China/Pakistan Economic Corridor

© The Author 2015. Published by Oxford University Press. All rights reserved doi: 10.1093/chinesejil/jmv045; Advance Access publication 17 November 2015 ...... China/Pakistan Economic Corridor: A Critical National and International Law Policy Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 Based Perspective

Asif H. Qureshi*

Abstract

This paper focuses on the China/Pakistan Economic Corridor (CPEC) arrangement between Pakistan and China from a legal and policy standpoint. It takes into account the Chinese Silk Road Economic Belt and 21st Century Maritime Silk Road Vision under which CPEC is set. The paper highlights the relevance of the application of both Pakistani law and international law to CPEC. In particular the paper focuses on some fundamental legal questions, for example the very legal character of CPEC. The discussion on the fundamental legal questions is followed by the various streams of legal frameworks that have a bearing on CPEC including the Pakistani Constitution and world trade and international investment norms. The purpose of this paper is to provide a framework of issues raised by CPEC. It is not intended as an exhaustive analysis of all the issues raised.

I. Introduction1 1. The China/Pakistan Economic Corridor (CPEC) is part of the greater Chinese Silk Road Economic Belt and 21st Century Maritime Silk Road Vision (hereinafter referred to as BRP), ﬁrst alluded to by the Chinese President XI Jinping, when visiting Central

∗ Law School, Korea University, Seoul, Korea. I am grateful to Professor Wang Guiguo for drawing my attention to this topic. I am also grateful to Yoon-Kyung Lee for her assistance in this article. This paper elaborates on a brief talk delivered in July 2015 in Hong Kong at a conference on One Belt One Road under the auspices of the Hong Kong WTO Research Institute. 1 See Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road 2015/03/28; Issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’sRe- public of China, with State Council authorization (March 2015), http://en.ndrc.gov.cn/ newsrelease/201503/t20150330_669367.html (Last visited 14 October 2015).

...... 14 Chinese Journal of International Law (2015), 777–799 778 Chinese JIL (2015)

Asia and Southeast Asia in 2013.2 The blueprint for this Chinese vision isto be found in the Vision and Actions March 2015 paper, prepared by the Chinese government. 2. CPEC is one of the premier Chinese initiatives under BRP, involving a Chinese investment of some $45 billion into Pakistan, mainly through Chinese State and non- State actors in China. This investment seems to be tied to the use of Chinese investors3 and labour. Briefly, CPEC is a multifaceted development plan,4 encompassing a Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 number of different projects. These include mainly the following: (1) a connectivity component, which encompasses building a 3000 kilometre road,5 railway and oil pipeline from Kashghar, in Western China, to a Pakistani deep sea port in Gwadar, including the building of an airport and deep sea port; (2) building an information network infrastructure; (3) energy co-operation for the demands of energy in Pakistan; (4) in- dustry and industrial parks; and (5) agricultural development. In these projects the connectivity and related projects are of importance to China, although they serve Pakistani intereststoo; whereasthe investment in the energysector is of primary interest to Pakistan. Thus, the projects have, to some extent, a mutuality of interest for the two countries. The implementation of CPEC, which has already started, is straddled in different phases until 2030. CPEC was launched in 2013, through the signing of a Memorandum of Understanding between China and Pakistan. It is generally agreed that if all the expectations from this development project are actually realised as intended the injection of investment in the Pakistani infrastructure will bring significant benefits to Pakistan. 3. CPEC has been accompanied by much euphoria in Pakistan, given the amount of investment in Pakistani infrastructure that it involves, and the evidence of the long- standing fraternal relationship between Pakistan and China that it symbolises. Such euphoria however should not detract from a clinical analysis of CPEC. CPEC has also prompted comparative assessments. For example, the amount of Chinese investment has been contrasted with the amount and quality of US investment in Pakistan, over

2 Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road 2015/03/28 (March 2015), above n.1. 3 See Khaleeq Kiani, “Chinese firmsto get contracts for two CPEC projects”, Dawn (13 August 2015), referring to Article-II of the CPEC Framework Agreement which is said to give only Chinese firms the opportunity to bid for China/Pakistan Economic Corridor projects. http://www.dawn.com/news/1200203 (Last visited 14 October 2015). 4 See for a comprehensive description of the project: Ministry of Planning, Develop- ment & Reform, Government of Pakistan, Ascending the Saga of National Progress: China/Pak Economic Corridor (Pakistan Planning Commission, Ministry of Plan- ning, 2015). Sent as a PDF file to the author by Dr Zahir Shah, Project Director/ CPEC Coordinator, Islamabad, Pakistan. 5 Note: In some sources the length is described as 2000 and in others it is described as 3000 kilometres. Qureshi, China Pakistan Economic Corridor 779 the many years of its involvement since 2002.6 Such comparisons, however, need to be understood against the background of the entire Pakistan/US and Pakistan/China relationship. Furthermore, in terms of the domestic Pakistani internal politics, there is some level of political capitalisation of the project—for example, the Minister of Planning in his description of CPEC7 pointedly attributes the CPEC initiative to the current government. It is to be noted also that there is a coincidence of the Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 timing of a number of energy projects completing under CPEC, just before the next Pakistani elections. Such claims need to be evaluated against the background of the initiatives taken by the previous government and completion dates considered in the light of the particular exigencies of the projects themselves. CPEC has also managed to fuel some rancourover the distributionof its benefits within the provinces in Pakistan amongst opposition parties. Such rancour needs to be understood within the context of domestic Pakistani politics and internal tensions. 4. On the other hand, the essential aims and objectives of China’sBRP8 can be summarised as follows: • To promote connectivity in all its forms in the Asian, European and African Continents; • To create a multipolar world; • To reinforce free trade and investment and an open world economy; • To facilitate economic policy coordination and regional cooperation; • To realise diversified, independent, balanced and sustainable development; • To facilitate free flow of economic factors; • To facilitate common security. In pursuance of these aims and objectives China intends to engage with interested countries to create the infrastructure for: • Policy co-ordination; • Connectivity (rail, road, air and IT) facilitation, including energy connectivity; • Communications connectivity; • Unhindered trade and investment; • Financial co-operation and integration through institution building within Asia; • People-to-people bond.

6 $31 billion since 2002, mostly on security-related issues in Pakistan (see for example Reuters, (April 2015). (http://www.reuters.com/article/2015/04/20/us-pakistan- china-idUSKBN0NA12T20150420 ) (last visited July 2015). 7 Ministryof Planning, Development & Reform, Government of Pakistan, “Ascending the Saga of National Progress: China/Pak Economic Corridor” (2015), above n.4. 8 Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road, above n.1. 780 Chinese JIL (2015)

5. This paperoutlines from a legal perspective some of the national and international issues CPEC mightpose. It is not the intentionof the author towrite from a Pakistani or Chinese perspective. Thus, no claims either on the basis of Pakistani sovereignty or the imposition of conditionality by China as such are advanced here. Rather the object of this exercise isto ﬂesh-out issuesthat arise from CPEC that need to be addressed in both

China and Pakistan. It is not however intended as an exhaustive analysis of the issues Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 highlighted. This is because some of the original sources necessary for an exhaustive analysis are not readily available in the public domain. Some of the observations therefore are based on inferences. 6.Inthe ﬁrstinstance thepaperfocusses onsomefundamental legal questionsunder- lying CPEC against the background of BRP. Second, the paper highlights the general problems that have been identiﬁed since the announcement of CPEC, and the start of its implementation. Third, the paper explores the different perspectives from which CPEC can and should be considered, namely economic, security and environmental. Finally, the legal issues at the national and international levels are highlighted, against the background of concerns that have been expressed with respect to CPEC.

