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May 16, 2017

OBOR optimism


May 16, 2017

China’s One Belt, One Road (OBOR) initiative could end up creating a new world order. Originally announced in 2013, OBOR was conceived as an alternative to the US-led Trans-Pacific Partnership (TPP), which itself was an American attempt to challenge China’s influence in the region. US President Trump has now killed the TPP, which made the two-day Belt and Road summit in Beijing over the weekend something of a coronation for China and the vastly expanded international trade and investment it is planning. In his speech at the summit, Chinese President Xi Jingping presented an internationalist agenda of free trade and specifically rejected the protectionism that is exemplified by Trump. For China, OBOR is an economic investment. Much of the money that China will give to member countries will end up back in Chinese hands as it develops infrastructure and benefits from increased trade. But equally important is the political dimension. OBOR comprises six land corridors and one sea route, which will link China to Russia, Turkey, Singapore, India, Pakistan and the Mediterranean Sea. The economic fortunes of these countries – and all the other countries the trade routes will pass through – will increasingly be linked to China. That gives it a political power that now matches – or even exceeds – that of the US in the region. It was telling though, and perhaps indicative of the future, that India chose to boycott the summit. India objects to the inclusion of Azad Kashmir in projects related to CPEC, insisting that the territory is part of India. China, to its credit, has refused to be cowed down by Indian threats.

Pakistan has understandably concentrated on the CPEC portion of OBOR. In his speech to the conference, Nawaz Sharif focused on the trade routes linking Gwadar and Karachi to Xinjiang and the effect that will have on our economy. There are certainly many immediate benefits to Pakistan from the massive increase in Chinese investment, particularly in the creation of jobs and the development of infrastructure. Many other advantages will be accrued at a later date, such as the increased capacity for the production of electricity. CPEC is expected toput the country at the centre of China’s global trade network. Potential benefits include the development of major highways, ports as well as new power plants, which could push Pakistan towards a new spur of economic development. It could not only make Pakistan an attractive destination for investment, but also spur locally led business ventures. Reportedly, $35 billion has been marked for private investments in the country’s power sector while $11 billion has been marked for low-cost loans to upgrade the road and rail infrastructure. Overall investments in the country under the project are set to range from anywhere between $52 billion and $60 billion. The cash flow would provide a significant boost to the Pakistani economy. But there are also worries that the bill presented to Pakistan at the end will be beyond our means. Being the junior power in a relationship is rarely a good idea. The lack of transparency over the scale, scope and financial dimensions of CPEC has started giving rise to speculation. These are all relevant questions that must be answered for CPEC’s impact on Pakistan’s future to be reasonably predicted. How much debt Pakistan will owe China by the time the project is completed is something that must be shared. The Chinese president himself addressed concerns about sovereignty by promising that China will not interfere in our domestic affairs. More questions will continue to be asked as the OBOR project moves ahead. For now, there is much to be cautiously optimistic about.


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