Introduction:

China-Pakistan Economic Corridor is a framework of regional connectivity. CPEC will not only
benefit China and Pakistan but will have positive impact on Iran, Afghanistan, India, Central
Asian Republic, and the region. The enhancement of geographical linkages having improved
road, rail and air transportation system with frequent and free exchanges of growth and people to
people contact, enhancing understanding through academic, cultural and regional knowledge and
culture, activity of higher volume of flow of trade and businesses, producing and moving energy
to have more optimal businesses and enhancement of co-operation by win-win model will result
in well connected, integrated region of shared destiny, harmony and development. 

China Pakistan Economic Corridor is journey towards economic regionalization in the globalized
world. It founded peace, development, and win-win model for all of them.
 
China Pakistan Economic Corridor is hope of better region of the future with peace, development
and growth of economy.

Mission and vision:

To improve the lives of people of Pakistan and China by building an economic corridor promoting
bilateral connectivity, construction, explore potential bilateral investment, economic and trade, logistics
and people to people contact for regional connectivity.
It includes:

 Integrated Transport & IT systems including Road, Rail, Port, Air and Data Communication
Channels

 Energy cooperation

 Spatial layout, functional zones, industries and industrial parks

 Agricultural development & poverty alleviation

 Tourism cooperation & people to people communication

 Cooperation in livelihood areas

 Financial cooperation

 Human Resource Development

CPEC Vision and Mission includes the enhancement of geographical linkages having improved road,
rail, maritime and air transportation system with frequent changes of growth and people to people contact,
enhancing understanding through academic, cultural, regional knowledge and culture, activity of higher
level of flow of trade and businesses, producing and moving energy to have more optimal businesses and
enhancement of cooperation by win-win model will result in well connected, integrated region of shared
destiny, harmony and development.

Improving the lives of people of Pakistan and China by building economic corridor promoting bilateral
connectivity, construction, explore bilateral investment, economic and trade, logistics and people to
people contact for regional connectivity.

The Institutional Framework Of CPEC

The institutional framework of China Pakistan Economic Corridor (CPEC) is basically a decision-making
framework which consists of Joint Commission Committee (JCC).  All the major decisions related
to CPEC are finalized in this meeting with the mutual collaboration of Pakistan and China. Joint
Committee Commission (JCC) is further divided into five-level hierarchy which are Economic zone,
Gwadar, Planning, Energy, transport.
Joint Cooperation Committee
The 7th meeting of Joint Cooperation Committee (JCC) of the China Pakistan Economic Corridor
(CPEC) approved six documents including the long-term plan (LTP) 2017-2030. CPEC entered into the
first phase of its completion and 7th JCC was of historical significance to finalize the long-term plan of
projects. CPEC’s first phase involved removing energy and infrastructure bottlenecks in Pakistan to make
them enablers of economic growth and hence $35 billion out of $46bn portfolio went to the energy sector,
resulting in $27bn worth of projects now in implementation stage.

Gwadar – Joint Working Group (JWG)

The Gwadar Group discussed key projects including Electricity Project, Water Supply, New Gwadar
International Airport, readiness status of Gwadar Port & Free Zone, Gwadar Expansion of Multipurpose
Terminal including Breakwater and Dredging Project. It also discussed social sector projects including
Gwadar Hospital and China Pakistan Vocational Training Institute and other projects. Minutes of the 7th
JCC were also approved by both sides, as well as those from the meeting of the Joint Working Groups on
Gwadar, Energy and Industrial Parks. Implementation minutes on New Gwadar International Airport
were also finalized.

Economic Zones – Joint Working Group (JWG)

The long-term plan LTP framework would help Pakistan to promote industries by making investment in
the country through special economic zones Three prioritized special economic zone of the China-
Pakistan Economic Corridor (CPEC) are set to take off, as Beijing has agreed to cooperate in the
development of Faisalabad, Hatter and Dhabeji industrial areas.

China conveyed its willingness to promote these zones during the second meeting of the Joint Working
Group (JWG) on Industrial Cooperation, announced the Board of Investment on Friday. The meeting was
co-chaired by Li Xuedong, Deputy Director General of Department of International Cooperation, NDRC
and Azher Ali Choudhry, the BOI secretary.

Energy – Joint Working Group (JWG)

CPEC has allocated a major proportion of its funds to energy generation and transmission to overcome
the growing energy needs of Pakistan.

The projects stated below are included in CPEC and would contribute towards the sustainable growth of
industries and unhindered electric supply for domestic consumption in Pakistan. Minutes from Joint
Working Groups (JWG) on energy, industrial parks and Gwadar also got approved from both Pakistan
and China. And among the implementation minutes for New Gwadar International Airport were also
finalized.
Transport – Joint Working Group (JWG)
The second meeting of China-Pakistan Economic Corridor Joint Working Group on Transport
Infrastructure was held in Beijing during August 20-21 and concluded its deliberations on Thursday.

JCC will undertake work on financial arrangement and commercial contract for ML-I Pakistan Railways
project, which will see setting up of a high-speed rail link between Peshawar and Karachi. ML-I is the
single highest project in CPEC. The Karachi Circular Railway (KCR) being granted approval by the
China-Pakistan Economic Corridor (CPEC) joint working group is a great victory for the people of the
city,
Pakistan delegation was headed by Secretary Ministry of Communications Babar Yaqoob and the Chinese
delegation was led by Director General Department of International Cooperation Ministry of Transport,
Yang Zan. Both deliberated upon various projects of CPEC transport infrastructure and achieved
substantial progress ahead of the forthcoming meeting of Joint Coordination Committee to take place
towards the end of the month.
The CPEC transport planning, roadmap of future work and port related matters also came under
discussion.

