CHINA PAKISTAN ECONOMIC CORRIDOR

-CPEC is the largest investment in the history of Pakistan. It was announced in 2015 during Xi

Jin Ping’s visit.

-$46Bn originally committed, now it is $62Bn+

- More than $25Bn has already arrived.

INVESTMENT:

1- Energy sector.

2- Roads and Railways.

3- Seaport.

4- Special Economic Zones (SEZ).

5- Agriculture sector: investment committed but has not yet arrived.

This is also known as the 4+1 project.

1- INVESTMENT IN THE ENERGY SECTOR:

- $36Bn investment in the energy sector.

- 1,800 MW electricity is to be generated.

*Investment in the Coal sector:

- It is a rental project, taken on rent for ten years.

- Total 3 projects.

- Every project is 1,320 MW each.

 - Imported coal will be used.

- Projects completed in: Karachi, Hub and Sahiwal.

*Local Coal:

- Major focus is coal from Thar.

- 4 projects of 330 MW each.

- 2 projects are operational and 2 are under construction.

- Coal is extracted from block 1 of Thar.

- Second project is 660 MW and is under progress -> new technology -> underground coal

gasification -> Thar Supernova Project.

- Gwadar coal power plant -> 330 MW.

- Hub coal project -> 600 MW -> under construction.

- Bhikki power project -> LNG (Liquifying Natural Gas) project -> 1,100 MW and is

operational in Sheikhupura.

- Sahiwal coal project -> 600 MW.

- Port Qasim coal power plant -> 2,400 MW.

*CIVIL NUCLEAR PROJECT:

- Investment of $9Bn in civil nuclear technology.

- K2 & K3 -> $4.5Bn each.

- Both completed.

- C5 -> 1,100 MW -> Not initiated.

*HYDRO PROJECTS:

- China is making one of the highest portions of investment in Hydro projects.

- Suki Kinari project at Kunhar river completed in December -> 890 MW.

- Kohala Hydro project -> 1,100 MW -> $2.4Bn

- Karrot Hydro project -> 730 MW -> $1.5Bn

- Azad Pattan Hydro project -> 300 MW

- Pir Mahal project.

- 400 MW small projects across Gilgit Baltistan under CPEC.

*SOLAR PROJECTS:

- Quaid-e-Azam solar power plant Bahawalpur -> 1000 MW -> completed.

- Agreement with KP government under CPEC i.e electrification of schools, mosques and

safe city project.

- Electrification of tube well, electrification of safe city project in Punjab.

- Electrification of road and safe city project in Islamabad.

- Gwadar 300MW solar plant -> 2 projects -> 1 is approved, and 1 is waiting for approval.

*WIND PROJECTS:

- More than 500 MW wind projects will be installed in the coastal belt of Pakistan i.e

Thatta, Badeen, etc.

- 500MW projects will be installed in areas bordering with Iran and Afghanistan

- The coastal belt of Sindh especially Jhimpir.

- Dalbandin area of Balochistan.

 - All projects will be completed by 2027.

*MITYARI LHR TRANSMISSION LINE:

- $1.3Bn invested.

- Operational.

ADVANTAGES OF ENERGY PROJECTS:

1- Load shedding would end once and for all. From 2018-2016 -> 5000MW -> 8000MW

shortfall -> Economy decreased -> agri + market industry affected.

- Gen Kiyani in 2011 said that the energy crisis is a far bigger problem for Pakistan than

terrorism.

- The installed capacity is more than what is required.

2- Increasing focus on carbon free energy or renewable energy projects i.e focus on hydro + wind

+ solar + civil nuclear projects that don’t cause carbon emissions.

- Renewables will produce 20,000 MW energy and will be completed in 2027.

- Cheapest source of electricity.

- By 2030, production from civil nuclear technology will be 10,000 MW.

3- Cheaper electricity generation:

- Pakistan generates expensive electricity because of a furnace oil based generation.

- Oil is imported and the cost per unit is high.

