China’s Belt and Road Initiative in a Global Context

The China Pakistan Economic Corridor (CPEC) is the flagship component of the Belt and Road Initiative. This book offers a comprehensive overview of CPEC from a business and management perspective and provides theoretical and empirical analyses of the opportunities and challenges facing businesses in relation to CPEC. Key topics covered include economics, project management, industrial zones, agriculture, energy, value chain, ethics, governance and security, creating a useful tool for academics as well as policymakers and practitioners in China, Pakistan and other countries along the new Silk Road.

This chapter offers a critical overview of the Belt and Road Initiative (BRI), which is a Chinese development strategy that focuses on economic, cultural and political cooperation between China and the world through the land-based and maritime Silk Road. In particular, it discusses the Pakistani section of the BRI, known as the China Pakistan Economic Corridor (CPEC). The chapter discusses the financial and other aspects of CPEC, highlights its significance for China and Pakistan, and also outlines some key issues and challenges.

In this chapter, social cost benefit analysis (SCBA)—an appraisal based on the economic costs and the benefits faced by society—is applied to the early harvest component of China Pakistan Economic Corridor energy projects. The requisite steps of SCBA are explained in the context of important issues such as the social discount rate and social cost of carbon emissions. The methodology is then applied to the Sahiwal Coal Power Project, with the aim of gauging the extent to which the environmentally detrimental impact of the recently operational Sahiwal Coal Power Plant is offset by the potential benefits of overcoming the energy shortfall in Pakistan. The analysis therefore includes not only the private costs and benefits of setting up the plant, but also the related economic, environmental and social implications, duly monetized and discounted over a 30-year period; the usual life of such plants. The results indicate that the power plant generates a net economic benefit if the lower bound of the social cost of carbon is used and a net loss if the upper bound is considered. Findings from the case study indicate that carbon dioxide emissions from five imported coal-fuelled plants will increase by 18% from the base of the 2014 national carbon emissions inventory. The study also raises important policy questions about the spatial location and environmental footprint of coal power and whether the national benefits warrant any local compensation.

This chapter highlights the important role of ethics and governance norms in multi-country and cross-cultural contexts and illustrates this discussion by focusing on the China Pakistan Economic Corridor (CPEC). The chapter contrasts Islamic and Chinese concepts in ethics and discusses their implications for CPEC and governance. This perspective is important to develop a contextual approach to ethics and governance and make full use of the opportunities for economic and human development offered by CPEC.

The China Pakistan Economic Corridor (CPEC), an infrastructure-based framework for regional connectivity, is widely perceived in Pakistan as the savior of the country’s economic woes. As the means toward regional political prowess and much-needed economic revival through developmental partnership with the emergent superpower that is China, CPEC-associated projects have become, as expressed through the dominant narrative of the country’s lead planning body (the Planning Commission), the backbone of Pakistan’s medium to a long-term developmental program. Consequently, CPEC projects have been approved, swiftly funded, and expedited in far greater numbers than ever done in the country’s history.

Employing classical contingency theory, this chapter attempts to identify key situational factors impacting the performance of CPEC projects. The chapter identifies complexity, poor implementation capacity, and level of change as specific operational situational factors (OSFs) that CPEC projects contend with in Pakistan. It also identifies institutional voids, poor transparency, project connectedness, and political ambition as strategic situational factors (SSFs). The chapter contends that CPEC projects are not the usual ‘run-of-mill developmental projects’ undertaken in the country; hence the need to manage them differently. Another argument presented is that CPEC projects in Pakistan are representative of a much wider, global phenomenon, that of increasing South-South Economic Development (SSED) collaboration between China and other developing countries (the ‘South’), especially in Africa and Asia. This too, impacts the how CPEC projects need to be managed in a way that is different from ‘the usual’. Pakistan has traditionally been a recipient of Western-led financial and technical assistance for its infrastructure development. However, as a key regional partner in CPEC, Pakistan is undertaking several dozen infrastructure megaprojects, several valued at over a billion dollars each, most of which are either directly or indirectly supported through Chinese SSED. In order to understand the phenomenon, the chapter explains the emergence of Chinese South-South Development Cooperation in Africa and Asia over the last few decades. Differentiating characteristics of SSED-led projects and their implications for recipient countries are explored. The chapter then contends that in Pakistan, where OECD developmental support has been the norm, additional institutional safety nets may be required as the undertaking of novel, complex megaprojects may propel systemic shocks that the country may be inadequately prepared for, especially given the SSFs. The chapter argues that it is essential that both OSFs and SSFs accompanying the country’s first major exposure to south-south development cooperation need to be clearly understood prior to operationalization of the emergent project portfolio. A formalized knowledge management system spanning CPEC projects is recommended.

