FOREWORD. Dr. Kaiser Bengali Consultant for Economic Affairs & Head, Chief Minister s Policy Reform Unit Government of Balochistan

ii China-Pakistan Economic Corridor The Route Controversy FOREWORD The China-Pakistan Economic Corridor is the most important mega project in Pa...
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China-Pakistan Economic Corridor

The Route Controversy

FOREWORD

The China-Pakistan Economic Corridor is the most important mega project in Pakistan after the Indus Water Works initiated in the 1960s. There is no doubt that the Economic Corridor will be hugely beneficial to the people of Pakistan and China. The route that the Corridor will pass through in Pakistan had, however, become a subject of controversy, fuelled largely by lack of information. In mid-April, the Hon. Chief Minister Dr. Abdul Malik Baloch asked CMPRU for a report on the Corridor issue. The Report helped frame Balochistan government’s position on the subject and the May 28, 2915 APC on the subject arrived at a unanimously approved decision and set all controversy at rest. This publication is based on the said report and is aimed at facilitating an informed discussion by the public at large and proceedings of the relevant parliamentary committee and working groups.

Dr. Kaiser Bengali Consultant for Economic Affairs & Head, Chief Minister’s Policy Reform Unit Government of Balochistan May 2015

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The Team Dr. Kaiser Bengali Dr. Ishaque Baloch Badar-ud-din Khan Mahmood Tareen Mehnaz Hafeez Saeed Yousuf

Graphics and Designing Muhammad Rizwanullah Khan

Printed at The Times Press - Karachi

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“Lack of access to markets and to employment, educational, health and socialization opportunities in some areas defines as regional inequality and, in most cases, constitutes the basis of disaffection and insurgency, creating conditions for higher security costs.” “Security considerations are important, of course; however, bombardment of disaffected areas with jobs is a better option than bombardment with drones.”

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China-Pakistan Economic Corridor The Route Controversy

INTRODUCTION Plans for Pakistan-China economic cooperation in strategic spheres appears to have developed in the mid-2000s, with the proposal to create an Economic Corridor from Gwadar in Balochistan to Kashgar in the Western Chinese province of Sinkiang. Two necessary conditions of the Corridor were – and are – development of the port at Gwadar and creating surface transport connectivity between Gwadar and Kashgar. They are absolutely necessary because without the port and without the transport connectivity, no other economic activity with respect to the Corridor can be possible. The main substance of the Corridor is the Gwadar port and the Gwadar-Kashgar highway; the rest is icing on the cake. One of the first overt manifestations of this strategic cooperation is the 84-slide presentation in 2006 to the then leadership in Pakistan by the then Deputy Chairman of the Planning Commission, Government of Pakistan. proposed route of the Economic Corridor.

Slide 29 shows a map of the

The map, which carries the Planning

Commission logo, can be considered the first official identification of the route planned for the Economic Corridor. The route on the map corresponds with the route now being referred to by the federal government as the ‘the Central Route’1. The Central Route is stipulated to pass through: 

Gwadar-Turbat-Panjgur-Khuzdar2-Ratodero-Kashmore-Rajanpur-Dera Ghazi Khan-Dera Ismail Khan-Bannu-Kohat-Peshawar-Hasanabdal-and onwards.

1

The map carries the NHA (National Highway Authority) logo.

2

Gwadar to Khuzdar is also part of the proposed M-8 and an earlier version routes the motorway from Turbat to Khuzdar via Hoshab and Awaran

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Presentation to the Hon. President and Hon. Prime Minister ON

President’s Initiative for Trade, Energy, Transport and Industrial Corridor: Follow up of President’s China Visit Engr. Dr. M. Akram Sheikh, H.I. Minister of State / Deputy Chairman, Planning Commission Government of Pakistan 28 July, 2006

Development of Energy, Trade, Transport and Industrial Corridor

Khunjrab Pass

CHINA

Tarbela Dam

HUBS

CORRIDORS

JALALABAD

Peshawar Torkham

KASHMIR

SEZ/SIZ/ EPZ

Islamabad Rawalpindi

DISPUTED TERRITORY

KOHAT Mangla Dam

D.I. Khan Chaman

Qila Saifullah

Faisala Shorkotbad

Quetta Taftan

D.G. Khan

Lakpass Nok Kundi

Lahore Wagah Okara

Multan Mian Channu Bahawalpur

IRAN

Rahim Yar Khan

Sukkur Ratodero

Rohri

Turbat

Hala Hyderabad

Gwadar Hub Karachi

Kotri

ARABIAN SEA

China-Pakistan Economic Corridor

Major new Industrial Estates / Clusters will be set up along the new Trade Corridors

