Belt and Road Initiative in the Gulf Region: Progress and Challenges

China International Studies (English) - - Contents - Liu Li & Wang Zesheng

The Belt and Road Initiative has become the main focus of strategic cooperation between China and the Gulf region. Despite the risks derived from regional turbulence and political rivalry among major powers, there remains room for a turnaround in the situation. China should seize this opportunity to enhance pragmatic cooperation.

China and countries in the Gulf region are at Asia’s eastern and western ends respectively, linked by the ancient Silk Road across the Gobi desert. In the new century, the Belt and Road Initiative has become the main focus of strategic cooperation between the two sides. The Gulf countries are “natural cooperative partners” in the Belt and Road construction1 in an important geographical area difficult to bypass. Although the political and security situation in the Gulf region is complicated and unpredictable, presenting challenges to the implementation of the Belt and Road Initiative, there remains room for a turnaround in the situation of West Asia and North Africa including the Gulf region itself. China should seize this opportunity, circumventing possible risks and enhancing pragmatic cooperation under the Belt and Road Initiative.

Strategic Importance of the Gulf Region

The Gulf region, including the Gulf Cooperation Council countries plus Iran and Iraq, is situated in the area where the three continents of Asia, Africa and Europe and the five seas of Mediterranean, Red Sea, Arabian Sea, Caspian Sea and Black Sea converge, and is adjacent to the four maritime

strategic channels of Bosporus, Dardanelles, Mandeb and Hormuz. The area is also at the intersection of the Silk Road Economic Belt and the 21st Century Maritime Silk Road. With its advantageous location, unique endowment of resources and huge industrialization potential, the Gulf region’s strategic importance is beyond doubt.

The Gulf region holds a prominent position in the Belt and Road construction, providing a positive demonstration effect across the entire Arab world. After World War II, affected by the Us-soviet competition for hegemony and the Arab-israeli conflict, the Levant region with Palestine at the center attracted widespread attention from the international community. Following the Gulf War, the United States’ diplomatic strategy of “containing Iraq and Iran in the east and promoting peace talks in the west” brought stability to Levant and the Gulf region. In the wake of the Iraqi War, especially with the emergence of the Iranian nuclear issue, regional structure presented a feature of “rising east and declining west.” GCC countries have generally remained stable in the turmoil that spread West Asia and North Africa, and made an attempt to incorporate Jordan and Morocco into the organization in May 2011. Following two successive revolutions in Egypt and the signing of the Iranian nuclear agreement in 2015, the Saudi Arabia-led GCC began to dominate the affairs of the Arab League. As a result, the influence and strategic importance of the Gulf region increased rapidly. Chinese President Xi Jinping’s visit to Saudi Arabia as the first stop of his West Asia and North Africa tour in January 2016 demonstrated the Gulf region’s position in China’s overall diplomacy. As the strategic focus of West Asia and North Africa and a major component of the Arab world, the Gulf region will play an increasingly critical role in the implementation of the Belt and Road Initiative. Cooperation between China and the Gulf countries will also promote Sino-arab cooperation.

The Gulf region is the engine of regional development, and also stands at the core of the entire Asia-europe-africa economic plate in the Belt and Road construction. Since the turmoil in West Asia and North Africa,

the Gulf states have become a prosperous “special zone” in stark contrast to other Arabian countries that have suffered severe economic downturn. The main reasons for this are threefold. First, the region is endowed with abundant energy reserves. The oil reserves of the Gulf region account for about 48 percent of the world’s total with a production life of another 78 years at low cost; natural gas reserves account for about 40 percent of the world’s total with a production life of another 264 years, while the global production life is only 67 years.2 Second, the region occupies a strategic channel in the international trading route. The 1040-kilometer-long sea route, which extends from the west coast of the Persian Gulf via the Strait of Hormuz and the Gulf of Oman to the Arabian Sea, carries more than 50 percent of the world’s oil. Third, the region has strong economic power. The economic size of Gulf states accounts for about 50 percent of the Arab countries’ total, with their foreign trade volume accounting for about 60 percent and foreign investment about 70 percent.3 It is also worth mentioning that the Gulf states own huge amounts of petrodollars. The total size of their sovereign wealth funds has reached US$2.3 trillion, accounting for about 36 percent of the world’s total.4 As China’s economy enters a period of “new normal,” characterized by the coexistence of momentum for economic growth and pressure of economic downturn, the Belt and Road Initiative will promote economic cooperation and connectivity between China and the Gulf countries. The Gulf states are not only China’s important partners to achieve its objective of steady economic growth, but also possess significant influence across West Asia, North Africa, and even inland Africa and Europe.

The Gulf region is foundation of stability in West Asia and North Africa and relations between China and the Gulf countries are key to the

security of Belt and Road construction. Most Gulf states are still ruled by monarchies with more than one hundred years of family rule, which infuses these countries with a very distinctive cultural heritage and has contributed significantly to political stability. Such stability is exemplified clearly with the leadership change in the United Arab Emirates, Saudi Arabia and Qatar. A new generation of leaders, including Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces Mohammed bin Zayed Al Nahyan, Saudi Arabia’s Deputy Crown Prince and Defense Minister Mohammad bin Salman Al Saud, Bahraini Crown Prince and Deputy Supreme Commander Salman bin Hamad Al Khalifa, and Qatar’s Emir Tamim bin Hamad Al Thani, have successively managed a seamless power transition. Oman’s Sultan Qaboos and Kuwait’s royal Sabah family have also achieved solid ruling, and established a relatively stable succession mechanism. The six Gulf states, besides maintaining high living standards and social welfare for all, have worked to keep appropriate balance among legislative, executive and judiciary branches, and pushed forward reforms to address corruption. They have also promoted dialogue on religious tolerance, expanded civil rights and improved women’s role and status. These changes have significantly enhanced social cohesion and national identity, and are welcomed by the majority of people. Political stability has provided a secure environment for foreign investment. Promoting relations with the Gulf states is conducive to improving security along the Belt and Road, combating the “three forces” of terrorism, separatism and extremism, and maintaining stability of China’s western border.

Current State of Cooperation under the Belt and Road Initiative

With the publication of Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st-century Maritime Silk Road and China’s first Arab Policy Paper, China and the Gulf states, based on the principle of wide consultation, joint contribution and shared benefits, have achieved significant progress in the Belt and Road construction.

