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Aftab Maken
The China-Pakistan Economic Corridor (CPEC) began its first phase in Pakistan with the primary objective of improving the country’s infrastructure. Alongside this, it also played a crucial role in addressing Pakistan’s energy shortages. Under CPEC, direct and indirect Chinese investments transformed Pakistan’s energy landscape, turning a deficit into a surplus. This consistent availability of energy allowed industries to operate efficiently, contributing significantly to Pakistan’s GDP growth. Moreover, the investment in road infrastructure enhanced connectivity not only within Pakistan but also at the regional level, paving the way for greater economic integration.
The development projects under CPEC, initiated in 2014, focused on energy generation and infrastructure development. These projects were executed efficiently, with most of them either completed or near completion by the 2018 general elections. These advancements marked a transformative era for Pakistan, as improved infrastructure and reliable energy supply started yielding positive economic results. However, this momentum was disrupted with the change in government in 2018.
The incoming government slowed down the pace of CPEC projects significantly, and some initiatives were halted altogether. This policy shift led to a resurgence of energy shortages in the country. Moreover, the second phase of CPEC, which focused on establishing Special Economic Zones (SEZs), was deprioritized. The SEZs were intended to leverage the newly developed road infrastructure by fostering export-oriented industrial activities, thereby creating employment opportunities for locals and generating export revenues for the government.
The abrupt slowdown and reversal of CPEC projects had far-reaching consequences for Pakistan’s economy. Instead of yielding dividends for the nation and its people, the stalled projects began to take a toll. The country witnessed negative GDP growth in 2019, exacerbated by the economic disruptions caused by the COVID-19 pandemic. However, the underlying issue was the failure to operationalize SEZs, which hindered the anticipated economic benefits of CPEC’s first phase.
The non-functional SEZs further deteriorated Pakistan’s balance of payments, leaving the country vulnerable to external shocks. Multilateral donors, observing the precarious economic situation, were reluctant to extend substantial financial assistance. This lack of support compounded the economic crisis, leading to a sharp depreciation of the Pakistani Rupee against the US Dollar and worsening inflationary pressures.
In light of these challenges, it is imperative to revive CPEC with renewed commitment and vigor, branding it as “CPEC 2.0.” This renewed initiative has the potential not only to benefit Pakistan but also to contribute to regional stability and development. By fostering connectivity, CPEC 2.0 can serve as a cornerstone for regional integration, enabling countries to leverage shared resources and markets for collective prosperity.
Development and connectivity are the cornerstones of economic growth. South Asia, one of the most populous regions in the world, stands to gain immensely from enhanced connectivity and development. Improved road networks under CPEC can facilitate farmers in transporting their produce to domestic and international markets efficiently, reducing post-harvest losses and enhancing agricultural productivity. Similarly, industries can benefit from easier access to imported raw materials, which, with value addition, can be transformed into export-ready goods. This cycle of production and trade holds the potential to uplift communities, create jobs, and drive economic transformation.
The significance of CPEC 2.0 extends beyond Pakistan’s borders. South Asia faces multifaceted challenges, including poverty, lack of access to basic amenities, and vulnerability to climate change. Approximately 40% of the region’s population lives below the poverty line, with limited access to safe drinking water and essential services. Development initiatives like CPEC are critical to addressing these issues, as they create economic opportunities and improve living standards.
Moreover, the region has endured decades of conflict, both from internal strife and foreign interventions. Development is a powerful antidote to these challenges, offering a pathway to stability and peace. By fostering economic growth and creating employment opportunities, CPEC 2.0 can help address the root causes of migration and displacement, reducing the strain on more developed areas and ensuring a more equitable distribution of resources and opportunities.
A key focus of CPEC 2.0 should be the establishment and operationalization of SEZs. These zones can serve as hubs of industrial activity, attracting domestic and foreign investments. By providing tax incentives, streamlined regulations, and modern infrastructure, SEZs can become engines of economic growth, enabling Pakistan to diversify its exports and reduce its reliance on imports.
The SEZs can also foster innovation and technology transfer, as foreign investors bring expertise and best practices. This, in turn, can boost the competitiveness of local industries, enabling them to participate effectively in global value chains. The employment generated by SEZs will not only improve livelihoods but also contribute to social cohesion and stability, reducing the appeal of extremist ideologies that often thrive in economically marginalized areas.
While pursuing economic growth, it is essential to ensure that CPEC 2.0 adheres to principles of environmental sustainability. Investments in renewable energy projects, such as solar and wind power, should be prioritized to reduce Pakistan’s carbon footprint. Additionally, measures should be taken to mitigate the environmental impact of infrastructure development, such as reforestation initiatives and the use of eco-friendly construction practices.
CPEC 2.0 can also play a pivotal role in addressing the region’s vulnerability to climate change. Improved infrastructure can enhance disaster resilience, enabling communities to respond more effectively to floods, droughts, and other climate-related challenges. By integrating climate-smart practices into its development agenda, CPEC 2.0 can contribute to a more sustainable and resilient future for the region.
Reviving CPEC with a comprehensive and inclusive approach is essential for Pakistan’s economic recovery and regional development. By addressing the shortcomings of the past and prioritizing the operationalization of SEZs, Pakistan can unlock the full potential of CPEC. The initiative’s success will depend on strong political will, effective governance, and sustained collaboration with China and other regional stakeholders.
CPEC 2.0 is not merely an economic initiative; it is a vision for a prosperous and interconnected region. By fostering development, reducing poverty, and addressing the root causes of instability, it has the potential to transform South Asia into a hub of economic activity and innovation. The time to act is now, as delays will only exacerbate existing challenges and widen the gap between potential and reality.
In conclusion, CPEC 2.0 represents a beacon of hope for Pakistan and the region. By embracing this development model, we can create a future where economic prosperity, social equity, and environmental sustainability go hand in hand, ensuring a better tomorrow for generations to come.