II. Fundamental legal questions relating to the China/Pakistan Economic Corridor and Chinese Silk Road Economic Belt and 21st Century Maritime Silk Road Vision 7. From the perspective of International Economic Law, this arrangement raises a number of fundamental questions. First and foremost the Chinese Vision is a development strategy intended as a “new model of international cooperation and global governance”.9 As such, the nature of this new development model calls for some analysis. Second, the set of principles that govern both the BRP and CPEC are important and serve to shed further light on the nature of the Chinese Vision. Finally the legal nature of the underlying apparatus within which CPEC is set out is signiﬁcant in informing the legal rights and obligations of the parties concerned. 8. First, the nature of the Chinese development strategy in the Chinese Vision Paper needs to be set against the background of the evolution of conceptions of development. This has been described elsewhere as follows:10 Historically in international economic relations the notion of development has been associated with economic development. Thus, developing countries have been preoccupied with such issues as preferential treatment in trade, stable com- modity prices, nationalisation, access to capital and good governance in

9 Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road, above n.1. 10 See Asif H Qureshi & Andreas Ziegler, International Economic Law (Third Edition: 2011), 616. Footnotes omitted. Qureshi, China Pakistan Economic Corridor 781

international economic institutions. However, over time conceptions of development have evolved and indeed differ […] from the grips of colonialism to the lib- erating movementof the New International Economic Order; from thatreaction, to the more all-encompassing notion of sustainable development. Today there is increasing emphasis on poverty elimination at the practical level; and the realisa-

tion of fundamental human freedoms and international distributive justice at the Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 ideological level. Thus there has been a movement away from the historical eco- nomicfocusto amore holistic approach todevelopment.Theextent of this movement […] depends as Daniel Bradlow very aptly put it “to a large extent on one’s view of the relationship between economic growth and the social (including human rights), environmental, political, and cultural aspects of the development process.” Moreover, the means to achieve development whether in the economic or holistic sense are not necessarily universally agreed. 9. The Chinese Vision echoes the historical Silk Road used for trade in Eurasia11 and is essentially a modern day equivalent “connectivity” concept viz., roads, railways, IT and energy transportation—that in the process incorporates a strategy for a level of regional development, as well as literallyopening doors forconnecting Chinawith the rest of the relevant trading world market. The essential driver for development therefore is the connectivity function intended to facilitate trade, investment and an open market. As such certainly the Chinese approach is a new model of international economic cooperation that has a distinctive functional connectivity basis to it. Is it a conception of development, and if so a novel one? Or is it a modus operandi for the delivery/negotiation of a mutual development package? Or is it an admixture of both a conception of development and a delivery/negotiation mechanism for a development package? 10. Certainly there is no overarching conception of development. It is not intended to be so. Development in this Chinese Vision is closely associated with the function of connectivity. It is not directly an end in itself. This conclusion is reinforced by the absence of anysigniﬁcant conditions foreseen under which the project isto excel. More- over, in this conception of development the dichotomy between donor and recipient is at some level blurred. In sum, this functionally-oriented conception of development is closer to economic development than the “social (including human rights), environmental, political, and cultural aspects of the development process”. However, these latter non-economic concerns seem to some extent at any rate to be alluded to in the Chinese Vision Paper, if not incorporated. They nevertheless are not set out as ends in themselves but serve mainly to ensure and cement the functioning of the connectivity project. 11. Moreover, the development strategy is very much Statist—focusing on the State and leaving it to the State to handle the distribution of the fruits of development. It is, in

11 Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road, above n.1. 782 Chinese JIL (2015) short, neutral on such questions as distributive justice within the State itself. On the other hand, the delivery of the development is project based, functionally associated with the connectivity theme, and reciprocally premised on mutual beneﬁtas between “donor and recipient”. In a sense the conception of development and the modus and conditions of delivery are conﬂated. Such an embryonic conception of development constructed out of pragmatism begs the question now whether there is Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 scope for nurturing a more developed conception of development. 12. Second, what are the basic principles that underpin the Chinese Vision? These may be gleaned from the Chinese Vision Paper as follows:

• Principles set out in the UN Charter; • Five Principles of Peaceful Coexistence that inform Chinese foreign policy viz., mutual respect for each other’s sovereignty and territorial integrity, mutual non-aggression, mutual non-interference in each other’s internal affairs, equality and mutual beneﬁt, and peaceful co-existence; • Integrate the development strategies of the countries along the Belt and Road; • Market rules; • Mutual beneﬁt—reciprocity; • International norms; • Environmental and climate change concerns; • Corporate social responsibility in protecting local biodiversity and eco-environment.

