CPEC: Lessons from History

By Anjum Altaf

How does one get a grip on the proposed China-Pakistan Economic Corridor (CPEC) and its associated investments without any hard information except for the hype? In the absence of any mechanism for credible evaluation I suggest we hold it up against a historical parallel and see what emerges by way of tentative conclusions. Some discussion grounded in real experience may be better than taking sides in the dark.

Around the turn of the twentieth century the British invested vast sums of money in the part of the subcontinent that now comprises Pakistan. Amongst these investments were the network of canals and barrages, the post and telegraph, and roads and railways. All included it would have likely added up in real terms to be bigger than the $56 billion associated with the CPEC.

What came of all that investment and what economic transformations did it sustain? At the macro level, Pakistan remains a desperately poor country with around a third of its population struggling to survive below the poverty line. Almost half the population is functionally illiterate without access to safe water and sanitation or adequate health care. Stunting, malnutrition, and infant and maternal mortality are at levels considered unacceptable in the rest of the world.

The sobering conclusion would be that even if the investments had huge economic payoffs, extremely venal governance ensured that while some people became phenomenally rich very few of the benefits trickled down to the majority in any meaningful sense.

Notwithstanding the issues of governance and distribution, which remain as critical now as then, the question remains: Did the investments have huge economic payoffs? Even to speculate intelligently on the question one would need to disaggregate the investments and consider them separately.

Take the canal colonies and the barrages. I believe most people would accept that the outcomes were positive and significant. One can assess the outcomes in terms of crop outputs, crop yields, employment created, or incomes generated for farming households.

Next, consider the railways where the comparisons become more interesting. The link between Karachi and Peshawar via Hyderabad, Sukkur, Multan, Lahore, and Rawalpindi can be considered the central artery of the Pakistani economy capable of transporting people and products efficiently and economically. Once again, I believe there would be agreement that the outcomes were positive and the payoffs significant.

Now consider some other investments in the railways that turned out differently. Among these were the links between Peshawar and Landikotal on the Afghanistan border, the link between Quetta and Chaman that was intended to have been extended to Kandahar in Afghanistan, and the Trans-Balochistan railroad from Quetta to Zahedan, inside Iran.

All these could be considered as economic corridors of their time. Even if they were not intended as such, they could have become so after the independence of Pakistan. The Trans-Balochistan railroad extended 455 miles with 38 stops linking very friendly countries between which much trade was possible. Indeed, under the Regional Cooperation for Development there was the possibility of extending the link to Turkey and thereby into Europe, an opening with immense economic potential. Today, the Peshawar-Landikotal link is inoperative, and the Quetta-Zahedan link operates on a nominal frequency of twice a month. None of these corridors had any transformative impact on the local or national economies.

Take roads as another example. The British upgraded and extended the Grand Trunk Road, an ancient trade route linking populated habitations, to great and sustained benefit. Contrast the limited economic impact of the more recent Lahore-Peshawar motorway. The equally recent Karakoram and Thar-Karachi highways have had virtually no significant transformative impacts on the local economies except to make it easier for local labor to migrate to more prosperous areas for employment.

Some tentative conclusions can be adduced. For investments to yield economic benefits, it seems a necessary, if not a sufficient, condition for them to either generate employment or to connect populated locations at relatively comparable levels of economic development. The historical evidence suggests that routing corridors through sparsely populated territory even with associated investments that create very few jobs is unlikely to be transformative. And linking disproportionately developed areas without prior complementary investments may just accelerate a drain of people and resources from the less developed regions.

It is indeed possible that investments in roads in some sparsely populated areas, e.g., in the Northern Areas or along the Mekran coast, would pay off economically if as a result a significant inflow of people is facilitated as would be the case with a major boost to tourism. But such prospects are scarce given Pakistan’s security conditions and increasing social conservatism.   

It will no doubt be argued that the unsuccessful rail corridors mentioned above were not made by the British for economic but for strategic military purposes and therefore comparisons with the CPEC are invalid. However, as mentioned before, there was nothing to prevent the conversion of the ready-made investments to economic purposes after 1947. There was significant trade potential both with Afghanistan and Iran and the latter was a very friendly country at the time. The shrivelling of the corridors should prompt serious questions inquiring what went wrong after all the investments were made.

At the same time it could be argued in turn that the CPEC is an equally strategic initiative of the Chinese presented as one with transformative economic payoff for Pakistan. The latter remains to be demonstrated independently and objectively. The historical evidence cautions that mere hand-waving is not enough.

One should also consider what might be the fate of the CPEC if relations with China turn sour in the future. This may seem a far-fetched concern at this time but the evolution of the relationship with Iran should provide a reality check. Pakistan’s abysmal relations with all its primary neighbors does not leave much room for complacency and demand a credible fall-back alternative.  

If the national objective is to further the development of the lagging provinces of Balochistan and Khyber-Pakhtunkhwa, it might be better to think in terms of employment-generating investments in the regional economies much as the canal colonies created jobs in the Punjab in the twentieth century. It might make more sense for economic corridors to follow and not precede such investments.

Anjum Altaf is a Fellow at the Centre for Development Policy Research in Lahore. This opinion appeared in Dawn on January 17, 2016 and is reproduced here with permission of the author.

