CPEC Future Prospects and Challenges.pptx

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CPEC-Future
Prospects and
Challenges
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This postulation is devoted to: The Allah, my Creator and my Master, and envoy,
Mohammed (May Allah favor and give him), who showed us the motivation
behind life. My country Pakistan, the hottest womb; Allama Iqbal Open
University, Islamabad; my second wonderful home; My awesome guardians, who
never quit giving of themselves in incalculable ways, My dearest friend, who
drives me through the valley of dimness with light of trust and support, My

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cherished siblings and sisters; especially my dearest sibling, who remains by me
when things look disheartening, My beloved Parents: whom I can't compel myself
to quit loving. All the general population in my life who touch my heart, I commit
this research.

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ABSTRACT
Global economy paradigm is shifting from the West to the East while China is
torch bearer in this context with it’s master stroke OBOR project. The beauty of
this unique project is that it provides a new trade corridor and a new route to at
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least 60 countries. If we make an educated guess, then about 80% of the world
population would get benefit from this project. This project can be divided into
“Silk Road economic belt” and Maritime silk road”. For disbursement of funds,
five financial institutions are opened so that the complete burden should not fall on
China. Now it has been a proven fact that the US, few Western countries and India
are lobbying and conspiring against the OBOR project.
The most important project of this initiative is CPEC as it gives China access to
the most important geo-strategic location of Gwadar that had always been dream
of Russia and NATO for their strategic, military and economic interests in the
region. The only project which gives landlocked countries access to the sea. CPEC

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certainly can be game changer due to its potential of creating mass industrial
productivity, exports, and job creation not only for Pakistan but for entire South
Asian region.
Due to various factors, there are always chances that mistrust may prevail among
Pakistan and China, which can have a direct impact on Pakistan’s economy. The
economy plays a fundamental role in the development and strengthening of any
country, but unfortunately, Pakistan was unable to stabilize this sector for decades.
As soon as the situation becomes better, another incident of unrest happens.
Attacks like the Dasu hydropower plant in Khyber Pakhtunkhwa or like Serena
Hotel Quetta are preplanned efforts of our enemies like India to destabilize the

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project. Although, it has been accepted by Chinese think tanks on various
occasions that the security situation has improved in Pakistan during the recent
few years.

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Introduction
Chinese huge $62 billion investment in China-Pakistan Economic Corridor
(CPEC) project in Pakistan creates numerous prospects and challenges for the
economy and stability of Pakistan. CPEC is part of the China’s One Belt and
Road Initiative (OBRI), which connects different countries and encourages the
global economic Initiative. CPEC includes energy, agriculture, tourism, Gwadar
port, communication and connectivity infrastructure and many other different
types of projects. Currently CPEC first phase is completed and now second phase
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has begun. CPEC can play the most important role in the future direction of the
Pakistani economy. CPEC is very beneficial for the people of Pakistan and
China. This review study on the prospects and challenges for economy of
Pakistan from the perspective of CPEC is evaluating the recent scenarios, which
sees the potential and evaluation of areas on economic activities and potential
threats, which can counter by the governments of Pakistan and China on regional
and global level. This study also highlights the difficulties, which are creating by
the India to impose sanctions on economic products of Pakistan through the
platform of (Financial Action Task Force) FATF and harm the projects of CPEC.
The findings revealed that Pakistan must promote the CPEC, counter CPEC

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propaganda, and integrate with the plan to create a smoother image of Pakistan,
achieve national cohesion and reduce radicalization. Moreover, China and
Pakistan should work together to break the shadow of distrust.
China and Pakistan have long maintained diplomatic and military ties. However,
close economic cooperation is a more recent development. The flagship project of
China’s ambitious Belt and Road Initiative (BRI) — the China-Pakistan Economic
Corridor (CPEC) — is expected to provide $40 billion in Chinese investments to
Pakistan. CPEC is not only a strong economic boon for Pakistan’s economic
growth in the next three to five years, but also an opportunity for Pakistan to
stabilize its society and reshape its image from a fragile state to an emerging

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economy in Asia. From a geopolitical perspective, CPEC is also regarded as a
game-changing project in South and Central Asia. The prospect is promising,
although the detailed opportunities and challenges CPEC faces still need to be
carefully evaluated. Although CPEC is a bilateral project between China and
Pakistan, it has already drawn interest and worry from other stakeholders in the
region, including the United States and India.
Pakistan is important not only for the stability of South Asia, but for US national
interests (including Afghanistan policy), China’s regional interests, global
counterterrorism, and the stability of the Muslim world as well. CPEC acts as a
game-changing opportunity for Pakistan’s development and its future role in the