Planning – Joint Working Group (JWG)

Quetta Mass Transit:
 JCC agreed in principle for inclusion of Rail Based Mass Transit Systems in Provincial
headquarters as part of CPEC.

 JWG on Transport Infrastructure has been asked to complete the necessary formalities.

 Feasibility of Quetta Mass Transit is under process.

CPEC project
CPEC is an ongoing development mega project which aims to connect Gwadar Port of Pakistan to
China’s north western region of Xinjiang, via a network of highways, railways, and pipelines. The
economic corridor is considered central to China–Pakistan relations and will run about 2700 km from
Gwadar to Kashgar.

China-Pakistan Economic Corridor and its connectivity with Central Asia, Middle East and Africa will
help to shape the entire region. Overall construction costs are estimated at around $46 billion, with the
entire project expected to be completed in several years.
The Corridor is an extension of China’s proposed 21st century Silk Road initiative. This is the biggest
overseas investment by China announced so far and the corridor is expected to be operational within three
years. The corridor will be a strategic game-changer in the region and would go a long way in making
Pakistan a richer and stronger entity.

The CPEC projects, investment on the corridor will transform Pakistan into a regional economic hub. The
corridor will be a confidence booster for investors and attract investment not only from China but from
other parts of the world as well. Other than transportation infrastructure, the economic corridor will
provide Pakistan with telecommunications and energy infrastructure.

MAIN COMPONENTS OF CORRIDOR:

1. Gwadar (including port and city and Gwadar region socio-economic development)

2. Energy (Coal, Hydel, Wind, Solar, LNG, Transmission)

3. Transport Infrastructure (Road, Rail, Aviation)

4. Investment & Industrial Cooperation (Gwadar Free Zone and other industrial parks to be
finalized)

5. Any other area of interest mutually agreed

The table given below summarizes the number of projects identified so far along with estimated cost
under CPEC

Sr. No of
No. Sector Projects Estimated Cost (Million $)

01 Energy 21 33,793

Transport
02 Infrastructure 4 9,784

03 Gwadar 8 792.62

DIVERSE INVESTMENT OPPORTUNITIES

1. Industrial Cooperation
2. Financial Cooperation

3. Agricultural Cooperation

4. Tourism

5. Educational linkage

6. Human resource development

7. Health Care

8. People to people contact

9. Increase in livelihood opportunities

10. Enhance Security and stability of the region

CPEC Will Enhance Bilateral Trade Between China and the Middle East
CPEC will strengthen China’s position relative to other industrial nations in the Middle Eastern
economies. The Middle East region is the largest supplier of crude oil and natural gas to China. At present
these resources are transported mainly by sea routes to eastern China, where most of its industrial
activities are located. Once the CPEC railways and pipelines are constructed, it will be economical to
transport commodities, such as oil and natural gas, to the Gwadar port and, from there to western China.
Western China Development Strategy, the cost of transporting these energy products to China’s western
regions through CPEC will be smaller than using the current sea route through the Indian Ocean to the
east coast of China, followed by a ground transfer (by pipe and railway) to the western regions.

In the first phase of CPEC (2015-2020) the Karakoram highway renovation project in northern Pakistan
was completed and since November 2016 it has become possible to transport goods by truck from
Kashgar to Gwadar. This was no easy engineering task in light of the very challenging mountainous
terrain in northern Pakistan. This highway is now actively used for bilateral trade and will undergo further
expansion and modernization in the second (2020-25) and third (2025-30) phases of CPEC’s  long-term
plan. The CPEC railway and pipelines are currently in the planning stage but their construction is also
scheduled for the second phase and they are expected to play an important role in China-Middle East
energy trade.

To the extent that CPEC will create a new channel for the flow of goods (and eventually people) in both
directions between the Middle East and China, it will increase their economic and geopolitical
interdependence. By facilitating this China-Middle East connectivity,
CPEC and China’s Capacity to Project Power in the Middle East
China is involved in several infrastructure projects in the Gwadar deep-water seaport and has signed a
long-term lease for management of this port. This extensive and long-term involvement will enable China
to use Gwadar as a supply and maintenance facility for its naval assets. Furthermore, the connectivity of
Gwadar to the CPEC network will enhance China’s capability to transport both military hardware and
military personnel to Gwadar through Pakistan if needed. Consequently, access to Gwadar port and
CPEC-related ground transportation will allow China to substantially enhance its military capabilities in
the Indian Ocean, the Arabian Sea, and the Persian Gulf. If China seeks Pakistan’s approval to use
Gwadar to support its naval presence in the Arabian Sea, it is unlikely that this request will be rejected.
Military relations between China and Pakistan date back to the early 1960s and remain strong, as both
countries view India as a regional rival. In recent years China has emerged as the main supplier of
military hardware to Pakistan and the two countries have cooperated in development of several weapon
systems, such as the JF-17 Thunder fighter jet.

So far there has been no formal announcement by the Chinese or the Pakistani government about
establishment of a Chinese naval base in Gwadar but Pakistan’s military has increased its naval and
ground force presence in Gwadar. According to a detailed 2018 investigative report in the Herald (a
Pakistan-based newspaper), the Pakistani Navy (and to a lesser extent other branches of Pakistan’s armed
forces,) have quietly but aggressively purchased several thousands of acres of land around Gwadar port
since 2015. These land acquisitions and growing presence of armed forces around Gwadar offer strong
support for the claim that the Pakistani military is developing a naval base near Gwadar. In the context of
the close military partnership between China and Pakistan, and the strong commitment of China to the
development of Gwadar port, it is highly probable that Pakistan’s naval assets near Gwadar will be either
formally or informally available to China.

