In a recent study, the Asian Development Bank has observed that the China-Pakistan Economic Corridor could pull off a number of economic objectives if implemented successfully. The report not only rubbishes US apprehensions about the project pushing Pakistan “deeper into an already stifling debt burden, fostering corruption and repatriating jobs and profits to China” but also highlights its benefits for the people and economy of Pakistan.

The ADB study, titled “Economic Corridor Development in Pakistan: Concept, Framework, and Case Studies,” cautions that the CPEC alone could not improve Pakistan’s economy and it would need to be supported by structural reforms to unleash its true potential. It suggested four policy recommendations to fully benefit from the mega project, including undertaking structural reforms to facilitate private sector development, broadening the tax base to make use of the country’s tax revenue potential and improving fairness of tax collection. It also proposed utilising transport infrastructure under the CPEC to maximise investment return, turning it into a multilateral initiative and expediting development of nine special economic zones planned along its routes.

Earlier, the annual report for 2020-21 on investment security of China’s Belt and Road construction said reforms by Pakistan had placed the country among top 10 economies of the world. The report by a think tank noted that Pakistan’s economic security had increased by 220pc in 2019 compared with 2010. However, data for Chinese investments in the 138 countries of the Belt and Road Initiative shows that overall investments in the BRI in 2020 were about US$47 billion, a decline of 54pc to investments in 2019 and about US$78 billion less than in the peak year of BRI investments 2015. Possibly due to the COVID-19 pandemic, BRI investments were at its slowest pace since China’s overseas investment strategy was coined “Belt and Road Initiative” in 2013.

According to data released by the Chinese Ministry of Commerce covering the period from January to November 2020, Chinese enterprises invested about US$17 billion in non-financial direct investments in countries “along the Belt and Road”. Compared to non-BRI countries, the decline of Chinese investments was more moderate in BRI countries: The decline of Chinese investments in BRI countries was about 54pc, whereas countries that have not signed MoUs to work with China under the BRI framework saw a decline of 70pc of Chinese investments.

Asia continued to receive the largest share of BRI investments (about 54pc in 2020), while Africa received about 27pc of BRI investments. Investments into European BRI countries were least affected by COVID-19, declining by 36pc only. In contrast, investments into African regions (Sub-Saharan Africa, Arab and Middle East) were most heavily impacted by COVID-19 and declined by 69pc and 66pc respectively from 2019 to 2020.

The countries that received the most investments were Vietnam, Indonesia, Pakistan and Chile. Particularly Vietnam saw a strong increase of investments – an increase of over 200pc compared to 2019, possibly driven by near-shoring to avoid American sanctions. Other BRI countries that saw increases in investments despite the COVID-19 pandemic included Poland, Bulgaria, Serbia, Zimbabwe, Zambia and Chile, as well as Thailand. Energy investments constitute the majority of all large BRI investments volume (energy investments also constitute the largest amount of deals). In 2020, energy investments were about US$20 billion. This compares to more than US$40 billion investments in 2016 and 2017. In 2020, the majority of energy investments went into hydro power (35pc), followed by coal (27pc) and solar (23pc). Accordingly, investments into renewable energies constituted the majority of energy investments in the BRI in 2020. The trend of increasing shares of renewable energy investments in the BRI has accelerated since 2017, when only 35pc of BRI investments went to hydro and solar and wind projects. By 2020, 56pc of BRI investments went into these sectors – a strong relative increase. Within the renewable energy sector, solar, wind and hydro all increased their relative share of the total energy investments.

Coal investments have steadily declined from their peak in 2015. At the same time, however, coal investments have seen a relative resurgence in 2020, moving from 15pc of coal-related investments in 2018 to 27pc in 2020. Pakistan received the most energy investments from 2013 to 2020, followed by the Russian Federation and Indonesia. Pakistan is both the largest recipient of coal-related investments and also the largest recipient of investments in hydropower. Overall, Pakistan attracted more than 50pc of renewable energy investments (47pc of which in hydropower), while Russia and Indonesia received predominantly fossil fuel related energy investments.

China invested across all countries with investments including road construction in Pakistan (e.g. Karakoram Highway connecting China and Pakistan all the way to Pakistan’s Gwadar Port). In 2020 investments in road infrastructure decreased by close to 70pc to about US$4 billion. Pakistan is also one of the largest recipients of investments in port infrastructure, such as the Gwadar port operated by China Overseas Port Holding Company, which is a strategically important and also contested investment for China.

The latest data shows that the CPEC slowed down in recent years because of the pandemic, which also affected the BRI in the rest of the countries. However, Pakistan will have to reform its economy and tax system to make the most of the project.