COMPLETE & COMPREHENSIVE PRESENTATION ON CPEC

1. CPEC
China Pakistan Economic Corridor

2. 1) Introduction
2) Four major components.
I. Energy
II. Infrastructure
III. Special economic zones
IV. Gawader Port
3) Key challenges
4) Critical Analysis
5) Conclusion
6) Recommendations
Outline

3. CPEC is a fusion of multiple corridors:
1. Investment corridor
2. Trade corridor
3. Energy corridor
4. Transport corridor
5. Infrastructure corridor
6. Industrial corridor
Introduction

4.  CPEC is first of the six corridors that China has
embarked on under One Belt One Road (OBOR)
initiative.
 The second corridor will pass through Central Asia to
Turkey,
 The third through Eurasia,
 The fourth Mongolia and Russia,
 The fifth East Asia and
 The sixth corridor through India.
Introduction

6.  The 3,000-km long CPEC consisting of highways,
railways and pipelines connects China’s landlocked
north-western province of Xinjiang to Pakistan’s
Gwadar Port.
 CPEC is not restricted to Pakistan. It is a project under
the Chinese vision of ‘One Belt One Road’ that will link
64 countries including Pakistan.
Introduction

7.  Joint Cooperation Committee (JCC) is the key decision
making body, its 7th meeting held on 21st November
2017, in Islamabad.
 There are five joint working groups (JWGs) — Gwadar,
energy, transport infrastructure, special economic zones
and planning
 33 potential sites for SEZs in all provinces identified
from Khunjrab to Gwader
Introduction

8.  The CPEC offers huge investment and trade
opportunities. Major investment areas are;
 Energy $33.7 b (73%)
 Transport and infrastructure $10.6b (23%)
 Others $1.84b (4%)
Introduction

9.  The idea transformed into a Memorandum of
Understanding (MoU) in 2013.
 Formal agreements there under finalized in 2015 by
signing 51 MOUs.
 The first trade activity took place on November 13,
2016.
 CPEC should take an initial shape by 2020,
 By 2025, the CPEC building shall be basically done
Introduction

10.  For Pakistan it is beneficial due to investment, transport
infrastructure, energy projects, industrialization and
Gawader port. Its GDP would enhance, employment
opportunities increase, export enhancement in future.
 For China, it is part of OBOR. China annually imports
2.3 billion barrels of oil from Middle East which costs
$7.3 Billion.
 CPEC would reduce this cost significantly.
Introduction

11.  CPEC to be completed in four phases:
 2018 – Early Harvest
 2020 – Short Term
 2025 – Medium Term
 2030 – Long Term
 The LTP envisions the two countries striving for
synchronisation and reciprocity of economic
development.
Intoduction

12. Energy
Transport infrastructure
Special Economic Zones
Gawader Port
Four Major Components

14.  The first phase of the economic corridor is focused on
$33.7 b (73%) worth of energy projects.
 China’s state-owned banks will finance Chinese
companies to fund, build and operate $45.6 billion worth
of energy and infrastructure projects in Pakistan over the
next six years.
1- Energy

15.  Major Chinese companies investing in Pakistan’s energy
sector will include China’s Three Gorges Corp which
built the world’s biggest hydro power project, and China
Power International Development Ltd.
 $15.5 billion worth of coal, wind, solar and hydro
energy projects will come online by 2017 and add
10,400 megawatts of energy to the national grid.
1. Energy

16.  Currently, about 15 prioritized energy projects valuing at
$22.4 billion and having 11,110-megawatt generation
capacity are part of the CPEC framework.
 Among these, only two are hydroelectric power projects
with cumulative capacity of 1,590MW.
 Most of the CPEC energy projects are based on coal.
 An additional 6,120 megawatts will be added to the
national grid at a cost of $18.2 billion by 2021.
1. Energy

17.  The transport and communication infrastructure – roads,
railways, cable, and oil and gas pipelines – will stretch
2,700 kilometers from Gwadar on the Arabian Sea to the
Khunjerab Pass at the China-Pakistan border in the
Karakorams.
 There are three routes of corridor, Western, Eastern and
Central.
 About $10 Billion (23%) have been allocated for this
purposes.
2. Transport Infrastructure

18.  Long term Alignment
 Length 2,442 Km
 Route-1 via Quetta
 Length 2,474 Km
 Route-2 via Indus Highway
 Length 2,756 Km
 Route -3 via Motorway
 Length 2,781 km
2. Transport Infrastructure

19.  The key projects are $8bn Main Line-I (the 1,875km
railway line from Karachi to Lahore to Peshawar) and
 $3.5bn Karachi Circular Railway.
2. Transport Infrastructure – Railways

20.  Beyond the initial phase, there are plans to establish
special economic zones in the Corridor where Chinese
companies will locate factories.
 Extensive manufacturing collaboration between the two
neighbours will include a wide range of products from
cheap toys and textiles to consumer electronics and
supersonic fighter planes.
3. Special economic zones

