CPEC- Importance, Challenges and Implications To The Region

M. Bilal Abdul Ghani.

In the laps of history of Pakistan it is first time Pakistan is part of multinational project that is “One Belt and One Road”. The foundation of this project was laid down by Chinese president under the vision of shared destiny and connectivity in late 2013.

OBOR has seven (6+1) corridors as following:

  1. CPEC
  2. Western china to Turkey.
  3. China with Eurasia.
  4. China-Magnolia-Russia corridor
  5. South East Asia corridor that will pass through Bangladesh and Myanmar.
  6. China-Indochina peninsula corridor.
  7. Seventh corridor is sea corridor through Gwadar-Mumbasa-Humbantota-Indonesia-south China Sea corridor.

Figure 1: Routes of BRI.

What is CPEC?

CPEC is fusion of multiple corridors that are

  • Infrastructure corridor
  • Industrial corridor
  • Investment corridor
  • Energy corridor
  • Trade corridor
  • Transportation corridor

The approximate length of CPEC is 3000KM. and it consists of seaways, railways, highways, motorways, pipelines etc. It will connect western province Xinjiang of China to Pakistan’s Gawader port. CPEC is flagship project of chines one belt one road initiative. Which will link 68 countries of the world including Pakistan. Pakistan and china has made joint cooperation committee for the mounting and other decision regarding CPEC. Its 7th  meeting held on 21st November 2017 in Islamabad Pakistan. under JCC there are five working groups that deals with Gawader ,energy, transport, Special economic zones  and planning. Under special economic zones,33 potential sites will be identified and industrial parks of international level will be built. These parks will provide an opportunity to international investors to invest in Pakistan. the major investment of CPEC is on energy crisis that is 73%, for roads and infrastructure it is 23%. The first MOU was signed in late November 2013 but the full shape of CPEC was announced during the visit of Chinese president Xi- Jinping to Pakistan in 2015 with the signing of 51MOUs. The first trade activity was taken place in November 2016. CPEC will take its initial shape in 2020. The initial cost of CPEC was 46 billion dollar and now it has reached to $62 billion because with the passage of time more and more projects have been included into the CPEC. Under CPEC many projects will be completed with public private partnership and others will be completed with the help of Chinese soft loans and investment money.

Time line of CPEC

CPEC will be completed in four phases that are

  1. Early harvest ———————————2018
  2. Short term plan —————————–2020
  3. Mid Term Plan——————————–2025
  4. Long Term Plan——————————-2030

Major components of CPEC

CPEC has four major components

  1. Energy
  2. Transportation
  3. Special Economic Zones
  4. Gawader Port

ENERGY

CPEC is contributing in all types of energy I,e. coal, Hydel, wind, solar etc. the major contribution of CPEC energy project is in coal sector. These projects will by run by both imported and exported coal. The volume of investment is 73# in energy sector. Till the end of 2017 10,400MW electricity is added to national grid and Chinese companies are working on built, operate and transfer model. . Currently about 15 projects are prioritized of capacity 11,110MW which includes two hydro projects of capacity of 1590MW are part of it. Till the end of 2021 additional 6120MW will be added to system. Energy corridor has become main backbone of CPEC as under energy corridor coal from Thar is being extracted for coal based power projects and this will help in the development of economically deprived areas.  Major chunk of CPEC projects come under power private infrastructure board (PPIB). They have two types of energy portfolios one is coal and other is Hydel. Their cumulative capacity is 10,934MW. Its distribution is as under:

  • Thar Coal 3960MW
  • Imported coal 4260MW
  • Hydel 2714MW

Major investment in energy sector is in IPP mode. PPIB has achieved following mile stones:

  1. COD of 1320MW Port Qasim, imported coal power project
  2. COD of 1320MW Sahiwal, imported coal power project.
  3. 10% progress has been achieved for 870MW in Suki Kinari Hydel IPP
  4. 30% progress achieved for 720MW karot Hydel IPP
  5. Financial closing is in progress for Kohala Hydel power project of 1124MW.
  6. Financial closing and construction has been started for 660MW Thar coal power project.
  7. Financial closing of 1320MW HUBCO imported coal power project.
  8. Working has been started on +/-600KV Mitiari-Lahore HVDC transmission line.

These projects have paved the way for job opportunities for local manpower. Chinese contractor are used local resources I,e construction material, cement, steel, diesel, paint contributing into the economic uplift of the country.

