Recent developments concerning Pakistani involvement in the China-Pakistan Economic Corridor (CPEC) highlight the growing unease many Pakistanis have with the project’s potential effects on their economy. The newly elected prime minister, Imran Khan, has raised concern over Pakistan’s over-reliance on foreign debt, and now his government seems to be thinking more carefully about CPEC projects than the previous administration. Yet, a crucial part of CPEC is still being overlooked by the Pakistani government but warrants attention – namely, the Port-Park-City model that China is pursuing in Gwadar, which could have undesirable consequences for the country.
Early in September, a Financial Times report indicated that Khan’s government would renegotiate aspects of CPEC, the multibillion dollar megaproject by the Chinese government to invest in Pakistan as part of Beijing’s global Belt and Road Initiative (BRI). The article quoted Abdul Razak Dawood, a cabinet-level adviser to Khan, as saying, “The previous government did a bad job negotiating with China on CPEC… Chinese companies received tax breaks, many breaks and have an undue advantage in Pakistan.”
Yet, almost immediately afterwards, the Chinese and Pakistani governments both made statements denying that Pakistan was hesitant toward any aspect of CPEC, and Dawood even said that his words had been taken out of context. Contrary to FT’s claims, Pakistan’s minister for information and broadcasting, Fawad Chaudhry, announced that the Pakistani government would ensure the success of CPEC and accused Western media sources of being biased. Dawood’s backtracking and Chaudhry’s forcefully positive language likely stems from the competitive pressure between Pakistani political parties to each portray themselves as the most “pro-CPEC.”Enjoying this article? Click here to subscribe for full access. Just $5 a month.
A Trend of Rethinking the BRI
Despite the conflicting messaging, it appears that the current Pakistani administration is less enthusiastic about CPEC than its predecessor. By the end of September, Reuters reported that Pakistan was specifically rethinking a rail line between Peshawar and Karachi, one of the major CPEC projects, and that China only expressed openness to renegotiate projects that had not been started yet. Pakistan also announced that Saudi Arabia will join CPEC as another investor, thereby increasing the diversity of funding sources. These moves to not become entangled in Chinese debt suggest that Pakistan is cognizant of other countries’ BRI-related troubles and seeking to avoid similar blunders.
Given the warnings that China’s “checkbook diplomacy” is actually a form of “debt trap diplomacy,” a few other countries that had previously welcomed BRI investment with open arms have begun pulling back or expressing dissatisfaction. For example, Sri Lanka’s experience with the deep sea port of Hambantota is a cautionary tale. When it could not pay back its loans, China negotiated a 99-year lease of the port and a 70 percent share of its profits in exchange for giving Sri Lanka approximately $8 billion in infrastructure and development contracts, to be repaid at 6.3 percent interest. Similar lending deals have been struck with other ports including Piraeus in Greece, Doraleh in Djibouti, and, of course, CPEC’s crown jewel: Gwadar.
A recent Economist report evinces the regret that some in Sri Lanka feel regarding the large amount of Chinese-borrowed money used for constructing an airport and cricket ground near Hambantota, as opposed to building universities, which would have helped strengthen the country’s human capital and future self-reliance. Current plans for Gwadar, if not renegotiated, include similar large-scale infrastructure development without a corresponding investment in local human capital. Put another way, there is a difference between giving a man a fish and teaching a man how to fish. Through the BRI, Beijing’s strategy seems to be to position itself as much of the world’s fish hawker for the foreseeable future.
The Port-Park-City Model in Gwadar
At this moment of potential revision and disruption of CPEC, Khan’s government should consider raising the issue of Gwadar with China. The deep sea port in Gwadar has been referred to as the “gateway city” to CPEC and as a “gateway to Asia.” Although on the surface China’s ambitions to develop a bustling waterway on the Arabian Sea appear clear, China also seeks to a plant a seed there that foments long-term influence and ownership. Gaining control of Gwadar affords China an opportunity to connect its land-based transport routes through Islamabad all the way to western China, as well as to construct a crude oil pipeline spanning that corridor. Port control in Gwadar also aids China in stringing together maritime ports, “pearls,” along the Indian Ocean back to Hainan. Still, while access to Pakistan’s port is enticing for connecting its global supply chains, port development alone does not directly provide China with a new commercial hub.
