Dynamics of OBOR Initiative In quest of new economic horizons across the globe

China’s Belt and Road Initiative, also known as One Belt, One Road (OBOR), is one of the most ambitious foreign and economic projects. It aims to materialize a grand plan of infrastructure building throughout China’s neighboring regions. Many foreign policy analysts view this initiative largely through a geopolitical lens, viewing it as an attempt to engrave the new economic horizons. However, some analysts argue that the key drivers behind OBOR are largely motivated by China’s pressing economic concerns.

Beijing hopes its transnational infrastructure building program will boost up the growth in China’s underdeveloped regions along with opening the economic opportunities for the other countries. Though the initiative will have a heavy domestic focus, but it will also work as a platform to address the country’s excess production capacity. It is more about migrating surplus factories than dumping excess products.

The regional development aspect of OBOR is perhaps one of the most important economic policy objectives. The coordinating government agency heading OBOR is the National Development and Reform Commission (NDRC), the country’s premier economic planning agency. It is likely that Chinese domestic components of OBOR projects will be built before any overseas components for the simple reason that Beijing can enforce its plans much more effectively within its own jurisdiction.

In 2014 OBOR was officially incorporated into China’s national economic development strategy at the ‘Central Economic Work Conference’, the annual agenda-setting economic summit for policymakers. Beijing announced three regional development plans, one of which was OBOR. These regional development plans are designed to address the long-standing problem of uneven development in China. Economic inequality between inland western regions and prosperous eastern seaboard states is a huge challenge for the ruling party. For example, the coastal mega-metropolis of Shanghai is five times wealthier than the inland province of Gansu, which is part of the old Silk Road. Beijing has tried to close the gap between these provinces.

Since 1999 the Chinese Government has pursued the so-called ‘western development strategy’ to revitalize continuously underperforming provinces including the majority Muslim autonomous region of Xinjiang. However, these efforts have produced few tangible results. Despite Beijing’s preferential policies, large-scale fiscal injections and state-directed investments, the western provinces’ share of China’s total GDP increased only marginally from 17.1 percent in 2000 to 18.7 percent in 2010.

One acute side-effect of heavy state subsidies in these western provinces has been a high concentration of state-owned enterprises and low penetration of private firms. For instance, the western regions of Xinjiang, Tibet, Qinghai, and Gansu are the four lowest-ranked provinces on the China Economic Research Institute’s Free Market Index. Their average score is 2.67 (0 represents no private enterprise and 10 represents complete privately owned industry) whereas the national average is 6.56.

The world’s geo-economic scenario has been undergoing drastic changes since the advent of China’s One Belt One Road (OBOR) initiative. A new but crucial dimension was added to this situation when soon after Donald Trump was sworn as the 45th President of the US, he signaled what can only be described as a policy of isolation by adopting the ‘America First’ slogan. In response to China’s OBOR initiative and Washington’s America First policy, those countries that felt their economies would be affected one way or the other as a result started recalibrating their relation with the two superpowers – one as old as history itself and the other making history as it entered the current century. Therefore, it was only understandable that many old friends of the America started mending their economic ties with China and at the same time de-escalating decades old economic ties with Washington.

Countries like Philippines, Malaysia, Thailand, Laos and Cambodia have already moved closer to China. Japan and South Korea feel uneasy because of North Korea’s war like posturing; otherwise these two would have also gone over to China. But if President Trump carries out his ‘America first’ policy to its logical conclusion then these two countries would also find it impossible to remain within the US camp any longer.

Today, China is Australia’s largest market for merchandise exports. Canberra also is in consultation with other nations to forge ahead with Trans-Pacific Partnership. In the same way Europe and the UK seem to be wooing China and cold shouldering the US at least in matters of economy. In South Asia, India perhaps dictated by its pathological hatred of Pakistan and worried about China’s strategic ambitions in the wake of its OBOR initiative has gone very close to the US. The recent confrontation between the Chinese and Indian troops in the Himalayas-Doklam plateau at China-Bhutan border has pushed New Delhi further into the lap of United States. It is in this changing geo-economic context that Pakistan also needs to reset its own economic policies by throwing the Washington Consensus book out of the window as a first step.

The initiative of One Belt One Road looms on a scope and scale which is unprecedented in modern history, promising more than $1 trillion in infrastructure and spanning more than 68 countries and encompassing 4.4 billion people and up to 40% of the global GDP, OBOR initiative is all about changing the economic order of the world.

CPEC indeed the doorway to prosperity.

Pakistan’s economy has grown at an annual average rate of about 7 percent during last few years, which is why the world is interested to collaborate in several economic and development projects with Pakistan. The $46 billion China-Pakistan Economic Corridor (CPEC) is a reflection of expanding cooperation between the two friendly neighbors and will have a significant economic impact on the region The CPEC is aimed at promoting connectivity across Pakistan with a network of highways, railways, and pipelines accompanied by energy, industrial, and other infrastructural development projects to address critical energy shortages needed to boost Pakistan’s economic growth.