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10 Responses to “CPEC: Lessons from History”

  1. Vikram Says:

    You have brought out the economic and social consequences of a foreign entity investing heavily in a relatively unindustrialized region.

    However, there are psychological consequences as well. The technologically advanced colonizer develops a parent-child dynamic with the native, especially the elite natives, who are most exposed to such interventions intellectually.

    The nature and scale of British investment in the Indo-Gangetic plain conditioned the elite there to convert their physical and social capital into bureaucratic positions, instead of industrial capital. Under the British gaze, the Indian upper castes wanted their sons to become babus or military personnel in the empire, rather than industrialists.

    This is a drastic difference from the US for example. It was a similar industrial laggard initially. But the rich farmers of 19th century America set their sons up to be industrialists, not bureaucrats. For example, Leland Stanford (founder of Stanford University) was the son of a wealthy farmer. Most founders and benefactors of Ivy League schools have a similar story. Colgate, Heinz, Ford and Rockefeller have similar stories.

    Son of wealthy American farmer/trader/aristocrat becomes a even wealthier American industrialist. Son of Indian farmer/trader/aristocrat becomes a sarkari babu.

    The one region in South Asia that was not as affected by such conditioning was Gujarat.
    https://www.quora.com/Why-are-Gujaratis-so-good-at-business-in-India/answer/Anupam-Kumar-150

    • Sandeep Says:

      Vikram has rightly said. I belong to a rural area. People want their kids to be in government jobs. Rich farmers want kids to be IAS/IPS. I think this is very much related to the historic prestige IAS got in india despite doing nothing.

      • Anjum Altaf Says:

        Sandeep: You are right. The change is that government jobs used to be the preserve of the urban and rural elites at the time of the British. Now the middle-class aspires to them and the rural population ranks them much higher than the urban because more alternatives have opened up for the latter.

    • Anjum Altaf Says:

      Vikram: You are right though one should keep in mind that the situations were very different in the settler colonies where the small native populations had been marginalized and colonies in Asia and Africa with large native populations. In America industries were being set up while in India even existing industries were being destroyed by the British. The only avenue of upward mobility in India was working directly or indirectly for the British. After more than half a century things are beginning to change with the brightest moving away from government service to the private sector, some as employees and others as entrepreneurs.

      There is something different about Gujarat. I recall Aakar Patel wring about it a while back. We had also mentioned it in a tribute to GM Mekhri who had a hypothesis about trading castes from Gujarat: https://thesouthasianidea.wordpress.com/2009/05/23/on-the-poverty-of-indian-muslims/

      Sunil Khilnani in his book The Idea of India had mentioned that among the big cities in India, Ahmedabad could be considered the only one to have escaped a colonial impact. I would like to know how that happened in case anyone has ideas.

      • Sandeep Says:

        I like to add one more aspect. Britishers designed the government job with very much impunity. It is life long permanent and hardly any performance expectation from you. Facilities like house, medical, children education, servant are provided. Salary at lower end jobs is much more than private sector. Salary increases regularly with dearnance allowance Enforcement is so lax that if you do corruption within limit, you won’t get caught. Even caught, the case will take decades in court. What you will ask further? I doubt if any other jobs would be better in india. I like to know how Britishers designed government jobs in other countries and effect of that on current level of country.

      • Vikram Says:

        Regarding the movement of Indians from government jobs to private sector and entrepreneurship, I will say that though there is a nascent growth of entrepreneurship, the predominant swing is towards the private sector. However, the mentality of job-seeking is very much the same.

        I wrote on this topic for Livemint a few months back:
        http://www.livemint.com/Sundayapp/kSXYyMY4dQZVouVS0lm7wL/Industrialization-and-the-Indian-middle-class.html

    • Vikram Says:

      Note how the lack of entrepreneurial elites shifts the burden of economic inclusion onto the shoulders of the limited political inclusion, increasing corruption levels and distorting the democratic process.

      “Direct access to the provincial government allowed him to provide around 15,000 government jobs to his constituents and get approval for many development projects in Faisalabad, says his protégé Tahir Jameel, a Punjab Assembly member from the city.”

      http://herald.dawn.com/news/1153679/how-the-sharifs-have-handled-local-government-polls-in-pubjab

  2. Anjum Altaf Says:

    Vikram: Mention of Bohras and Khojas also crops up in this excerpt from Teesta Setalvad’s biography. The implication is that perhaps the presence of the most successful and prosperous Muslim groups also made “the anti-Muslim sentiment in Gujarat… far cruder in the state than anywhere else in the country.”

    https://scroll.in/article/827288/teesta-setalvad-has-written-her-memoir-and-its-every-bit-as-chilling-as-you-might-imagine

    There are always reasons that make one place different from others – in this case in a negative way.

  3. Vikram Says:

    The interesting question for me here is what the psychological impact of these massive Chinese investments in Pakistan will be. Will it be a redux of the British investment, where in elites now try to corner a pie of these new investments through the state ? Or will it lead to a boom in entrepreneurship, somewhat like venture capital investments have done for the tech sector in India, China and Vietnam ?

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