Transport Infrastructure.

Transport infrastructure is second component of CPEC that has revolutionized the region. It includes the motorways, Highways, railways, oil and gas pipe line projects. The roads and railways will connect Gawader on Arabian sea with khunjrab pass at china-Pakistan borders. In order to accommodate all provinces there are three routes , one is western route, second is central route, third is eastern route. Western route will pass through Quetta and its approximate length is 2474Km. central route will pass through DI Khan, DG khan, via Indus highway and its length is 2756Km. third route is eastern route that will follow Karachi-Lahore Motorway and its approximate length is 2781 Km. almost 23% amount is allocated for infrastructure development. There are two major railways project one is Main Line-1 that will connect Karachi to Lahore to Peshawar. Its length is 1875Km and cost is $8bn. Second major project is Karachi circular railway and its cost is $3.5bn.

Special Economic Zones.

After successful completion of energy and transport corridor , special economic zones will be built on both sides of road and in allover Pakistan. the basic idea is to develop a strong industrial base. Which will attract foreign investment and provide job  opportunities to local manpower and ultimate become source of economic prosperity of country. This manufacturing setup will include wide range of products from cheap toys and textile consumers electronics and supersonic fighter planes. In this industrial base Chinese will set up their factories with the help of local investors and pave the way for another industrial revolution in the country. Sam model has helped the succession of Indonesia, Japan, Hong Kong, Malaysia, South Korea , Taiwan, China from cheap manufacturing to advanced level exports. In this regard 33 SEZ will be setup out of which 9 have been shortlisted yet. Major industrial cities are Rashakai, Maqpoondas, Dhebaji, Boostan and Allama Iqbal industrial city near Faisalabad. In Pakistan manufacturing setup has become stagnant over the year. Investment to GDP has fallen from 20% to 15% with time. These SEZ’s will beef up the existing setup and provide a new blood line to economic prosperity and stability of our country. Under this model Pakistan will experience private sector led growth and govt. will just focus on policy making and its regulations.

Gwadar.

Gwadar is gateways of CPEC and a pivot point for both china and Pakistan. Gwadar is located in Arabian Sea and has landlocked position. It will provide shortest route to china for access of Arabian Sea for import of oil and goods from Gulf and western countries. It will provide an alternate route of Malacca Straits that is why china is taking keen interest for development of Gwadar Port at 700Km long coastal belt of Baluchistan. Gwadar Port was first under Singapore port authority but in later stage it was given to china Overseas Port Holding Company for 43 years. This company will complete all developmental work on Gwadar port. China will get 91% share of revenue and remaining will goes to Gwadar port authority. An industrial zone will also be established in Gwadar which will bring prosperity and development in Balochistan. Gwadar port is best in all three factors having depth 17 to 18 meter, no of births are 120 with cheaper labor cost. When Gwadar port will be developed its cargo handling capacity will be 400 million ton per annum, which will make it largest port in the region. China will also get the business of $500bn. It is believed that full operational Gwadar port will be hub of regional and international trade business.

Geo Strategic Importance of CPEC.

CPEC is flagship project of One Belt one Road initiative and has become strategically important for Pakistan and all over the world that includes central Asia, Europe, South Asia, and Persian Gulf. Since Pakistan is located at cross roads of South Asia, when CPEC will be completed it will become new engine of growth for three billion people living in this region. It is estimated that till 2050 the contribution of Asia in world GDP will be 52% and CPEC will be major source of it. On completion of Gwadar port, it will become hub of international business and trade. CPEC will provide regional connectivity and Pakistan will become the hub of trade, commerce, manufacturing and global supply chain through this part of world. Strategically it has changed the power equation of world. Through this project Pakistan has come closer to China and Russia and to counter this bloc US has joined hands with India. Its strategic importance can be estimated from the fact that India has established a special unit in her intelligence agency RAW with the budget of $500m to sabotage this project and its clear proof is arrest of Kulbhushan Jadhav.

Economic Uplift of the region and world.

CPEC has provided another bloodline and another chance of recovery to the economy of Pakistan. it has raised the GDP and per capita income of country. In the previous years from 2008 to 20113 the annual GDP growth was 3% only and after the CPEC it raised to 5% and for year 2018 it was 5.8%. 75% of income of CPEC is in IPP mode.