Consequently, China’s ability to use the CPEC network and Gwadar for military purposes will enhance
China’s naval capabilities in the Indian Ocean and the Arabian Sea. This enhanced capability will have a
strong impact on China’s strategic and geopolitical relations in the Middle East. China has maintained a
policy of nonintervention and neutrality with regard to multiple conflicts among its Middle East trade
partners so far. These include the decades-old Iran-Saudi proxy war and the tensions between Qatar and
Saudi Arabia since 2017. Despite its heavy dependence on Middle East oil, China has not challenged the
U.S. military dominance and its special role as the main external power that provides stability and
maritime security in the Persian Gulf.

Instead of a direct naval presence in the Middle East to protect its economic interests, China has so far
limited its military role to exporting arms to most Middle Eastern countries, including Iran and Saudi
Arabia. This lack of direct military presence so far has been a result of China’s decision to project itself as
an economic power rather than a military one, as well as a consequence of its limited military assets. The
access to the CPEC transport network and Gwadar port, however, will significantly enhance China’s
ability to project power in West Asia and Indian Ocean, if needed. The United States, Russia, and the
regional powers will have to take these enhanced capacities into account as they formulate their Middle
East policies.

Strategic Significance of Gwadar in China-Middle East Relations

Among multiple CPEC infrastructure projects, China appears most committed to the Gwadar seaport.
This strong commitment was demonstrated by China’s decision in 2015 to convert a $230 million loan for
the development of Gwadar airport into a grant. Another $140 million loan for development of a 19 km
expressway connecting Gwadar to Pakistan’s coastal highway was also converted to an interest-free loan.
China has not shown this type of generosity for other CPEC projects.

If developed according to the CPEC long-term plan, Gwadar will emerge as a major trade hub for China’s
economic relations with the Middle East and North Africa. Under its 40-year lease China is involved in
several projects for developing Gwadar into a modern commercial port and special economic zone. These
projects include an international airport, an industrial zone, a water desalination plan, an oil terminal and
petrochemical complex, a coal power generation plant, and other auxiliary facilities, all of which are
currently under way. The coordinated China-Pakistan master plan for Gwadar relies heavily on public
private partnership (PPP) for attraction of private and international investment for industrial and
commercial activities in Gwadar. The Pakistani government has announced several investment and tax
incentives for Gwadar economic zones for this purpose. As these major projects move forward, the
Gwadar Seaport will make four important contributions to the China-Middle East economic relations.

First, once the transportation and shipment of goods through CPEC becomes more cost-effective than the
current Indian Ocean sea route, Gwadar will serve as the major transit and transshipment port for China’s
trade with the Middle East and Africa. As such, it will capture part of the port services that Dubai is
currently providing for many Middle Eastern countries. Some of the Chinese products that arrive in Dubai
port for re-export to other countries in smaller vessels will use Gwadar port for this purpose.

Second, Gwadar special economic zones and re-export zones that are currently under development will
attract a significant amount of direct investment from Arab countries. Qatar, which is currently under an
economic blockade by the United Arab Emirates and has lost access to Dubai port facilities, has
expressed interest in development of food storage facilities in Gwadar. The government of the United
Arab Emirates is also actively promoting investments by UAE-based businesses in Gwadar economic
zone.

Third, China and Pakistan are developing a major oil and petrochemical investment zone in Gwadar,
which will attract significant investment from Middle Eastern oil exporting countries. The Gwadar Oil
Terminal City will include large terminal and storage facilities for crude oil and associated petrochemical
industries. These units will produce refined oil products for both Pakistani and Chinese markets. Several
oil exporting Arab countries have already announced major investments in this initiative. In February
2019 Saudi Arabia announced a $10 billion petrochemical investment in Gwadar during an official visit
by Crown Prince Mohammed bin Salman to Pakistan. In October of the same year the UAE announced
that it was close to finalizing a $5 billion joint venture agreement with Pakistan for construction of an oil
refinery in Gwadar. It is likely that many other Arab oil exporting countries will follow the lead of Saudi
Arabia and the UAE for investment in Gwadar Oil Terminal City.

Fourth, the development of Gwadar seaport will affect Iran’s relations with China and India. When China
and Pakistan announced CPEC, India responded by approaching Iran to develop the Chabahar port in the
Oman Sea in order to create an alternative north-south corridor for India’s trade with Afghanistan and
Central Asia. But growing strategic ties between the United States and India have increased India’s
sensitivity to the U.S. economic sanctions against Iran, and as a result, India has cut back her economic
relations and oil purchases from Iran.

In response to this development, Iranian officials have expressed an interest in linking Chabahar port to
Gwadar by highway and natural gas pipeline. This interest was articulated by Iran’s foreign minister,
Mohammed Javad Zarif, during a May 2019 visit to Pakistan: “We believe that Chabahar — one of Iran’s
developing seaports on the Oman Sea — and Gwadar — a port city on the southwestern coast of
Baluchistan, Pakistan, also on the Oman sea — can complement each other.”

Linking Chabahar to Gwadar will serve several objectives for Iran. First, it will allow Iran to export
natural gas to Pakistan and China via Gwadar. Iran has already completed a natural gas pipeline to the
Pakistan border under an earlier Iran-Pakistan agreement but the portion in Pakistan has not been
constructed due to pressure from the United States and Saudi Arabia. Now Iran has pinned its hopes on
China’s support to save the project and to balance the growing Saudi Arabian influence in CPEC by its
own participation. So far there has been no official response by Pakistan and China to Iran’s request but
government officials in both countries have expressed positive reactions to the potential for Iran’s
participation in CPEC.
Final Words
China’s massive financial commitment to CPEC cannot be justified by its impact on China-Pakistan
bilateral relations alone. The connectivity and transport capacity that CPEC will create between western
China and the Arabian Sea can prove even more valuable to China than the direct gains in China-Pakistan
relations. CPEC will significantly enhance China’s capacity to expand her economic and strategic
relations with energy-rich Middle Eastern countries. CPEC will also allow China to connect the Arab
countries to the Belt and Road network in Central Asia and Eurasia. Due to their rivalries with Iran, many
of these countries were reluctant to use Iran’s transit routes for that purpose.