 (Q can come on PH 2)

REVIVAL OF CPEC/CPEC PHASE 2:

1- INCREASING FOCUS ON RENEWABLE ENERGY PROJECTS:

- Projects completed.

- Projects under construction.

- Projects that will be initiated in the future e.g C5 of civil nuclear technology.

2- INVESTMENT IN TRANSPORTATION SECTOR:

- Northern part -> Khunjerab to Burhan.

- Southern part -> Gwadar to Baseema.

- Eastern alignment -> Burhan to Faisalabad to Multan to Sukkur to Hyderabad to Karachi

motorway.

- Ratodero Gwadar motorway.

- Main Line 1 (ML1) -> Railway project -> double track, signal free -> KHI - LHR -

Havelliyan - Peshawar - 160 KM/hr.

- Central alignment -> Burhan - Hakla - D I Khan - Quetta - Gwadar.

- Development of Gwadar seas port.

3- INCREASING INDUSTRIALIZATION UNDER CPEC:

- One major dimension is the establishment of Special Economic Zones.

 - In 2015, 6 MOUs were signed regarding SEZ.

- By 2018, it reached 10 MOUs.

- KP, Balochistan and Punjab signed 2 each.

- Sindh, Gilgit Baltistan, AJK, ISL signed 1 each.

- Under the revival of CPEC, the major focus is SEZ.

1- The first economic zone that materialized is Allama Iqbal Economic Zone in Faisalabad in

February of 2020 and is ready for investment.

- 3000 acres.

- 400 industrial plots.

- A variety of industries will be installed there.

- The largest textile city of South Asia will be installed there.

- Production of sports’ products.

- Automobile industries.

- Leather industries.

- Production of surgical equipment.

- Rs 400 Bn investment.

2- Rashakai Economic Zone in Mardan, KPK.

- Ready for investment.

- Rs 300 Bn investment needed.

- 230 industrial plots.

- Electrical equipment, tobacco industry, textile, automobiles.

3- Gwadar Economic Zone in Balochistan.

- 230 industrial plots -> Rs 300 Bn investment.

- Copper, gold, silver, marble, food and beverages.

4- Revival of Industrialization in Pakistan:

- Industrial sector was in decline in 2008 and onwards.

- Energy crunch.

- CPEC is reviving it.

- Provincial governments are encouraged to go for industrialization more and more.

- Punjab has announced 13 SEZs, KP announced 4, Balochistan announced 4, Sindh

announced 5.

- Investment in friendly policies i.e providing land on lease to Pakistanis and foreigners for

a period of 29 years in which 10 years are free of tax for Chinese investors. Pakistani

investors are free from tax for 5 years.

- 50% cut in prices of electricity for mega products, 25% cut for small industries ->

announced in 2020.

All of this will provide jobs, some special industries will announce 10K jobs. If all SEZ under

CPEC materialize, they will offer 1.5 lac jobs and local SEZ will provide 2 lac jobs.

—————————————————
DEVELOPMENT OF THE GWADAR PORT:

- Largest sea port in the world.

- 120 berths will be made by 2038.

- 3km trunk ahead into sea.

- Master plan approved in 2020.

- Gwadar’s marine drive is completed.

LAND DEVELOPMENT:

1- Airport

2- SEZ

3- Residential markets

4- Drinking water dams -> one completed.

- Gwadar sea port will transform Pakistan into a transit corridor.

- 64 countries will be dependent on Pakistan for trade with China.

- In 2023, China conducted a trade of $30 Bn through Gwadar and this will be an annual

occurrence.

- Large portion of imports will be of hydrocarbons from Iran, the Middle East, Central

Asia Republics and Africa.

- There is an opportunity for Russia.

- Gwadar sea port will be a focal point.

INVESTMENT IN AGRICULTURAL SECTOR:

- Modernisation of irrigation techniques.

- Current technology is outdated and wastes water.

- Drip and sprinkle technology.