In energy sector all investment is private investment, not a single penny is taken as loan to Pakistan government. CPEC has also boost up the manufacturing sector GDP growth which was fallen previously from 20% to 15% in previous years. According to project director of CPEC “if Pakistan can be hub of 5% china’s total trade, a total of $250bn worth of goods will pass through country” and it will increase the economic prosperity of whole region. CPEC economic activity will increase the people to people connectivity that ensure the mutual prosperity and growth of people of whole region. SEZ’s will play a major role in economic growth of country because it will provide opportunities on both sides of people. CPEC has also reduced our current account deficit from $16bn to $5bn easing the pressure on external payments and external borrowings. With CPEC, Pakistan exports have touched $32bn by 2017~2018. Another economic benefit of CPEC is that it has uplifted the economically backward areas of Baluchistan and western provinces of china.it has also raised the per capita income of country that is $1600 and for china it is $9000. With the building of infrastructure it will enhance the trading activity and exchange of goods which will raise the livings standard of people of adjoining areas CPEC will also attract the foreign direct investment (FDI) from European, Middle Eastern countries that will lead to the economic prosperity of region. Since CPEC is integral part of BRI and it connects 68 countries and 60% population of the world, when CPEC grows it will impact the growth of whole belt and road imitative. As Deng Xio Peng once said “Cross the river by feeling stones”, so the path to economic prosperity is being crossed through the vision of CPEC.

In Pakistan the major achieved milestones are:

  • It has raised the GDP of country from 3% to 5.79%.
  • It has increased the per capita income of country to $1600.
  • With the development of Gwadar Port the property and real estate business will boom from 200 million to 30,000 million.
  • SEZs will alleviate the menace of unemployment and poverty and it will provide the opportunities of employment to technical, non-technical labor.
  • Toll taxes, Import duty, road taxes of chines good transfer will increase the volume of finance of national exchequer.
  • CPEC will turn the economically failed state to economic giant.

Social Implication of CPEC.

Poverty.

CPEC will create 85milllion jobs for three billion people of region and it will help to alleviate the poverty of large number of people. This project will bring the people of backward areas of Thar and Xin Jiang to mainstream elite of country. It will reduce the disparities of income among the rich and poor people of country.

Education.

Due to regional connectivity and people to people linkage, an educational revolution is underway. Both countries are promoting each other’s national language by keeping in view the future prospects of skill developments, HR development and mutual understanding. There are eight Chinese universities working to promote Urdu language and twelve Pakistani study centers are working to promote Chinese and mutual understanding of both countries. There are 22000 Pakistani students getting higher education in Chinese universities. Pakistani universities has started a course of Chinese language in their study curriculum. Technical and vocational institutes has been established in all over the region to produce skilled labor for whole project.

Cultural Revolution.

Since the essence of BRI and CPEC is connectivity, shared prosperity, so with the CPEC and BRI there will be Cultural Revolution in whole region. When projects are in progress, people meet each other at each level and pave the way for Cultural Revolution. Cultural exchange of people will help the adjustment of foreigners in each other countries. In Pakistan Chinese restaurants with chines people are working, Chinese people are investing in property and business and with all these steps a cultural revolution will come along with CPEC and BRI. When BRI will be completed it will revolutionized the 60% population,68 countries of the world with each other’s traditions.

Key challenges.

It is obvious that when you want to achieve something that is precious you have to face a lot of difficulties. Since CPEC is project of immense importance for both countries so there are many challenges ahead to its completion. The key challenges are security, foreign forces, provincialism, transparency, Baluchistan, and clean water issue at Gwadar port. Although these challenges are not insurmountable but a high level of effort is required to overcome these hurdles and successful completion of projects.

For security purposes the Govt. of Pakistan has taken two steps one is at federal level and second is at province level. At federal level a special security division is being established for CPEC purpose. There will be nine battalion of army and six battalion of civil forces. In Punjab, govt. of Punjab has established a special protection unit for the safety of Chinese personnel working on different projects.

Foreign forces are another hurdle. There are many international forces which are working against the completion of CPEC. US and Israel have openly criticized this project. India has established a separate cell in her intelligence agency with separate budget of $500million. Its prove is arrest of kulbhushan Jadhav, and Indian naval officer, from Iran border.