13. This set of principles is minimal, in particular in its articulation of a set of development goals, which is descriptive more of the parameters within which the arrangement is to proceed and be cemented, as opposed to articulating a positive vision of a development strategy as such. Thus, the main body of the principles are “laissez fair” viz., sovereign equality, reciprocity and “market rules”. The assertion of the application of international norms, i.e., non-departure from them, reinforces the non-doctrinal development characteristics of the framework. Nevertheless the principles are indeed an important starting point demonstrating an innovative consciousness about a development strategy. Moreover, the latitude in the set of principles allows fora particular connectivity project to be contextualised to the specifics of a project and country. Hopefully they will be developed further. 14. The nature of the set of principles in the Vision Paper begs the question whether it is ever possible for a donor to not attach conditions, in particular where the arrangement has a distinctive mutuality of interest about it. The ambivalence in the Vision Paper in terms of arranging a mutually agreed set of conditions does need to be addressed. For example the question of whether a connectivity project suited to China can result in an equitable distribution of benefits within the different provinces of Pakistan as required under the Pakistan constitution is a complex question, which is not necessarily answered by a non-conditionality approach to development funding. In fact, such a non-conditionality approach could be the harbinger of future problems Qureshi, China Pakistan Economic Corridor 783 originating within Pakistan but impacting on the continued connectivityof the systems in question. To reiterate, is it really possible for a donor to turn a blind eye to, for example,12 the use of child labour in the building of a road intended to serve it; the violation of international environmental and human rights norms in the process of constructing the road; the imposition under national law of the death penalty for a minor traffic offense; and the prohibition of female drivers? Conversely, would it not Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 be appropriate for Pakistan to ensure that connectivity facilities are only used for non-military purposes? Could not interfering in the internal affairs of another State and/or relying on the State’s capacity to implement internationally agreed norms amount to turning a blind eye? Of course non-interference in the domestic affairs of another State has much to commend it as a rule. In particular it gives ownership of a project where it should be and results in an allocation of responsibility where it should be. However, mutually agreeing to a set of relevant conditions and, more to the point, addressing the question of what those conditions should be need not be equated with interfering in the domestic affairs of another State. 15. Certainly there are investment and trade agreements which do not have any form of conditionality. Equally, there are such agreements which do. However, this should not have a bearing on the projects under the Chinese Vision which should set a bench mark of its own in this unique endeavour that has been undertaken. Moreover, the agreements have a general character focusing on investment and trade generally whereas connectivity projects are very specific and are in the nature of projects rather than normative frameworks for investment and trade flows as such. Furthermore “conditionality” does not have to be an imposition, as has been stated already—there can be, and there needs to be, joint ownership of it as there is mutual interest in the disciplines. 16. The Chinese aversion to conditionality may come from its perception of the nature and manner of the imposition of conditionality in terms of the IMF and World Bank; including its own sense of its sovereign internal affairs. Here it should be noted that the nature/content of conditionality can be different, as indeed the manner of its implementation. Thus, a knee-jerk aversion to the formulation of conditionality through mutual agreement between both countries, is not a rational response. This is because it responds to the question whether there should or should not be in- trusive/political conditionality attached to the project. The relevant question is really about what the appropriate conditions are under the circumstances to be attached. This question needs to be posited and addressed to elicit the conditions appropriate for both countries under the particular circumstances of connectivity projects—otherwise there could be a lacuna which in the long run could be problematic. As an addendum here, it needsto be added that highlighting the need for the question to be posited is not necessarily to argue for the imposition of any particular form of conditionality.

12 It is not being suggested that in Pakistan there are necessarily such problems. These are merely examples to illustrate a point. 784 Chinese JIL (2015)

17. Be thatas itmay, are these set of parameters in anysense significantorlegally binding? The principles are aspirational and not set out as conditions for the development package. Thus, fundamentally market rules do not apply to the awarding of contracts under certain projects—which seem to be confined to Chinese bidders alone. Moreover, the Vision Paper is neither part of an agreement, nor does it comprise a code as such. However, the Vision Paper is set out on the Chinese foreign ministry website, and has the weight of Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 the Chinese State. It does set out a statement of intent, purpose and a broad set of principles and modus operandi. As such, could it inform the relationshipsthat will form or have formed between China and different countries—whether or not those relationships are set in a legally binding template? The principles are certainly important at the time of negotiations, and may have some significance in shedding light on the nature of any subsequent arrangement, including its implementation. The Vision Paper provides a basis for evaluating the extent to which subsequent arrangements reflect the principles set out in the Vision Paper, including the manner in which CPEC has developed. 18. Finally, whilst the principles set out in the Vision Paper are minimalist they nevertheless touch to the extent that they do upon some of the right buttons that have gained international currency, albeit to different degrees—for example, the environment andcorporatesocial responsibility. Indeed, there is even mentionof sustainable development. The problem with these laudable objectives is that they could be perceived as being self-serving. The critical question is do theyserve to displace perceptions of the initiative in the Chinese Vision Paper as a package for Chinese hegemonic intentions? Moreover, can adequate and effective safeguards, for example for the protection of the environment and human rights, be so incorporated and managed by those who have a vested interest in the connectivity endeavour as an imperative? The reality is that connectivity for boosting international trade and investment is an international issue that concerns all nations. A universally agreed-upon code for connectivity at a multilateral level would serve much to take this innovative development model a leap further in the right direction. Alternatively, clearly incorporating and effectively implementing internationally agreed-upon “development related standards” into the Vision Paper and the mutual agreements could be another option. 19. In sum, there is room for the further development of the principles within which this new model of cooperation is set. The underlying premise of non-interference does not sit well with the declared objectives of integrating development strategies and policy coordination. Both “integration” and “policy coordination” call for some set of mutually agreed rules. Moreover, the mutuality of benefits that in a sense performs the cementing function for drawing the parties to agree will not, however, necessarily keep the connections locked on, in the event of a major change in policy and disagree- ment. A set of principlesthat clearly incorporate internationallyagreed-upon minimum standards—for example on the environment, human rights and development objectives, including effective mechanisms for their implementation—would go a long way toward allaying fears of hegemonic intentions. Qureshi, China Pakistan Economic Corridor 785

20. Finally, focussing on the legal nature of the CPEC arrangement in Pakistan is difficult. This is because information with respect to it, apart from government hype, is difficult to ascertain. The department in the Ministry of Planning, Develop- ment & Reform charged with CPEC has limited original materials on its website13 and requests for all the relevant arrangements as between China and Pakistan have been difficult to establish. Indeed, the press in Pakistan has pointed out the lackof trans- Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 parency in the establishment and execution of CPEC.14 This much seems to be clear from press reports, namely that the modus operandi in relation to CPEC as between China and Pakistan has been entirely through Memorandums of Understanding. More than 51 Memorandums of Understanding have been signed15 between Pakistan

13 http://www.pc.gov.pk/?page_id=2731 (Last visited July 2015). The Chinese coun- terpart is similarly opaque viz., National Development and Reform Commission (NDRC), http://en.ndrc.gov.cn/. 14 K Husain, “Analysis: China-Pakistan corridor or labyrinth?” Updated 18 February 2015 01:10PM, Dawn, http://www.dawn.com/news/1164337 (last visited 14 October 2015). 15 M Haider & Irfan Haider, “Economic corridor in focus as Pakistan, China sign 51 MoUs’ Dawn April 20th 2015, http://www.dawn.com/news/1177109 (last visited 14 October 2015). The MOU include: Joint Statement between the People’s Republic of China and the Islamic Republic of Pakistan on establishing the all-weather strategic cooperative partnership; Minutes of the 4th JCC of China- Pakistan Economic Corridor; Economic and Technical Cooperation Agreement between the Government of the People’s Republic of China and the Government of the Islamic Republic of Pakistan; Exchange of Notes of feasibilitystudyof the Dem- onstration Project of the DTMB between the Government of the People’s Republic of China and the Government of the Islamic Republic of Pakistan; Exchange of notes on provision of Anti-Narcotics Equipment between the Government of the People’sRe- public of China and the Government of the Islamic Republic of Pakistan; Exchange of notes on provision of Law Enforcement Equipment between the Government of the People’s Republic of China and the Government of the Islamic Republic of Pakistan; Exchange of Notes on Feasibility Studyof Gwadar Hospital between the Government of the People’s Republic of China and the Government of the Islamic Republic of Pakistan; MOU on provision of Chinese Governmental concessional Loan for second phase up-gradation of Karakorum Highway (Havelian to Thakot) between Ministry of Commerce of the People’s Republic of China and Ministry of Finance and Economic Affairs of the Islamic Republic of Pakistan; MOU on provision of Chinese Governmental concessional Loan for Karachi-Lahore Motorway (Multan to Sukkur) between Ministry of Commerce of the People’s Republic of China and Ministry of Finance and Economic Affairs of the Islamic Republic of Pakistan; MOU on provision of Chinese Governmental concessional Loan for Gwadar port East Bay Expressway Project between Ministry of Commerce of the People’s Republic of China and Ministry of Finance and Economic Affairs of the Islamic Republic of Pakistan; MOU on provision of Chinese Governmental concessional Loan for Gwadar International Airport between Ministry of Commerce of the People’s Repub- lic of China and Ministry of Finance and Economic Affairs of the Islamic Republic of 786 Chinese JIL (2015) and China, including various agreements as between different Pakistani and Chinese organisations. The most important of the MoU seems to be the May 2013 Memoran- dum of Understanding on the Cooperation of Developing “China-Pakistan Economic Corridor” Long-Term Plan and Action Plan between National Development and Reform Commission of the People’s Republic of China and Ministry of Planning and Development of the Islamic Republic of Pakistan. This understanding does not Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 have the hallmark of legal drafting and language. The language is essentially couched

