Is the Crown Jewel of the Belt and Road losing its shine?

When Imran Khan took the oath as Pakistan’s new prime minister back in August, the general consensus was that China had nothing to fear. Despite the change in government from the previous ruling Pakistan Muslim League-Nawaz (PMLN) to Khan and his Pakistan Tehreek-e-Insaf (PTI), there was no reason to think the PTI would jeopardize the long-standing “iron brotherhood” between Pakistan and China. As Michael Kugelman, deputy director of the Asia Program and senior associate for South Asia at the Wilson Center in Washington, DC, told The Diplomat at the time of Khan’s swearing-in, “There’s a deep political consensus in Pakistan in favor of maintaining Islamabad’s deep partnership with Beijing. That won’t change under Khan.”

Since then, however, there have been signs that Khan might be rethinking the China-Pakistan relationship to a larger degree than expected – while still extolling that all-important partnership. The first sign came when Khan chose Saudi Arabia over China as the site of his first foreign visit as prime minister, breaking with previous convention. As it turned out, China won’t even be the second country Khan visits. The Pakistani prime minister is making a second visit to Saudi Arabia and then spending two days in Malaysia before finally touching down in China on November 3. But, as if to make up for the delay, Khan is reportedly set to spend a week in China, during which he will attend the opening of the Shanghai International Import Expo.

Khan’s approach to China catapulted into the headlines thanks to a report on his upcoming travel from Dawn, Pakistan’s leading English-language daily. In particular, Dawn suggested that the PTI government wants a major change in the China-Pakistan Economic Corridor. “Khan would inform the Chinese leadership that his government wanted to bring about a significant shift in the projects falling under the purview of China-Pakistan Economic Corridor (CPEC),” according to Dawn, citing sources in the Pakistan government.

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…Under the previous government there was an emphasis on infrastructure schemes, but the present government wanted projects involving agriculture, job creation and foreign investment [to] take center stage.

The Prime Minister’s Office had already decided on such a shift in early October. “Earlier, the CPEC was only aimed at construction of motorways and highways, but now the prime minister decided that it will be used to support the agriculture sector, create more jobs and attract other foreign countries like Saudi Arabia to invest in the country,” Information Minister Fawad Chaudhry told Dawn on October 9.

The fate of CPEC is of immense interest not just to China and Pakistan, but to observers around the world who are keeping a close eye on China’s ambitious Belt and Road Initiative (BRI). CPEC has been explicitly described as a “pilot project” for the BRI and a lot of the BRI’s fate is riding on the megaproject. Given the unusually close ties between Beijing and Islamabad, there’s a perception that if the BRI can’t succeed in Pakistan, it can’t succeed anywhere.

So reports that Pakistan wants to rethink the project have sparked a flurry of speculation that the Belt and Road is losing its shine even in capitals friendly to Beijing. The truth of the situation is more complicated: while Khan does want a major shift in the way CPEC is being conceptualized, he is still betting heavily on Chinese investment and aid to jumpstart Pakistan’s economy. While CPEC as Khan envisions it would require flexibility from Beijing, cooperation with Khan could actually lead to a BRI model that is both more sustainable for and more enticing to host governments around the world.

According to the “1+4” framework for China-Pakistan relations, agreed upon during Chinese President Xi Jinping’s April 2015 visit to Pakistan, CPEC is “at the center” of China-Pakistan relations. Within CPEC (the “1”), “Gwadar Port, energy, transport infrastructure, and industrial cooperation [are] the four key areas to achieve common development.” Similarly, the “Long Term Plan for China-Pakistan Economic Corridor,” released under the previous PML-N government, listed “the comprehensive transportation corridor and industrial cooperation between China and Pakistan as the main axis” for CPEC.

“Industrial cooperation” is the key for Khan. Under his planned CPEC rethink, three of the four priorities would be downgraded, with “industrial cooperation” – in the sense of China investing in Pakistani industry – taking the forefront. Importantly, this area was already included in the vision for CPEC, making this a change in emphasis rather than a complete overhaul.

The change in emphasis is a substantial one, though. CPEC to date has been almost entirely overshadowed by infrastructure projects. The government of Pakistan’s official CPEC website, which offers an overview of all CPEC projects to date, lists 15 “energy priority projects” worth over $21 billion and eight infrastructure projects (five roads and three railways) worth over $13 billion. That doesn’t include infrastructure projects linked to the development of Gwadar port and the surrounding area; port construction, along with a related expressway and international airport, will add another $520 million to CPEC.

By contrast, there are no projects listed that directly relate to Pakistan’s agriculture sector, a major priority for Khan, even though agricultural development is also pegged as a “key cooperation area” in the Long-Term Plan.

Along the same lines, Khan has indicated his interest in special economic zones (SEZs) that could “help the local industry grow, creating huge employment opportunities for the youth,” in Dawn’s words. As with agricultural cooperation, SEZs are already included in the CPEC blueprint, but have seen little concrete progress.

The Pakistani government’s CPEC plan includes a list of nine proposed special economic zones in Pakistan, from an “ICT Model Industrial Zone” in Islamabad to “Mohmand Marble City” in what used to be known as Pakistan’s Federally Administered Tribal Areas (FATA), now incorporated into Khyber Pakhtunkhwa. That’s in line with the Long-Term Plan’s call to “promote Special Economic Zones (SEZs) in all provinces and regions in Pakistan.” Yet according to the official CPEC website, all these proposed SEZs are still stuck in the feasibility study stage, over five years after CPEC was officially conceived of.

Still, the seeds for Khan’s reframing of CPEC are already included in the project’s official framing. In fact, taking a global perspective, promises of industrial cooperation are a staple of China’s cooperation with other developing countries, and have been a particular focus when it comes to China’s relationships with African countries. But in practice, Chinese investment in the developing world has been overshadowed by megaprojects – some would say “white elephants” – in the energy and infrastructure sectors. Potential Chinese partners like Pakistan, spooked by fears of national debt, are less and less interested in the infrastructure-heavy model. But that doesn’t mean regional leaders want an end to cooperation with China – rather, there’s a desire for a new type of cooperation.

The truth is that Khan – and other leaders in the region – are still very keen on securing access to Chinese money. Khan, for example, is going to China not only to discuss reshaping CPEC but to ask for foreign aid from China to help assuage Pakistan’s looming debt crisis. What’s new is a shift in prioritizing how that money is spent. Where infrastructure was once seen as a country’s ticket to development, now there’s more attention being paid to projects that lead to direct employment opportunities at home. If China can work with Pakistan and Imran Khan to make such a shift in CPEC, the BRI will only grow more attractive to potential partners.

If Beijing can’t demonstrate that level of flexibility, however, we’ll continue to see the future of CPEC – and by extension the BRI – brought into question.

"Monitoring Desk"

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