Historically, both Pakistan and China have deep ties of friendship in different ways. Significantly, these ties have strengthened the geopolitical cooperation along with the strategic impetus for both countries in the region, although the socioeconomic aspect has been focused but not prioritized. To address this matter, in 2013 a milestone was achieved between Pakistan and China on economic cooperation to strengthen and accelerate economic relations. This project has great importance not only for the expansion of trade and industry in the region, but for the connection of the Pakistani and Chinese people to the rest of the world. The major objective of this study is to explore the economic and strategic importance of the China Pakistan Economic Corridor (CPEC) and to find out its impacts on the development of Azad Jammu and Kashmir, Pakistan. It can be concluded that CPEC will contribute to the socioeconomic development and expansion of industries in Pakistan. Simultaneously, it will contribute to the development of infrastructure, industry, tourism, connectivity, energy, food, livestock and the social fabric in Azad Jammu and Kashmir. Finally, this study proposes some recommendations for policymakers to capitalize on this megaproject.

The China Pakistan Economic Corridor (CPEC) has tremendous potential to transform regional dynamics in terms of socioeconomic development, trade and politics. However, this is unfolding against the backdrop of looming security threats in Pakistan. Internally, these threats come from extremist Islamist and ethnocentric groups in Pakistan. Externally, some foreign powers are alleged to be involved in trying to sabotage CPEC. These threats are real in terms of incidents of violence against Chinese individuals and businesses, and, given the strategic and economic importance of CPEC for both China and Pakistan, deserve an urgent policy response in terms of the strategic security of CPEC. Such a response may address issues of physical security and ideological security. The current approach by the Pakistani government is, in the main, focused on physical security and protective intelligence, with limited or no attention to the ideological roots of violence. In this chapter, a critical overview of security threats facing China’s Belt and Road Initiative (BRI) in Pakistan is offered. With a focus on CPEC, the chapter presents a comprehensive account of attacks on Chinese nationals and businesses from 2001 to 2017. This ongoing threat has increased the Chinese concerns about CPEC’s security. The chapter identifies Takfiri Islamists or Khawarij (Taliban and affiliates) and ethnic Baloch separatists as two major groups posing threats to CPEC. The analysis demonstrates that the much-publicized socioeconomic benefits of CPEC may not be fully realized unless both forms of militancy are addressed through a multi-pronged security policy. The chapter may guide government, security officials and policymakers in Pakistan and China to direct their attention to the two main sources of violence which pose threats to BRI in Pakistan. It may also help readers to understand the security aspects and requirements of engaging with or employing Chinese individuals and businesses in Pakistan.

