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View from across the border

It is time for India to overcome the hurdles posed by its difficult history with Pakistan and China by being part of CPEC and BRI

View from across the border
Gwadar: Emerging economic reality.

In South Asia, we have three histories. One that is told and taught in Pakistan, the other that is told and taught in India (or for that matter Bangladesh vis-à-vis Pakistan) and third which is the real history that is people’s history neither told here nor there. It is not only about history; one can say the same about three sets and heroes, two geographies and two maps etc.

A latest addition in this list is China’s Belt Road Initiative (BRI), of which China Pakistan Economic Corridor (CPEC) is an important part. While many in Pakistan look at BRI’s potential of infrastructural and economic integration as an unprecedented opportunity for regional transformation, many in India are sceptic about Chinese agenda of transcontinental and transoceanic extension and perceives it as China’s tool for economic dominance.

BRI has two major nodes in South Asia. The first one is CPEC, and the second is China, Bangladesh, Myanmar, India economic corridor (CBMI). While there is fervour about CPEC in Pakistan, India has still not formally participated in China’s initiative due to certain concerns. Last week, I was in India to attend a conference on BRI by Observer Research Foundation Mumbai, and that is where I got a better understanding of India’s perspective on CPEC and BRI.

Some of the concerns highlighted by the India intelligentsia were based on the chequered relations between India and China. For instance, Chinese quest to “overtake” major ports in Indian Ocean (Through 21st Century Maritime Silk Road) were perceived as a direct threat to Indian security. There was a concern that CPEC has more geo-political dimensions (against India) and does not make economic sense. India is also concerned over Chinese investment in “disputed territory”. It is perceived in India that all projects under CPEC are funded by soft loans that Pakistan will not be paying back. The speakers were of the opinion that neither India can ignore BRI, nor can BRI ignore India.

To me, most of these concerns are based on perceptions and not on evidences. Looking at China’s interest and investment in Iran, Afghanistan, Bangladesh, Pakistan, Nepal, Sri Lanka and India, it is obvious that China is becoming a common denominator in the region and would have the potential to reduce tension among neighbours owing to its economic interests in the region.

One has to be mindful of the fact that economic decisions are subservient to geo-political and geo-strategic realities and so should be CPEC. However, it would be wrong to say that “CPEC does not make economic sense”.

One has to be mindful of the fact that economic decisions are subservient to geo-political and geo-strategic realities and so should be CPEC. However, it would be wrong to say that “CPEC does not make economic sense”. The current maritime distance between Persian Gulf and Tianjin port near Beijing is 12900 KM. One has to add another 4000 KM, if the shipment is to be transported from Beijing to China’s western parts such as Kashgar. The distance between Gwadar and Kashgar is 2500 Km. Thus, it makes perfect economic sense to use Gwadar Port for supplies to China’s western parts.

On India’s concern about China’s investment in “disputed territories”, one must look at cost sharing formula in different CPEC projects. Almost 68 per cent ($33.8 billion) CPEC is energy related projects, where Pakistan’s domestic share is 20-50 per cent (50 per cent in case of hydel projects). In Road projects, China’s share is $5.9 billion, whereas Pakistan’s domestic share is 80 per cent ($4.7 bn). To save its diplomatic relations with India, China can very easily say that investment in disputed area of Pakistan is made through Pakistan’s domestic resources and nothing to do with the government of China’s money.

On the perception that Pakistan would not be paying back CPEC loan, I wish if it was true. Being a sovereign country, Pakistan would have to pay back its loans. However, one needs to see how much of the CPEC money would be “loan” and how much would be “investment” from private sector (most probably through Chinese EXIM bank). My hunch is that most of the energy projects (that make the bulk of CPEC) would be funded by private sector.

As per my information, the government of Pakistan has already negotiated tariff, number of units of electricity, and a time period with different power generation companies willing to install power generation plants under CPEC. This is a secured and safest investment as private investors have already got assured buyers.

My worry is not that Pakistan would not be able to pay back the loans under CPEC. My worry is that the tariff and number of units formula may not lead us to a situation that we are facing with independent power producers of 90s. However, I am hopeful that our policymakers must have learnt some lessons from IPPs saga and have thought of safeguard clauses while negotiating with generation companies under CPEC. I also have concerns on climatic aspects of coal powered electricity generation but I am still looking for more details on environmental friendliness of super-critical coal plants under CPEC.

On last point, “neither India can ignore BRI, nor can BRI ignore India”; I think we should keep in mind that nothing is indispensable in this world. The world is changing too fast and those who do not read the pulse of time lose out. Pakistan did not want to be part of motor vehicle transport agreement in the last SAARC summit. Bangladesh, Bhutan, India, and Nepal signed BBIN motor vehicle transport agreement leaving Pakistan out (Maldives and Sri Lanka are islands, while Afghanistan cannot be part of BBIN as it requires transit through Pakistan).

Likewise, Afghanistan did not want to give transit to Pakistan to Central Asia and thus tried to restrict CPEC. However, Gwadar-Urmaci-Almati-Astana-Moscow route would eliminate the need for Pakistan to seek transit from Afghanistan in order to reach Central Asia and beyond. Thus, it can be said that India cannot ignore BRI, BRI can still do well without India.

We should keep in mind that President Trump’s “U” turn on Trans Pacific Partnership agreement with East Asian and Pacific economies have provided a room for China to offer Regional Comprehensive Economic Partnership (RECP) to ASEAN and Pacific countries. India also has a free trade agreement with ASEAN and can play a role in RECP otherwise it would be letting ASEAN to be economically influenced by China. I foresee that RECP would be integrated with BRI sooner or later.

Thus, India has to make a rationale choice whether it wants to play a responsible role in the region by being part of BRI and CPEC. It is time for India to overcome the hurdles posed by its difficult history with Pakistan and China by not resisting CPEC and integrating in BRI which has the potential to bring peace in the region. 

Dr Abid Qaiyum Suleri

abid suleri
The writer heads Sustainable Development Policy Institute. He may be contacted at Suleri@sdpi.org.

One comment

  • Our region is poor but it homes world half population, that makes its a very big market, CPEC or OBOR is one way to explore this bigger potential, so neighbors should sit together and solve their poverty problem and not let this opportunity go. about coal generation plants, the world is going for renwables and have chockout a road map for 2050. Renewables cost have gone down considerably, just think if life of coal plants is 20 years and by then if world is shifted to renewables will it be viable to continue ruining them and pay for the debt acquired.

    Abid sahib, indeed history here and there and in BD are different but all understand it was based on “divide and rule” this fact is common among all.

    poverty is far bigger problem in India and BD and if they think keeping PAKISTAN out they can solve this problem, I would say they are naive and egoistic

    I inderstand you have trigger a thought process, let’s see where we go from here

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