Pakistan; Protocol on Banking Services to Agreement on Trade in Services between the Government of the Islamic Republic of Pakistan and the Government of the People’s Republic of China; MOU on provision of Material for Tackling Climate Change between National Development and Reform Commission of the People’sRe- public of China and Ministry of Finance (EAD) of the Islamic Republic of Pakistan; Framework Agreement on Cooperation on Major Communications Infrastructure Project between the Government of the People’s Republic of China and the Govern- ment of the Islamic Republic of Pakistan; MOU on Cooperation between NDRC of the People’s Republic of China and ministryof Planning Development and Reform of the Islamic Republic of Pakistan; MOU on Pro Bono Projects in the Port of Gwadar Region between Ministry for Planning, Development and Reform of the Islamic Re- public of Pakistan and the International Department of the Central Committee of the Communist Party of China; MOU on establishment of China-Pakistan Joint Cotton Bio-Tech Laboratory between the Ministryof Science and Technologyof the People’s Republic of China and the Ministry of Science and Technology of the Islamic Repub- lic of Pakistan; Framework Agreement between the National Railway Administration, Government of the People’s Republic of China and the Ministryof Railways, Govern- ment of the Islamic Republic of Pakistan on Joint Feasibility Study for up-gradation of ML1 and Establishment of Havelain Dry port of Pakistan Railways; Protocol on the Establishment of China-Pakistan Joint Marine Research Centre between State Oceanic Administration of the People’s Republic of China and the Ministry of Science and Technology of the Islamic Republic of Pakistan; MOU on cooperation between the State Administration of Press, Publication, Radio, Films and Television of China and Ministry of Information, Broadcasting and National Heritage of Pakistan; Triple Party Agreement between China Central Television and PTV and Pakistan Television Foundation on the re-broadcasting of CCTV-NEWS/CCTV- 9 Documentary in Pakistan; Protocol on establishment of Sister Cities Relationship between Chengdu city Sichuan Province of PRC and Lahore City; Protocol on establishment of Sister Cities Relationship between Zhuhai City, Guangdong province of the People’s Republic of China and Gwadar city, Balochistan of the Islamic Republic of Pakistan; Protocol on establishment of Sister Cities Relationship between Karamay City, XianjianUgur, autonomous region of the People’s Republic of China and Gwadar city, Balochistan of the Islamic Republic of Pakistan; Framework Agreement between NEA and MoPNRon Gwadar-Nawabshah LNG Terminal and Pipeline Project; Commercial Contract on Lahore Orange Line Metro Train Project; Agree- ment on financing for Lahore Orange line Metro Train project; MOU on financing for KKH up-gradation Phase-2 (Havelian to Takot), KLM, Gwadar East Bay Express- way, Gwadar International Airport Projects; Financing Agreement relating to the 870 MW Hydro-Electric Suki Kinari Hydropower Project between EXIM Bankof China, Qureshi, China Pakistan Economic Corridor 787 in soft terms viz., “agree to co-operate”, “explore and promote”. Moreover, the dispute settlement provision refers to the resolution of disputes through “friendly consulta- tions”. Under the circumstances, it probably is reasonable to infer that the totality of all the MoUs exhibit similar characteristics—namely, they are not international Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 Industrial and Commercial Bank of China Limited and SK Hydro (Private) Limited; Financing Cooperation Agreement between the EXIM Bank of China and Port Qasim Electric Power Company (Private) Limited (on Port Qasim 2×660 MW Coal-fired Power Plant); Framework Facility Agreement for 720MW Karot Hydro- power Project between China Development Bank Corporation, EXIM Bank of China and Karot Power Company (Private) Limited; Term Sheet of the facility for Zonergy 9×100 MW solar project in Punjab between China Development Bank Cor- poration, EXIM Bank of China and Zonergy Company limited; Drawdown Agree- ment on Jhimpir wind Power project between UEP Wind power (Private) Limited as Borrower and China Development Bank Corporation as lender; Terms and Con- ditions in favor of Sindh Engro Coal Mining Company for Thar Block II 3.8 Mt/a mining Project, Sindh province, Pakistan Arranged by China Development Bank Corporation; Terms and Conditions in favor of Engro Powergen Thar (Private) Limited, Sindh province, Pakistan for Thar Block II 2×330 MW Coal Fired Power Project Arranged by China Development Bank Corporation; Framework Agreement of Financing Cooperation in Implementing the China-Pakistan Economic Corridor between China Development Corporation and HBL; MOU with respect to Cooper- ation between WAPDAand CTG; MOU among PPIB, CTG, and Silk Road Fund on Development of Private Hydro Power Projects; Facility operating Agreement for Dawood Wind Power project between ICBC and PCCof China and HDPPL; Frame- work Agreement for Promoting Chinese Investments and industrial Parks Develop- ments in Pakistan between ICBC and HBL on financial services corporation; The financing term sheet agreement for Thar Block–I between ICBC, SSRL; Energy Stra- tegic Cooperation Framework Agreement between Punjab Province of Pakistan and China Huaneng Group; Framework Agreement on the China Pakistan Economic Corridor Energy Project Cooperation between Ministry of Water & Power and China Export & Credit Insurance Corporation (SINOSURE); Cooperation Agree- ment between Sino-Sindh Resources (Pvt.) Ltd and Shanghai Electric Group for Thar Coalfield Block I Coal-Power integrated Project in Pakistan; Cooperation Agree- ment for Matiyari-Lahore and Matyari (Port Qasim)-Faisalabad Transmission and Transformation Project between National Transmission Distribution Company (NTDC) and National Grid of China; IA on Port Qasim Coal-fired Power Plant between Power China and GoP; Facility Agreement for the Sahiwal Coal-fired Power Plant Project between industrial and Commercial Bank of China Limited, Huaneng Shandong Electricity limited and Shandong Ruyi Group; Cooperation Agreement on Hubco Coal-fired Power Plant Project between CPIH and Hubco Power Company; Facilitation Agreement on Salt Range Coal-fired Power Project between CMEC and Punjab Government; MOU between NUML Pakistan and Xin- jiang Normal University, Urumqi China for Cooperation on Higher Education; Agreement on collaboration on establishment of NUML International Centre of education (NICE) between NUML Pakistan and Xinjiang Normal University, Urumqi, China.” 788 Chinese JIL (2015) agreements registered with the UN under Article 102 of the UN Charter. In conclusion, the whole apparatus as between China and Pakistan is essentially set up in soft law. Soft law is more effective for the more powerful State in circumstances where the power ratio between two countries is unequal. 21. Are the principles in the Chinese Vision Paper in any manner reflected and further developed in the 2013 MoU? Generally it seems not. How, then, will this Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 inform the international perception of the references to some laudable internationally agreed-upon objectives set out in the Chinese Vision Paper?