The world population is growing, putting added pressure on scarce life-supporting resources of the Earth. Individuals and societies look for a better quality of services which implies compatible economic growth. Sustainable economic growth for the better financial health of communities is possible through the judicious employment of factors of production. Means of communication provide a platform for mutual business and trade where all benefit from each other’s expertise. The Belt and Road Initiative (BRI) with the China Pakistan Economic Corridor (CPEC) wrapped in it fundamentally provides connectivity to facilitate interaction among communities and countries. Resource-scarce states can benefit from it according to their capacities for improving economic growth and social development compatible with international standards. Like every strategic initiative, there are misperceptions, misgivings and apprehensions about BRI as well; however, most pertain to what the other side is going to achieve. In the business world of competition and rivalry, customarily, any achievement by the other side (a competitor) is taken at the cost of oneself, thereby finding a reason to oppose it. Since the start of this initiative, there has been an abundance of write-ups from different stakeholders apprehending what China in BRI and Pakistan in CPEC are going to achieve. If the notion is reversed, so that instead of looking at it for the benefit it provides to the other side, looking at what it provides to you and others on merit, the issue can be resolved.

Despite all the straightforward answers to different questions pertaining to the apprehensions and misgivings, there is definitely a need to put in place some tangible measures. This is particularly so in the case of Pakistan, which is facing a non-responding sizeable portion of its population. The narratives of misgivings are well grounded at the moment in the absence of a tangible response from the state mechanism. The reversal of these narratives is possible with some visibility of CPEC projects materializing and sharing benefits with deprived segments of society. The stakes are not very high, just a matter of providing basic needs for social uplift through jobs on merit. The communication means that are appearing are sufficient to facilitate movement of people for jobs, business and trade. The provision of seed-money to kick-start smaller businesses would go a long way in reducing pressure on the job market. In dealing with the Chinese, the friendship slogan should only be employed for mutual businesses on a level playing field. It should not be expected for favour giving or receiving; businesses should instead maintain professionalism. Pakistan, at the same time, would need to keep neutral on the religious side. Non-interference in one another’s internal affairs would help develop professionalism in business and economic growth. Pakistan and China’s rivals in geoeconomic and geostrategic dimensions would feel comfortable in creating disturbance through religious sensitivities; both would therefore need to exercise the utmost care in dealing with such matters. The economic corridor should objectively be used for business only without any discrimination, not even with India. This would build confidence for mutual trade and peace for mutual benefits and coexistence.

The traditional approaches to the integration of low-income countries have been the assembly of intermediate goods, which are generally produced in high-income countries, for re-export to the final consumers. This strategy should be re-evaluated, especially for a low-income country such as Pakistan, to integrate more value-added activities and services. The main objective of this research is to identify the possible value chain for integration and ranking of a suitable value chain based on the criteria of potential volumes. For instance, a country like Pakistan has been following the traditional integration cycle, but the Belt and Road Initiative and China Pakistan Economic Corridor (CPEC) projects provide an ample opportunity to strategically align itself with the Chinese exporting industrialization regime, which will create a baseline for the much-needed industrial revolution in Pakistan. Therefore, the governments of both China and Pakistan have rightly incorporated special economic zones (SEZs) as a kick-starter for the Industrial revolution in Pakistan under the banner of CPEC, keeping the success of Chinese SEZs in consideration. This chapter will explicitly show the rationale and decisional process for how Pakistan can efficiently utilize CPEC projects to integrate its industry and trade with the global value chains of China, coupled with its geostrategic economic advantages, and create a ‘win–win’ for both.

The China Pakistan Economic Corridor (CPEC) was largely conceived as a transport and energy project, rather than a possible engine of growth with better regional connectivity. It is critical to establish a clear narrative regarding Pakistan’s economy in the future—trading or manufacturing nation or following prior approaches of import substitution. Experts suggest in the short to medium term it is more feasible to harvest the low-hanging fruit and for this reason the long-term CPEC plan 2017–2030 has cited agriculture as a priority sector. Pakistan’s federal government under the leadership of the Pakistan Tehreek-e-Insafe party is aggressively identifying procedures to provide a much-needed boost for the sector and utilize CPEC as a growth vent. In that regard, this chapter is primarily concerned with the development of competitive agriculture and agro-industry in priority regions. To establish competitiveness, trade policies must be given priority. This chapter looks at two aspects of CPEC through an agricultural lens: (1) how to unlock the agricultural potential of the country in some traditional crops, livestock and horticulture; and (2) value addition and the present and prospective agricultural trade regime and future potential, especially in the light of CPEC’s better connectivity. Pakistani agriculture is largely producing low-value crops and trade is dominated by agriculture and agro-based products and would continue to be so for some time to come. The chapter also highlights that the identified clusters of agriculture value chains in four corridor zones, especially the central zone (Indus Basin) classified under the CPEC project which carries a comparative advantage in producing a diversified crop mix, have not been fully exploited. In order to translate this comparative advantage into a competitive advantage, there is a need not only to develop clusters of commercially viable farming, processing and service firms located in specific geographical areas, but also to adopt good global production and trade practices. This chapter aims to critically evaluate the policies and investment priorities pursued in developing CPEC in general and agriculture and agro-industry in particular.