21.  The basic idea of an industrial corridor is to develop a
sound industrial base, served by competitive
infrastructure as a prerequisite for attracting investments
into export oriented industries and manufacturing.
3. Special economic zones

22.  Rashakai near Nowshera - 1,000-acre land
 Maqpoondas in GB
 Dhabeji economic zone in Sindh, 1,000 acres
 An industrial park on 1,500 acres of Pakistan Steel
Mills’ land at Port Qasim
 200-acre Bostan industrial zone in Balochistan
 Allama Iqbal industrial city near Faisalabad
3. Nine Sezs

23.  Mohmand marble city in Fata,
 ICT model industrial zone in Islamabad and
 A mix-industry special zone in Mirpur, AJK
3. Nine Sezs

24.  Such industries have helped a succession of countries
like Indonesia, Japan, Hong Kong, Malaysia, South
Korea, Taiwan, China and now even Vietnam rise from
low-cost manufacturing base to more advanced, high-
end exports.
 As a country’s labour gets too expensive to be used to
produce low-value products, some poorer country take
over.
3. Special economic zones

25.  Once completed, the China-Pakistan Economic
Corridor with a sound industrial base and competitive
infrastructure combined with low labour costs is
expected to draw growing FDI from manufacturers in
many other countries looking for a low-cost location to
build products for exports to rich OECD nations.
3. Special economic zones

26.  Pak-China 40 Years Agreement
 Ports are categorized by its three features.
 Depth of the seaport
 Number of berths
 Labour cost
 Cargo Handling Capacity
 Conclusion
4. Gwader Port (GP)

27.  Pakistan has signed a 40-year agreement with China for
the Gwadar Port operations.
 Under the agreement, China would carry out all the
development work on the port.
 China has 91 percent share of revenue collection from
the gross revenue of the terminal and marine operations
and
 Gawader Port Authority would get 9% revenue.
4. GP- 40 Years Agreement

28.  The agreement was based on a build-operate and transfer
model spread over 40 years.
 That means that Pakistan will take over the operation of
the port along with the infrastructure to be built on it
during the period to enhance the port’s cargo-handling
capacity.
 85% share from gross revenue of free zone operation.
4. GP- 40 Years Agreement

29.  Gawader 17 to 18 M
 Karachi 9 to 10 M
 Jebel Ali (UAE) 15 to 16 M
 Khor Fakkan (UAE) 16 M
 Bander Abbas (IRAN) 9 to 10 M
 Chabahar (Iran) 11M
 Salala (Oman) 10 M
 Damam (Saudi Arabia) 9 M
 Doha (Qater) 11 to 12 M
4. Depth of the seaport - GP

30.  Gawader 120
 Karachi 33
 Jebel Ali (UAE) 67
 Bander Abbas (IRAN) 24
 Chabahar (Iran) 10
 Salala (Oman) 19
 Damam (Saudi Arabia) 39
 Doha (Qater) 29
4. Number of berths - GP

31.  In labour rate Pakistan is the cheapest in the region and
providing cheap manpower to other regional ports.
4. Labour cost - GP

32.  The Gawader Port capacity of cargo handling is over
400 million ton per year (After Completion) which
would make it largest in the region.
4. Cargo Handling Capacity - GP

33.  Gawader Port is best in all features.
 Ports cannot be run without massive investment and
business.
 China itself expected business through Gawader Port is
over $500 billion dollar.
 Its believed, after full operational Gawader Port would
be the regional hub of international business.
Conclusion - GP

34.  While the commitment is there on both sides to make the
corridor a reality, there are many challenges that need to
be overcome.
 The key ones are maintaining security and political
stability, ensuring transparency, good governance and
quality of execution.
 These challenges are not insurmountable but
overcoming them does require serious effort on the part
of both sides.
Key challenges

35.  Security: A Special Security Division (SSD) is being
set up for the China-Pakistan Economic Corridor,
consisting of nine battalions of the army and six
battalions of the civilian forces.
 $250 million sanctioned for army force to guard Chinese
personnel working on CPEC – $60 million annual
budget.
Key challenges

36.  Foreign forces which did not view the project positively
and were trying to sabotage the project. India is at the
forefront due to disputed region.
 RAW has established a special cell at a cost of $500
million to sabotage the CPEC, according to CJCSC
General Zubair Mehmood Hayat.
 USA has also shown its reservations. Israel is also
against it.
Key challenges

37.  Provincialism. All the four provinces were not on the
same page at the outset, on its routes and the
establishment of SEZs at the outset.
 Some call it China Punjab Economic Corridor.
 Baluchistan and KP accused the PML (N) government
for diverting it to other provinces as originally there was
one route.
 PML (N) is of the view that CPEC is for all provinces.
Key challenges

38.  Transparency in order to remove any ambiguities about
the economic corridor. It should remove sense of
deprivation while focusing on building consensus.
 Balochistan, being the backward province should get
the lion share followed by KP, GB and AJK.
Key challenges