III. Issues raised by CPEC 22. There are a number of issues that have been publicly voiced in relation to CPEC within and outside Pakistan. First, concern has been expressed that not sufﬁcient consultation has taken place with all the provinces in Pakistan—despite the establishment of a parliamentary oversight committee.16 Indeed, this has led to the allegation that the CPEC is very Punjab-focussed,17 beneﬁtting the Punjab province more in the way the China-Pakistan road has been routed—Punjab being the ruling party’s base. However, in a question put to the Planning Ministry in the Pakistan National Assembly, the response given has been that no changes have been made to the original route of the corridor.18 Of course, it needs to be recognised that expectations about the degree of transparency and consensus-building in the context of a developing country may well need to be informed by the exigencies of the development imperatives of the country. Second, Indian concerns have been raised in relation to the routing of the China Pakistan road through Pakistan-administered Kashmir.19 However, in one view the development of the region cannot be put to a freeze because of a long, possibly never-ending territorial dispute. Third, there has been general concern over security, good governance, corruption and safety issues,20 including the capacity of the govern-

16 Dawn (13 May 2015), http://www.dawn.com/news/1181714 (last visited 14 October 2015). 17 See for example Adnan Aamir, “China-Punjab Economic Corridor”, republished in The Balochistan Point (6 May 2015) http://thebalochistanpoint.com/china- punjab-economic-corridor/ (last visited July 2015). 18 See response by Minister of Planning to question by Ms. Musarat Rafique Mahesar in the 20th Session of the Pakistan National Assembly, http://www.na.gov.pk/en/ index.php (last visited 14 October 2015). 19 D Bhatarcharjee, India Council of World Affairs: Issue Brief (12 May 2015). 20 Wali zahid (Feb 2015): http://walizahid.com/2015/02/46b-china-pakistan- economic-corridor-15-years-4-phases-3-routes-51-projects/, and New York Times http://www.nytimes.com/2015/04/23/opinion/chinas-big-plunge-in-pakistan. html?_r=0 (Last visited July 2015). Qureshi, China Pakistan Economic Corridor 789 ment to properly plan and execute projects.21 These are legitimate concernsthat need to be addressed but such pessimism in itself cannot be an argument for not undertaking the project. Indeed, such concerns may well be proven to have been misplaced. 23. In addition, other issues may be highlighted here. First, given that the CPEC is a far reaching project that intertwines Pakistan with China in a very deep geo-physical and eco- nomicmanner—thefuturedefactoabilityofthePakistaniStateintermsofitsformulationof Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 its foreign policy towards China is potentially fatally linked to China. This may well be stra- tegicallytobothcountries’advantagenowandinfuture.Indeed,itmaywellbetobothcoun- tries’ economic benefit. Certainly there is a history of fraternal relations. However, these relations have now been taken to a new level. Therefore the question does arise whether the tying of such a close and long term bond between the two countries calls for greater discourse and consensus amongst their people, not simply as between the two States? 24. Moreover, a connectivity corridor could create future rights of passage under international law for China. Should there have been in Pakistan afull and frank consultation with the public over such a potentially irreversible foreign policy, even though at the moment it is not an issue? Has any deliberation with respect to future rights of passage within Pakistan taken place? Have any precautionary measures been taken to ensure that both countries’ rights are appropriately preserved in this respect? On the other hand, have Chinese expectations of the continued use of the connectivity corridor despite the possible turmoil of bilateral foreign relations been addressed? After all, China is investing significantly in the project. 25. Second, CPEC has an impact on investors and traders in Pakistan; various indigenous people; and the environment. There is no evidence of any widespread process of consultation with relevant stakeholders. This may be based on the assumption that the project will have a beneficial effect for all relevant stakeholders. It may also be to prevent any unnecessary squabbling between different constituencies that may hinder the ini- tiation and implementation of the project. Nor is there evidence of any sustainable development impact assessments planned or completed at any rate prior to the embarking of CPEC. The requirement of environmental impact assessments seem to be accompanied by different projects, however, during the implementation stages of the project. 26. Third, preferences for Chinese goods and services, and Chinese companies in terms of investment measures, could—for example in the way investment contracts are awarded, or economic zones set up—distort the conditions of competition as between different goods, services and investors.22 Preferences for Chinese contractors

21 Dawn (1 May 2015), http://www.dawn.com/news/1179169 (last visited 14 October 2015). 22 Both China and Pakistan are not signatories to the WTO Agreement on Government Procurement although Hong Kong, China is. However, this does not mean that other WTO Agreements do not have a bearing on the manner in which for example government contracts are awarded. Moreover, bilateral investment agreements may have relevance. 790 Chinese JIL (2015) may be understandable given the source of the investment, although any violations of non-discrimination provisions in investment agreements would need to be considered with reference to the terms of the non-discrimination provisions in the agreements and any defences to violations that are set therein. In the same vein use of only Chinese imported inputs strain the ability of Pakistani and foreign goods traded within Pakistan to compete fairly and in a non-discriminatory manner. Fourth, and related, there is no Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 indication of any requirements being placed on Chinese companies to avail of the local market, without preference to the Chinese market. Of course such a local content requirement itself would not be in conformity with market rules or indeed with WTO obligations. Finally, it is incumbent on both China and Pakistan to clarify whether detailed steps have been taken to ensure that there is an appropriate level of corporate social responsibility effectively placed on Chinese investor companies. This is more a matter of responsible behaviour, since much of corporate social responsibility is only set in soft law generally. 27. In sum, the dazzle of the amount of investment has effectively stiﬂed rational discourse within Pakistan about CPEC. The amount and importance of the project to the current political regime gives the impression that any form of rational and measured discourse would be regarded with some grave concern—possibly branded as being India-inspired!

