Growth not development -
The China Pakistan Economic Corridor
JUNE 13, 2018
“This will be my first visit to Pakistan, but
I feel as if I am going to visit the home of my own brother.”
– President Xi Jin Ping during his visit to
Islamabad to finalise CPEC (2015)
In 2015, China and Pakistan officialised CPEC,
a $46 billion (now estimated $62 billion) investment by China into various
sectors of Pakistan’s economy. This investment includes interest free loans,
soft loans, and export credit (Ramay 2018). The government of Pakistan has
termed CPEC a ‘game changer’ for Pakistan, and leaders of both countries have
signed over 50 project files for the initiative. The plan aligns with the
Pakistan development vision for 2025, as well with China’s national 5-year plan
(Government of Pakistan, People’s Republic of China 2017). The corridor links
the city of Kashgar in western China with Gwadar Port that lies on the Arabian
Sea in the south of Pakistan; the intention is to promote connectivity and
boost growth across the country through networks of highways, railways, gas and
oil pipelines, and infrastructure projects (Markey and West 2016). Special
Economic Zones (SEZ) and Industrial Parks are also set up at various sites
along the corridor.
The corridor consists of three major routes,
Central, Western, and Eastern collectively working on three main sectors,
Energy, Infrastructure and the Gwadar port (Government of Pakistan 2017).
A soft loan is often provided to developing
countries and consists of “lenient terms and conditions as compared to other
loans available in the market, such as lower interest rates and prolonged
repayment duration.” (The Economic Times 2018)
In a period of 15 years, CPEC aims to add
approximately 17,000MW to Pakistan’s national grid, create over 700,000 new
jobs and add up to 2.5% to Pakistan’s annual growth rate (China Pak Investment
Ltd 2017). In a long-term plan published by the two governments the goals for
CPEC are divided into three phases (Government of Pakistan, People’s Republic
of China 2017):
1. By 2020, CPEC initiatives seek
to address major obstacles to Pakistan’s social and economic development and
boost economic growth for both China and Pakistan.
2. By 2025, the construction phase
should be completed, industrial systems almost running, and major economic
functions “brought into play in a holistic way”, which would scientifically
improve the livelihood of people and achieve balanced development across the
region; in doing so it will address all the goals of Pakistan’s Vision 2025.
·
By 2030, CPEC will be completed in its entirety, the
“mechanisms for sustainable economic growth will be in place” and the corridor
will become an international economic zone holding global influence.
Lack of transparency and public participation
in its process has also made CPEC the subject of a great deal of criticism.
Time and again discrepancies have appeared in projects, or in the bidding
process, that have kept these criticisms alive. Some of the main concerns are
outlined below.
Figure: Major CPEC projects (China Pak
Investment Ltd 2017)
Sustainable development is one of the
priorities outlined in the goals for CPEC. Pakistan loses around $3.3 billion
due to environmental degradation issues annually (Ramay 2018). Energy is the
largest sector of CPEC, and 5 of its main plants are coal powered (Government
of Pakistan 2017). The Asian Development Bank has expressed concerns over the
potential environmental degradation that may be caused due to these plants, but
these concerns were dismissed by the acting Chinese ambassador who stated that
“environmentally friendly technology’ is being used in coal powered plants
(Pakistan China Institute 2017). However, the coal that is used for energy
generation in Pakistan is “lignite”, which emits gases that contribute
significantly to global warming and climate change across the world (Shahid
2017). The project has issued no details on the technology being used to mitigate
environmental damage done as a result of energy production.
Investment in hydropower plants has also
raised alarms, particularly for the $50 billion 5-dam Indus Cascade that is set
to generate more than 22,000MW. This cascade poses a threat to areas downstream
of the river Indus, causing possible displacement of thousands of locals
(Ebrahim 2017). Had this truly been a development initiative, priority would be
given to accommodating the needs of communities of living around the river.
One of the more promising projects from an
environmental sustainability point of view is the Quaid-e-Azam 900MW (formerly
1000MW) Solar Park in Bahawalpur. However, each panel requires 1 litre of water
for maintenance, and Pakistan is already facing considerable water shortages
(Ebrahim 2015). This is not so much the fault of solar panels as it is a lack
of foresight from project managers. The panels have an age of 25 years, and no
long-term planning has been done to ensure that the cost they bring can be
sustained by the projected benefits. This, as previously discussed, is an
indication of “uneconomic growth” where the costs of the project begin to
outweigh the benefits, and in the long run, make Pakistan poorer (Daly 2007,
10).
Overall, too, China is not providing aid but
rather investing through loans into the country. Eventually, the money spent
will need to be paid back, with interest. Officials are banking on the
prediction that this investment will create a range of economic opportunities
for local businesses and industry, which can then generate enough revenue to
help cover the debt incurred by this project. However, this is not Pakistan’s
first experience with foreign loans; the country was under a debt of $85
billion by the end of 2017, after a year on year increase of 12.3% (State Bank
of Pakistan 2017). This coupled with the fact that there are several
concessions given to the Chinese, and not local businesses, makes it seem
highly likely that the government is being over optimistic about the country’s
future.
