Lessons from Africa (Part One)

China Pakistan Economic Corridor (CPEC) is generating euphoria in Pakistan. In the first part of the two part series ‘Lessons from Africa’, Asad Abbasi briefly looks at the global context of CPEC. 

The China Pakistan Economic Corridor (CPEC) is set to be the biggest investment of any kind on infrastructure in Pakistan. By 2030, China will invest a total of $46 billion in energy, transport, fibre optics and Gwadar port. It forms part of the 3,000 km corridor that China is building with the aim of reducing the transportation time of oil and goods from the Middle East from 12 days to 36 hours.

CPEC has brought euphoria in Pakistan. A recent survey shows that the ‘majority of people (in Pakistan) believe that China-Pakistan Economic corridor (CPEC) will have a good impact’. The Prime Minister of Pakistan has called CPEC the ‘future’; the President has called it a ‘benefit to the region’, while the Chief Ministers of Punjab and Sindh have hailed it as a ‘gift’ and ‘life line’.

IAEA Imagebank / Creative Commons License. Picture of Pakistan's Prime Minister Nawaz Sharif (Right).

IAEA Imagebank / Creative Commons License. Picture of Pakistan’s Prime Minister Nawaz Sharif (Right).

Above all, Chief of Army Staff, most powerful man in the country, has vowed to protect CPEC and is making ‘all the efforts’ to ensure its success. It is likely that no less than ten thousand special security troops will be placed to protect ‘CPEC projects’.

Is it the titillation of $46 billion that excites everyone? Is development for all automatically guaranteed with this investment? The first question is perhaps rhetorical, but the second is important. I address it by looking at China’s investment in Africa, which shows that if proper institutions are not built and workers are not protected then economic growth will foster severe inequality.

China Pakistan Economic Corridor (CPEC)

In Pakistan, CPEC is advertised as a prelude to growth and development.There are reservations from political parties, who fear that Punjab, province of ruling party, will get superfluous share of the wealth and insist a ‘rightful’ share of CPEC investment should be divided among all provinces However, as all parties are keen to take advantage of CPEC, it is likely that a resolution will be found in the near future.

nznationalparty / Creative Commons License

nznationalparty / Creative Commons License


For Pakistan, CPEC might represent ‘prosperity’, ‘unity’, etc., but for China it is just one small part of Yi Dai Yai Lu. This is usually translated into English as “One Belt One Road” (OBOR) but according to Tim Summers, senior consulting fellow at Chatham House, the English translation fails to convey the dynamic meaning that the phrase encapsulates. Yi Dai Yai Lu conjures up two different epochs of Chinese history: Silk Road of Tang Dynasty (618-906 AD) and modern silk maritime trade routes from coastal China. The aim of the project is to connect China with 65 countries in Asia and Europe. China estimates that OBOR will add $2.5 trillion to its trade over the next decade.

The recent fall in local demand means that Chinese factories are producing more than they sell at home. This ‘overcapacity’ of Chinese firms means that China needs to look elsewhere to make efficient use of its capital.  One Belt One Road provides opportunities for Chinese firms to invest abroad. PwC estimates that since 2013 ‘projects worth $250 billion have already been contracted’ to Chinese companies. In future, OBOR will bring even ‘more investment opportunity for Chinese enterprises’.

There is one problem—trust. There are many reservations about Chinese investment. The Heritage Foundation estimates loss of deals worth $200 billion due to ‘nasty surprise of some sort’. Some say it is because stakeholders in many countries do not trust state-funded Chinese investment. China will have no such complication in Pakistan, particularly as the two countries have been developing an increasingly cosy relationship for some time. Investment risk will be minimal since it is closer to home and Pakistani Army has vowed to protect it, so CPEC is a win-win for Chinese corporations. Is it also win-win for Pakistan?

This article was originally published on the London School of Economics South Asia Blog and is reproduced with the writers permission.

The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.


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