IV. Evaluating CPEC 28. CPEC can (indeed should) be evaluated from a number of perspectives, in particular economic, security and environmental—not to mention the Millennium Development Goals and the post millennium development agenda. From this perspective it is to be noted that the Chinese Vision Paper 2015 is the first edition of the Vision Paper. This suggeststhat the Vision Paper is awork in progress and that there is room for inculcating other considerations into the Vision Paper. 29. First, from an economic perspective, there has already been some level of focus on CPECfromacost/benefitstand-point,albeit briefandmainlyofa journalisticflavour.23 Thusone such reportestimates more than $2billion insavingsto Chinainitscostsforoil imports and savings from containerised export traffic costs.24 In another report, from Pakistan’s perspective, the following more measured observation is of note25: Viewing CPEC solely from the prism of the quantum of envisaged investment it will bring, as the government is doing, is wrong and misleading, however. There

23 The Express Tribune (3 May 2015), http://tribune.com.pk/story/880259/ pakistan-china-economic-corridor-a-cost-beneﬁt-analysis/; and Sakibsherani, Evaluating CPEC, Dawn (1 May 2015) (last visited July 2015). 24 The Express Tribune (3 May 2015), http://tribune.com.pk/story/880259/ pakistan-china-economic-corridor-a-cost-beneﬁt-analysis/ (last visited July 2015). 25 Sakib Sherani, Evaluating CPEC, Dawn (1 May 2015), above n.21. Qureshi, China Pakistan Economic Corridor 791

are a number of facets of this mega-project that merit a closer examination to be able to determine if it will ultimately generate economic benefits for Pakistan, as opposedtoperceived strategicpay-offsfor thetwoallies.Infact,a propereconom- ic evaluation will need to arrive at the following conclusion: do the benefits out- weigh the costs? To arrive at an answer, the most fundamental aspect that needs to be studied is Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 whether the proposed China-Pakistan Economic Corridor will truly be an “economic” corridor, or will it be a string of strategically important roads and a bunch of power projects. An economic corridor [sic] ‘connects hubs or nodes of economic activity along a defined geography’ (Asian Development Bank). Hence, an empty road through a barren landscape connecting strategically important point A with strategically important point B 3,000 kilometres away does not fit the description. To be truly an economic corridor, the envisaged roads will need to connect demand (markets) with supply (production centres and clus- ters). The markets as well as production centres can be pre-existing ones, or new ones that will spring up as the ‘network effects’ of the economic corridor take root. An example of the latter could be new Special Economic Zones (SEZs) set up in different parts of the country to catalyse economic activity and exports.[…] If, despite the odds, the CPEC can be structured and operationalised as a truly networked economic corridor, its benefits for Pakistan will no doubt be enormous. If, however, it ends up primarily as a bilateral strategic project, the economic costs could be substantial. 30. In sum, there does not seem to have been any independent and thorough cost- benefit analysis in the pre-planning and planning stages of the CPEC qua economic corridor. Importantly, the construction of the economic corridor calls for particular overarching attention which is not apparent from the disparate MoUs signed with respect to different projects. This is essentially a Pakistani issue and attention to it may not have been perceived as important, as the exercise has been seen through “win-win” lenses foracountry whose general investment lustre is mired by internal political instability. A calculated appreciation of the costs would have been useful in nego- tiating the terms of CPEC. Just as acalculated estimate of the benefits would in the long run reinforce the efficient implementation of the project. 31. Second, given that CPEC traverses a number of regions in Pakistan where there are security issues, not to mention the security situation in the country as a whole, there has been a fair amount of focus on the security and political risks associated with the execution of the project.26 In this respect, one conclusion of note is proffered in an independent Pakistani study as follows:

26 See for example Safdar Sial, “The China-Pakistan Economic Corridor: An assessment of potential threats and constraints”,Conﬂict and Peace Studies Vol 6, Number 2 (2014), Pakistan Institute for Peace Studies (2014). 792 Chinese JIL (2015)

Although the prevailing environment of insecurity, militancy and violence in Pakistan can pose serious threats to the construction of the China-Pakistan Eco- nomic Corridor, the level and nature of this threat is not uniform across Pakistan. It is encouraging that the areas through which the ﬁnalized eastern alignment of the corridor will run are relatively more secure than those of the earlier planned western alignment, though with fewexceptions. The level of threat to the security Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 of the CPEC project, including sites and personnel, is low along most areas of eastern alignment with the exceptions of Gwadar, the Makran Coastal Belt and Karachi, where threat level is assessed to be medium. At the same time, it is imperative to ensure stringent security measures along the entire CPEC alignment.

32. The response to the securitysituation has been robust in Pakistan. A special security division has been set up to safeguard Chinese workers and the CPEC projects.27 33. Third, CPEC has obvious implications for the environment and climate change. Under Pakistani law environmental impact assessments are necessary prior to the implementation of projects.28 In March 2015, the Pakistan Environment Protection Agency (Pak-EPA) rejected a commissioned Environment Impact Assessment Report by the National Highway Authority to assess the environmental damage from road construction arising from CPEC.29 The conclusions of the report in question do not seem to be in the public domain, although the reasons for its rejection have been made public—namely that the report was incomplete.30 However, the Pakistan Min- ister for Climate Change has assured that “environment and climate change scientists would be engaged to study in detail the potential hazardous impacts on the environment and livelihood of the communities the 3,000km-long economic corridor passes through”.31 34. On the other hand, on thewebsite of the PAK-EPA, an Executive Summaryof an Impact Assessment Exercise and Public Hearing in May 2015 with respect to “part of the Asian Highway AH4, the core section of land passage of China-Pakistan Economic Corridor (CPEC), and the main backbone of Pakistan North-South trunk road network, as well as the transportation link in North of Pakistan” concludes as follows32:

27 https://www.facebook.com/pakistanidefence/videos/10153020888797663/ (last visited 16 July 2015). 28 See Section 12 of the Pakistan Environmental Protection Act 1997. 29 J Shahid, “‘Environmental and economic sustainability’ of CPEC assured”,Dawn (June 2015), http://www.dawn.com/news/1186880 (last visited 14 October 2015). 30 J Shahid, above n.29. 31 Dawn (8 June 2015), above n.29. 32 http://environment.gov.pk/china-pakistan-economic-corridor-islamabad/ (last visited July 2015). Qureshi, China Pakistan Economic Corridor 793

This EIA has shown that potentially negative impacts associated with the proposed project are mostly moderate and reversible in nature, and can be easily addressed with the help of appropriately designed and effectively implemented mitigation measures proposed in this report. A comprehensive EMP has been prepared accompanied by an effective Environment Management Monitoring

Plan (EMMP) and supported by an institutional arrangement. It is mandatory Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 that EMP and EMMP are made an integral part of the contract documents. A system of contractor’s non–compliances / violations has been prescribed and linked with contractor’s bill payments. For the implementation of EMP at work site the contractor will engage a full time environment specialist. The Engineering SuperVision Consultants (ESC) will also have on their team a full time environmental expert placed at the construction site to provide professional guidance and superVision for the EMP implementation including environmental monitoring. In NHA there is an Environmentalist, who will be overall responsible for the EMP implementation throughout the project and ensure application of environmental measures during the detailed design, bidding and construction stages. The process and outcome of the EMP implementation activities will be included in the progress reports prepared by the NHA. The EMP implementation cost has been estimated at PKR 296 million. 35. In sum, consideration has been given to the economic, securityand environmental issues. However, as to whether there has been sufﬁcient rigour in the examination of CPEC from these stand-points is another matter.