While China is likely to continue its policy of neutrality and avoiding direct military intervention in the
Middle East, development of CPEC will enhance its capacity to project military and naval power in the
region if and when it decides to do so. This enhanced capacity will now be taken into account by Middle
Eastern counties and external powers that are currently projecting power in the region.

Despite many challenges and risks that have not been addressed in this article, Pakistan and China both
seem committed to CPEC and as the second and third phases of this initiative become operational in the
next 10 years, most Middle Eastern countries are likely to participate and take advantage of its
transportation network.

The China-Pakistan
Economic Corridor winds
through Gilgit Baltistan
The China-Pakistan Economic
Corridor could address Pakistan’s
energy shortfall and prove to be a
game-changer for the Gilgit-
Baltistan region but locals fear that
they are being marginalized and
might be displaced from their
homes.

Pakistan’s Gilgit-Baltistan region is

frequently in the news these days
and it is not for its mouth-watering
cherries and dried apricots. The much touted USD 46 billion China-Pakistan Economic Corridor (CPEC)
will be passing through this beautiful province in the north to reach the Chinese operated Gwadar port in
the south of the country, leading to hopes that it will transform the economy and help bridge Pakistan’s
power shortfall but also triggering concern that the local people might be left out of the gains.

To be built over the next several years, the 3,218-kilometer route will connect Kashgar in China’s western
Xinjiang region to the port of Gwadar. Currently nearly 80% of China’s oil is transported by ship from
the Strait of Malacca to Shanghai, a distance of more than 16,000 kilometers, with the journey taking
between two to three months. But once Gwadar begins operating, the distance would be reduced to less
than 5,000 kilometers.

If all goes well and on schedule, of the 21 agreements on energy – including gas, coal and solar energy –
14 will be able to provide up to 10, 400 MW of energy by March 2018, to make up for the 2015 energy
shortfall of 4,500 MW. According to China Daily these projects should provide up to 16, 400 MW of
energy altogether.

Businessmen like Milad-us-Salman, who belongs to Gilgit-Baltistan and exports fresh fruits like cherries,
apricots and apples, is hoping that CPEC would be a game-changer for the region. So far, the carefully
packaged truckloads of fruit traverse the rundown Karakoram highway to reach the national capital
Islamabad, from where they are flown to Qatar, Abu Dhabi and Dubai. Last year, his company,
Karakoram Natural Resources Pvt. Ltd., sold fruit worth PKR 20 million (USD 190,000). "We sold 30
tons of cherries and 100 tons of apples,” Salman told thethirdpole.net from Gilgit.

Hopes and doubts

With the CPEC passing through Gilgit-Baltistan, Salman is hoping the route would open business
opportunities for people of the region.

Diverting fruit to China would be more profitable, he said. "We can double our sales and profits if we can
sell to China where cherries are very popular.” he said. "We air cargo our produce to Dubai, but it would
be faster and cheaper if we could send it by road to China via Xinjiang as we can get a one-year border
pass to travel within that border.”

According to the Asian Development Bank (ADB), Gilgit-Baltistan produces over 100,000 metric tons of
fresh apricots annually. While there are no official surveys, Zulfiqar Momin, who heads Farm House Pvt
Ltd., which exports fresh and dried fruits to the Middle East, estimates that Gilgit-Baltistan produces up
to 4,000 tons of cherries and up to 20,000 tons of apples. "All fruits grown in Gilgit-Baltistan are organic
with no pesticides used,” he said. The CPEC, some believe, will also boost tourism to the 73,000 square
kilometer region, which is a mountaineer’s paradise and is home to five of the ‘eight-thousands’ (peaks
above 8,000 meters) as well as more than 50 mountains over 7,000 meters besides being home to the
world’s second highest peak K2 and the Nanga Parbat.
But development consultant Izhar Hunzai who also belongs to the area, has no such expectations. The
CPEC, he feels, is nothing more than a "black hole” as far as the people of the region are concerned.

"The government has not engaged with us; we do not know exactly how much or what Gilgit-Baltistan’s
role will be in CPEC or how we will benefit from it,” he said

While both Pakistan and China will

benefit through this region, his people
will be left "selling eggs”. "I fear when
the region opens up, it will give short
shrift to the locals.”

Land of opportunities
But it does not have to be this way.
According to Hunzai, the region has
infinite water resources to tap. "By
building hydropower projects,
Pakistan can sell clean energy to
China and even use it for itself. If
Bhutan can sell to India, why can’t
we sell to China?” he asked, and
pointed out that the Chinese were
already taking the country’s national grid to its border province.

It made little sense to him that the Pakistan government wanted to buy 1,000 MW of hydropower
from Tajikistan under the Central Asia South Asia (CASA-1000) project and construct an
expensive 750-kilometer transmission line when the resource was right there in the country’s
own backyard.

However, the government is almost ready to revive the Diemer-Bhasha dam, a gravity dam on
the Indus river in Gilgit-Baltistan, in the second phase of CPEC. Once completed, it would
generate 4,500 MW of electricity besides serving as a huge water reservoir for the country.

Hunzai also lamented the government’s decision of buying discarded coal powered plants from China and
using imported coal to run it. Doing some quick back-of-the-envelope calculations, he asked, "Why
produce 22 cents per unit electricity from imported fuel and sell it to the people at a subsidized rate of 15
cents. Why not make electricity from hydropower which would cost just 0.02 cents?”