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Subsequently, more than one version of the Corridor route has emerged. A second route, referred to by the federal government as the ‘Eastern Route’, is stipulated to pass through: 

Gwadar-Turbat-Panjgur-Khuzdar-Ratodero-Kashmore-Rajanpur-Dera Ghazi Khan-Multan-Faisalabad-Pindi Bhatian-Rawalpindi-Hasanabdaland onwards.

Following the emergence of the ‘Eastern Route’ in the media, demand for a third route, referred to as the ‘Western Route’ has been put forth, particularly from north-eastern Balochistan. This route is proposed to pass through: 

Gwadar-Turbat-Panjgur-Khuzdar-Kalat-Quetta-Zhob-Dera Ismail KhanBannu-Kohat-Peshawar-Hasanabdal-and onwards.

THE ROUTE CONTROVERSY The route that the Economic Corridor is proposed to take within Pakistan has now become controversial.

And the controversy appears to have been fuelled by initial

silence and subsequent contradictory statements. Three main strands can be identified with regard to federal government attempt at explanations. 

Initially, the position the federal government took was that there was “no change” in the route, but failed to specify what the government presumed was the original route. This position was maintained for most of the year since the controversy broke.



Subsequently, in 2015, the federal government took the position that there were three routes and that all the routes would be built. This explanation cannot be accepted as plausible; as the resources to build all three routes are not available and China would certainly not allocate resources to pander to political disagreements in Pakistan.



One variant, among others, of the above explanation is that the three routes would be built in stages and that the Central and Western routes

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would also be built at a later stage. Clearly, there can be no certainty as to when that later stage will arrive. And if the routes are to be built in stages, a clear rationale needs to be provided for the route that is to be built first. 

The latest explanation – an acknowledgement that the federal government is prioritizing the ‘Eastern Route’ – is that it is cheaper and faster to route the Corridor through areas with pre-existing road connections.

This

implies that the Corridor will be routed through areas of the country that are already relatively developed. However, if the reasoning for the Corridor route is to be based on the availability of pre-existing roads and facilities, then the logical route appears to be Karachi-Lahore-Rawalpindi-Hasanabdal-Khunjrab; with two already developed ports (Karachi and Bin Qasim), two national highways (N-5 and N-55) and several economic centres along the way.

In the

event, the entire rationale and justification for development of Gwadar port disappears, as far as the China-Pakistan Economic Corridor is concerned. 

Two possible conclusions emerge from the perusal of the Corridor case. One, despite denials and statements to the contrary, the route has been changed to pass through Central Punjab. And two, given that it is now claimed that there are three routes, the priority has changed.

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What does the PSDP say? Perusal of the federal Public Sector Development Programme (PSDP) 2014-15 adopted in June 2014 is indicative of the government’s priority with respect to the corridor route. There are five Communications Division schemes (Serial Nos. 100-104) under the caption China-Pak Economic Corridor (CPEC) at a total cost of Rs. 49 billion and includes the following: 1. Karachi-Lahore Motorway 2. Lahore-Abdul Hakeem-Khanewal section 3. Multan-Sukkur section 4. Sukkur-Hyderabad section 5. Railkot-Havelian-Islamabad section Although, all the above schemes are listed as “Un-Approved”, their very inclusion is indicative of the possibility that the Eastern Route was decided upon as far back as early 2014. However, the PSDP 2014-15 also includes the following On-going schemes as follows: 1. Gwadar-Turbat-Hoshab section 2. Hoshab-Nag-Besima-Surab section 3. Kalat-Quetta-Chaman section Additionally, external financing has also been arranged for the Zhob-Dera Ismail Khan section.