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region. With the implementation of CPEC and the emerging
attractiveness of Pakistan and the South Asia region, Chinese and US economic
and security interests in Pakistan and the region are converging.
Pakistan has about 200 million people and is the second-most-populous Muslim-
majority country in the world. It shares borders with India, China, Afghanistan,
and Iran, which are all important players to the stability of the region and the
world. As a nuclear country, Pakistan’s influence should not be underestimated.
The country has a number of extremist groups and global terrorist organizations,
and has sacrificed soldiers, civilians, and treasure fighting terrorism. Pakistan is
still a fragile and internally divided state with a promising yet troubled economy.
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commercial
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US strategy and policies towards Pakistan need to be reoriented and reshaped.
Pakistan and South Asia have long posed a challenge for US leaders, and that
challenge has become one of the priorities of the Trump administration, as
evidenced in the newly-announced strategy for Afghanistan and South Asia.
Opportunities
CPEC offers a number of opportunities, the first of which is economic
development. The large influx of investments will work as a strong economic
incentive for Pakistan’s government and social sectors to improve the business
environment and enhance commercial attractiveness for more foreign investments,
which will not only benefit Chinese investors engaged in CPEC, but will also

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benefit all foreign investors in
Industrialization in Pakistan will also help to create jobs for the country’s large,
under-employed population, turning a social and fiscal burden into an economic
and developmental driver.
A second opportunity that CPEC could provide is stabilization and improved
security. With planned infrastructure, energy, and manufacturing investments,
CPEC will create more private-sector opportunities and offer a realistic pathway
out of poverty for Pakistan’s people, especially those extremely poor who
otherwise may be tempted to fight as mercenaries for the Taliban or ISIS.
Economic development will help to maintain domestic stability and enhance
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Pakistan, including the United States.
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security in Pakistan for the medium to long term. Combined with strengthened
governance and improved capacity, Pakistan will have greater political willingness
and capability to fulfill its security commitment and responsibilities for global
counterterrorism.
Finally, CPEC could contribute to the further integration of South Asia. The core
vision of CPEC is to improve infrastructure to facilitate interconnectivity. The
project is expected to connect China, Pakistan, Iran, Afghanistan, and Central
Asian countries together, integrating a market of two billion people and stabilizing
the region. CPEC will empower South Asia to enjoy the full benefits of region-
wide trade, stretching from Iran to China.

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Challenges
Despite the many opportunities that CPEC potentially affords, clearly there are
challenges too. First, CPEC could be an opportunity to enhance governance, but
for CPEC to succeed in the first place Pakistan’s political and social governance is
vital. By the end of 2016, almost all of Pakistan’s political parties as well as the
different provincial governments formed a political consensus in support of CPEC.
But, with the large amount of foreign investments expected, there must be the fair
and efficient allocation of development benefits. This will be a test of Pakistan’s
political and social governance capabilities.
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Second, security will remain a challenge. For now, the Pakistani government and
military have arranged more than 10,000 security forces to protect the people and
projects of CPEC while a long-term and sustainable security mechanism is built.
Finally, there is geopolitics. The complaints that China’s promotion of CPEC blurs
the distinction between political strategy and commercial interests demonstrate
that the other main players in the region like India may try to contain CPEC and
dismiss the potential cooperation opportunities brought by the project. With the
concern that an empowered Pakistan will threaten India, India may provoke
Pakistan, trapping the two states in traditional hostilities and losing the focus on
economic development.

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Implications of CPEC
CPEC is intended to strengthen and diversify Pakistan’s role in South Asia,
activate Pakistan’s role in the global value chain and to integrate the whole South
Asia region. The project also works as a benchmark or complementary project for
existing US cooperation programs with Pakistan. China, the United States, and the
global community should make full use of their respective resources to stabilize
Pakistan and support its economic development as a new emerging economy in
Asia. US support for CPEC, or simply no containment of China’s engagement in
Pakistan and the region, will also reduce the trust deficit between Pakistan and the
United States.
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Moreover, the US government can also encourage or facilitate US companies’
entry and business in Pakistan, helping them to create a better business
environment. With such facilitation, American high-end manufacturing companies
like GE, Caterpillar, and top consulting firms like McKinsey will be able to seize
the emerging commercial opportunities with CPEC in infrastructure, energy,
manufacturing, and other industries and become beneficiaries of CPEC-driven
business opportunities in Pakistan.
CPEC in particular offers a win-win situation for participating nations and it has a
strong component of social development, poverty alleviation, and demographic
uplift, unlike similar programs offered by other international donors. CPEC would