The CPEC reduces China’s route from the Indian Ocean to 3,000km across Pakistani territory from the Gwadar Port and avoids the straits altogether. It facilitates trade by road and rail, while at the same time boosting oil and gas pipelines through infrastructural enhancement.

Gwadar has a 200,000 tonne tanker capacity, which presents unmatched opportunities for boosting global economic interactivity. Pakistan is located strategically at the tail of the corridor, yet at the confluence of most of the world’s oil-producing states, Gwadar automatically becomes one of the largest trans-shipment ports. It is envisaged to have an international airport, crude oil refineries and the ability to dock larger ships, turning it into a robust trade and transportation hub. The power plants in Pakistan, upgrades to a major highway and a $1 billion port expansion, are a political bulwark.

By prompting growth in Pakistan, China wants to blunt the spread of Pakistan’s terrorists across the border into the Xinjiang region, where a restive Muslim population of Uighurs resides. It has military benefits, providing China’s navy future access to a remote port at Gwadar managed by a state-backed Chinese company with a 40-year contract. In November 2016, the birth of the CPEC began in earnest when Chinese cargo was transported to the port of Gwadar for onward maritime shipment to Africa and West Asia.

Infrastructure projects will span the length and breadth of Pakistan and will eventually link Pakistani seaports in Gwadar and Karachi to China’s northwestern autonomous region of Xinjiang via a vast network of highways and railways. Infrastructure projects will be financed by heavily subsidized concessionary loans via the Exim Bank of China, China Development Bank, and the Industrial and Commercial Bank of China. Over $33 billion worth of energy infrastructure projects are to be constructed to alleviate Pakistan’s unending energy shortages. A network of pipelines to transport liquefied natural gas and oil will also be laid as part of the project, including a $2.5 billion pipeline between Gwadar and Nawabshah to eventually transport gas from Iran.

Many countries in the program have serious needs. The Asian Development Bank estimated that emerging Asian economies need $1.7 trillion per year in infrastructure to maintain growth, tackle poverty and respond to climate change. Pakistan achieved a total generation capacity of 1,185 megawatts from renewable energy when the first wind power project under the CPEC was installed in Gharo. Pakistan is amongst the few countries in the world today producing over 1,000 megawatts of electricity from renewable energy sources and had been listed 39th in the renewable energy index. The present installed power generation capacity from renewable energy sources stands at 1,135 MW, which includes 590 MW from wind, 400 MW from solar and 145 MW from bagasse. Plans are in progress to increase power generation from solar and wind to 1,756 MW and 1,000 MW respectively within the next two years.

According to a report regarding CPEC, “this is the biggest overseas investment by China announced yet and the corridor is expected to be operational within three years and will be a strategic game changer in the region, which would go a long way in making Pakistan a richer and stronger entity than ever before.” When it comes to the stakeholders of the said project, we need to identify primary project stakeholders for the project Pak China Business corridor.

Chinese Government is the financier of this mega initiative and the pivotal partner. With the completion of this project China will reach new horizons of prosperity by the access of new markets to sell their products and buy their desired ones. They have also their stake as customer and the most beneficial end users.

Government of Pakistan has its own concerns as it is a multipurpose project. Economists think that this project will open new doors of prosperity for Pakistan as there are many new assets to be created in Pakistan for the project including Gwadar seaport, airport, railway lines, Karakorum highway, motorway networks and industrial zones near motorway roots etc.

Government of Azad Jammu & Kashmir is also a primary stakeholder because the main supply route network (Roads, railways, pipelines etc) is passing through their territory. So they will be also in legal bindings with the project owners and client countries. Provincial governments of all four provinces of Pakistan will be equally bonded in the projects for providing different facilities to different entities involved in projects and gaining benefits for that and after completion benefits.

Project suppliers or vendors provide tangible inputs for the project which is acquired through a standard and usually competitive procurement process and same is the case here. Like project contractors, project suppliers/vendors are key stakeholders in construction and many other categories of CPEC projects. Some manufactures perform supply functions, others use distributors.

Various government departments are also the primary stakeholders because they will be in direct or legal bindings to the project. Some of the notable ones are Planning Commission of Pakistan, Gwadar Port Authority, Ministry of Ports and Shipping, WAPDA, OGDCL, SNGPL, SSGPL, Law enforcement agencies and National Highway Authority among others. Trade unions established by the co-ordination of the traders are also the stakeholders. They are established to run the trade process smoothly and fight for the trader’s right and support traders. These are also the entities having no legal but a definite relationship to the project.

World trade organization is also the stakeholders because this project will be a turning point in the world’s trade. This will affect the trade in different continents and turn a major part to the china. Apart from these stakeholders the general public of the both countries is the real stakeholder of this forthcoming development and progress. They are all ready to witness the emergence of new economic horizon on the global canvas.

Newsletter SignUp

About Amna Malik 50 Articles
Author is the President, Center of Pakistan and International Relations (COPAIR) and Editor-in-Chief of ‘Mélange int’l Magazine’ and ‘ The Asian Telegraph’.