V. National and international law issues 36. The normative regimes which CPEC and its implementation implicate involve a multilevel of disciplines—both soft and hard. The principal disciplines involved may be summarised as follows: • Pakistani law, including its constitution; • The MoUs signed between Pakistan and China, including the different organs of the Pakistani and Chinese State; • Bilateral Investment Agreements signed between Pakistan and third States; and as between China and Pakistan; • WTO Agreements; • International environmental law; • IMF disciplines, including any conditions under Pakistan’s IMF Extended Fund Facility; • International law on territories; • The law governing the investment arrangement as between Pakistan and the Chinese investor. 794 Chinese JIL (2015)

37. In terms of national law, the obvious point of note isthat the execution of the CPEC project needs to conform to various relevant Pakistani national legislations, for example the Pakistan Environmental Protection Act, (PEPA) 1997. 38. From aconstitutional perspective, the following in the Pakistan constitution isto be noted. First, as alluded to earlier, given the nature and time framework of CPEC, spanning around three decades, the connectivity corridor cements Pakistan’s alliance Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 with China, such that during this period, and thereafter, it would be difﬁcult in fact for Pakistan to have any other foreign policy with China. This may well be desirable but if circumstances change, Pakistan’s freedom in foreign policy making is affected. In addition, there is a possibility that the connectivity corridor could, if not immediate- ly, in the long run result in the creation of a servitude, such that aforeign right of passage is sculptured through Pakistani territory.33 Such a circumstance of integration, impacting critically on State territorial sovereignty, calls for wider discourse and a speciﬁc process of consensus/referendum within Pakistan. In this respect, the preamble to the Pakistan constitution refers to the safeguarding of the “integrity of the territories of the Federation, its independence and all its rights including its sovereign rights on land sea and air […]”. 39. Second, there seem to be serious transparency issues with respect to the project. Certainly, the author’s requests for all the relevant MoU in relation to CPEC have not been heeded. This despite the fact that Article 19A of the Pakistan constitution states: Every citizen shall have the right to have access to information in all matters of public importance subject to regulation and reasonable restrictions imposed by law. 40. Third, the constitution is clear on requiring equitable distribution of resources as between the different provinces. This has relevance both in terms of the route of the road from China to the South of Pakistan, as well as all the other projects including in particular the energy projects. Thus, Article 38 states in relevant parts: The State shall:

(a) secure the well-being of the people, irrespective of sex, caste creed or race, by raising their standard of living, by preventing the concentration of wealth and means of production and distribution in the hands of a few to the detriment of general interest […]. […] (g) ensure that the share of the Provinces in all Federal services including autonomous bodies and corporations established by, or under the control of, the

33 See on servitudes in international law, for example, Pilman B Potter, The doctrine of servitudes in International Law, 9 AJIL (1915), 627–641; M Shaw, International Law (6th Edition) at 538; Right of Passage Case, ICJ Reports 1960. Qureshi, China Pakistan Economic Corridor 795

Federal Government, shall be secured and anyomissionin the allocation of shares of the Provinces in the past shall be rectiﬁed.

And in the same vein, Article 156 states: The National Economic Council […] it shall, amongst other factors, ensure balanced development and regional equity and shall also be guided by the Prin- Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 ciples of Policy set out in Chapter 2 Part II. 41. In the event of investment disputes between China and Pakistan could “conditionality shy” China, having considered this purely an internal matter, be at the receiv- ing end of a defence under Pakistan’s constitution, for breaches of standards of investment protection applicable as between the two countries? 42. As discussed, the character of the various MoUs between China and Pakistan relating to the setup of CPEC as binding, enforceable international agreements is not clear. However, regardless of their legal character, it is safe to assume that both parties intend the written commitments to be honoured. Although, it is unlikely that the MoUs can be invoked in the domestic courts of Pakistan, unless they can be proven to have been transformed into the Pakistani legal system.34 Moreover, since these appear to be only understandings, the various bilateral and multilateral agreements to which Pakistan is a party could inform and trump generally the provisions of these MoUs. This is reinforced by the fact that the overarching Chinese Vision on BRP specificallyalludesto international norms as beinggoverning in the circumstances. Nevertheless, if upon a construction of the MoUs they have a legal standing pari passu a binding international agreement, and there are conflicts as between the provisions of the MoU and for example, bilateral investment/trade agreements between China and Pakistan, there is a likelihood that the latter in time may prevail. 43. Pakistan has entered into some 50 bilateral investment agreements, including with China (in force 1990); Japan (in force 2002), Korea (in force 1990) and with most European countries.35 Additionally of note, Pakistan is signatory to Pakistan- US TIFA (2003), EC-Cooperation Agreement (2004) and China-Pakistan FTA (2007).36 The US and EC agreements do not contain much that is legally significant.

34 There does not seem to have been much that has been written about the relationship between domestic law of Pakistan and International Law. See, however for example, Rashin Sultan, “International Law and Pakistan’s Domestic Legal Order”, https:// www.linkedin.com/pulse/20141117063038-105216481-international-law-and- pakistan-s-domestic-legal-order (last visited August 2015). This article by R Sultan is however not very clear. But it is safe to assume Pakistani law would follow the dualist UK approach to international agreements. 35 Source: http://investmentpolicyhub.unctad.org/IIA/CountryBits/160#iiaInner Menu (last visited August 2015). 36 Source: http://investmentpolicyhub.unctad.org/IIA/CountryOtherIias/160#iia InnerMenu (last visited July 2015). 796 Chinese JIL (2015)

On the other hand, the China-Pakistan FTA is an elaborate FTA with an investment chapter. 44. These agreements could have an impact in the following manneron CPEC. First, the Chinese investment will be protected under the China-Pakistan FTA and the Pakistan-China BIT. This protection however seems to be confined to national treatment, most-favoured-nation treatment, fairand equitable treatment and expropriation. Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 Fullprotectionandsecurity isnotdirectly referred to.Given thatCPECprojects involve investments in security risk areas of Pakistan, this is a notable omission in the protection of which Chinese investors could avail. However, Article 5 of the Japan/Pakistan Bilat- eral Investment Agreement contains a “constant protection and security” provision.37 In addition, the Germany/Pakistan (2009) investment agreement, although not yet in force,38 contains more elaborate standards which may be relevant—for instance it offers protection against arbitrary or discriminatory measures; the “impeding of marketing of products inside and outside”. In sum, the protection afforded to Chinese investment through most favoured nation provisions in the Pakistan/China agreements can be more extensive, to include those in other bilateral investment agreements. 45. Second, non-Chinese foreign investment in Pakistan will be protected by relevant investment agreement/s with Pakistan, including standards in Pakistan investment agreements with third countries, on a most favoured basis. The treatment given by Pakistan to Chinese investors would therefore need to take into account the obligations owed to non-Chinese foreign investors in Pakistan, in particular the most favoured nation standard. Herein it would need to be clarified whether the Chinese investors whose government is facilitating the investment and the non-Chinese investor whose government is not facilitating the investment are like investor/investment for the purposes of the application of the most favoured nation standard. 46. Insofar as international trade is concerned, the trade flows in Pakistan under CPEC would need to conform not only to the disciplines set out in the China-Pakistan FTA; but also to the relevant WTO disciplines which are not displaced by the FTA, in accordance with WTO law and jurisprudence. For example, Chinese goods and services enjoying any form of subsidies may be the subject of WTO disciplines.39 In the same vein, Chinese goods enjoying preferential access to the roads and railways, into and across Pakistan, will need to be the subject of Article V of GATT 1994 disciplines, which includes a non-discrimination provision. Economic zones set up across the country with tax exemptions and other incentives may also implicate WTO disciplines.