Rather, China often pursues a development model referred to as “Port-Park-City” (PPC). PPC dictates that the development of a port will be followed by the construction of a majority Chinese-funded (but ostensibly jointly-managed) industrial park, which is then intended to lead to the establishment of a proxy Chinese city inside another sovereign state. To this end, the China Pak Investment Corporation (CPIC) has obtained approval for joint construction projects that will see the establishment of the International Port City in Gwadar, including the Gwadar Financial District, an airport, and a $265 million luxury golf resort, among many other promises.
Surprisingly, recent news that China seeks to settle hundreds of thousands of its citizens in Gwadar went almost unnoticed in Pakistan, with few outlets publishing stories on it. According to the Economic Times, CPIC “bought the 3.6-million square foot International Port City and will build a $150-million gated community for the anticipated 500,000 Chinese professionals who will be located by 2022 and work in its proposed new financial district in Gwadar.”
An example of a PPC analog closer to completion exists in Malaysia, in what is known as Forest City. This development project has “room for 700,000 residents being built across a string of man-made islands just off the coast of Malaysia” and is marketed as a way for Chinese to live in China – while actually inside a different country. Forest City is located in Malaysia’s Iskandar special economic corridor, a region that was launched by the host country’s government, but with foreign direct investment from China and other international stakeholders. Before returning to power this year, Prime Minister Mahathir Mohamad had criticized the easy sale of Malaysian land to Chinese developers, adding that “we cannot be proud of a magnificently developed Malaysia, occupied and owned by foreigners.” In general, Mahathir has been strongly opposed to over-reliance on Chinese debt and has gone so far as to halt $20 billion with of BRI infrastructure projects in Malaysia. He argued that the projects were unnecessary, and that Malaysia did not have the money to afford them anyway.
The PPC model currently being executed in Malaysia and Pakistan is reminiscent of the first wave of European colonialism, during which European countries established small trading posts on the coasts of Asian and African countries. If large numbers of Chinese nationals do indeed settle Gwadar, it could have troubling demographic consequences. Gwadar is located Balochistan, Pakistan’s least populated province. According to a 2016 report in The Nation, Baloch natives may be outnumbered by Chinese expats in the province by 2048. Given the wide-ranging grievances in Balochistan that already exist against the Pakistani federal government, a scenario in which foreign nationals outnumber Baloch and control the province’s most lucrative industries and port would likely only add to the discord.
Before entering office, Imran Khan had taken a similar approach to Mahathir when he had criticized previous Pakistani administrations for depending too much on foreign aid. It is unclear whether Khan will cancel Chinese projects altogether as Mahathir did, since his government claims to be fully on board with CPEC as an overall idea. But the Pakistani government appears to be beginning to recognize the potential dangers of CPEC for Pakistan’s macroeconomic health, and the Malaysian and Sri Lankan cases serve as useful points of comparison.
Although Pakistan is in a delicate situation given the interconnectivity of economic and political ties in the China-Pakistan bilateral relationship, Islamabad must understand the risks associated with the PPC model in Gwadar for both its economy and domestic security. Pakistan should be particularly careful that it does not allow the promising city to become an example of a Chinese imperium in imperio, or “state within a state.” Controlling infrastructure projects is one thing; resettling sizable numbers of people as well is a whole other game.
Logan Pauley is a Herbert Scoville Jr. Peace Fellow at the Stimson Center, a nonpartisan think tank in Washington, D.C.
Hamza Shad is a research assistant at the Stimson Center’s South Asia program.