According to the ADB, Gilgit-Baltistan has the potential to produce nearly 50,000 MW of energy. Just
Benji Dam, a run-of-the-river project that the ADB has invested in, can generate up to 7,100 MW
electricity when completed.

The government is not willfully neglecting the region, countered long-time hydropower advocate Tahir
Dhindsa of the Islamabad-based Sustainable Development Policy Institute. Instead the problem is more
about the profits that middlemen make. It is all about the "kickbacks and commissions” that one can earn
quickly from "cheap and carbon spewing coal power plants” compared to almost none from hydropower
projects that can take up to 10 years or more.

"The future is renewables as has been reiterated in Paris at the COP21 and Pakistan should seriously be
thinking about its future course of action,” he said.

Demographic shift
There is also the fear that the CPEC may lead to widespread displacement of the locals. "Of the 73,000
square kilometers, cultivable land is just 1%. If that is also swallowed by rich investors from outside, we
will become a minority and economically subservient once there will be no farmland or orchards left to
earn our livelihood from,” said Hunzai. He is not the only one. Given the secrecy and confusion
surrounding the project, its design and its budgetary allocation, three of Pakistan’s four provinces recently
held a well-attended All Parties Conference (APC) and vented their anger at the central government for
its opaqueness regarding the share of investments for each of the provinces.

"CPEC is not the problem. It has just highlighted the imbalance in provinces with the largest one – Punjab
– being seen as favored specially as far as investments on road infrastructure is concerned and fueling
bitterness among the rest of the three provinces,” rued Waqar Zakaria, an energy expert heading Haggler
Bailey.

Trying to address the concerns of the provinces soon after the APC, federal minister for planning, Ahsan
Iqbal, who heads the Planning Commission of Pakistan, said in a television interview that this was not a
time for scoring political points by making the project controversial. CPEC, he said, was not a project to
benefit a party or a government as was being portrayed by politicians and the media but to the entire
country. Of the USD 46 billion, between USD 35 to 38 billion were earmarked for the energy sector – of
this, USD 11.6 billion would be invested in Khyber Pakhtunkhwa, USD 11.5 billion in Sindh, USD 7.1
billion in Baluchistan and USD 6.9 billion in Punjab.
Beijing has urged Islamabad to resolve the internal differences on the CPEC to create favorable working
conditions for the project to be rolled out smoothly.

The issue
The China-Pakistan Economic Corridor (CPEC), a flagship of China’s Belt and Road Initiative (BRI) that
was officially launched in April 2015, promised transformational gains. Five years later, a quarter of
announced projects have been completed, energy projects dominate, and industrialization efforts are
lagging, according to data collected by the CSIS Reconnecting Asia Project and made available to the
public here.

KEY FINDINGS
 Scaled-back Ambitions: Of 122 announced projects, a quarter (32 projects) have been
completed, or roughly $20 billion of the estimated $87 billion in funding. While this is a
significant amount of activity, particularly in the transport and energy sectors, it also highlights a
gap between projects announced and completed.
 Energy Focus Carries Environmental Costs: Energy projects account for nearly two-thirds of
CPEC funding, and nearly 40 percent of the planned generation capacity uses coal, despite
ongoing concerns about the high public health costs of pollution in Pakistan.
 Stuck on the Value Chain: Despite promises to turn Pakistan into a higher-value manufacturing
hub, the vast majority of special economic zones (SEZs) remain empty, and information and
communication technology (ICT) projects have been limited.

Scaled-back Ambitions:
Since the CPEC’s official announcement in 2015, Chinese and Pakistani officials have declared it a
success. “Good progress has been made in building the China-Pakistan Economic Corridor,” Xi Jinping
told Pakistan’s parliament during his visit in April 2015. (While the CPEC has a much longer history, and
includes projects started earlier, Xi’s visit marked its formal announcement.) Three years later, a joint
statement declared: “As a signature project of BRI, the fast development of the CPEC has played a
significant role in the Belt and Road cooperation.” At last year’s Belt and Road Forum, Pakistani Prime
Minister Imran Khan said: “The China-Pakistan Economic Corridor, one of the BRI’s major components
—and one of its earliest manifestations—has made substantial progress.”

Using official targets, however, the CPEC has underperformed. “By 2020 . . . major bottlenecks to
Pakistan’s economic and social development shall be basically addressed, and the CPEC shall start to
boost the economic growth along it for both countries,” a joint planning document promised in 2017. By
2018, Pakistan was again facing unsustainable debt levels and sought assistance from China, Saudi
Arabia, and the United Arab Emirates. In 2019, Pakistan received a bailout from the International
Monetary Fund, and its economy mostly appeared to be moving in reverse: growth slowed to 3.3 percent,
inflation hit a five-year high, and deficits soared. The CPEC is not responsible for all Pakistan’s troubles,
of course, but it has exacerbated long-standing challenges.

Progress on the ground provides some clues, revealing where projects have succeeded and failed and
illustrating how the CPEC’s grand ambitions have been scaled back. Of 122 announced projects, only a
quarter (32 projects) have been completed, or roughly $20 billion of the estimated $87 billion in funding.
Less than half (54 out of 122 projects) are completed or under construction. These activities reflect a
broad definition that counts projects announced by either side as well as media reports associating them
with the CPEC. Dropping large projects that have been shelved, such as the Diemer-Bhasha Dam, the
Pakistan-Iran gas line, and the Muzaffargarh Coal Power Project, brings the overall total to $67 billion.

Announced project funding (excluding national and cross-border projects) is distributed roughly evenly
across Pakistan’s provinces, with the exception of the most developed (AJK) and two least-developed
provinces (Baluchistan and FATA). This has played out in project completion rates as well, with the most
and least developed provinces having no completed projects so far, and the moderately developed
provinces of Punjab and Sindh approaching completion rates of 50 percent. Two of the three provinces
with no completed projects (excluding cross-border links), AJK and Gilgit Baltistan, are located in
Pakistan-administered parts of the Kashmir region in dispute by India and do not have representation in
Pakistan’s national parliament.

