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Why is Pakistan’s new PM Shehbaz Sharif so keen to accelerate the CPEC with Beijing?

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Pakistan’s Prime Minister Shehbaz Sharif. Photo: EPA-EFE

Within minutes of being declared Pakistan’s new prime minister on Monday, Shehbaz Sharif made clear his intention to breathe new life into the estimated US$60 billion China-Pakistan Economic Corridor (CPEC).

It was no coincidence that a Chinese embassy delegation was among the first callers on Sharif when he started work on Tuesday.

Beijing’s showcase Belt and Road Initiative infrastructure programme was personally announced by President Xi Jinping when he visited Islamabad in April 2015.

At the time, Zhao Lijian, now famed as a hawkish spokesman of the Chinese foreign ministry, was the deputy chief of mission at the Chinese embassy in Islamabad.

Zhao was also well-acquainted with Sharif who, as the chief minister of Punjab province, was deeply involved in negotiating which infrastructure projects would be built there during the “early harvest” phase of the 15-year CPEC scheme.

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Zhao and Sharif went on to attend dozens of meetings on the CPEC over the three years up to 2018.

So it came as no surprise when Zhao, in his current capacity as a foreign ministry spokesman, was asked by a correspondent of the official Associated Press of Pakistan news agency for China’s reaction to Sharif’s positive remarks about the CPEC.

“We noted Prime Minister Shehbaz Sharif’s remarks on the CPEC and we highly commend them,” Zhao replied.

A section of a highway being built as part of the China-Pakistan Economic Corridor. File photo: Xinhua

Why is the CPEC so important to PM Shehbaz Sharif?

By the time Shehbaz’s tenure as Punjab chief minister ended in 2018, the CPEC had enabled his brother, ex-prime minister Nawaz Sharif, to deliver on his promise to end Pakistan’s crippling electricity shortages.

CPEC projects had added a whopping 10,400 megawatts of power in three years and more was on the way.

Pakistan’s first-ever mass transit systems were commissioned in Islamabad, the Sharifs’ home city of Lahore, and the central city of Multan.

Shehbaz “played a crucial role in driving the CPEC forward”, said Mustafa Hyder Sayed, executive director of the Pakistan-China Centre, an Islamabad-based think tank.

“His work ethic and delivery of projects ahead of deadline became so famous that the Chinese leadership often used to refer to it as ‘Punjab speed’,” Sayed said.

But Nawaz was dismissed as prime minister by Pakistan’s Supreme Court in July 2017, and subsequently sentenced to 10 years’ imprisonment for corruption by an accountability court in July 2018.

Imran Khan was anointed as prime minister in August 2018, following the victory of his Pakistan Tehreek-e-Insaf (PTI) party in a general election actively manipulated by the military-led establishment.

Soon after, Khan’s cabinet ministers launched a tirade of corruption charges against Shehbaz, and accused him of taking kickbacks from Chinese state-owned enterprises working on CPEC projects in Punjab province.

Beijing was far from happy with the situation, experts on China-Pakistan relations said.

It had already been frustrated by the lack of enthusiasm shown by the PTI-led administration which has ruled northwest Khyber Pakhtunkhwa province since 2013.

The Chinese were also “frustrated that a government and political leadership they liked got squeezed out by the army in favour of one that they found harder to deal with on economic matters”, said Andrew Small, senior transatlantic fellow at the German Marshall Fund, a Washington-based think tank.

What’s the current state of the CPEC?

Despite pressure from both Beijing and the Pakistani establishment, Khan and his PTI-led government never embraced the CPEC during its three and a half-year rule.

Activity under the Chinese-funded programme slowed to the point that most under-construction projects fell far behind schedule, while no new major projects were launched.

The focal point of Khan administration’s policy on the CPEC was the establishment of three special economic zones so as to attract Chinese businesses looking to relocate their manufacturing facilities.

The response from Chinese firms was underwhelming, however.

Rather, Chinese diplomats and executives became increasingly vocal in their complaints about red tape holding back private and CPEC projects alike.

They were particularly annoyed by bureaucratic bottlenecks preventing the payment of hundreds of millions of dollars owed to the state-owned enterprises which operate the power generation plants built during Nawaz’s government.

Beijing’s anger boiled over after nine of its nationals working for the China Gezhouba Group Corp were killed in an unclaimed vehicular suicide bombing near the remote northern town of Dasu in July 2021.

Khan’s government and the Pakistani establishment scrambled to placate China, and Islamabad called the first meeting of the CPEC joint coordination committee since November 2019.

Speaking at the public opening session of the committee in September 2021, the vice-chairman of China’s National Development and Reform Commission Ning Jizhe sternly reminded Pakistan that the security of its nationals was the “precondition” for all Chinese economic investment.