SOME BASIC PERCEPTS OF NEW ROAD CONSTRUCTION There are some basic guidelines for new road construction, i.e., distance, cost – and political economy. Distance: 

A new route is justified if it reduces the distance, subject to physical features, i.e., a water body, mountain, etc. In the present case, this principle would justify the ‘shortest possible route’, with no weight accorded to the economics of the area in between; and can be called a transit passageway.



However, if the objective is to boost economic activity along the route, ‘shortest possible distance’ is redefined as ‘shortest feasible distance’ and can be called an economic passageway China-Pakistan Economic Corridor

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Cost: Cost is determined by: 

Opportunity cost of land: Land acquisition costs are likely to be higher, if the land to be acquired for the road is productive (for example, in terms of agricultural produce) and there is likely to be loss of output from conversion of land to the right of way. Conversely, costs are likely to be lower in the case of barren, unproductive land, as loss of output from conversion to right of way is likely to be minimal.



Dislocation costs (social and monetary) are likely to be higher in the former, as productive land is invariably more populated and a greater number of households and businesses would require to be compensated.



Nature of terrain: The cost of constructing the road is likely to be lower if the road runs through plains and higher if there is extensive land leveling to be carried out and numerous bridges, culverts, tunnels, etc., are to be constructed.



Pre-existence of part of the road: Overall costs are likely to be lower if the road alignment includes a pre-existing road, as the costs for that section would be saved. However, the width, quality, etc., of the pre-existing road matters. If the road is not of the width and/or quality required to carry heavy traffic, additional lanes will need to be built and the pre-existing sections will need to be re-laid.



Environmental considerations: Costs are likely to be higher if a diversion to the road alignment is needed on account of the presence of a protected area, e.g., a national park.



Military considerations: Costs are likely to be higher if a diversion to the road alignment is needed on account of the presence of a military area.



Security conditions: If the area is insecure and subject to lawlessness and criminal/insurgent attacks, the costs of providing security during construction and, subsequently, for traffic to move will increase the cost of the project.

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Political economy: 

A road creates connectivity and opens up markets for local produce and provides access for education, medical care and socialization. As such, the route that a road alignment takes confers benefits upon the people of the area to the exclusion of those away from the alignment. Pulls and pressures with regard to the alignment are, therefore, understandable.



Lack of access to markets and to employment, educational, health and socialization opportunities in some areas defines as regional inequality and, in most cases, constitutes the basis of disaffection and insurgency; creating conditions for higher security costs.

Comparative opportunity cost Comparative opportunity cost of the three routes is presented in terms of three variables: population density, total area under cultivation, and total production of four major crops (wheat, rice, cotton and sugar-cane). Larger area under cultivation and higher output is an indication of extensive economic activity. Higher Population density is an indication of higher economic potential of the area. Comparative examination of the above variables shows that average population density is highest in districts along the Eastern Route (264) and lowest in districts along the Western Route (98). Area under cultivation is highest in districts along the Eastern Route (10.3 million hectares) and lowest in districts along the Western Route (2.9 million hectares). Total production of the four above stated crops is the highest in districts along the Eastern Route (30.9 million tonnes) and lowest in districts along the Western Route (7.4 million tonnes). Central Route Average population density Total area under cultivation (000 ha) Production of 4 major crops (000 tonnes)

156 5,829 13,754

Eastern Route 264 10,322 30,928

Western Route 98 2,933 7,430

The above comparative statistics are indicative of higher value of land and higher population densities – implying higher cost of land acquisition and higher dislocation compensation cost – with respect to the Eastern Route relative to the Western Route and even the Central Route.

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COMPARATIVE ANALYSIS A comparative analysis of the three routes with respect to the above precepts indicates that: Central Route  The Central Route is likely to be longer than the Western Route, but shorter than the Eastern Route.

Eastern Route

Western Route

 The Eastern Route is likely to be  The Western Route is likely to longer than the Central Route be shorter than the Central and the Eastern Route. Route and the Eastern Route.

 The alignment will open up  Except for backward areas of economic opportunities for a vast south and central Balochistan, swathe of abjectly backward regions northern Sindh and southern of the country. Punjab, more than half the distance will pass through relatively developed areas of Central Punjab.

 The alignment will open up economic opportunities for a vast swathe of abjectly backward regions of the country.

 The area covered by the alignment is relatively unproductive and population density is low. The cost of land acquisition and population dislocation compensation is likely to be lower.