39.  One challenging aspect of the CPEC is the availability
of portable water for Gwadar Port City, for which
authorities are running from pillar to post.
 Against the requirement of 12 million gallons per day
(MGD) for the port city, the authorities have been able
to ensure around 1MGD for now.
 The supply would be increased to 5MGD with the
installation of a desalination plant in six to 10 months.
Key challenges

40.  The success of this initiative lies in successful
interaction between investment, institutions and policy.
 What policies are needed to maximise benefits and
minimise costs to the country?
 There are several, but at least six areas need careful
design and execution
(Policy imperatives for CPEC)
ISHRAT HUSAIN Dawn, 10-4-2017
Critical Analysis

41. 1. Energy policy: Circular Debt, line loses, theft
2. Industrial policy:
3. Trade policy:
4. Foreign exchange regime
5. Financial policy:
6. Skill development policy:
(Policy imperatives for CPEC)
ISHRAT HUSAIN Dawn, 10-4-2017
Critical Analysis

42.  Here is a set of 12 questions, the answers to which will help
form a basis of informed discussion.
1. Has Pakistan prepared an overall CPEC Feasibility?
2. Has Pakistan prepared a CPEC Environment Impact
Assessment?
3. What is Pakistan’s share in Gwadar port revenues, if any?
(Losses and gains Kaiser Bengali, The
News 10/09/2017)
Critical Analysis

43. 4. What is Balochistan’s share in Gwadar port revenues,
if any?
5. Is the Gwadar-Khunjrab Highway a toll road? If yes,
what are the shares for provinces through which the
Highway passes?
6. What will be the (positive and adverse) impact of
China Transit Trade on Pakistan’s manufacturing
sector?
Critical Analysis

44. 7. What will be the impact of tax exemptions to CPEC-
related foreign imports on Pakistan’s manufacturing
sector?
8. What will be the (medium and long-term) Balance of
Payments impact of foreign exchange inflows (Loans,
FDI) and outflows (debt repayment, profit
remittance)?
9. What is the budgetary burden on Pakistan for
protecting foreign road and sea convoys?
Critical Analysis

45. 10. What percentage of security units, being raised for
CPEC related protection, recruited from districts
through which the Gwadar-Khunjrab Highway passes?
11. What is the water provision plan for Gwadar? If
desalinated, what is the financing plan to cover the
high cost?
12. What is the plan to ensure that Gwadar does not
become a Baloch minority city?
Critical Analysis

46.  If CPEC’s overall feasibility in terms of economic,
social, environmental, political and military impacts has
not been carried out, it would amount to jumping in the
sea with blindfolds. (Q, 1&2).
 Questions 6, 7, 8 and 9 are crucially relevant to the
national economy. Potentially, CPEC can pose three
macroeconomic hazards for Pakistan’s economy.
Critical Analysis

47.  Balance of Payments stability: CPEC-related foreign
and foreign-supported investments is largely, if not
almost exclusively, in the form of loans and FDI.
 The former will entail debt servicing and the latter profit
remittance to host countries.
 If corresponding foreign exchange inflows are not
ensured there is likely to be a Balance of Payments
crisis.
Critical Analysis

48.  The manufacturing sector: The Gwadar-Kashgar
traffic is another name for China transit trade, the goods
in transit leaking into the Pakistan market, like Afghan
transit trade, may have negative repercussions.
 Experience shows that tax exemptions to industries or to
regions have only created distortions, without
benefitting the economy.
Critical Analysis

49.  Fiscal stability: Security expenditure: Pakistan’s
commitment to CPEC extends to providing maximum
security on land and at sea. To this end, it is raising
dedicated security units, which will entail rupee costs to
be met from the national budget, unless funded
autonomously.
Critical Analysis

50.  Water: The water availability question in Gwadar is
serious, but always brushed under the carpet to avoid
discussion.
Critical Analysis

51.  Questions 3, 4, 5, 10, and 11 relate to Balochistan.
CPEC is Gwadar and Gwadar is Balochistan. If
Balochistan’s share of economic benefits are not
substantial, then CPEC is irrelevant to the province.
 Mention of the three necessary conditions —
connectivity, urban development and human resource
development — without which CPEC will not be a game
changer for Balochistan.
Critical Analysis

52.  CPEC is an important project not only for both the
countries but also for the whole region.
 Its successful completion is dependent on the leadership,
institutions, policies of both countries.
 It should be a win-win situation for both countries and in
Pakistan, Baluchistan should be its greatest beneficiary.
Conclusion

53.  It should be mutually beneficial by addressing the
mutual concerns.
 Pakistan should keep its own house in order for getting
its full benefits.
 Regional disputes must be given priority for its
resolution.
 China should not dictate its terms of reference.
 All the provinces and regions should get its due share.
Recommendations

54.  All provinces must stand united to foil the designs
against the CPEC.
 Issues related to routes and location of economic zones
must be settled amicably.
Recommendations