Why The China-Pak Economic Corridor Is Unviable, And How It Could Cost China More Than Just Money
The CPEC faces harsh challenges on many different fronts, including but not limited to engineering, costs and labour.
This will make the CPEC a very costly affair for China – and not just in terms of money.
In this second part of two articles, the authors demonstrate that the CPEC project is unviable.
- The success of the China-Pakistan Economic Corridor (CPEC) is dependent on the successful laying of highways, railways and pipelines and its operation through the Balochistan, Khyber-Pakhtunkhwa and Gilgit regions.
- The entire highway passes through some of the least hospitable terrain in Eurasia and through regions totally unsuitable for movement of commercial traffic.
- It may be noted that the Khunjerab Pass, which is the primary connection into Chinese territory, is at an altitude comparable to Mont Blanc and Mount Whitney, the highest points in Western Europe and Continental United States (US), respectively.
- From Havelian, where the current Pakistan rail network terminates, to Khunjerab is a 650km stretch. This 650km of pipeline will have to be laid from an elevation of 830m to 4,700m.
- Effectively, hundreds of kilometres of tunnels boring through mountains have to be constructed.
- To compare, such pipelines that go through tunnels are never more than 120km and, till now, carry only water.
- The hazardous nature of this enterprise is beyond ambition and in the realm of the foolhardy.
- Seismic activity in the region could impede progress of projects as well as necessitate frequent repairs. Due to the mountainous nature of the region, the pipeline would have to be equipped with many bends and diversions. Studies prove that such bends show increased vulnerability to seismic activity.
- Geological instability of the regions through which the CPEC’s main roads shall pass
- Gilgit-Baltistan is notorious for earthquakes. The US Geological Survey has identified it as among the most geologically active areas in the world.
- To illustrate, a 2010 landslide resulted in the formation of the Attabad Lake and blocked the Karakoram Highway for months. It took five years for the highway to return to normal operations.
Balochistan is a water-scarce region. Water must be transported there by trucks. Desalination plants are already running under capacity. Additional workforce accumulation and construction activity will result in severe pressures on the water supply. And constructing desalination plants is capital-intensive and has long gestation periods.
The corridor moves through some very environmentally sensitive regions of the planet, which is home to many rare species of flora and fauna. An example is the sensitive Ramsar mangrove swamps. Another is the Khunjerab National Park, which houses the endangered snow leopard. International environmental fora could object to this project on these grounds.
A Pakistani analyst has cautioned that the cost of moving crude oil, for instance, through this land route can be anywhere from seven to ten times as high as moving the same crude through the Malacca Straits. Tanker charter rates are at record lows. Add to this, there is excess capacity in Chinese-owned crude tankers.
The existing Chabahar port in Iran, which is a mere 100km to the west, will be a major competitor. India is committed to the project, which will be a valuable conduit for crude and other resources from Iran, a major producer itself, and the countries of Africa. It will be a trade point between Iran, East Africa and the countries of Central Asia, including former Commonwealth of Independent States. It may be noted that India, Russia and Iran would all be in favour of the Chabahar port.
There will be hard competition for this pipeline from planned mega oil and gas pipeline projects which originate from resource-rich countries like Kazakhstan, Russia and Turkmenistan.
In comparison, almost all of the source of crude for the planned CPEC pipeline will be from outside Pakistan, from countries that may not have a direct benefit in transporting their crude through Pakistan.
Markets and balance of trade
The largest significant market for the CPEC is in the cities of western China, a minimum of 3,500km from the mouth of the highway.
The eastward traffic will be of raw material and energy imports into China. And since Kashgar is the largest producer of cotton in China, it will reciprocate by flooding the Pakistani market with cheap cotton imports.
The cost of this project is estimated to be up to $50 billion and growing. Most of the cost is being directly borne by the Chinese government by means of low-interest and interest-free loans through state-controlled banks. In outlay terms, this is about 5 per cent of the overall One Belt, One Road initiative, which is expected to cost China $1 trillion, of which $850 billion is to come from China Development Bank.
However, most of the construction contracts have been awarded to Chinese firms that are using Chinese labour to fulfil these contracts.
Today, China has a large construction workforce that has been affected by the slowdown. There will be pressure to redeploy these workers in the construction activity on the CPEC.
There is a shortage of skilled industrial and construction workers among the native population of Pakistan. And going by all precedents, Chinese CAPEX projects in foreign countries tend to rely on Chinese labour extensively.
Given these two conditions, it can be safely surmised that employment opportunities on the projects of the CPEC will overwhelmingly favour the Chinese.
A large influx of Chinese workers (mostly single young men) with Chinese dietary habits in the conservative environment of rural Pakistan is bound to create tension.
This is an ever-present danger due to the strategic leverage the US, Russia, Iran and India have over the regions directly or in adjoining areas. Additionally, the remoteness and seismic faults will enable all players to easily achieve plausible deniability.
A critical portion of the highway, the section that connects to China through the Khunjerab Pass in the Karakorams is claimed by India.
Large portions of the CPEC are through relatively uninhabited regions, or regions inhabited by ethnicities that have been marginalised by the dominant Sunni Punjabi Muslim nationality. Besides the now visible Baloch insurgency, a significant groundswell of support and an initial germ of insurgency exists even in the Sindh province.
India could object to projects in the territory claimed by itself in international fora, including filing a request for redressal to the United Nations.
The Pakistani Taliban could turn against the project. One may recollect the Lal Masjid siege, when the Pakistani government was faced with Hobson’s Choice.
Separatist elements in Xinjiang could sabotage the project as well.
From the economic and geopolitical discussion in this two-part essay, we can conclude that the success of this project is jeopardised.
Given Xi Jinping’s effusive praise of Pakistan and his commitment to this project, significant cost overruns and delays could result in his doubling down on the commitment. This will create a drain on China’s already-stretched finances.
It will be impossible for the Chinese President to bow out of the project, as the resultant loss of face cannot be countered. Even though the current President is probably the single most powerful leader after Mao, it is still possible such a ‘Xi’s Folly’ could cause internal unrest in the Chinese Communist Party.
Eventual abandonment of the project might well prove to be his undoing. And the Makran would continue to be the true ‘Graveyard of Empires’.
Understanding Beijing’s Thinking Behind The China-Pakistan Economic Corridor (Part 1)
China-Pak Economic Corridor: Why Gwadar Is An Overrated Port
Chinese Corridors And Their Economic, Political Implications For India
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