High-level exchanges and cooperation mechanisms

China attaches great importance to high-level exchanges and policy communication with the Gulf states, and the two sides have maintained a close and cooperative relationship. In January 2016, President Xi Jinping visited Saudi Arabia, Egypt and Iran, announced the first Arab Policy Paper, and signed 52 cooperation documents. During his meeting with the GCC’S Secretary-general, Xi said, “China-gcc relations have been maturing. Cooperation between the two sides enjoys solid foundation and bright prospects. It is hoped that the two sides will forge ahead and pool more consensus to elevate the level of bilateral relations and promote China-gcc mutually beneficial cooperation to bring more benefits to the people of the two sides. China is willing to launch mutually beneficial cooperation with the GCC countries in combination with the Belt and Road construction, and realize the docking of respective development plans and strategies.5 As of now, China has established strategic partnerships with Iraq, Qatar and the UAE, and comprehensive strategic partnerships with Saudi Arabia and Iran. In the China-initiated Asian Infrastructure Investment Bank (AIIB), Iran, Oman, Qatar, Saudi Arabia and the UAE are founding members. China has signed memorandums of understanding with Qatar, the UAE, Kuwait, Saudi Arabia and Iran to jointly build the Belt and Road, and has begun free trade area negotiations with the GCC and Iran respectively.

Promoted by high-level visits, China and the Gulf states have established a series of bilateral and multilateral cooperation mechanisms. For example, China and Saudi Arabia established a high-level joint committee in 2016, with six subcommittees in charge of political and diplomatic affairs, the Belt and Road Initiative, major cooperation projects, energy, trade and investment, and culture, technology and tourism respectively. The Chinaarab States Cooperation Forum is a multilateral cooperation framework

with multiple levels and diverse content. Except Iran, all countries in the Gulf region are Arab states, representing an important and unique part of the Islam world. Since the establishment of the China-arab States Cooperation Forum in 2004, the two sides’ pragmatic cooperation have achieved leapfrog progress and the Gulf states have made outstanding contributions. At the sixth ministerial meeting of the Forum in June 2014, President Xi Jinping proposed the “1+2+3” cooperation pattern, taking energy cooperation as the core, infrastructure construction and trade and investment facilitation as the two wings, and three high and new tech fields of nuclear energy, space satellite and new energy as the three breakthroughs. In May 2016, the seventh ministerial meeting of the Forum identified connectivity, industrial capacity cooperation and cultural and people-to-people exchanges as the three pillars of Belt and Road joint construction, and allocated key areas and projects for cooperation.

Infrastructure connectivity

Connectivity, as the basis of the Belt and Road Initiative, aims at linking land, sea, air and cyberspace environments of countries along the routes. Through six major economic corridors of China-mongoliarussia, New Eurasian Continental Bridge, China-central Asia-west Asia, China-indochina Peninsula, China-pakistan and Bangladesh-china-indiamyanmar, China will be closely connected with Europe, Africa and the rest of Asia. While the Gulf states are well funded and in urgent need of infrastructure construction, China’s experience and technology accumulated in its own development process could offer vital assistance. At present, the GCC is considering a regional railway network modeled on the European high-speed railway, which is composed of the Kuwait-saudi Arabia-bahrain line, the Bahrain-doha line, the Saudi Arabia-abu Dhabi-al Ain line and the Muscat-sohar line, etc., with a total mileage of 2,117 km and a total investment of about $15.4 billion. It is expected to be completed in 2020. Chinese enterprises have actively participated in the above projects and other infrastructure such as ports, docks, industrial parks and oil pipelines.6

Traditional economic and trade cooperation

The economies of China and the Gulf states are highly complementary. The two sides have deepened cooperation in the fields of energy, trade, project contracting and investment since the proposal of the Belt and Road Initiative. By the end of 2015, China has imported 110 million tons of crude oil from GCC countries, accounting for 75 percent of China’s imports from Arab countries; the trade volume between China and the Gulf states has amounted to $136.8 billion, which is 70 percent of total China-arab trade; the value of signed labor service contracts between China and the Gulf states has reached $102.8 billion. In 2015, the worth of completed project contracts reached $11.55 billion, 7.56 percent of China’s total turnover of overseas contracted

projects, and the newly signed contracts amounted to $11.87 billion. The total investment of non-financial projects between the two sides reached $8.6 billion. From 2010 to 2015, Chinese investment in the Gulf states increased from $430 million to $1.97 billion, an average annual growth of 35.6 percent. At the same time, the GCC’S investment in China is also on the rise.7

At present, the Gulf states have become China’s largest source of oil imports, the second largest contracted labor market and the second largest engineering construction market in the world. Meanwhile, China is the eighth largest trading partner of the Gulf states. The continuous progress of Belt and Road construction will bring greater development space for bilateral cooperation in traditional fields. For example, the China-arab States Expo has been held twice since its inception in 2013 and 163 projects with a total investment of 171.2 billion yuan have been signed at these events, including 86 foreign projects worth over 100 billion yuan and 77 domestic projects worth nearly 70 billion yuan. In addition, the China-gcc FTA negotiation was restarted in 2016. A comprehensive FTA would promote bilateral trade, facilitate investment and enhance mutual investment, which is conducive to the further internationalization of Chinese enterprises. The institutional cooperation between China and the Gulf states in the fields of service trade, financial investment and regulatory coordination is also helpful to constrain the attempt of the US and European countries to reshape the rules of global free trade.

Financial connectivity

The Gulf states are in great need of infrastructure investment, but remain constrained by limited public financial resources. The input of social capital has not been satisfactory either. However, the Belt and Road Initiative provides the Gulf states with ideas and directions to change the traditional concept of relying on fiscal appropriation by strengthening international financial cooperation and innovating financing models, promoting

development with projects that bring both social and economic benefits. In order to facilitate cross-border trade settlement and bilateral economic cooperation, China launched the renminbi’s internationalization in 2009.

Driven inter-governmental cooperation mechanisms, the Gulf region’s cross-border use, product innovation and offshore clearing centers of the renminbi have developed rapidly in recent years. The Gulf countries have become an important platform for the Chinese currency’s internationalization. According to SWIFT statistics, from August 2014 to August 2016, the renminbi-denominated payment in the UAE has increased by 210.8 percent, and 81.4 percent of its transactions with Mainland China and Hong Kong were directly settled in the renminbi. In September 2016, the ratio of using the renminbi in direct payment between Kuwait and China has exceeded 10 percent. In 2012 and 2014, China signed bilateral currency swap agreements with the UAE and Qatar respectively, both with a scale of 35 billion yuan. In 2014, China established a renminbi clearing center in Doha, and as of April 2016, the total amount of business has amounted to 303 billion yuan.8 In 2015, the People’s Bank of China announced the expansion of the Renminbi Qualified Foreign Institutional Investor (RQFII) pilot scheme to the UAE. In addition, China has set up a $20 billion coinvestment fund with the UAE and Qatar, planning to jointly invest in traditional energy, infrastructure and high-end manufacturing in the Gulf region. China’s policy-based financial institutions, commercial banks, the AIIB, and the Silk Road Fund have all provided special support for the Belt and Road projects, and the Gulf states are also actively exploring ways to establish or expand bilateral and multilateral cooperation funds.