The impact of the Free Trade Agreement already
proved China’s competitive advantage in Pakistan’s market, yet concessions are
being given to Chinese firms along the corridor; there is little evidence to
suggest that the same is being done for local companies. For this reason and
others, several scholars have compared CPEC to the former East India Company
used by the British to colonise India. While it may seem like a stretch to
associate the two, the lack of transparency and the obvious benefits provided
to the Chinese gives evidence to such assertions. In a master plan revealed in
2017, for example, much was written about China’s investment in various
segments of Pakistan’s culture and economy. The plan discusses acquisition of
thousands of acres of agricultural land by the Chinese for ‘demonstration
projects’, including work on fibre optics for internet and television to
“disseminate Chinese culture” (Husain 2017). Additionally, most of material and
labour for construction of various projects along the corridor is being brought
from China. Several scholars and economists in China and Pakistan both seem to
think this is being done to cater to the excess capacity in China’s industrial
sector (Venkatachalam 2017).
The first issue of transparency is that there
has been no formal document set forth by either government that provides
comprehensive details about the projects that are being financed by CPEC. A
condensed document issued as the ‘Long Term Plan’ was published in 2017 but
gives no information on how the goals of CPEC will be achieved, how the bidding
process works, what are the terms of the projects, what are employment
policies, and what measures are being taken to ensure protection of heritage,
wildlife, ecology and local livelihood. All prior development and economic
investment documents in Pakistan, such as national five-year plans and IMF
agreements have remained open for public viewing, and critics argue that CPEC
cannot be an exception (Dawn news 2017).
The project came under scrutiny again when, in
February 2018, the National Highway Authority (NHA) “confessed irregularities
in the award of a $2.9-billion contract to a Chinese firm for construction of a
motorway under CPEC” (Rana 2018). The bidding process has already been heavily
criticised, and this recent development has called for action against the NHA.
Observers, however, feel that little will be done to the organisation for fear
of “tarnishing the image of CPEC” (Mahmood 2018).
I would argue that CPEC comes across as an
economic growth initiative but not a development project. The biggest indicator
of this is the government’s ongoing praise of the initiative for boosting the
national GDP and its complete silence on the project’s potential impact on
human development in the country. The GDP boost is simply a citation of the
amount of money flowing in the economy and says nothing about where it is being
concentrated. This dependency on the GDP is often criticised, with academics cautioning
that that the use of this indicator allows for increased tolerance for
environmental degradation, income inequality, and poverty, all for the sake of
“maximum economic growth” (Basu 2000). This is evident in the way that some of
the aforementioned energy projects are being conducted.
Furthermore, if we look at the broad
categories of CPEC; Transportation Infrastructure, Energy, Gwadar, Industrial
Cooperation, Projects Annual Review, and Proposed Special Economic Zones, we
can ascertain that none, on face value, focus on development as something that
‘transcends growth’. Development, according to Wolfgang Sachs, is meant to be
“economic growth plus redistribution, plus participation, or plus human
development (Sachs 2000, 9). These ‘pluses’ are not incorporated into the
planning process of CPEC.
Investment can present itself as a great
opportunity to address various social and economic issues plaguing the country.
However, due to the lack of an adequate policy framework and Pakistan’s narrow
approach to development, the country fails to utilise this investment in a way
that it strengthens the social sector as well as the local economic structure.
There is an urgent need to rethink the process by which ‘development’ projects
are carried out in Pakistan. Although investment is an essential component of
growth and development, it is merely a tool; in the case of Pakistan it is
being used as the solution. Investment and capital will not contribute to
progress if not coupled with policies and practices that ensure unbiased access
to the opportunities created by the growing economy. The policies that have
followed international investment are highly influenced by foreign consultants,
to counter this Pakistan needs to demand inclusion of local expertise, critics,
environmentalists, sociologists, academics and historians in the planning
process.
CPEC, as the late architect and urban planner
Perween Rehman would say, appears to be a “mega-project” devoid of
“mega-management”, where the former only needs investment, contractors and
construction and the latter requires intellect, knowledge and a much more
comprehensive planning process. A more holistic framework of measuring
development needs to be adopted, so as to steer away from our absolute
dependency on the GDP as an indicator. More importantly, there is a need to rid
ourselves of the notion that development can be measured using solely indexes
and ranks; development, in its true essence, is assessed at a scale where its
impact on human lives is accounted for by the decision-making bodies.
Qualitative research, that takes a closer look
at the impact of development projects on the lives of indigenous communities,
needs to be conducted in order to provide reliable feedback on the
effectiveness of such projects. In this process, authorities from both the
public and private sector will need to be held accountable if the work they do
has a negative impact on social, economic or environmental conditions of a
region.
The author is a graduate of City and Regional
Planning from the Georgia Institute of Technology, and of Architecture from the
National College of Arts. Her research interests lie in the field of
development economics, in particular on local economic structures and
empowerment of those groups and individuals who are often side-lined in the
process of ‘development’. Her paper on CPEC has been presented at a conference
by the Association of Public Policy and Management in Washington DC, and at the
Conference of Urban and Regional Planning at NEDUET Karachi.
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