He listed Beijing’s complaints about Islamabad’s handling of the CPEC. No new projects were announced and, despite the Khan administration’s best efforts, China did not make funding available for a US$6.8 billion overhaul of Pakistan’s crumbling railways network.

Shehbaz has become Pakistan’s prime minister amid the rolling out of the second phase of the CPEC.

“It’s like a homecoming for him, resuming work on the CPEC,” said the Pakistan-China Institute’s Sayed.

“His leadership will be instrumental in accelerating the work on the CPEC, and also troubleshooting some of the problems that Chinese companies operating in Pakistan have faced in the past few years,” he said. “The hopes of the Chinese are quite high – as are the expectations.”

Inaugurating a metro bus line connecting Islamabad with its new Chinese-built international airport on Monday, Shehbaz publicly appealed to President Xi Jinping to fund the revival of a mass transit railway system in the populous port city of Karachi by adding the project to the CPEC.

CPEC also figured prominently in Shehbaz’s appointment on Tuesday of Ahsan Iqbal as the minister for planning and development.

Iqbal developed a close working relationship with Chinese official when he held the post between 2015 and 2018, and oversaw the implementation of the early harvest phase of the CPEC on behalf of the Nawaz administration.

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The Gwadar Port, a part of the China Pakistan Economic Corridor. File photo: Reuters

What do India and the US think about the CPEC?

India was the first country to voice outright opposition to the CPEC after it was unveiled in 2015.

New Delhi premised its objections upon the routing of the sole overland connection between China and Pakistan through the disputed Gilgit-Baltistan region, which is part of the broader Kashmir dispute. The region is also a flashpoint for India’s border disputes with China.

The US did not complain about the CPEC until its foreign policy towards China became combative during the Donald Trump administration.

Washington has since expressed concerns that US financial assistance to Pakistan, whether bilateral or through multilateral institutions, could be used by Islamabad to repay Beijing for the CPEC.

But the core strategic concern about the CPEC by both India and the US – partners in the Quadrilateral Security Dialogue – is “more about what China gets in return from Pakistan, in particular in the military domain”, said Asfandyar Mir, a senior expert at the Washington-based US Institute of Peace.

Amid intensifying military contestation between China and the US, as well as China and India, there are questions over the military role Pakistan might play in the coming years, he said.

“This could be because of China’s growing influence over Pakistan, which can make Pakistan align more closely with China’s broader military aims,” Mir said. “It is also possible due to growing Chinese and Pakistani military interoperability.”

There is also a question of if Pakistan will allow the Chinese to militarise some of the CPEC infrastructure – in particular the Chinese-operated port of Gwadar – or make it dual-purpose, he said.

“While there is some hyperbole on the ongoing strategic cooperation between Pakistan and China, serious people will say that it is not necessary the Pakistanis have already agreed to greater strategic cooperation,” Mir said.

But concerns remain that China will attain more leverage over Pakistan “over a period of time, perhaps due to loan repayment challenges, which will allow them to force their terms”, he said.

An aerial view of the Sukkur-Multan Motorway in central Pakistan’s Multan. File photo: Xinhua

What are the future prospects for the CPEC?

Despite the West’s opposition to doing business with the Taliban regime which seized control of Kabul last August, China remains interested in extending the CPEC into Afghanistan.

During talks with the Taliban regime in Kabul on March 24, Foreign Minister Wang Yi reiterated China’s “willingness” to do so.

Pakistan has urged China to extend the CPEC into both Afghanistan and Iran, it’s other western border, since Nawaz was last its prime minister.

China is also on course to ramp up investment in Iran under a 25-year strategic partnership agreement signed in June 2020.

To a large extent, this is dependent on the success of negotiations between Iran and the Western powers on the revival of the 2015 Joint Comprehensive Plan of Action to prevent Tehran from developing nuclear weapons.

The prospective return to the pact by Washington, which withdrew in 2018, would lead to the lifting of many sanctions on Iran and its economic partners.

But Pakistan has to make a lot of changes before any westbound expansion of the CPEC can happen, analysts said.

“The CPEC is a good programme, but Pakistan has a lot of work to do on security, corruption, and governance,” said Barnett R. Rubin, a non-resident senior fellow at the Centre on International Cooperation at New York University.

Despite a shift in Pakistan’s national security policy last year from hostility with eastern neighbour India to connectivity-driven geoeconomics, Islamabad’s “actions do not match its rhetoric”, he said.

Pakistan would remain “unconvincing as long as it keeps its eastern border sealed off and does not permit connectivity by India to Afghanistan and Central Asia”, Rubin said. “I believe China would welcome such a change, but I don’t think Pakistan will do it.”