People-to-people exchanges

People-to-people exchanges are an important link between China and the Gulf states. The two sides have extensive interactions in the fields of

scientific research, education, culture, health, youth, tourism and religion, providing a solid base of public support. The China-arab States Friendship Year was held in 2014-2015, when the two sides signed an agreement on the first jointly-built university and started cooperation between 100 cultural institutions from both sides. At present, the number of Arab overseas students in China has been more than 14,000, and there have been 11 Confucius Institutes in Arab countries. The number of flights between China and Arab countries has also reached 183 per week. Specifically, there are 2,457 students from GCC countries studying in China, 3 Confucius Institutes in GCC countries, and 168 flights between China and the region. In addition, visa-free or visa on arrival policies have been implemented between China and Bahrain, Iran and the UAE’S Dubai. In August 2016, China and Bahrain signed a memorandum of understanding on the establishment of a Chinese cultural center.

Reasons for Belt and Road Progress in the Gulf Region

The major progress of the Belt and Road Initiative in the Gulf states is the result of joint efforts of China and the Gulf states following the trend of the times.

New opportunities presented by regional situation

The Gulf region has witnessed sound development in recent years, and cooperation among major powers in the region has been on the rise, which has together brought about a relatively stable political environment for Belt and Road construction.

First, the US rebalancing strategy in the Asia-pacific has been conducive to the promotion of the Belt and Road Initiative. In order to shift the United States’ strategic focus toward the East, the Obama administration’s posture in the Middle East has been restrained. One, accepting the Russian proposal of “chemical weapons for peace,” and exhibiting unusual tolerance toward Russia’s aggressive intervention in Syria. Two, refusing to dispatch largescale ground forces to combat the ISIS. Three, releasing Iran from sanctions

despite opposition from Israel and Saudi Arabia. The US limited retreat from the Middle East has objectively allowed regional countries to look to the East. Meanwhile, it has reduced obstacles that had prevented China from entering the Middle East.

Second, the temporary Us-russia collaboration in West Asia and North Africa has benefited the implementation of the Belt and Road Initiative. With the recession of America and aggression of Russia in the region, the two countries have reached certain reconciliation to ensure their dominant status in respective “strategic pivotal states.” One, the global consensus on combating the ISIS has been reinforced. With the international community stepping up anti-terrorist operations at different levels, regional terrorist forces have suffered heavy losses. Two, thanks to international efforts for peace, parties involved in Syrian and Yemeni conflicts, while still in battle, have returned to the negotiating table, which has increased the possibility of a ceasefire and political dialogue. Three, the implementation of the Iranian nuclear agreement has been progressing smoothly, making it possible to rebuild regional peace and bringing new opportunities for China and Iran to jointly build the Belt and Road.

Third, the political stability of the Gulf states has provided a fundamental guarantee for Belt and Road construction. The six GCC states have been actively fighting against terrorism, preventing religious extremist ideologies from spreading, and effectively keeping under control the shock of Yemeni, Iraqi and Syrian conflicts on their societies. International organizations like the World Bank and the IMF, and rating agencies like the S&P, Fitch and Moody have been positive toward the Gulf states’ sovereignty credit and their commercial environment, holding that their systematic risk are low.9 The overall high level of civilization in the Gulf states, with their high level of social welfare, low crime rate, and management of migrant

labors, has helped create a sound social environment.

Gulf states’ eastward policy compatible with Belt and Road

Most Gulf states are emerging and developing countries that are currently at the primary or acceleration stage of industrialization and urbanization. These countries are longing for social and economic development and accelerated industrialization to assuage domestic conflicts and avoid being left behind in the wave of globalization. To this end, they have been actively rolling out plans for long-term development, for instance, Saudi Arabia’s Vision 2030 and National Transformation Program, the UAE’S Vision 2021, Oman’s Vision 2020, Kuwait’s Vision 2035, and Qatar’s and Bahrain’s respective Vision 2030s. These countries are striving to achieve sustainable development by privatizing and developing non-oil industries. Among them, Saudi Arabia’s reform is the most forceful. It aims to achieve economic transformation by 2020, and reduce its over-reliance on oil.

The Gulf states’ economic structural adjustment and pluralistic reforms will bring about more business opportunities for the Belt and Road construction and foreign investment. Against the backdrop of the international financial crisis and low oil price, the Gulf states have looked to China and other emerging economies, showing strong interest in China’s development pattern and governance, in the hope of taking advantage of Chinese experience, capital and technology to facilitate their domestic infrastructure construction and industrialization.10 Oman’s Ambassador to China Abdullah Salleh Al Saadi stated recently that China-gcc cooperation over the Belt and Road Initiative holds great development potential, and that the two sides should jointly promote such a grand strategy.11 The Gulf states’ eastward and China’s westward policies have converged under the banner of Belt and Road, and their strategic synergy will bring brand new opportunities for both sides.

Gulf states’ unique potential in Belt and Road construction

Energy security, industrial cooperation, infrastructure construction and financial cooperation are four major areas that are most promising for Chinagcc joint building of the Belt and Road Initiative.12 As a result, the Gulf region will provide new momentum for China’s economic transformation.

First, for China, the Gulf states’ oil and gas resources constitute a strategic guarantee for sustainable development. Even though China is endeavoring to change its economic growth pattern and facilitate the structural transformation of its energy demands, it still needs to rely on sustained fossil energy supplies in the short term. The continuously sluggish international crude oil price and the relatively high cost of domestic oil exploration have resulted in decreasing crude oil production in China since 2016, and an increase of foreign dependence to 63.8 percent.13 The Gulf states, especially GCC countries, have been major sources of China’s oil imports. According to China’s General Administration of Customs, China imported 381 million tons of crude oil in 2016, a record high since 2011; of this total, 115 million tons were from GCC states, accounting for 30.2 percent.14 China’s demand for natural gas is also on the increase. In 2016, China surpassed South Korea and became the second largest importing country of liquefied natural gas. It is expected that by 2020, China’s natural gas consumption will amount to 400 billion cubic meters. With its production volume reaching 220 billion cubic meters and imports rising to 180 billion cubic meters, the foreign dependence will reach 45 percent.15 The GCC states are an important guarantee for China’s natural gas imports. Of these countries, Qatar and the UAE are China’s third and

fourth largest importing sources in 2016. Looking at the general trend, China’s economy remains on an upward trend; the Belt and Road Initiative progresses apace; the trade for non-state-owned crude oil has been deregulated; domestic crude oil production continues to decline; and China’s demands for oil imports remain robust. Meanwhile, with the guidance of domestic policies and mounting pressure for environmental protection, the utility of natural gas is increasing and the supply will be in shortage over the long term. The Gulf region, with abundant oil and gas resources and convenient exploration and transportation conditions, are able to satisfy China’s surging demands and could be a crucial guarantee for China’s oil and gas imports in the foreseeable future.

