In 2013, President of People’s Republic of China Xi Jinping envisioned “One Belt One Road Initiative” currently known as Belt and Road Initiative (BRI). A remarkable idea that was meant to promote regional connectivity and socio-economic cooperation by connecting three major continents Asia, Africa and Europe through a number of road, rail and maritime routes. China Pakistan Economic Corridor is an important link to this chain.
Pakistan and China not only share their geographical boundaries with each other but also a deep rooted bond. As famous saying goes Pak-China friendship is higher than Himalayas, deeper than ocean, sweeter than honey, and stronger than steel. In 2021, Pak China marked 70 years of their strong friendship. Both neighbors stood with each other through thick and thin all these years.
In 2015, China Pakistan Economic Corridor opened a new chapter in history of bon homie relations of Pakistan and China with a vision to make this bond stronger than ever. Pakistan’s geographical location was one of the key factors in initiating CPEC. Pakistan is located at junction of South Asia, Central Asia and Middle East. Since Arabian Sea links to Indian Ocean, it connects to Middle East via Persian Gulf, to Europe via Mediterranean Sea and Africa via Bab-ul-Mandeb. Central Asian states are rich in oil and gas resources, however these are land locked states and therefore their access to trade with the rest of the world is limited. Pakistan provides an ideal transit route for trade with land locked states of Central Asia as well as Afghanistan. South Asian states have immense potential of trade with rest of the world and CPEC serves this very purpose through Pakistan with support of China.
Work on CPEC officially began in 2015 with several short term and long term goals laid out. CPEC was planned in three phases, each for period of five years. Phase I (2015-2019) has already been completed. Phase II (2020-2025) is underway where some projects have already been completed and some others are in pipeline and Phase III (2025 to 2030) is based on proposed
Each phase of CPEC is based on two kinds of projects. The Corridor Projects and Economic Investment Projects, both of which are supported by investment and loans from Government of China. The corridor projects are based on construction of road and rail routes to connect Pakistan’s sea ports to China’s North Western province Xinjiang. Previously, Pakistan only had two operational deep sea ports. Port Qasim and Karachi Port. As part of CPEC, Chinese government invested $248 million in first phase of Gwadar port in Gwadar,
Balochistan to develop Pakistan’s largest infrastructural project ever since its inception. Gwadar port opened avenues of trade with Middle East, Africa, Europe, Central Asia and South Asia, thus giving a boost to Pakistan’s economy by expanding its potential of maritime and transit trade. In this way, Pakistan’s revenue generation will improve several folds through transit trade tax and custom duty tax. In addition to maritime route, the road route to Central Asia has been opened too which goes up to Russia, thus increasing the potential of trade up to several folds.
Gwadar port already has created millions of jobs which continue to add as project expands in upcoming phases of CPEC. This international sea port is helping Pakistan’s local industries to flourish like fisheries, tourism and agriculture. Pakistan’s export base shall increase as trade comes to Pakistan’s doorstep. Pakistan soon plans to begin ferry service to Iran and other nearby states from Gwadar to promote tourism.
Balochistan is the largest province of Pakistan but till date, remains most under developed due to complex socio political dynamics of this region. Due to its poor civil infrastructure, Balochistan’s natural resources remain unexplored. However, Gwadar is the first ever development project of its kind in this province which shall definitely improve the standard of life in this area. Not to mention, Gwadar Port is based on state of the art infrastructure, which in itself is a manifestation of Pakistan’s golden future and shall definitely open the way for development of Balochistan on the whole.
As of CPEC Phase I, the corridor projects included Eastern Corridor, Western Corridor and Central Corridor. Since Karakorum Highway already connects Pakistan to China, there was a need to have an extended network of roads to connect China with Pakistan’s sea ports of Gwadar and Karachi in South West and South of Pakistan respectively. The route of Eastern Corridor is based on Hassan Abdal (Hazara Expressway) – Islamabad (M2 Motorway) – Lahore (M4 Motorway)-Multan (M-5 motorway) –Karachi (Coastal Highway) – Gwadar.
