CPEC could be a diplomatic debt-trap
The China-Pakistan Economic Corridor (CPEC) lies in areas wracked by terrorism and separatist movements, raising serious security concerns.
We have all heard of the “Silk Route”, a historic network of trade routes that connected Europe, Asia and Africa, and facilitated a dynamic exchange of ideas and culture between the people across these continents. When China’s President Xi Jinping proposed his landmark Belt and Road Initiative (BRI) in line with China’s strategic push to play a greater role in global affairs, it appeared that a “New Silk Route” was being developed. However, a closer look at the BRI’s crucial component, the China-Pakistan Economic Corridor (CPEC) raises major concerns over the feasibility and intentions of this project.
A $50 billion enterprise, the CPEC consists of extensive investments in developing Pakistan’s telecommunications, transport and energy infrastructure. The corridor is projected to extend about 3,000 km, beginning at Kashgar in China’s restive Xinjiang province, home to the oppressed Uyghur Muslim community. The Karakoram Highway that connects Kashgar to the insurgency-riven Gilgit-Baltistan province, part of the disputed territory of Jammu & Kashmir between India and Pakistan, forces itself through the perilous Karakoram Mountain Range. It is a narrow road that will struggle to handle even moderate traffic. The corridor will then snake its way through Pakistan to end at Gwadar in Balochistan province, the heartland of human rights violation. The native inhabitant of the lands through which the CPEC muscles its way have incessantly protested the development of this project, owing to which they have been forced out of their homes, silenced or “disappeared”.
Furthermore, given China’s intention of linking the Arabian Sea route with Central Asia, roads will have to be built connecting Gwadar with Kabul through Peshawar or Kandahar province, both of which are under constant attacks by the Afghan Taliban. In other words, CPEC lies in areas wracked by terrorism and separatist movements raising serious security concerns. To make matters worse, neither the weather nor the geology of the terrain is in China’s favour. Even an optimist would shy away from predicting a tangible future for CPEC.
A panel discussion was organised at the Royal Asiatic Society in London to realistically examine the feasibility of CPEC and provide a safe space for oppressed stakeholders of the project to voice their concerns. Leading experts including Dr Troy Sternberg, Junaid Qureshi, Dr Filippo Boni, Dr Shabir Choudhary and Burzine Waghmar, questioned Pakistan’s legal credibility in sanctioning the project in the disputed territory of Gilgit Baltistan and dubbed the CPEC as China’s imperialist agenda. They called for greater transparency and highlighted the futility of the project, given the insurmountable physical limitations of the landscape. Concerns were raised that exploitation of water and natural resources in the region would result in ecological imbalance and adverse changes in climate, which cannot justify CPEC’s projected monetary benefits. It was also argued that the asymmetrical deliberately cynical relationship between Beijing and Islamabad, failed to safeguard the interests of local manufacturers, industries and supply-chains in Pakistan. Arif Ajakia, Pakistani human rights activist, called CPEC the “ChinaPunjab” Economic Corridor and raised concerns over the exploitation of people from other provinces of Pakistan. Furthermore, Pakistan’s apathy towards the tyrannised Uyghur Muslims in China’s Xinjiang Province, where even fasting during Ramzan is prohibited, was questioned. A champion of the Uyghur Muslim community, Rahima Mahmut recounted the inhumane treatment of Uyghurs and said that China’s intention in developing CPEC was purely self-serving.
The $ 50bn question is what purpose does the CPEC serve, if not as an actual avenue for trade and commerce? Reports suggest that Gwadar, which is under a 40-year lease to China, may be a part of China’s String of Pearls—serving as yet another Chinese naval outpost, threatening India’s energy and economic security. India and other regional players have expressed their concerns over the unilateral design and operations of this initiative. With the perfect recipe to aggravate the complexities of the Indian subcontinent and expand China’s strategic interests of increasing its illegitimate land share in the state of Jammu & Kashmir, is CPEC really an economic game-changer or a guise for wielding soft power? Lastly, it is worth remembering that CPEC is an investment, not an aid to Pakistan. Will this initiative strengthen the Pakistani economy or burdened it with unserviceable debt and internal turmoil? Dr Sweta Raghavan, Founder and Director Scientists & Co., was Chair of the panel discussion on CPEC: Diplomatic Debt-Trap or Economic GameChanger for South Asia? held at the Royal Asiatic Society and organised by EFSAS. Greaves Cotton Ltd is a Rs 1,800 crore multi product, multi locational company, and one of the leading engineering companies in the country, with core competencies in diesel/ petrol engines, farm equipments and gensets. Last year has been quite good for the automobile industry, with the passenger vehicle segment recording significant improvement in demand due to new product launches and lower interest rates on consumer loans. While sales were flat in the medium and heavy commercial vehicles segment, the light commercial vehicle segment recorded a decent increase in volumes. In case of three wheelers, demonetisation affected the demand somewhat negatively. This was more so in cash sensitive areas. The commercial vehicle segment is expected to register an increase in the next few quarters, as they are a popular choice for the freight and logistics sector. Notwithstanding the moderation in growth in the last few quarters, the demand for light commercial vehicles is expected to remain buoyant over the long term, as these vehicles are a preferred mode due to stringent restrictions on entry of heavy duty trucks and expanding city limits. Modern power systems and large gensets are a much needed back-up for large corporates in the telecom, IT, medical, retail and the hospitality sectors. Higher government spending on infrastructure, especially in roadways and railways, has accelerated the need for diesel generators. Greaves Cotton has over five-decade-long experience in the auxiliary power business, serving retail and commercial complexes, hotels, hospitals, defence and many government departments. While the power industry has been going through a transformation, the outlook seems quite bright in the foreseeable future. Facing multiple growth challenges, Greaves Cotton posted a weak set of numbers, missing the revenue and profit estimate figures of most analysts. This made the stock correct by nearly 20% in the last 2-3 months, but it has stabilised somewhat currently. There does not seem any downward risk from the present level, as the valuations command a tax free dividend yield of nearly 4% for the stock. As many fund managers and analysts feel, when the economy picks up, demand for the company’s products will start to pick up in the near future. The Greaves Cotton stock currently quoting at Rs 135 can potentially climb by nearly 30% to arrive at a price target of Rs 175 in a one-year time horizon. Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.