Second, as Chinese enterprises go global, the Gulf region will be a major destination of China’s advantageous production capacity. China and the Gulf states are all at a critical stage of economic transformation, and the huge complementarity among the economies will facilitate further cooperation in many areas. To reduce reliance on the oil industry, the Gulf states are promoting industrial diversification. China has a comprehensive industrial system and strong manufacturing capabilities. If it combines its relative strengths in industrial capacity with the Gulf states’ resources, geography and market opportunities through the Belt and Road Initiative, both sides will achieve substantial benefits. The Gulf states’ demands for infrastructure construction will remain robust, and in the next decade, the six GCC countries’ total value of planning projects will reach around $2 trillion. Of these countries, Saudi Arabia plans to invest $45 billion in building a national railway network; the bidding value of Kuwait’s major projects has already reached $30 billion; the investment in infrastructure and urban construction of the UAE for hosting the 2020 World Expo is expected to be $18.3 billion; Qatar, for hosting the 2022 World Cup, will invest more than $205 billion in infrastructure construction.16 In addition, the Gulf states have all launched infrastructure projects such as island development, railway

construction, airport expansion, urban renovation, and free trade zones. Kuwait plans to invest $130 billion to build a “Silk City” on its northern coast; Oman plans to build the Duqm economic special zone in its Al Wusta Governorate, and has expressed an unequivocal willingness to cooperate with China.17 As the director of the State Council Development Research Center Li Wei pointed out, there is a convergence of interests between the GCC’S economic diversification strategy and China’s initiative of international industrial cooperation. The two sides should utilize their respective comparative advantages, reinforce each other through wide consultation and joint contribution, to facilitate bilateral economic cooperation and the Belt and Road construction while pushing forward the optimization of the two sides’ economic structures.18

Last but not least, China has made the Gulf region an important “experimental zone” for the renminbi’s internationalization. In recent years, the continuously sluggish international oil price has magnified the capital strain and put increasing fiscal pressure on the Gulf states, which has presented China with a historic opportunity to facilitate the renminbi’s internationalization. As China and the Gulf states cannot alter the current situation of energy supply and demand in the short run, the drawbacks of using a single currency (the US dollar) in oil exports have become obvious. To achieve greater market share in China than Russia, the Gulf states are attempting to use the renminbi in their settlement of oil trade. Since September 26, 2016, the renminbi has been directly tradable with the Emirati dirham and the Saudi riyal. As major oil producers in the Gulf region, Saudi Arabia and the UAE accepting the renminbi in settlement will encourage other Gulf states to use the Chinese currency and reduce the sometimes turbulent ramifications of a fluctuating international oil price on China’s oil industry. Furthermore, the acceptance will expand the renminbi’s

scope of application, and at the same time safeguard the use and reserve values of the renminbi in the international market.19 Meanwhile, China’s launching of the RQFII trial in the UAE and Qatar, with 50 billion and 30 billion yuan of investment limit approved respectively, will expand the investment channels of renminbi holders in the Middle East and increase the currency’s attractiveness in trade settlement. However, since China’s capital market is not yet sound and the openness of capital account is limited, outbound renminbi can only flow back to China through RQFII and other limited channels, which adds difficulty to the renminbi’s reflow. Besides, the renminbi’s use in trade settlement in the Gulf states is just at the early stage without widespread application.20 Therefore, China should seize the opportunity brought by the implementation of the Belt and Road Initiative and low international crude oil price, and adopt a gradual approach to promote the renminbi’s use in trade settlement.21

Challenges of Belt and Road Construction in the Gulf Region

Thanks to its unique geopolitical position, the Gulf region has been a global energy base and a continent of hope, but it is also a region rife with ethnic, religious, and political conflicts. Regional turbulence and political rivalry among major powers add to challenges and uncertainties of cooperation between China and the Gulf states.

Geopolitical risks. West Asia and North Africa are experiencing the most profound transformation since the turn of the century. First is the adjustment of Us-russia relations. Russia, taking advantage of the US eastward strategic rebalancing, dispatched its troops to Syria and involved itself in the complicacy of regional conflicts. There has been a trend of

foreign enterprises and undergoing contracted projects. Second is the fierce competition with other countries. The Gulf states, having dealt with the US and European countries for a long time, tend to recognize Western standards in planning and design, production and operation, and quality supervision. In the traditional civil engineering field, China is also facing competition from other developing countries like India and Turkey. The comparative advantage of Chinese enterprises is relatively weak. Third is the bottleneck in project funding. Infrastructure projects has generally low profitability, long period for return on investment and strict government monitoring; so private investment and available financing channels are limited. As most Gulf states are under great fiscal pressure, their investment capabilities are so weak that it is hard to meet their financing demands only by relying on the AIIB and the Silk Road Fund. Fourth is the issue of labor interests. Chinese enterprises, as they go global, are in need of more and more local labors. However, lack of knowledge about local regulations and deficiencies at the operational level have led to the rise of labor and economic disputes.

Religious and cultural risks. In the Gulf region, Islam holds a dominant position. As a religion and a cultural value system, Islam has profound bearings on local society and economy. With the expansion of Belt and Road construction, there would be inevitable interactions between Chinese and Islamic cultures. The two sides’ relatively large cultural and cognitive differences due to discrepancies in religion and language would affect people-to-people exchanges and the development of bilateral relations. Moreover, through the Belt and Road, Islam might penetrate eastwards and reinforce the religious awareness of local Muslims. For instance, in China’s northwestern region, Islam has taken on features of Wahhabism. Religious fanaticism might be stirred up by people with ulterior motives to instigate conflicts between religious and secular worlds, which could easily lead to the emergence of violent or terrorist activities. The Gulf region has long been the base camp for Al Qaeda, ISIS, and other terrorist groups. Though ISIS has been heavily defeated thanks to joint efforts of the international community, it is unlikely to be wiped out in the

short term as its outward expansion is still underway, which poses threats to regional security. As the Belt and Road Initiative proceeds, there is possibility that extremist groups and criminals might hijack Chinese people for their own political or economic ends.

