Sustainable economic prosperity is a cornerstone for national development. In the modern world, economic interdependence is not a luxury, but a fact of life. This interdependence translates into booming trade and specialized industries.
Nations need to trade if they are to fulfill every demand of their citizens. The System of Autarky has utterly failed, and free-market trade is the only way forward. The one point of concern is that if a nation is to survive this intense interplay of economic forces, its domestic industry must, in no uncertain terms, be solidly grounded. National economies with feet of clay usually do not tend to last long in the intense competition that is international, free-trade.
The Rise of China Rise of China
China today, stands as one of the most successful stories of economic revivalism in the world. In 1995, China’s total exports stood at $280.9 billion, which was three percent of the total global trade. By 2018, Chinese global trade stood at $4.6 trillion and was a whopping 12.4 percent of all global trade.
China has gone from being a basket case and downright reprehensible economic drain basin to a behemoth that has outgrown even the United States in terms of global trade. But as the Thucydides Trap extrapolates, no peripheral power can rise and dethrone the reigning core power with some form of military conflict. This appears to be the case, and as the Sino-U.S trade war intensifies and the South China Sea becomes increasingly militarized, the Chinese lifeline, i.e. its trade through the Strait of Malacca, becomes increasingly more vulnerable to potential blockades and military quarantines. Ergo, it is imperative for the Chinese to, among other things, find an alternate route to transport valuables to the markets of Europe, the Middle East, and now even Africa. Such a route would have to pass through the friendly territory and be safe from any external aggression. Enter the China-Pakistan Economic Corridor or CPEC. CPEC effectively shaves off twenty-one to twenty-four days of transportation from the Chinese trade route to the Middle East and twenty-one days to the markets in Europe. Through Malacca and the South China Sea, shipments take forty-five days. All in all, a forty-foot container destined for the Middle East now costs China $1450 less to transport, and a container destined for Europe costs $1350 less to transport. The regular route through the Malacca Strait costs $3517 to the Middle East, per container and $4117 per container to Europe. The savings on transportation costs alone are phenomenal, and the security of Chinese trade through Pakistan is all but ensured.
Gwadar Port and CPEC
The jewel on the crown of CPEC is the Gwadar Port. Gwadar is a deep seaport on the Makran coast of Balochistan. Pakistan acquired the Gwadar enclave from Oman on 8 September 1958, and the Gwadar Port officially became part of Pakistan on 8 December 1958, putting an end to two hundred years of Omani suzerainty. Though the area had been identified as a suitable venue for a deep seaport back in 1954; serious developmental projects were not undertaken until 2001. By 2007, the port was ready to operate, and the first cargo vessel, the Pos Glory with a 70,000 metric ton cargo docked on the port on 15 March 2008.
Gwadar port city is not only essential for the Pak-China Corridor, but for the entire Chinese OBOR (One Belt One Road) initiative. It does, however, feature prominently in the Pak-China Corridor, and may even be referred to as quintessential in the CPEC initiative. The latest CPEC news is that of the ten projects currently underway in Gwadar, one is 100% complete, namely the China-Pakistan Faqeer Primary School Project. The Gwadar Eastbay Expressway (19 km, connecting Gwadar Port to Mehran Coastal Highway) is 60% complete, and the date of completion is estimated to be October 2020. The Gwadar Free Zone is 60% complete, the Gwadar New International Airport is 40% complete, and the Gwadar Smart Port City Master Plan is at 20% completion. The remainder of the projects stands at 15 to 10% completion. This has caused Gwadar property prices to sour, and the area is now a lucrative investment opportunity for both Pakistani and Chinese investors.
Benefits of CEPC
CPEC has often been referred to as China’s Marshall Plan for Pakistan. Official Government of Pakistan estimates indicate that CPEC will create more than 2.3 million jobs till 2030, and add 2 to 2.5 percentage points to the annual national growth. The projected $46 billion to be invested in Pakistan through CPEC is equivalent to all foreign direct investment (FDI) in Pakistan since 1970. Official statistics have estimated that road and bridge tolls alone will bring in $6-8 billion per year. CPEC finances are 20% debt-based, and 80% through Joint Ventures between Pakistan and China. The total loan provided for CPEC is 6% of Pakistan’s GDP, and it has been labeled by the Indian and American governments. However, independent economic analysts have estimated that though the loans are considerable, the long term benefits of economic growth are immensely tangible and sustainable.
The question here is one of trust and sustainability. The Chinese government has thoroughly clarified that should Pakistan find itself in hot water, the Central People’s Government and Communist Party would not be averse to easing the payment schedule. Pakistan and China have an all-weather friendship that has withstood the test of time on multiple occasions. It is unrealistic to assume that China would ever want Pakistan to be a basket case, incapable of independent action. On the contrary, a strong sovereign Pakistan will serve China’s interests best as a means to counterbalance a rising India. Pakistan may be the key in China’s plans to escape the Thucydides Trap and for Pakistan, these investments are a godsend. All in all, this is a win-win situation for both Pakistan and China.