- Hybrid seed production -> sugarcane, rice and wheat.

- Revamping the canal system.

- Making cold storages -> Sialkot, Peshawar, Havelliyan.

- Increasing investment in the agricultural sector.

IS CPEC ANOTHER EAST INDIA COMPANY/DEBT TRAP?

Argument: Alex Wells, US rep to South Asia and Department secretary of state, said that this a

debt trap for Pakistan. He quoted ML1, energy and rail projects and a loan with a higher interest

rate will bring Pakistan’s economic downfall and how will PK repay the loans.

Counter Argument:

1- Pakistan’s economy is already under debt but it is not because of CPEC but because of wrong

policies adopted by successor governments.

2- China’s projects through CPEC are not all loan based but rental based -> LNG, Coal.

3- Majority of projects are on a BOT (Build, Operate, Transfer) Module.

- 85% goes to China, 15% goes to Pk but this share will keep increasing. In 8 years, it will

break even and shares will be 50/50.

- In 16 years, 100% of profit will go to Pakistan.

 - The loan based projects are concessional loans.

- Maximum machinery and labor being used in CPEC is China’s because that kind of

machinery is unavailable in Pakistan for example, high altitude cranes and tunnel boring.

- Truck and majority labor is Pakistan’s.

- Skilled labor is Chinese.

- Chinese are training Pakistani labors.

THE POTENTIAL OF CPEC FOR PAKISTAN:

- Trade deficit will decrease because of a reduction in HC imports -> $10Bn

- 2021, 2022 -> $23Bn worth of HC imported in which 50% is used in electricity

generation.

- By 2028 -> dependency on HC will be 0%

- Minimum 25 % - 30 % trade deficit will be reduced.

- Cheap electricity for industries which will result in cheaper products which will result in

an increase in export.

- When debt and trade deficit decreases, so does the rate of dollar which will result in an

increment in the value of PKR.

1- Tapping the geo-strategic potential of Pk.

2- Economic gains.
3- Reduction in militancy and terrorism because less developed areas will prosper due to jobs

becoming available.

4- Infrastructural development (Gwadar, SEZ, 1+4 project)

5- Energy production

6- Improved connectivity -> PK will become a global trade connector.

7- Source of strengthening Pakistan’s relations with other countries.

8- Gwadar port development.

9- Boosting up the defense system of Pk.

10- Opportunity for smart technology transfer.

ISSUES AND CHALLENGES FOR CPEC:

1- EXTERNAL THREATS:

- Security threats - July 2021.

- Indian rivalry - BLF, BLA, BRA (India trains and finances them to attack Pk)

- Instability in Afghanistan.

- Debt trap.

2- INTERNAL CHALLENGES:

- Political instability -> some stances are against CPEC -> divergent stances of political

parties.

- The insurgency in Balochistan.

 - Gwadar Haq Do Tehreek -> demanding the stop of illegal fishing, removal of

unnecessary security checkpoints.

- Training of skills in Pk.

RECOMMENDATIONS:

- Security improvement for Chinese people working in Pk.

- Pk should keep an eye on the situation in Afghanistan.

- Pk should address the grievances of Balochistan’s people.

- Pk should neutralize propaganda about CPEC globally.

- Efforts should be made to solve political crisis (only write this point if this situation stays

the same till exams)

- Pk should include the Baloch youth so that they don’t become a part of the insurgency.

- Federal and provincial govts should enter into a dialogue with the locals of Gwadar to

address their problems.

- Speedy implementation of all projects.

CONCLUSION

CPEC is not only a game changer for Pakistan but for China as well. CPEC can not only boost

Pakistan’s economy, create new jobs, develop infrastructure but will also help in Pakistan’s

relations with other countries. If the implementation of CPEC projects is timely and smoothly

done, Pakistan will not only become a regional economic hub but also an emerging economic
giant; however, Pakistan needs to neutralize the threats to CPEC and empower the people of

Balochistan by including them into the process.