Approaches to Promoting Belt and Road in the Gulf Region

The Belt and Road Initiative has provided a platform for deepening and expanding relations between China and the Gulf states. A common demand for development necessitates close bilateral relations. In spite of challenges, risks can be turned into opportunities as long as we face them up squarely and respond positively.

Strengthening policy coordination and enhancing mutual trust. High-level exchanges between China and the Gulf states have been frequent and mutual political trust has been further enhanced. While maintaining interactions with Saudi Arabia, the UAE, Iran and other major Gulf powers, China should increase high-level visits and contacts with small and medium Gulf states, increasing mutual understanding and support on issues of core interest and major concern. First, the two sides should strengthen coordination on regional affairs, such as Syria, Yemen and the Iranian nuclear issue, and continue to promote political solutions to hotspot issues. Second, the two sides should improve bilateral and multilateral mechanisms, such as the China-gcc free trade area and the China-arab States Cooperation Forum, and make full use of bilateral high-level joint committees and subcommittees to implement strategic synergy. Third, the two sides need to establish dialogue mechanisms with countries outside the region, thereby transforming the cooperation momentum of individual parties into an assurance for sustained stability. Under the right concept of morality and interests, China and the Gulf states should aim to jointly build a community of common interests on the principle of wide consultation, a community of shared responsibility on the principle of joint contribution, and a community of common destiny on the principle of shared benefits, to assist the Belt and

Road construction.22

Building the Gulf corridor and linking the West Asian Silk Road.

Of the six economic corridors of the Belt and Road Initiative, there is one overlapping with the New Eurasian Land Bridge, extending from Alataw Pass and Khorgos on the China-kazakhstan border to Turkey via Uzbekistan, Kyrgyzstan, Tajikistan, Turkmenistan, Iran and Iraq. Different from the Eurasian Land Bridge highlighting railway advantages, this economic corridor is the area that China’s oil and gas pipelines must pass through. With the extension of Belt and Road construction, the China-central Asiawest Asia economic corridor will continue to extend to the Gulf countries such as Saudi Arabia, Iraq and Iran. If a Gulf corridor is built and connected with the China-pakistan Economic Corridor to form the West Asian Silk Road, China’s energy security will enjoy maximum protection. This West Asian Silk Road will further stretch along the Mediterranean coast and beyond through the Arabian Peninsula, enriching and extending the connotation and space of the Belt and Road and perfectly linking Asian, European and African economic circles.23

Improving trade and optimizing industrial capacity cooperation.

China is the most important trade partner of the Gulf region, but trade between the two sides is still at a low level: the proportion of energy is high while the export of China’s high value-added and technology-intensive products is small, and there are few landmark cooperation projects. Although cooperation between China and the Gulf countries has extended from traditional industries and infrastructure construction to retail, finance, telecommunications and tourism, there is still great development space in industrial policy, industrial layout and the cultivation of key industries. First is to synergize development strategies. The two sides need to expand areas of industrial capacity cooperation, and focus on major projects such as ports,

logistics and industrial parks to achieve early harvest. Second is to balance investment. The Chinese projects should not only concentrate on countries with rich energy resources, strong consumption capacity and great regional influence such as Iran, Saudi Arabia, and the UAE. China should also speed up the perfection of regional industrial layout. Third is to carry out thirdparty cooperation. Avoiding fighting alone in the bidding and construction of major projects and cooperating with other international companies or local enterprises would reduce the burden and share the benefits.

Enhancing financial cooperation. Well-funded with petro-dollars, the Gulf countries are one of the most important long-term sources of capital in the international community. The strategic importance should not be underestimated. The following forms of cooperation could be adopted: setting up local branches, strengthening contact with local peer industries, carrying out bank-enterprise cooperation, and cooperating in the capital market by issuing bonds, equity financing or establishing cooperative funds. China and the Gulf states could explore cooperation in the following areas. First, diversifying financing to break the funding bottleneck. On the one hand, there are multilateral institutions such as the AIIB, the Silk Road Fund and the BRICS New Development Bank to establish a benefit and risk-sharing decision-making mechanism. On the other, there are a variety of financial products, such as external guarantee, mixed loan and the Silk Road bonds to open up financing opportunities through innovation. Second, increasing business outlets to improve the geographical layout across the Gulf region. The number of branches of Chinese commercial banks in the Gulf region is seriously lagging behind the expansion of Chinese enterprises. It is difficult for Chinese financial institutions to provide comprehensive services to the enterprises, and thus assistance from the Gulf countries is necessary. Third, understanding financial regulations and training qualified professionals. The Gulf region is the core area of Islamic finance, which requests compatibility with the teachings of Islam and thus has a strong moral orientation, emphasizing a fair, equitable partnership that shares both profits and losses. To integrate with the Islamic financial model, familiarity

with Islamic teachings and commercial regulations in Islamic countries is necessary besides professional knowledge and skills.

Reinforcing risk prevention and establishing crisis management. In order to address the risks associated with the Belt and Road construction, it is necessary to set up issue-specific security and risk assessment mechanisms to be forewarned of possible crises and prevent unnecessary setbacks. First, it is imperative to undertake detailed homework. China should further its understanding of the situation in the Gulf countries, analyze the political and security risks therein, grasp the direction of policy changes, the commercial and cultural environment, the fiscal and taxation system as well as the legal regime of target countries, and establish a knowledge system of risk prevention. Second, China should establish mechanisms to carry out joint anti-terrorist operations. It is necessary to strengthen intergovernmental exchanges of intelligence through bilateral or multilateral channels, and share the responsibility with relevant countries to build a long-term win-win security mechanism. Third, China should enhance security protection and promote corporate governance in accordance with law. Chinese overseas enterprises could employ local or international lawyers, and insist on payment with letters of credit or the combination of prepayment and collection. They should also take advantage of foreign aid to promote settlement in the renminbi, and cooperate with overseas security companies to reduce legal and payment risks, to safeguard the property and personnel safety of overseas enterprises.