37 Article 5. 38 http://investmentpolicyhub.unctad.org/IIA/CountryBits/160#iiaInnerMenu (last visited July 2015). 39 WTO Agreement on Subsidies and Countervailing Measures. Qureshi, China Pakistan Economic Corridor 797

47. Pakistan is a signatory to a number of multilateral environmental agreements.40 CPEC projects impact on the environment, and need to conform to international environmental disciplines, in particular those relating to rights of indigenous people, wild life, deforestation andpollution. Whilst this has been taken on board at some level, what is significant is whether there is the political will to allow environmental concerns to trump the progress of CPEC. Moreover, if there is a default on the part of Pakistan Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 in terms of these international disciplines, given that the connectivity corridor benefi- ciary is China, with a significant involvement in the project, could there be a case for Chinese State responsibility at the international level here? In sum, CPEC can conform to the internationally accepted sustainable development norms if there is the political will in both Pakistan and China. 48. Given that CPEC also touches on financial issues, the monetary and financial aspects of CPEC projects may need some reflection, in terms, for example, of indirect taxes, subsidies, and exchange rate arrangements—insofar as they touch upon obligations under the IMF, including Pakistan’s obligations under its Extended Fund Ar- rangement with the IMF. 49. Roads/railroads and a port in another State are permanent fixtures. Moreover, a “constant and uniform” practice of access through such corridors can in international law give rise to a right of passage. With respect to the latter it is not clear whether the two parties considered this and reflected it in the MoUs. Thus, the International Court of Justice in the Case Concerning Right of Passage Over Indian Territory (Merits) concluded as between India and Portugal as follows41: It was common ground between the Parties that during the British and post- British periods the passage of private persons and civil officials had not been

40 Pakistan is a signatory to the following conventions Convention for the Protection of the Ozone Layer (Vienna Convention) (1988); Convention on Biological Diversity (1992); The Cartagena Protocol on Biosafety (2001); Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); Convention on the Conservation of Migratory Species of Wild Animals; Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (Basel Convention) (1992); Convention on Wetlands of International Importance es- pecially as Waterfowl Habitat (Ramsar Convention); Convention to Combat Desert- ification in those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa (1994); International Treaty on Plant Genetic Resources for Food and Agriculture (2001); International Plant Protection Convention (1952); Plant protection Agreement for the Asia and the Pacific Region (1956); United Nations Convention on the Law of the Sea (1982); Male Declaration on Control and Prevention of Air Pollution and its Likely Transboundary Effects for South Asia; United Nations Framework Convention on Climate Change (UNFCCC) (1992); Kyoto Protocol (2005). 41 ICJ 1960 http://www.icj-cij.org/docket/index.php?sum=278&code=poi&p1= 3&p2=3&case=32&k=ce&p3=5 (last visited 21st July 2015). 798 Chinese JIL (2015)

subject to any restrictions beyond routine control. Merchandise other than arms and ammunition had also passed freely subject only, at certain times, to customs regulations and such regulation and control as were necessitated by considerations of security or revenue. The Court therefore concluded that, with regard to private persons, civil ofﬁcials and goods in general there had existed a constant

and uniform practice allowing free passage between Daman and the enclaves, it Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 was, in view of all the circumstances of the case, satisfied that that practice had been accepted as law by the Parties and had given rise to a right and a correlative obligation. 50. Moreover, in the event of a change in title to territory where these connectivity routes are situated, as for instance the disputed region in Kashmir, or a successful lib- eration movement in Baluchistan, the status (including any liabilities) of the connectivity corridor would need to be considered. These may be unlikely events but a prudent development project would need to have some measure of foresight with respect to such eventualities in the future. 51. Finally, in the rush for investment agreements, the manner in which these investment agreements are drafted needs careful consideration, in particular in the light of the investment arbitration jurisprudence that has now emerged. Care needs to be taken to ensure that Pakistan’s regulatory authority is not stifled by the manner in which the investor’s rights have been formulated as between Pakistan and the investor. VI. Conclusion 52. CPEC is a far reaching project that, if successfully implemented, could have a trans- formative impact on the socio-economic and foreign policy setup in Pakistan. And whilst it is the case that the exigency of hardship on a people has a compelling argument for the consensus of those people to be sought, as for example the recent Greek referendum on the EU rescue programme, it is equally the case that any change that is trans- formative for a nation should also ultimately command the consent of the people of the State specifically. CPEC is not just an economic corridor as between Pakistan and China, it carries with it a level of economic and political integration between the two States that has been described variously as a “game changer” in the relations between the two countries and in particular for Pakistan. Such an alliance however commend- able and appropriate for the two nations needed to be more widely discussed and considered within Pakistan amongst its people. 53. CPEC has been described as multifaceted. That certainly is the case. But it is not clear how well its different threads are woven together to provide a coherent overarching seam. There are different projects, details of which seem to have been separately agreed upon. Moreover, there is no evidence at the outset of measured and considered examination of the overall impact of CPEC on the socio-economic, environmental, and foreign policy environment within which CPEC would exist, or should take its cue for its structuring. Qureshi, China Pakistan Economic Corridor 799

54. The entire apparatus on the face of it seems to lack clarity for legal safeguards for both parties. Generally, the language of law and dispute settlement seems to have been eschewed. Furthermore the interactions of the different layers of law, let alone the iden- tiﬁcation of the different normative frameworks that may come into play, do not seem to have been elaborated upon.

55. CPEC can be evaluated from the lenses of the Chinese Vision Paper. For Downloaded from https://academic.oup.com/chinesejil/article/14/4/777/340338 by guest on 29 September 2021 example, the Vision Paper refers to “an open, inclusive and balanced regional economic cooperation architecture that benefits all”. Is CPEC transparent? Transparency is a sin qua non for benefits to be realised for all, not to mention necessary for “open economic cooperation”. 56. Finally, connectivity is an international issue that is important for international trade and investment. Equally, there are important societal values with which the quest for connectivity can come into clash. It is important that some form of a code with a multilateral imprimatur is established, not to mention an international facilitator to improve connectivity for all countries of the world. This could be engineered in the form of existing institutions and agreements or specifically.