Province Human development Project completion rate

index score (2018)
AJK 0.611 0%
GILGIT BALTISTAN 0.593 0%
PUNJAB 0.567 47%
SINDH 0.533 45%
KPK 0.529 7%
BLOSHISTAN 0.477 24%
FATA 0.466 0%

While still lagging behind Punjab and Sindh, Baluchistan has fared slightly better than other provinces,
with 24 percent of announced projects complete to date and announced funding levels above the national
per capita average (although per capita comparison’s across provinces are difficult due to incomplete
population statistics). Baluchistan is home to Gwadar port, the CPEC’s “anchor” and the site of more than
half of the province’s projects, as well as some of the CPEC’s strongest opposition.

ENERGY FOCUS CARRIES ENVIRONMENTAL COSTS:

Pakistan currently faces an energy deficit of 3,000 MW during peak demand—an issue that successive
governments have made a top priority for the CPEC since 2013. Although energy projects, including
power plants, pipelines, and transmission projects, account for nearly two-thirds of announced funding,
much of that is concentrated in
large projects that have since
been delayed or shelved.

 Shelving of Large
Energy Projects:
Energy projects
account for 14 of the 20
most expensive CPEC
projects, but several
have since been
shelved. While this is
beneficial in cases
where project risks
could outweigh their
benefits, it has resulted
in major funding losses
for some provinces, and only 34 percent of energy projects have been completed overall. This is
particularly true in Baluchistan and Punjab, where energy projects account for around 60 percent
 of announced CPEC funding, but in each province two projects that make up nearly half of that
spending have been shelved. In Gilgit Baltistan, the shelving of a single $14 billion hydropower
plant meant the loss of 98 percent of CPEC funds to the province.
 Prolonging Fossil-fuel Dependency: 38 percent of the generation capacity from active CPEC
projects comes from coal, despite criticism from locals and environmental groups and assurances
from the government that it would work with China to address environmental concerns “at all
costs.” Wind and solar account for only 8 percent of generation capacity under the CPEC, while
hydro projects account for 54 percent. Reaching Pakistan’s goal of sourcing 30 percent of energy
from wind and solar by 203 0 would require a significant shift in CPEC’s energy mix. This
remains the case despite concerns about the public health impacts of pollution in the country, to
which coal generation is a major contributor. Three of the world’s most polluted cities are located
in Pakistan, and air pollution results in the death of an estimated 128,000 annually.

STUCK ON THE VALUE CHAIN

The CPEC’s supporters claimed it would help industrialize Pakistan, turning it into a manufacturing hub.
“CPEC will greatly speed up the industrialization and urbanization process in Pakistan and help it grow
into a highly inclusive, globally competitive and prosperous country capable of providing high-quality
life to its citizens,” promises a joint planning document. While energy and transportation projects are
critical for this transition, spending on other important areas, such as manufacturing and ICT projects, has
lagged.
  Empty Special Economic and Industrial Zones: Prime Minister Imran Khan has emphasized
the importance of SEZs and industrial zones to the CPEC since he was elected in 2018, but little
progress has been made. Although 11 SEZs and other types of industrial zones are currently
planned as part of CPEC, only one (in Gwadar) has actually been completed, with another in
Punjab under construction. Gwadar is also the only SEZ in which China has legal authority,
suggesting that the government of Pakistan bears responsibility for the lack of progress in the
other SEZs.
 Significant ICT Needs, Mixed Implementation: As of 2017, only 15.5 percent of households
had access to the internet, but only eight CPEC projects are ICT-related. While projects such as
the Kashgar to Islamabad fiber-optic line and expansion of 3G and 4G service along the
Karakoram Highway directly address these needs, reporting on safe city projects, such as the
system in Islamabad, suggests that some ICT projects that have been completed have not lived up
to expectations.

These areas are expected to receive more attention in the years ahead. The second phase of CPEC, which
began in late 2019, promises to stimulate economic growth, with a focus on industrialization, agriculture,
and socio- economic development. Facing a harsher economic environment, however, China and Pakistan
may be forced to make additional tradeoffs between completing energy and transportation projects that
were started during the first phase and focusing on these areas. Canceling more big-ticket projects could
be financially wise but politically challenging given the CPEC’s symbolic importance to Xi’s signature
foreign policy vision. But if Pakistan does not carefully steer the Belt and Road’s flagship during the next
five years, it could find itself scrambling for the lifeboats.

Role of CPEC to reduce poverty

China and Pakistan have broad potential for cooperation in the area of poverty alleviation. The
development of the CPEC has become a helping hand for Pakistan to improve the lives of ordinary
people, and the poverty alleviation campaign may speed up that process.

Infrastructure construction can be a powerful engine for economic growth and poverty alleviation. The
multi-billion-dollar China-Pakistan Economic Corridor (CPEC) goes beyond a collection of infrastructure
projects that are under construction throughout Pakistan. With the new government's poverty alleviation
campaign, China and Pakistan will work more closely together to improve infrastructure in the South
Asian country.
China will provide funding for business opportunities under the CPEC to create more jobs for low-income
people and lift them out of poverty.

The energy projects under the CPEC will eliminate load shedding from Pakistan, enhance industrial
development in the country and ensure economic growth leading to reduction in unemployment and
poverty.

China will not be stingy in offering necessary assistance to Pakistani people working for the CPEC-
related industries and it will strive to improve the skills of local employees. Those efforts will help
Pakistan raise its labor productivity and improve its economic competitiveness.