Deepening exchanges to achieve closer people-to-people bonds. First is to guide religious interactions. Normal exchanges among religions are not only important for people-to-people bonds, but are also effective in addressing the spread of extremism. Second is to voice the Chinese opinion more actively. China should demonstrate due guidance in its engagement with the Gulf states to build a friendly foundation of public opinion. Third is to strengthen think tank dialogues. Domestic think tanks should try to go beyond the traditional departmental and regional divisions and carry out joint research, and at the same time develop interactions and exchanges with foreign think tanks.

project, China Pakistan Economic Corridor (CPEC), is seen as Beijing’s version of Marshall Plan for her all-weather iron friend. The Marshall Plan witnessed the United States intervene in continental Europe to deliver prosperity from the ruins of the World Wars, while China today attempts to provide Pakistan with a similar opportunity to shed the debilitating scars of war, establish sustainable peace within the fractured self, and extend it beyond to temper regional perspectives. Since the Marshall Plan was accompanied by the formation of NATO’S transatlantic security pact, it is often seen as a tool of American imperialism; therefore, Chinese policy-makers avoid referring to the CPEC as such. From a Pakistani perspective, however, loans and investment under the CPEC may not be termed as China offering “imperialistic aid” to one of her allies, but the potential of this initiative to help recover Pakistan from the scars of decades-long war on terror makes it equivalent to the Marshall Plan. Any other parallels between the CPEC and Marshall Plan could be misleading.

The CPEC has raised Pakistan’s global profile. From “the world’s most dangerous country”4 in 2007, Pakistan came to be seen in 2015 as the next economic success story.5 Economic and financial indicators published by The Economist in January 2017 highlighted Pakistan to be the world’s fastest-growing Muslim economy in 2017 ahead of Indonesia, Malaysia, Turkey and Egypt.6 The Economist’s forecast is not alone in its predictions about Pakistan’s economic outlook. A Bloomberg article by Tyler Cowan picked Pakistan as the most underrated economies of the world for the year 2017. These and other predictions are based on hard facts: poverty rate has fallen by half since 2002 - a staggering fall - according to the World Bank;

the middle class has swollen to 38 percent while a further 4 percent is upper class — roughly equivalent to the entire populations of Germany or Turkey; the Karachi stock market rose 46 percent last year and continues to soar on the back of the MSCI’S decision to upgrade Pakistan to EM status and the GDP growth is reaching 5 percent, enough to put the economy on the right path. On the macro side, inflation is not a problem, the country has staved off a foreign exchange crisis, and it is rebuilding its reserves. The debt-to-gdp ratio is high at more than 60 percent, but the country has graduated from its adjustment program with the International Monetary Fund and appears to be in a stable fiscal state. This data reinforced a Harvard University study which predicted Pakistan to grow by more than 5 percent in the next decade.7

New Delhi is opposed to the CPEC because it fears that Pakistan may convert her newly acquired wealth into military muscle and obstruct India’s rise as a global power.8 In opposition to the CPEC, India has invoked the disputed nature of territory in Gilgit-baltistan region from where the Pakistani section of the CPEC commence. India considers the CPEC detrimental to its security interests. It fears that increased Chinese economic stakes in the area has the potential to internationalize the Kashmir dispute. As the regional environment becomes ever more conducive for Chinese economic activity, the Indian strategic community is growing apprehensive that the CPEC initiative may challenge New Delhi’s role as a net security provider to island states of the Indian Ocean.

India’s opposition to the CPEC has further complicated the South Asian geopolitics. Violent extremist organizations such as the Baloch Republican Army, the Jamaat-ul-ahrar and Tehrik-i-taliban Pakistan, which hitherto operated purely as ideological entities, are now keen on seeking New Delhi’s patronage to fight a common enemy, i.e. Pakistan. It seems, with the inception of the CPEC and subsequent Indian opposition, that the era of

ideological terrorism driven by political Islam and sense of vengeance against the West has ended and is replaced by Cold War-era “proxyism,” where different states are increasingly relying on non-state and sub-state actors to pursue their strategic and commercial interests. Besides external threats, internal political dynamics of Pakistan can also hinder the CPEC’S timely and smooth implementation.

This paper aims to outline the significance of the CPEC, internal and external risks to its implementation, Islamabad’s counter-measures and their likely outcomes. The first section highlights the economic and strategic significance of the CPEC for both Pakistan and China, followed by an overview of Indian response to the project. The subsequent discussion elaborates the implications of power competition on regional terrorism landscape, as to how some terrorist organizations are seeking convergences with some state actors to challenge the CPEC. An overview of security and strategic measures by China and Pakistan is also provided to evaluate their effectiveness for smooth implementation and utilization of the project.

Understanding the CPEC

In 2013, Chinese President Xi Jinping unveiled one of the most important infrastructure construction projects of the human history, which was first termed as One Belt One Road and then the Belt and Road Initiative. As one of the six pillars of the BRI,9 the CPEC is the paw of both China and Pakistan in reconfiguring geo-economic cum political realities. The peculiar attribute of the CEPC is its intersection between the 21st Century Maritime Silk Road and the land-based Silk Road Economic Belt. Its total length is approximately 3000 km spanning from Pakistan’s Gwadar port to Kashghar in northwestern China’s Xinjiang Uygur autonomous region. The $55 billion10 planned investments range from a deep-sea port at Gwadar to high-speed railways,

energy infrastructure and urban mass transit systems.

Significance for Pakistan

In the global war on terror, Pakistan has contributed a lot but also suffered much. The country has experienced huge monetary, political, social, and human losses under active engagement in regional conflicts. The Us-led intervention in Afghanistan further compounded historical fault lines, and the subsequent global war against the Taliban immersed Pakistan as a direct participant in the war on terror. This also served to nurture extremism which in turn retarded economic development within the state.

The CPEC offered Pakistan a window of opportunity to recover from the losses incurred. It will not only help Pakistan overcome the economic opportunities missed due to involvement in the war on terror, but will also transform the country into an economic hub, resurrecting her path to development. The CPEC is unparalleled in its scope, vision and the amount of money involved. The project promises to elevate Islamabad’s strategic significance in a rapidly transforming world order, which may be more beneficial than the client-patron relations with the United States. While a number of countries may be wary of the rise of the dragon, Pakistan sees increased Chinese investment and stature as an opportunity to balance her complicated relationship with Washington and her regional allies and partners such as India. Further, in view of increasing anti-american sentiments in the society, Pakistani policy-makers find it difficult to justify overtures towards Washington, whereas “all-weather friendship with China” is easy to sell domestically.