Political destabilization, ethnicity of provinces, provincialism are major challenges for CPEC’s timely completion. A national unity is required for successful completion of BRI’s flagship project I, e. CPEC.

To maintain transparency is another challenge in the ways of CPEC projects. All projects should be transparent, equally fair for all provinces and there should be no ambiguity at any stage. This thing will lead towards consensus building and a way for completion of CPEC projects.
Development of Baluchistan is another challenge for government of Pakistan, since after 1947, Baluchistan remained ignored province in every government and now time has come to provide equal opportunities and rights to people of Baluchistan. The main reason was security risks and involvement of foreign hands in the development of Baluchistan. To remove the insecurity of Baluch people will remained another challenge in the ways of CPEC because if we will not take care about it then it will increase inferiority complex of Baluch residents.

Availability of clean and portable water is another challenge in the Gawader port area. The daily demand of clean water is 12milllion Gallons per day but available water is only 1 million gallon per day. This capacity would be increased to 5MGD with the installation of desalination plants in the next six months.

Unavailability of different polices is another challenge to get maximum fruits of CPEC. We need energy policy, industrial policy, trade policy, foreign exchange policy, financial policy, and development policy. These policies will carve out the future direction and bright prospect of Pakistan.

Environmental challenges and impacts of CPEC. 

Wherever in the world, development projects are started environment problems, global warming remained a main constraint that handle the dynamics of projects. In CPEC a major chunk of electricity is being produced through coal imported and local reserves which is huge source of environment pollution and global warming. Although these projects have been designed by keeping in view the international standards but to maintain these limits will remain a challenge for any government. According to former Prime Minister Shahid Khaqan Abbasi addressing inaugural session of Dawn CPEC summit in Karachi said “All CPEC projects are designed on two factors one is economic viability and seconds is environment stability”. Another way forward is concept of ECO-civilization. Ecological civilization includes 6 policies as following:

  1. Protection of natural resources
  2. Establishment of national park system
  3. Protection of arable lands
  4. Establishment of green financing system.
  5. Water resource management.
  6. Improvement of environmental consumption mechanism.

Through adopting these policies we can preserve our environment and can save our future generations along with CPEC giant projects.

Digital future of Pakistan.

In long term plan two major digital projects have been included. One projects is fibre optic project. Fibre optic project has two phases. In the first phase a new cable will be laid down from china to federal capital. Its length will be 820Km and pass through GB, KPK, Punjab and then Islamabad capital territory. In  second phase Gawader will be connected to Sukkur. This project will bring the digital revolution in Pakistan as it will decrease security risks to loss of strategic and confidential data through already existing submarine fibre optic. It will increase digital connectivity of landlocked central Asian states with china and Pakistan. Second mind blowing project is provision of Digital Terrestrial Multimedia Broadcast system, it will transfer our existing broadcasting system to digital television. Other digital projects include, construction of safe cities, set up of E-government, development of E-commerce setup, IT industrial parks, all these projects will bring IT revolution in country with more advanced human resource development.

Conclusion.

From all above mentioned discussion it can be included that CPEC is shared destiny of both countries and it will prove game changer and fate changer of the region. Its geostrategic importance will lead the globe toward new world order. Both countries have signed long term plan which provided conceptual frame work of CPEC, covering basic conditions, opportunities, , possible challenges, and goals of both countries. Govt. of both countries have signed LTP and set principles, rules and regulations, definitions once for all in comprehensive, categorical and chronological way. Long term plan is available on the website of ministry of planning. This long term plan is completely in line with the Pakistan vision 2025 presented by former planning minister Ahsan Iqbal and provide a strong base for implementation of CPEC projects at every level. The CPEC is also in line with the vision of Chinese president Xi-jinping and that is “Shared community”. CPEC is not only a source of development but also a source of connectivity of region with rest of the world. Through this project we can attract investors and other stakeholders for different activities and on the other side we can increase our influence on the all other adjoining countries of belt and road initiative. According to former interior minister Ahsan Iqbal, CPEC has provided us a third chance to come out from poverty, economic crisis and stand along with the other developed countries and now it is our turn how much effort, seriousness and attention we will give to this project of international importance to turn the lives of 207.7 million people. Long Live Pakistan.

About Author: 

Muhammad Bilal Abdul Ghani is a Mechanical Engineer from the University of Engineering and technology Lahore. He can be contacted at bilalghani_03@hotmail.com

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