Special Economic zones

Under the CPEC’s industrial cooperation, out of nine Special Economic Zones (SEZ) the work on
Rashakai has been initiated and 20 factories would be set up initially. According to original plan
employment in the SEZs would be given to the local people and the latest technology would be
transferred from China to Pakistan. There are six areas in the social sector, including education, health,
agriculture, water & irrigation, and poverty alleviation in which around 26 new projects will be initiated
in Pakistan. Under the social sector cooperation of CPEC two model villages would-be built-in Pakistan
under CPEC to uplift the living standard of low-income segments of the society but that need
sustainability in the income of people which can be ensured by providing employment.

Transport
A comprehensive transportation package is also prepared. The economic corridor is considered central to
China–Pakistan relations and will run about 2700 km from Gwadar to Kashgar. CPEC is intended to
rapidly modernize Pakistani infrastructure and strengthen its economy by the construction of modern
transportation networks, numerous energy projects, and special economic zones. A vast network of
highways and railways are to be built under the aegis of CPEC that will span the length and breadth of
Pakistan. Modern transportation networks built under CPEC will link seaports in Gwadar and Karachi
with northern Pakistan, as well as points further north in western China and Central Asia. A 1,100-
kilometre long motorway will be built between the cities of Karachi and Lahore as part of CPEC, while
the Karakoram Highway between Rawalpindi and the Chinese border will be completely reconstructed
and overhauled. It will also improve tourism industry of Pakistan and reduce the poverty level in northern
areas.

Energy
Over $33 billion worth of energy infrastructure are to be constructed by private consortia to help alleviate
Pakistan’s chronic energy shortage, which regularly amount to over 4,500MW. A network of pipelines to
transport liquefied natural gas and oil will also be laid as part of the project, including a $2.5 billion
pipeline between Gwadar and Nawab shah to eventually transport gas from Iran. Heavy construction
activities are expected in result of these interventions and local trained workforce in these sectors would
be largely required. It is time to work out the estimated required manpower and skill levels for these
projects. Energy shortfall will reduce and it improves the living standard of people working in mills or
energy related sector.

Skilled labor force

It is pertinent to mention that a Memorandum of Understanding (MoU) has also been signed on the
occasion between All Pakistan China Entrepreneurs Association (APCEA) and National Vocational &
Technical Training Commission (NAVTTC) to provide skilled workforce to Chinese companies engaged
in various projects in Pakistan. The Chairman of NAVTTC assured to provide all the required skilled
labor for their projects. The formal institutions produce a very small proportion of the total increments to
the skilled workforce and not necessarily in accordance with the demand and of the requisite quality.
Establishment of technical and vocational institutions will help to produce skill labor force.

Importance
China Pakistan Economic Corridor is a mega and game changer project for the whole region. It is equally
important for both Pakistan and China.

Importance of CPEC for Pakistan

After the completion of China-Pakistan Corridor (CPEC), Pakistan will become a regional economic hub
in the region. Geo political importance of Pakistan will increase. There will be Highways, Motorways and
Link roads throughout the country. Fast and modern rail network, oil and gas pipe lines, fast and modern
telecommunication network, Energy infrastructure, and intelligence sharing with china will be possible.
There would be fast and growing economy and cultural ties will the countries of the region especially
with China. China-Pakistan Economy Corridor (CPEC) will be connected at Zero-point Khokra Par and
Wagha border with India at eastern China-Pakistan Economic Corridor (CPEC) which will result
economic and cultural ties with India.

On the western route China- Pak Economic Corridor (CPEC) will be connected with Chaman border with
Afghanistan and with Iran at Tuftan border to enhance social, economic cultural relation with two brother
countries.

A lot of jobs and employment opportunities will arise with the construction of China-Pak Economic
Corridor (CPEC) for Pakistan. When all the energy projects of China-Pak Economic Corridor (CPEC)
will be completed, the pace of Economic growth in Pakistan will increase. A 2% annually increase in
GDP of Pakistan is expected. Some important gains for Pakistan are:

1. CPEC will provide opportunities in overcoming poverty, unemployment and inequalities among
smaller and larger provinces of Pakistan.
2. By completion of energy projects, Pakistan will get rid of its energy crises.
3. On either side of CPEC, construction workshop and petroleum will provide a job to a lot of
people which help Pakistan to overcome employment issues in the country.
4. It is expected that GDP of Pakistan will be increased by 15% by Chinese investments.
5. CPEC will bring prosperity and progress in Pakistan and it will help Pakistan to get rid of the
decade`s label of terrorist state, dangerous country and a falling state.
6. Once Pak-China connectivity through CPEC starts, Pakistan`s geo- strategic interest will be
guarded by China, whenever threatened.
7. USA has always betrayed Pakistan and is widely disliked by the people of Pakistan, will have to
negotiate with Pakistan in spite threaten.
8. Toll plaza fee
9. CPEC will reduce regional economic differences between provinces, as CPEC route passes all the
deprived and backward villages and cities.
10. Through CPEC not only the transportation of people and passengers will become cheap and easy
but also the deployment of force will also become fast and easy in any time of risk situation in
country.
11. CPEC will be the symbol of unity and national integrity in the country.

Revival of Pakistan economy through CPEC will build the confidence of foreign investors to invest in
Pakistan.

