for which is based on the fact that Pakistan will be maintaining and protecting the infrastructure in addition to paying for claims of insurance and damages.”

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Economic analysts stated that 3.5% of Pakistani GDP is lost due to poor transportation networks, hence, CPEC's transportation projects may counter this loss, as new roads will mean faster and reliable transportation of goods.

Another economically tangible benefit of this initiative includes an end to the major energy shortages in Pakistan which had previously crippled economic growth and resulted in the closing of many important industries around the country.

Can it be that critics feel threatened by the growing cooperation between China and Pakistan? Strong regional stability and prosperity that will result after the CPEC projects will be beneficial to the involved countries, but will possibly lessen the US stronghold over Pakistan. Could that be the reason why the CPEC's impact gets diminished on western media and its potential benefit gets twisted into something negative?

Despite the critics and difficulties that the CPEC has recently faced, the China-Pakistan Economic Corridor is back in the news again and it is planning to expand.

At the third meeting of the CPEC Joint Working Group on International Cooperation and Coordination (JWG-ICC) held on July 21, China and Pakistan decided to “promote cooperation schemes involving third parties in line with existing consensus, extending to Afghanistan.”

Chinese Foreign Minister Wang Yi reportedly said that China “hopes to push the alignment of the Belt and Road Initiative (BRI) with the development strategies of Afghanistan, support the extension of the China-Pakistan Economic Corridor (CPEC) to Afghanistan, and share China’s development opportunities.”

Overall, the China-Pakistan projects, and their possible expansion to include third countries in the coming years, will impact relations and the economy of the South Asia region, the benefits of which will be felt by the generations to come.

The views expressed in this column are those of the author and do not necessarily reflect the position of Sputnik.