In its seventy-fifth year, Pakistan’s economy is again mired in catastrophe, despite numerous episodes of economic crisis throughout its history. The country’s current economic situation is the consequence of the relentless issues in its economy’s structure, such as a flaring current account deficit and spiraling inflation owing to political turmoil in the country. Moreover, the appalling flash floods of 2022, an upshot of the drastic climate change, have also been proven to be a great blow to the country’s already crippled economy, inflicting a loss of billions of dollars.
At present, while Pakistan is confronted with abysmal economic challenges, there is a great need to diversify the country’s economy to put it back on track. In this regard, China Pakistan Economic Corridor offers Pakistan a great opportunity to strengthen its financial, geo-economic, and geostrategic standing and overcome this economic mayhem.
Pakistan’s vital geostrategic location_ a gateway to South Asia, Central Asia, the Middle East, Africa, and Europe, gives a major benefit to it, which has been regarded as a focal point for regional connectivity by both Islamabad and Beijing.
Since early 2016, Pakistan has been projecting the CPEC, worth US$46 billion, as the pivot of regional connectivity for its economic progress. The Pakistani leadership of PML-N has been quite optimistic about making the country a regional hub of transit, trade, and economic activity. However, with the political transition, the CPEC experienced a severe slowdown during the government of Pakistan Tehreek-i-Insaaf. In realistic terms, Pakistan’s trade and connectivity with its neighbors, apart from China and Afghanistan, has remained relatively low.
Now, if we assess the potential of CPEC to uplift the deflating economy of Pakistan, CPEC, by increasing regional connectivity and setting up an affordable integrated transportation system, will lower the transportation fee for Islamabad. Moreover, the GDP of Pakistan is expected to rise by 7.5 percent by 2030, with an investment of more than $40bn in Pakistan’s infrastructural, energy, industrial, and agricultural sectors.
Through investment in manufacturing areas of the economy and development in energy production capacity, CPEC assures an increment of nearly two million jobs in the labor market.
The need for energy and fuel is also anticipated to increase exponentially due to rising economic activity and urbanization, leading to long-term effects on Pakistan’s energy supply security amid the country’s present energy crisis. CPEC can help cater to this need.
Pakistan’s Maritime sector is another important avenue with enormous scope and great potential to flourish economically under the umbrella of CPEC. Presently, maritime trade has become an indispensable element of the global economy. The significance of Gwadar port has grown exponentially in the blue economy, as it has the potential to increase Pakistan’s seaborne trade significantly. Unfortunately, Pakistan has not been able to realize its potential to become a marine hub, and current maritime tourism contributes only $300m in GDP, equivalent to 0.4 pc of total GDP, which is far behind the current maritime revenue of India valued at $6bn and Bangladesh’s valued at $5.6bn.
The poor access to the port, out-of-date policies rejecting foreign investment, bad governance models, inadequate finances for modernization projects, lack of local professional and technical skills, inept bureaucratic set-up, and marine pollution leading to the degradation of mangroves all undermine the potential of Pakistan to become a marine hub. However, the development of Gwadar port and transportation facilities under CPEC can provide Pakistan with a foundation for economic growth through seaborne trade. Likewise, this port will improve the prospects for the shipping industry to expand in Pakistan by lowering freight costs, saving foreign cash, promoting overseas commerce, and creating jobs. Experts estimate the improvement of travel and coastal tourism sectors to the international level only can contribute up to 10 percent of GDP by the next decade.
The Gwadar port’s completion can be a great landmark in making Pakistan a regional trade hub. It has great potential to contribute to Pakistan’s blue assets upon becoming fully functional. With CPEC investment, Vision 2030 seeks to increase the trade-to-GDP ratio from 30% to 60% by 2030. This will only be achievable following FDI inflows into Pakistan via CPEC, where Gwadar is the epicenter of the development process.
However, since every opportunity comes with certain risks, a project of this large scale undoubtedly also faces significant challenges. At present, obstacles to CPEC completion include Pakistan’s domestic challenges, primarily political and economic turmoil, insecurity and violence, Afghanistan’s unstable condition, competing interests of immediate neighbors like India and Iran, particularly India’s suspicions, and US worries over the project and most recently COVID-19 pandemic that had the severe blow to the economies of the countries worldwide. Unless these issues are practically addressed, the CPEC will no doubt face various implications in the long run.
Currently, the corridor risks exasperating political turmoil flared social divides and new fonts of conflict in Pakistan. Therefore, the likely outcome of CPEC is heavily reliant on our collective response capacity, including the Federal, provincial, and local governments, the business community, the media, and civil society, all functioning in harmony with each other. If this occurs, the benefits to Pakistan’s economy and society, notably in underprivileged Balochistan and Southern KPK, will certainly outweigh the costs. However, suppose we continue our current course of rivalries, blaming, point scoring, limited territorial and personal considerations, red tape, hesitancy, and delays in problem-solving and removing bottlenecks. In that case, we will undoubtedly incur a heavy financial load.
The China-Pakistan Economic Corridor presents great potential to bolster Pakistan’s distressing economy by augmenting economic and strategic ties with China, one of the most important regional and global economic powers.
CPEC has the full potential not just in making Pakistan a large consumer market by increasing its regional connectivity but also in terms of the possible upgradation of its economic structure, leading to considerable investment inflows in the country and accelerating the local economic growth via resource mobilization, thereby enabling Pakistan to make an economic turnaround.
The Author is associated with The China-Pakistan Study Centre at the Institute of Strategic Studies Islamabad and is a graduate student of International Relations from the School of Politics and International Relations, Quaid-i-Azam University, Islamabad. Her areas of interest include the International Politics of China, the Politics of South Asia, and Non-Traditional Security threats. She can be reached at email@example.com . She Tweets @thesaherrajput