 The area covered by the alignment is relatively unproductive and population density is low. The cost of land acquisition and population dislocation compensation is likely to be lower.

 The area from Multan to Rawalpindi is highly productive and densely populated. The cost of land acquisition and population dislocation compensation is likely to be higher.

 The terrain along the alignment is  The alignment will cross the  The terrain along the alignment arid and hilly and would entail higher River Indus between Dera Ghazi is arid and hilly and would entail land leveling costs. The alignment Khan and Multan and require a higher land leveling costs. The will cross the River Indus between major bridge. The area is alignment will cross the River Peshawar and Hasanabdal and will traversed by a number of Indus between Peshawar and require a major bridge. irrigation canals and will require Hasanabdal and will require a a number of bridges. major bridge.  Except for the Gwadar-Ratodero section, a road pre-exists, but is narrow and low quality, and will need to be re-laid in its entirety.

 Except for the Gwadar-Ratodero  Except for the Gwadar-Khuzdar section, a road pre-exists, but section, a road pre-exists, but is most sections will need to be narrow and low quality, and will widened and re-laid to cater to need to be re-laid in its entirety. the heavy traffic – in terms of volume and load.

 The alignment is not likely to require  The alignment will cross the  The alignment is not likely to diversion on account of Margalla Hills – a national park – require diversion on account of environmental or military reasons. and a tunnel underneath is environmental or military being considered. Recourse to reasons. the courts on environmental grounds is certain and likely to delay the project.  Security costs will be higher on account of insurgencies in Balochistan and FATA.

 The Ratodero-Hasanabdal section is relatively secure; as such, the alignment is likely to entail lower security costs.

 Security costs will be higher on account of insurgencies in Balochistan and FATA.

 The alignment passes through all the provinces of Pakistan and likely to command broad political support.

 The alignment completely bypasses the province of Khyber-Pakhtunkhwa and is likely to emerge as a new source of inter-provincial discord.

 The alignment passes through only two provinces of Pakistan.

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CONCLUSION & RECOMMENDATION The Western Route is likely to be the shortest and least cost in terms of opportunity cost and dislocation compensation cost. By comparison, the Eastern Route is likely to be the most expensive in terms of land acquisition and dislocation compensation. Arguments that pre-existing sections therein are likely to save time and costs are not tenable, as most sections will have to be widened and re-laid to cater to the volume and load of the traffic that is likely to be generated. The Eastern Route is also likely to be politically divisive and emerge as a source of political instability and carries the danger of imperiling the entire Corridor plan.

If

selection of the Eastern Route is made on grounds that the ‘Western’ and ‘Central’ routes carry security risks, then security considerations today will be traded for interprovincial discord and political instability in the future.

Security considerations are

important, of course; however, bombardment of disaffected areas with jobs is a better option than bombardment with drones. The importance of the project demands that the controversy be resolved at the earliest and a compromise solution that meets the aspirations of all the provinces is called for. One way forward could be to adopt: 1. The Western Route, with two loops: -

Dera Ismail Khan-Sarghoda-Lahore to connect with the Lahore-Karachi Motorway.

-

Khuzdar-Ratodero-Sukkur to connect with the LahoreKarachi Motorway.

A combination of routes, traversing all the provinces of the country can lead to a highway of national integration and stability.

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Postscript The APC decision The All Party Conference of May 28, 2015 unanimously decided to adopt a modified Western Route that would pass through: 

Gwadar-Turbat-Hoshab-Panjgur-Besima-Kalat-Quetta-Qila Saifullah-Zhob-Dera Ismail Khan-Mianwali-Attock-Hasanabdal-and onwards

This route is superior to all other options in terms of opportunity cost of land and dislocation compensation costs, as shown below. Economics of alternative routes

Cultivated Area (000 ha) Production** (000 tonnes) Population Density

Central Route

Eastern Route

Western Route

Western2 Route*

156

264

98

76

5,829

10,322

2,938

1,838

13,754

30,928

7,430

1,485

* Route decided at the APC ** Production of wheat, rice, sugar-cane and cotton

The Western2 Route passes through some of the

most inaccessible and

underdeveloped areas of the country and is likely to prove critical to the development of the area, particularly in terms of opening up to market centres, and generation of employment opportunities.

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