Western Corridor begins from Hassan Abdal – Dera Ismail Khan – Zhob – Quetta – Gwadar while Central Corridor takes the route Hassan Abdal – Dera Ismail Khan – Dera Ghazi Khan – Layyah – Bassima – Gwadar.
These corridors facilitate China with convenience of trade by cutting short trade routes of China to sea by 12,000 miles. The roads constructed as part of these projects are state of the art which have reduced the distance of intercity travelling between major cities of Pakistan especially Punjab to Sindh travelling has become easier. People of Pakistan feel at ease to commute on these new roads
for day to day travelling. New jobs have been created along these routes and toll taxes contribute to state’s revenue. As per Government of Pakistan, CPEC authority, the annual revenue from toll taxes is expected to reach $5billion by 2022. This shall help Pakistan overcome its balance of payment crisis and foreign debt repayments.
As part of CPEC Phase I, the economic investment projects included several energy projects. Pakistan is highly attractive for clean energy investment due to its abundant renewable energy sources. Pakistan is among top 10 solar power producing countries as per Powerweb Forecast International Energy Portal. CPEC phase I brought Pakistan’s first ever commercial solar power project Quaid-e-Azam Solar Park, established at Bahawalpur city, with capacity to produce 1000 MW of electricity. Jhimpir Wind Power Plants were set up in Sindh’s ideal wind corridors with a potential to generate 50, 000MW electricity. Sahiwal coal power plant produces 1320 MW electricity. These projects overall created energy generating capacity of 10, 400 MW.
Pakistan is a country that has experienced severe energy crisis in the past, in particular, in 2013, country faced its worst electricity short fall. Given the fact that Pakistan imports 75% of its oil from oil rich states and produces most of its electricity from oil, the circular debt is on rise. Pakistan’s energy demand is approximately 25,000 MW whereas transmission and distribution capacity stands at 22,000 MW. Switching to clean energy by initiating such projects will help meet the excess energy demand as well as help mitigate the effect of climate change caused by excess use of fossil fuels. Pakistan is among top five most vulnerable states to climate change and changing to clean energy is need of the hour. CPEC has already opened the avenue of clean and green Pakistan through such projects.
To improve telecommunication, a network of optic fiber cables was laid down from capital city Islamabad to China’s North Western province. Optic fiber cables ensure smooth, fast and reliable communication with no frequent line losses.
As of CPEC Phase II (2020-2025), the Phase I corridor projects were taken to completion. Last leg of Eastern corridor Sukkur to Hyderabad Motorway was completed. Remaining work on Western Corridor was taken towards completion. A major corridor project of CPEC Phase II is ML-1 rail transit from Peshawar to Karachi. It is a project worth $7.2 billion, provided as loan by Pakistan’s All Weather Friend China. ML-1 aims to connect North of Pakistan to South of Pakistan for easy commute of goods and people. This project aims to replace the existing railway tracks by new and improved railway tracks, doubling of the
railway tracks, up gradation of railway stations, removal of railway crossings and improvement of railway signals and communications. ML-1 shall have expected speed of up to 160 kmh-1 that shall considerably reduce the distance between Peshawar and Karachi.
Four urban mass transit projects are included in CPEC Phase II. Orange Line Train has already started operating in Lahore, making day to day intra city commute easy and generated new jobs.
CPEC Phase II again started up with several energy projects including two mega hydel power projects worth $11 billion. Overall, both countries have initiated energy projects of 17, 045MW capacity. For the first time, a 200MW civic waste power plant shall also be established in Karachi as part of CPEC economic investment project to help convert the civic waste at Karachi ports to energy. According to Chinese embassy, the CPEC energy projects accounted for one third of Pakistan’s power supply during pandemic in 2020.
