'Xinjiang-Pakistan' Corridor?

The release of the Long-Term Plan (LTP 2017-2030) for the China Pakistan Economic Corridor (CPEC), reportedly prepared by the China Development Bank, raises more questions than it answers. Nevertheless, it can serve as a starting point for dispassionate analyses at least of the economic-leaving aside the more significant strategic and diplomatic-opportunities and risks created by the CPEC (especially for Pakistan).
The CPEC may benefit Pakistan in two ways: one, from capital inflows (which need no physical corridor); the other, through creation of production clusters (through government intervention) and expansion of trade between them (which does require roads, railways, and trade-related logistics).On capital inflows, the simple-minded notion that growth "trickles down" to create development has been long debunked. Yet, old habits die hard: Both government and business leaders are looking at the CPEC almost exclusively as a potential portfolio of investment projects, albeit with a new source of finance: China. This may distort our investment priorities, which should be determined by national objectives, not available foreign finance. Nor is it possible-since not enough is known (even by government)-to estimate whether the benefits of these projects will exceed their cost, so we turn to the second source of gains.
China-Pakistan relations are much larger than the CPEC. About the CPEC, however, two things are clear. First, despite its name, the CPEC is really the Xinjiang-Pakistan Corridor (LTP: "CPEC covers China's Xinjiang Uygur Autonomous Region[XUAR] and the whole territory of Pakistan"); it is not a corridor to China's prosperous east coast, which China quite rationally seeks to link, not too far away Pakistan but by sea and land to next-door Southeast Asia. Second, whether the CPEC becomes an 'economic' corridor (that creates synergies from connecting two or more vibrant economic clusters) or remains a 'transit' corridor (through which goods of foreign origin and destination pass) will depend on the government's ability to realise the opportunity the CPEC presents to plan and implement social and economic reforms in the national interest, rather than leaving it all to the market (and China).
In identifying complementarities from which mutual gains from trade and regional integration are expected, therefore, we must focus mainly on Xinjiang-in fact, on the three lesser-developed administrative units in south-western Xinjiang identified as the CPEC's "core zone" in the LTP-and not on "China" (which in most accounts refers to China's south-east coastal provinces). It is important to realise that the CPEC links Gwadar to Kashgar, not to Urumqi, the capital of XUAR, 1,500-km north of Kashgar. Curiously, the LTP doesn't even mention Urumqi, from where the 'Belt' in China's Belt and Road Initiative passes and is the only major access east or west from Kashgar. (Pakistan should seek to extend the terminal node of the CPEC to Urumqi by mutual agreement, as the LTP Agreement provides.)
Xinjiang (xin, new; jiang, borderland) is by far the largest 'province' of China (with an area about one-sixth of China or twice that of Pakistan-of which albeit 90 percent is uninhabitable, a population of under 25 million, and a GDP about half of Pakistan), sharing a 5,000-km land border with eight countries (including Kazakhstan, Kyrgyzstan and Tajikistan, all potential economic partners through CPEC). Chinese military presence in Xinjiang is extensive, and the Xinjiang Production and Construction Corps (XPCC, or Bingtuan) is an empire unto itself, managing production by state-owned enterprises (eleven, publicly traded) and exercising quasi-judicial functions, in addition to its military and paramilitary duties. XPCC has the equivalent of provincial status in Chinese economic planning and is not under the control of the XUAR authorities. XPCC-administered Tumshuq (330 km east of Kashgar), the headquarters of XPCC Third Division, is a "key node" of CPEC. Realising gains from the CPEC, therefore, would also require widening our contacts beyond the central government to include both XPCC and XUAR authorities, and sub-regional administrative units.
Traditionally, Xinjiang's economy has been based on agriculture (cotton), livestock (sheep farming and wool production) and mining (oil, natural gas and coal), although manufacturing and services have become significant in recent years. Xinjiang's exports (about $18 billion) consist of textiles, garments, shoes and electromechanical products, primarily to Kazakhstan, Kyrgyzstan, Tajikistan and the US, while its imports (about $2 billion) consist of agricultural products, ore, crude oil, medical instruments and agricultural products, from Kazakhstan, Uzbekistan, the US and Russia. Foreign direct investment in Xinjiang is thought to be around $500 million annually, mainly in manufacturing. With this economic structure (LTP: "Southern Xinjiang of China suffers from a weak industrial base and limited economic scale."), seeking complementarities-in pursuit, for example, of the LTP's aims for our textile and garment industry-would be a challenge.
For China, among other gains, the CPEC would create a far more cost-effective and secure transit corridor between Xinjiang and the Middle East and Africa than at present. To transform this transit corridor into an economic corridor, however, besides vision and leadership four more things would be required: (1) existence of cities, areas and regions with genuine economic potential; (2) innovative research to identify business opportunities and infrastructure needs; (3) plans, policies and regulations to attract genuine investment in internationally competitive clusters(without protection, and guarantees against normal commercial risk, secured through corruption); and above all, (4) sustained commitment by governments, private investors, and other stakeholders over the decades it takes (well beyond 2030) for infrastructure projects to yield returns.
These conditions will not be met in Pakistan without radical reform of leadership and management. We cannot hope to emulate China's unity of command and control of national-and now, cross-national-economic management. But our ability to create vibrant economic clusters would call for a reassertion of the government's economic role, reminiscent of the 1950s and 1960s, in sharp reversal from the neo-liberal economic policies and practices being pursued (to excess) since the 1990s.Our success in resolving this central "contradiction" in economic ideology and practice will determine whether CPEC achieves its full potential.
What is needed is a more centralised vision of economic planning and industrial policy, despite the devolution envisaged under the 18th Amendment to the constitution and the 7th National Finance Commission award. This isn't reflected in the "Pakistan Vision 2025" document (in which, the Ministry of Planning, Development and Reforms is merely to "play the role of facilitator and integrator in the areas of economic policy and reforms in the post-devolution scenario").
The times demand a more sovereign approach to national management. "China," we learn from the LTP, "is responsible for projects ... within its territory," but "for those in Pakistan, China and Pakistan will jointly prepare plans, ..." While admirable as an expression of trust, we must learn to look after our national interests ourselves without imposing unsustainable burdens on our friendship with China. For, in the words of Russian analyst Andrew Korybko: "If, it is taken for granted that the Chinese will do everything for Pakistan and that foreign investors will all of a sudden flock to Pakistan, then this mistaken belief will lead to nothing, but false hopes and failure. On the other hand, if Pakistan takes the initiative and uses CPEC as a springboard for robust engagement, then this project will turn into one of the best blessings that Pakistan has ever received."
(The writer is former Advisor on Economic Affairs)