The Economic Corridor located in the hub of the BRI is the cornerstone of the 21st Century Maritime Silk Road. It is intended for the promotion of systematic opening of financially viable investments, complete with the allocation and distribution of vital resources and deep assimilation of the markets.11 The South Asian region is marred by instability, economic

under-development and conflict. Regional stability and development can be strengthened by forging mutual avenues of cooperation. Towards this end 51 MOUS were signed during Chinese President Xi Jinping’s visit to Pakistan in April 2015.12

The idea of developing a China-pakistan economic corridor was articulated by Chinese Premier Li Keqiang during his visit in May 2013. Subsequently a legal framework was developed to concretize the idea. The economic corridor connect the southwestern China, via Xinjiang, with Pakistan’s emerging port city Gwadar, interlinked via a network of roads and railways providing energy-starved Pakistan with much-needed economic infrastructure.

The Corridor is anticipated to bolster trade and commerce between

diversification of her energy and trade routes. The “Malacca dilemma” has always constrained China’s global ambitions. The largest consumer of the world energy, China’s industrial growth depends mostly on crude oil imports via sea routes from far flung regions like eastern Africa, western Africa and the Middle East. Currently, more than 80 percent of the imports pass through the Malacca Strait.

The principle of diversification is of paramount importance in the policy making process not only of China but of the entire international community. The diversification of trade routes has emerged as the main element in global power transformation. To mitigate the Malacca dilemma and ensure its energy security, China has diversified both its energy sources and the supply routes. The Chinese investment in Iraq, Iran, Nigeria, Angola, Russia and many more countries is just to diversify its sources of energy procurement. It is also diversifying its access routes to far-flung energy sources to ensure smooth flow of oil in the event of a crisis. Oil pipelines in Myanmar, the Gwadar port, oil and gas pipelines as well as rail and land routes to Central Asia and the Middle East are all alternative to sea lanes passing through the Malacca Strait.

For China, the CPEC is a game changer in both strategic and economic senses. First, in any crisis at Andaman and Nicobar Islands, the Malacca Strait and the South China Sea, Gwadar provides safe and smooth access of China to the Arabian Sea. The CPEC gives China’s trade cargo direct access to the Indian Ocean region circumventing Malacca that almost reduces the 12,000-kilometer distance to 3000 kilometers. The first pilot cargo was dispatched from Gwadar on November 13, 2016.13

Strategic aspects are brighter and more pivotal for China in reconfiguration of global power structure. Owing to a 9,000-mile temperate coastline with many good natural harbors, China is both a land power and a sea power.14 Gwadar is bolstering China’s geo-strategic leverage both in

position was that “no changes” were made to the original route, but the statement failed to specify what the original route in question was. Later, the federal government took the position that three routes existed, and all would be built. The government statement was criticized, “as the resources to build all three routes are not available and China would certainly not allocate resources to pander to political disagreements in Pakistan.”16 The federal government’s latest stand acknowledges that it is prioritizing the Eastern Route because it is cheaper and faster to route the Corridor through areas with pre-existing road connections. This implies that the Corridor will be routed through areas of the country that are relatively well developed.

Pakistan is located at geographic crossroads of ancient empires and civilizations, and thus inherits a myriad mix of inter-provincial conflicts spanning generations of active conflict and ancient rivalries. The CPEC route controversy, particularly the government’s preference for the Eastern Route, has made the inter-provincial rivalries to re-appear under a new political garb. The Eastern Route, which predominantly passes through Punjab, is under severe criticism by politicians from other provinces. Imran Khan, the Chairman of Pakistan Tehreek-e-insaf, has warned that any preferential treatment shown by the government will give birth to enmity between provinces.17

One of the key reasons for prioritizing the Eastern Route is that it is relatively more secure in comparison to other routes. The second motive for favoring the Eastern Route is to boost the existing industry in the east. The government claimed that it changed the route to ensure better security for workers and convoys once they were deployed. On the other hand, the advocates of Western Route first hold that the development of this route would have been better for both Balochistan and Khyber Pakhtunkhwa, the two less developed provinces which are more prone to violence as they share

borders with active conflict zones in Afghanistan. Whereas the law and order situation is much improved under recent military operations, positive peace can be established only through competitive trade and commerce, where the populace of these marginalized provinces is integrated into the national mainstream. Furthermore, the Western Route is 700 kilometers shorter than the Eastern Route and therefore more suited for economic corridor designs.

According to studies conducted by the provincial government of Balochistan, the Eastern Route is costlier than the Central or Western Routes. The acquisition of land itself is lower in either case, compared to the Eastern Route which was designed to pass through highly populated areas. The Eastern Route is likely to incur enormous costs in terms of compensation payments to the population at the risk of dislocation due to widening and relaying of the existing roads to accommodate much higher volume and load of traffic after the CPEC becomes operational. Additionally, there is a fear that political diversity may compromise the stability of Eastern route in the future. If selection of the Eastern Route is made on grounds that the Western and Central Routes carry security risks, then security considerations today will be traded for interprovincial discord and political instability in the future. Security considerations are important, of course; however, bombardment of disaffected areas with jobs is a better option than bombardment with drones.18

Security Risks to CPEC

The biggest concern for the Chinese is growing menace of terrorism inside Pakistan, her most trusted ally.19 Such perspectives are often viewed in Pakistan as a “conspiracy” to discourage China from investing in the country. However, the ground situation supports the arguments that highlight the threat posed by terrorism. A day prior to the Belt and Road Forum for International Cooperation held in Beijing in May 2017, two major terrorist

attacks struck Balochistan, one claimed by ISIS and the second ascribed to Baloch nationalist militants. Many in Pakistan see the twin attacks as a wellorchestrated plan by the Indian intelligence agency to malign Pakistan at the Belt and Road Forum.20 Ideological terrorism driven by misinterpretation of Islam and ethno-nationalism in Pakistan is undoubtedly a reality. The CPEC, however, transformed the threat landscape of the country, and added proxyism to a complex set of driving factors behind terrorism.

Islamabad has repeatedly accused India and other opponents of the CPEC of fomenting attacks with an ulterior goal in mind. During the Iranian President Hassan Rouhani’s state visit to Pakistan on March 25, 2016, Pakistani law enforcement agencies disclosed the arrest of Kulbhushan Yadav, a serving officer of the Research and Analysis Wing (RAW), the premier intelligence agency of India. Pakistani authorities claimed Yadav entered Pakistan from Iran and was arrested on March 3, 2016. The Indian government admitted that Yadav was a former naval officer, but categorically denied any involvement with the captured man, whereas the Pakistani government maintained he was an “Indian spy” assigned to sabotage the Cpec-related activities in Balochistan, especially around the Gwadar port. Pakistan asserts that India is bent on sabotaging the CPEC by funding and training anti-state elements in Balochistan. The claim is supported by India’s official concern over the CPEC and a potential Chinese naval base in Gwadar to ensure Chinese maritime presence in the Indian Ocean. During India’s Independence Day celebrations, the comments made by Prime Minister Narendra Modi added fuel to the fire.21 In his address to the nation, Modi endorsed separatists in Balochistan and accused Pakistan of human rights violations in the province.22 Pakistan has subsequently termed these remarks as a proof of Indian involvement in her internal affairs and territory.