CPEC Phase II aims at establishing network of pipelines to transport liquefied natural gas and oil across the country including $2.5 billion pipeline between Gwadar and Nawabshah to bring gas from Iran. Iran is Pakistan’s energy rich neighbor and importing gas from Iran is much cheaper and feasible for Pakistan than to import from other states.
Most important objective of CPEC Phase II economic investment was establishment of special economic zones (SEZ) to boost up Pakistan’s economy through industrializing Pakistan. Purpose was to promote the local industry and provide ample opportunities to industrialists as well as to provide jobs to the local labour. As part of this plan, a total of nine SEZ were decided to be put up. Four in each province, one in AJK, one in FATA, one in Gilgit Baltistan and remaining two were given under discretion of Federal Government which is constructing one in Karachi and one in Islamabad.
The type of industries to be set up in these zones are decided by mutual consultation of Government of China and Federal/Provincial governments of Pakistan and are exclusive to the provinces according to their specific resources. Punjab has mostly textile and automobile industries. Sindh has petrochemical industry. Khyber Pakhtunkhwa has predominantly mineral industries. Allama Iqbal Special Economic Zone in Faisalabad and Rashakai Special Economic Zone in Nowshera have already been inaugurated and are quickly being industrialized.
Government aims to provide incentives to industrialists such as tax exemptions and affordable electricity rates to attract investment from local and foreign companies. Pakistan also has a free trade agreement with China called
China Pakistan Free Trade Agreement (CPFTA) under which 90% of Pakistani products have access to China’s market which is world’s second largest economy.
Pakistan must use this as an incentive to promote foreign direct investment by encouraging other countries to invest in Pakistan’s special economic zones and then trade their products with China benefitting from CPFTA and using cheaper trade routes of CPEC.
These SEZ will create jobs for local labour, promote Pakistan’s local industry, expand Pakistan’s export base, increase Pakistan’s revenue generation, promote foreign direct investment and will help Pakistan in foreign debt repayment and overcome its trade deficit.
Since Gwadar port has been established, under CPEC Phase II, focus was to establish Gwadar as a modern city, equally good as other major urban hubs of Pakistan. To accomplish this, CPEC Phase II has established Gwadar Master City, Gwadar International Airport, Gwadar International Hospital, Gwadar Desalinzation Plant, Gwadar Power Plant, Pakistan’s first ever Vocational University, Gwadar and Gwadar Cricket Stadium. This will attract qualified people all over Pakistan as well as overseas to earn and settle at Gwadar. Revenue generation shall increase and so will foreign direct investment.
As part of CPEC Phase III (2025-2030), the corridor project is based on construction of rail route from North Western province Xinjiang of China to Havelian in Pakistan. This will benefit the two way trade and tourism between both neighbours.
The economic investment projects will have exclusive focus on boosting up Pakistan’s agriculture and tourism. Pakistan is primarily an agricultural country, therefore innovation in agriculture shall boost up Pakistan’s GDP. A US travel magazine listed Pakistan as top tourist destination for year 2020. Investment in Tourism will lift up Pakistan’s economy by leaps and bounds. In addition, phase III also aims at generating blue economy of the country by building sea side resorts, beaches, islands, recreational spots and hotels.
A wave of positivity has been generated by CPEC as people of Pakistan put their confidence in this project to bring a mega change in Pakistan. A boost in economy will bring better livelihood for people, income per capita shall increase and Pakistan will stabilize itself on road to sustainable economic development.
As the world calls it, China Pakistan Economic Corridor indeed is a game changer for Pakistan. It is anticipated that CPEC will create 2.3 million jobs from 2015 to 2030 and country’s annual GDP shall increase by 2-2.5%. Never in the
history of Pakistan has an investment been done on a scale as large as this in terms of civil infrastructure, energy and communication projects. CPEC shall revolutionize Pakistan within this decade and a new sun of prosperity shall dawn upon the horizon of Pakistan.
Article by: Zunaira Batool