In the wake of the China Pakistan Economic Corridor (CPEC), the construction industry in Pakistan has received a significant boost. Investments by Chinese and Pakistani governments as well as private sectors are especially aimed at the construction of power plants and transport infrastructure. Historically, power shortages in Pakistan have been a major challenge facing domestic users as well as local and international investors and industrialists. To address some of these issues, CPEC ‘early harvest’ projects are aimed at eradicating the energy shortfall and enabling economic uplift. This sector is strictly regulated by the government of Pakistan and the development of new energy projects requires tedious and cumbersome processes, including bureaucratic reviews and approvals. Given the inefficiencies of government processes and sub-par project management practices, delays in construction are commonplace, leading to massive cost over-runs. However, Sahiwal Coal Power Project (SCPP), a 1320 MW coal-powered facility, was completed in just 22 months, 22 days ahead of the internal control milestone plan, and 200 days ahead of the contract period. This study uses the project management framework to assess what learnings could be drawn from the construction of SCPP. It shows that factors such as proper project scheduling, efficient site management, a skilled labour force and governmental support played a key role in the timely completion of this project.

The use of special economic zones (SEZs) has played a vital role in the rapid industrialization of China. Shenzhen is largely regarded as a success story regarding implementation of SEZ idea, where a small fishing village has been converted into a thriving economic hub. However, China, owing to its rapidly increasing competitiveness and advance towards high-tech industries, has decided to relocate some of the industries outside its boundaries. Thus, the mega-agenda of the Belt and Road Initiative (BRI) was launched by Chinese President, Xi Jinping in 2015. The BRI comprises six economic corridors connecting China with diverse countries worldwide. The China Pakistan Economic Corridor (CPEC) is considered to be a flagship under the umbrella of the BRI. Under the CPEC, a window of opportunity has opened for Pakistan where the country can draw lessons from the Chinese experiences of rapid industrialization in the form of SEZs. In this regard, the SEZ mechanism remains an effective and significant tool for Pakistan to transform its national industrial outlook. However, the pragmatic practice of developing SEZs under the CPEC is not visible as yet, largely because of the internal and external challenges faced by Pakistan. This chapter tries to understand the general concept of the SEZs, their significance under the CPEC and the BRI, and the parameters of the SEZ mechanism with a Pakistani perspective. Apart from this, the study also explores multiple challenges, which are the major impediments to the successful establishment of the SEZ mechanism in Pakistan, by using the qualitative method and interview technique.

This chapter discusses the important collaborative role that business schools in China and Pakistan may play to support the China Pakistan Economic Corridor (CPEC), a flagship component of the Belt and Road Initiative. Given the vast scale of investment and infrastructure development related to this initiative, it is important to pay attention to the enormous need for technically and cross-culturally competent managers and business leaders to support this initiative. The chapter offers a brief overview of CPEC, highlights the human resource needs in its wake and outlines various fields within which business schools in both countries could support each other as well as the public and private sectors in the successful design and execution of CPEC projects. The chapter also offers some examples of cooperation already taking place among universities and business schools in China and Pakistan in support of CPEC. It also suggests some activities and deliverables of the proposed cooperation among business schools along the Belt and Road.