Cold-shouldered response of India to Pakistan’s offer to join the CPEC23 and her absence from the Belt and Road Forum reinforced the concerns in both Islamabad and Beijing that New Delhi would go to any extent to sabotage the CPEC.

Another creeping danger in Balochistan was the growing footprints of ISIS. Although ISIS had succeeded in acquiring the support of hundreds of domestic militants, its overall strategic objective for Pakistan was marred due to two major reasons: first, the swift and efficient response24 from Pakistani law enforcement agencies, resulting in country-wide raids and the arrest of approximately 118 ISIS supporters; and second, internal differences between ISIS militants of Afghan and Pakistani origin, with each accusing the other of being American or Pakistani agents. The ISIS ideology failed to unite individuals belonging to different nationalities and ethnicities and this could prove detrimental in the future.

Besides violent extremism and terrorism, Baloch and Sindhi ethnonationalist groups are another daunting challenge for the economic corridor. On May 30, 2016, a Chinese engineer was targeted by the Sindhudesh Revolutionary Party. Fortunately, the Chinese engineer was safe and the driver sustained minor injuries, but the terrorists left a pamphlet that denounced “foreign control over Sindh’s natural resources.”25 Another Chinese engineer escaped when a bomb planted on a bike exploded in Rohri area of Sukkur district.26 On September 30, 2016, the head of the Balochistan Liberation Front (BLF) Allah Nazar Baloch pledged that he would orchestrate further

attacks on the CPEC.27 He also welcomed Indian help against Pakistan. In September 2016 the Switzerland-based Baloch separatist Brahamdagh Bugti, president of the outlawed Baloch Republican Party and grandson of Baloch nationalist leader Nawab Akbar Khan Bugti, sought asylum in India.28

Following the terrorist attacks on Chinese workers in Federally Administered Tribal Areas (FATA) and Balochistan, Chinese ambassador to Pakistan Sun Weidong called for security of its workers in Pakistan. To ensure foolproof security, both China and Pakistan agreed on a four-layer security plan to cover the over 3000-kilometer-long trade route from Xinjiang to the Gwadar port. An estimated 32,000 security personnel force consisting of Frontier Corps, police and Levies29 would guard over 14,321 Chinese workers in Pakistan.30 A separate security division under the title of Special Security Division (SSD), comprising nine composite infantry battalions (9,000 personnel) and six civilian armed forces (CAFS) wings (6,000 personnel) to be headed by a serving major general of the Pakistan Army, was raised in April 2015 to protect the economic corridor.31 In a visit to the newly established SSD headquarters on February 19, 2016, then Chief of Army Staff General Raheel Sharif said, “We are totally aware of all campaigns against the corridor and I vow that the security forces are ready to pay any price to turn this long cherished dream into reality.”32 The government has spent Rs. 23 billion on the SSD to ensure the security of the CPEC.33

The next level of security operates in the maritime domain. Gwadar

has immense geo-strategic importance in the Arabian Sea. In September 2014, an attempt was made to hijack PNS Zulfiqar, Pakistan’s naval frigate.34 Another important reason is shifting trends from land to naval warfare and supremacy to keep safe and open Sea Lines of Communication (SLOC) for trade. On December 13, 2016, the Pakistan Navy raised a task force to protect the CPEC and the Gwadar port against traditional and nontraditional threats.35 The newly assembled force would comprise of ships, fast attack craft, aircraft, drones and surveillance assets.36 Commodore Muhammad Waris will serve as first commander of this task force TF-88.

China also handed over two maritime patrol ships equipped with stateof-the-art guns. The ships, named after two rivers Hingol and Basol near Gwadar, were received by Commander of the Pakistan Navy Vice-admiral Arifullah Hussaini. China is expected to provide two more ships Dasht and Zhob to the Pakistan navy.37 According to IHS Jane’s Navy International, “Armament to be fitted onboard includes either a 37 mm or a 30 mm gun as a primary weapon, in addition to mountings for two 12.7 mm machine guns. An artist’s illustration of the MPV (Maritime Patrol Vessel), shown at the ceremony, suggests that the Pakistan Maritime Security Agency (PMSA) has opted for an automatic stabilized naval gun system as the platform’s main weapon.38


China’s growing trade and defense relationships with South Asia have created fears of encirclement in India and hardened her attitude towards

Beijing, Islamabad and their joint economic ventures, which are seen entirely through strategic lens in New Delhi. Pakistan’s policy of “peaceful neighborhood” intended to woo India to share the dividends of the CPEC seems not to be paying off as India has not responded positively to Pakistan’s offer to join the CPEC. Against this backdrop, New Delhi could seek alliances and cooperation from state and non-state actors to undermine the CPEC.

The CPEC aspires to put Pakistan on a new trajectory of high growth through infrastructure development and subsequently transfer part of its labor-intensive industries to other countries. Success of this project is, however, highly dependent upon Pakistan’s internal security situation and how it manages its relations with India. It is of paramount importance that the Pakistani political leadership resolve their internal differences over the route controversy and distribution of benefits under the CPEC in order to maximize Pakistan’s output from this mega project. The current state of Pakistan’s economy is in dire straits, severely relying on loans from international monetary institutions and lending bodies, in order to cover large deficits in fiscal budgets. Further stress is exerted under the rampant proliferation of extremist and terrorist ideologies. Resultantly, economic opportunities have rapidly shrunk, causing additional strain on the social fabric of the nation. Within this reality, projects inaugurated under the Corridor have sparked a wave of rapid development in Pakistan, bringing with it the opportunities anew of increased and sustained economic growth, driven by the Chinese juggernaut which will not only benefit Pakistan but will directly benefit the people of multiple countries. In a globalized world, nation states focus on progress and development through cooperation. The mantra of globalization that guides the CPEC project and the direct collaboration between Pakistan and China is mutually beneficial. The benefits are likely to amplify and spread throughout the region.

The construction site of the Peshawar-karachi Motorway (Multan-sukkur Section) on April 21, 2017. The motorway, contracted to China State Construction Engineering Corporation, is currently the largest transport infrastructure project of the CPEC.

Chinese high-speed railway products gain attention from Jordanian businessmen at the latest China-arab States Expo held in Yinchuan, China in 2015. The 2017 Expo will be held from September 6 to 9, 2017 in the Chinese northwestern city.

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