From Infrastructure to Innovation: The Strategic Shift of CPEC 2.0

The Project, which started in 2015 and costs $62 billion, known as the China-Pakistan Economic Corridor (CPEC) is identified as the flagship project of the ‘Belt and Road Initiative’.

The Project, which started in 2015 and costs $62 billion, known as the China-Pakistan Economic Corridor (CPEC) is identified as the flagship project of the ‘Belt and Road Initiative’. CPEC is one of the grand wonders in the world in the 21st century which is planned to link Pakistan’s Gwadar and Karachi ports to China’s Xinjiang Uygur Autonomous Region. CPEC is entering a second phase – CPEC 2, where the project expanded the potential sectors for investment which includes agricultural, Information Technology (IT) and energy. The current changes are seen by the author as having profound consequences for Pakistan’s development of Pakistani economy and for regional stability, as he overemphasizes the role of the project in altering the economic landscape in Pakistan.

The China-Pakistan Economic Corridor (CPEC), launched in 2015 as a $62 billion project, stands as a flagship initiative under China’s ambitious Belt and Road Initiative (BRI). Designed to connect Pakistan’s Gwadar and Karachi ports to China’s Xinjiang Uygur Autonomous Region, CPEC is one of the most significant global undertakings of the 21st century. As it transitions into its second phase, CPEC 2.0, the project broadens its scope to include sectors such as agriculture, information technology (IT), and energy. The article discusses profound implications of this shift for Pakistan’s economic development and regional stability, underscoring the project’s potential to transform Pakistan’s economic landscape.

The Genesis and Achievements of CPEC

CPEC’s initial phase focused primarily on infrastructure and energy projects, significantly addressing Pakistan’s chronic energy shortages and improving transportation networks. The construction of the Gwadar seaport, multiple power plants, and an extensive road network were among the key achievements. These developments not only enhanced trade and mobility but also provided direct employment opportunities, with projections suggesting millions of jobs by 2030. Moreover, the strategic improvements in energy and transport infrastructure have laid a robust foundation for subsequent economic activities and industrialization, paving the way for sustained economic growth.

Transition to CPEC 2.0: A Broader Vision

CPEC 2.0 represents a strategic shift towards comprehensive and inclusive economic growth. This phase aims to address the shortcomings of the initial phase by focusing on sectors beyond infrastructure. Key areas of emphasis include agriculture, the upgrading of Pakistan’s railway network (notably the Main Line – I or ML-1), and the rearrangement of the Karakorum Highway. These initiatives are expected to stimulate regional development, enhance economic growth, improve regional connectivity, and alleviate poverty. By broadening its scope, CPEC 2.0 aims to create a more diversified and resilient economic base, ensuring that the benefits of development are widely distributed across the country.

New Developments and Strategic Initiatives

Recent developments underscore the deepening cooperation between China and Pakistan. In March 2024, the Vice President of China, Mr. He Lifeng, visited Pakistan, reinforcing the strong bilateral relations and mutual commitment to CPEC. During this visit, China pledged $1 billion towards Pakistan’s social sector development and committed to 63 projects with a cumulative cost of $35 billion over the next decade. This massive investment is projected to generate 2.3 million jobs, providing a much-needed boost to Pakistan’s economic growth.

CPEC 2.0 includes the establishment of five new economic corridors, aligned with Pakistan’s “5Es” development framework, which emphasizes export promotion, e-commerce development, environmental and climate change considerations, energy and infrastructure advancements, and equity and social empowerment. These new corridors are designed to target specific areas for development.

One of the most significant aspects of CPEC is its emphasis on inclusive development. Projects under CPEC 2.0 are meticulously designed to benefit local communities by creating employment opportunities, transferring technical skills, and promoting small and medium enterprises (SMEs). This grassroots approach ensures that the dividends of economic growth are shared equitably across Pakistan’s diverse socio-economic landscape. In Balochistan, CPEC initiatives have spurred remarkable infrastructural development, improving access to healthcare and education, and empowering local communities through comprehensive capacity-building programs. These efforts are transforming the region into a burgeoning hub of economic activity, fostering socio-economic inclusion and stability.

Moreover, the Corridor of Innovation is set to develop Pakistan’s knowledge-based economy through technological advancements. The Corridor of Green Energy will focus on sustainable energy solutions in line with global environmental trends. The Digital Pakistan Corridor (E-Pakistan Corridor) aims to enhance the digital infrastructure to support economic diversification. Lastly, the Inclusive Regional Development Corridor seeks to address regional imbalances by spreading the benefits of CPEC more widely.

Pakistan’s Role in CPEC 2.0

Pakistan’s contributions to CPEC 2.0 are crucial for the project’s success, encompassing several key areas. Firstly, Pakistan provides land and resources necessary for infrastructure development, including roads, railways, power plants, and special economic zones. This foundational support is vital for the physical expansion of CPEC projects. Secondly, ensuring the security of CPEC projects and personnel is a priority, with Pakistan collaborating closely with China on robust security measures to address potential threats. Additionally, Pakistan offers Chinese businesses access to its growing domestic market, fostering opportunities for trade and investment. To attract further investment and streamline project approvals, Pakistan is also focused on establishing a transparent and efficient policy and regulatory framework. Moreover, investing in skills development programs is essential to enhance the employability of Pakistani workers for various CPEC projects, ensuring that the local workforce can effectively contribute to and benefit from these initiatives.

Positive Impacts of CPEC 2.0

The new developments in CPEC 2.0 hold significant potential for Pakistan. The focus on innovation and digital infrastructure can help Pakistan move beyond traditional sectors and develop a robust knowledge-based economy. The emphasis on job creation targets employment opportunities, potentially addressing concerns about limited job spillover from the first phase. The focus on green energy aligns with global sustainability trends and ensures long-term environmental benefits. Additionally, efforts to address regional imbalances through the Inclusive Regional Development Corridor promise more equitable economic growth. These strategic initiatives are designed to create a diversified and sustainable economic base, ensuring that economic benefits are not only significant but also broadly shared.

Conclusion

CPEC 2.0 presents Pakistan with a historic chance of charting a new course towards economic development. Accordingly, with the help of China, Pakistan’s potential threats can be resolved, economic efficiency can be improved, and the country can become a leader in South Asia. To achieve the above outcomes, the following approaches will be adopted: courageous leadership, strategic planning as well as a reform mentality. Pakistan needs to do something to change the looming scenario and provide the people of the country and generations to come a better future. It means more than just project by project; and it means a vision of a better, a stronger, and a more independent Pakistan. Its success lies in a rational policy framework, namely the industry-energy interface, the shift of generation capacity to renewable sources of energy, and finally, building new capacities conducive to the sustainable and inclusive growth of Pakistan. Despite the challenges, a well-thought-out approach and consistent effort can help Pakistan unlock the potential of this transformative initiative and enhance the benefits for the country’s economy and citizens.

Alina Fayaz
Alina Fayaz
Alina Fayaz is a student of International relations at National Defence University, Pakistan.