Forecasting within scenario approach

Our scenario analysis is reasonable to forecast aggregate energy consumption, having differentiated
growth rates in each scenario.
These graphical pictures reflect that if the exogenous variables grow with the trends. The aggregate
energy consumption will increase in all future scenarios. Baseline scenario depicts that Pakistan will
experience approximately 41% more aggregate energy consumption in 2030 from its level in 2013. Our
results indicate that CPEC related economic activities will boost energy consumption by approximately
48% and 57% in 2030 from its level in 2013 under moderate and advance scenarios, respectively. The
forecasts suggest that industrial energy consumption will increase by 136, 211, and 312% till 2030 from
its 2013 level under baseline, moderate and advance scenario respectively.
These graphical pictures also reveal that commercial sector energy consumption will increase by 414%,
154% and 26% in 2030 compared to its value in 2013 under baseline, moderate and advance scenarios
respectively. This implies that in moderate and advance scenario, the commercial energy
consumption will be lower than baseline scenario. Our results represent the second portion of
Environmental Kuznets curve. It might have many reasons. First, we assume in the scenarios
development that energy efficiency will improve in the commercial sector in the future. Second, increase
in commercial GDP due to CPEC will reduce the energy consumption. Third, CPEC related FDI will
improve the road infrastructure and cause efficient utilization of fuel in transport, consequently reducing
energy consumption.

Importance of CPEC for China

China is the most populous country of the world, economic superpower of the 21 st century, has very close
bilateral relation and economic ties with Pakistan since it got independence in 1949.

Officially bilateral trade and commercial links between two countries established in January 1963. China
has spotted Pakistan in every field like defense, trade, economic, agriculture and industry. Many mega
projects have been completed with the assistance of China`s Government.

China has developed his economy and has made a remarkable progress in industry, and it has increased
its output and production. It has now decided to expend its economic activities across its boundary to
increase its exports to countries of the rest of the world, especially with the countries Middle East, Central
East, Europe and Africa as well as its neighboring South Asian countries. But this trade is only possible
via long sea route. On the other side, China needs to fulfill its energy requirements from Middle Eastern
countries. China has decided to construct four corridors to connect China to the rest of the world through
the roads and railways.

China-Pak Economic Corridor (CPEC) will give direct access to China to Arabian Sea from Gwadar port,
China will be able to reach Middle East to take advantages of rich minerals. China will get direct access
to Strait of Malacca through Arabian Sea. China will be connected with Iran through Quetta-Zahidan
railway link.

Due to China-Pak Economic Corridor (CPEC) 12000km distance will be cut off for China. China will
enhance its volume of trade with these countries through Arabian Sea. Gas an Oil pipe line is also a part
of China-Pak Economic Corridor (CPEC). Gas and Oil supply to China will become cheaper and fast
from Middle East countries to China. China will make commercial and economic link stronger and
durable with south Asian countries. If Kashghar is connected to sea route after passing interior regions of
China, it has to cover a length distance of 9000km. But if Kashghar is connected to Gwadar port of
Pakistan via CPEC, it has to over only a distance of 2442km to reach Arabian Sea.

Conclusion and recommendation

China-Pakistan Economic Corridor is a strategic economic project aiming at regional connectivity for
the economic development of Pakistan and China respectively. In this context, objective of this study is to
forecast the impact of CPEC related economic activities on overall and sectoral energy consumption and
their saving potential in Pakistan by 2030. We employed Johansen-Juselius Co-integration analysis to
estimate the long-run relationship between energy consumption and its underlying factors both at
aggregate and sectoral level and investigated the impact of CPEC on future energy consumption by 2030
using scenario analysis. Co-integration results demonstrate that both at aggregate and sectoral levels,
elasticity of energy consumption with respect to price is negative while it is positive for GDP and energy
intensity. Mixed results have been found for elasticity of energy consumption with respect to foreign
direct investment. In aggregate analysis, the trade openness plays an influential role in increasing energy
consumption.

Baseline scenario depicts that Pakistan will experience approximately 41% more aggregate energy
consumption in 2030 from its 2013 level. Our results indicate that CPEC related economic activities will
boost energy consumption by approximately 48% and 57% in 2030 from its 2013 level under moderate
and advance scenario, respectively. In comparison with baseline scenario, loss in energy saving potential
under moderate and advance scenarios will be 3.08 million TOE and 6.32 million TOE respectively in
2030.

Sectoral analysis revealed that under baseline scenario, energy consumption in industrial and commercial
sectors in 2030 will increase by more than 136% and 414% to their values in 2013 respectively. In
advance scenario the energy consumption will increase by approximately 312% in industrial sector by
2030 from its level in 2013. Therefore, losses in energy saving potential can be at increasing trend in
2030 i.e. 25.08 million TOE in comparison with the baseline scenario. In the commercial sector, energy
consumption will be only 26% higher than its 2013 level due to CPEC related economic activities under
advance scenario. Commercial gains in energy saving potentials can be at increasing trend with the
passage of time till 2030. It is estimated at 6.43 million TOE in advance scenario in comparison with the
baseline scenario. For risk analysis we apply Monte Carlo simulation. Monte Carlo simulation results are
very close to scenario design results based on co-integration. This verified not only our scenario BAU
results but also give the different possibilities of future energy consumption by 2030. The CPEC related
investment into installed generation capacity is expected to meet the increase in electricity demand and
reduce the existing energy shortages, their environmental impacts cannot be ignored as most of the
electricity to be produced in these projects is based on the coal related technologies. Targeted
interventions to reduce environmental implications from these projects with appropriate abatement
activities are required.

In this context, loss in overall energy saving potential calls for targeted energy conservation policies.
Energy conservation should be made part of the overall energy polices in the country and energy intensity
targets should be implemented for different sectors of the economy to realize its overall energy saving
potential and energy policy should aim at achieving energy resource conservation with investment
strategies to promote energy efficient technologies. Government should also make careful accounting and
related planning to account for potential increase in energy demand due to CPEC related economic
activities for each sector of the economy. Furthermore, as the increased economic activity under CPEC is
expected to carry environmental implications, it is important to analyze and forecast the future GHGs
emissions to plan appropriate abatement activities.