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not impact its balance of payments of Pakistan at any stage. The payment schedule
is very relaxed. It’s about geo-economics and the establishment of a non-
exploitable economic system. Another point is that CPEC is a transparent project
with all its details present on its websites. The projects of CPEC are not only
confined to specific areas but its network is present in the whole of Pakistan.
Although, it’s correct that Pakistan has a risky security environment, but Pakistan
has taken various positive steps in this regard like raising two “Security Divisions”
in Pakistan Army, incorporating special paramilitary forces, increasing
intelligence apparatus, and improving local police networks.

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There are eight main core areas linked with CPEC which are ‘integrated
transportation system’, ‘information network infrastructure’, cooperation in
‘energy related’ fields, ‘trade and industrial parks’, ‘agricultural development and
poverty alleviation, ‘tourism’, ‘social development and non-government
exchanges’ and lastly ‘financial cooperation’. CPEC is now attracting other
countries around the world who are also expressing their desire to join it.
In present circumstances, the CPEC projects must be completed as soon as
possible so that Pakistan’s geographical location can be truly exploited. Our
narrative building part is weaker in International media as India and other lobbies
are floating a huge bulk of anti-CPEC stories with fake facts and figures, we have

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to give proper rebuttal and our side of the story must be backed with verified facts
and figures. Another point to be focused on is that a prosperous Balochistan would
strengthen CPEC’s foundation. This is a real game-changer and we have to engage
maximum countries of the world in this project to get moral, social, and financial
support.
Conclusion & Recommendations
PAKISTAN and China have been trying their best to stimulate the China-Pakistan
Economic Corridor (CPEC) since its inception.
But unfortunately, some pseudo intellectuals, paid NGOs and self-centric media
outlets have been playing in the hands of foreigners to pollute the real spirits of

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CPEC. It seems that they do not have any sense of nationalism but plenty of
notorious agendas.
While Prime Minister Imran Khan and a Pakistani delegation was in China to
attend the opening ceremony of Beijing Winter Olympics one of the leading media
houses of the country intentionally published a report of Asian Development Bank
titled “Economic Corridor Development in Pakistan: Concept, Framework and
Case Studies” and thus circulated negative sentiments against CPEC, the lifeline
of Pakistan’s economy and guarantor of its future as described by Premier Imran
Khan.

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The said report indicated flaws in the country’s strategic geopolitical potential and
suggested improvement in regional and international economic connectivity to get
any benefit from CPEC and termed structural reforms vital to achieve optimal
benefits.
However, greater regional connectivity always depends upon geopolitics and
CPEC stands for geo-economy.
Thus this report’s assumption is not correct. It further elaborated that if CPEC is
successfully implemented; Pakistan can harness its strategic geopolitical location,
improve its regional and international economic connectivity, enhance industrial
development and become an economic hub for Central, South and West Asia.

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By saying this in complicated manners it intentionally undermined CPEC’s real
potential by attaching its efficiency and efficacy with structural reforms of private
sector development thus purposefully created doubts about strategic orientations
of CPEC.
The report observed that tax reforms are essential to broaden the tax base and
enhance the perceived fairness of the tax system. Infrastructure built under the
CPEC should be fully utilised to expand trade and regional cooperation.
It seems that the timing of this report and consequently its publication in the
country has some close liaison among the hidden enemies of prosperity and people
alike which tried to portray CPEC as an average project.

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Moreover, the absurd correlation of CPEC with the domestic tax system, reforms
and other segments of the national economy are rather misleading and
misconceived. Thus intentionally CPEC was put in the line of fire.
The study says Pakistan should transform its economy through export-led growth.
In this connection, CPEC would play a very important role in the country by
establishing Special Economic Free Zones and relocating Chinese firms.
Thus CPEC has direct correlation with the export capacity building mechanism of
the country because the economy works in integration not isolation. The report
pinpoints many policy flaws in the macro-economy of the country which actually
has nothing do with CPEC, its utility, orientation, scope and significance.

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CPEC is a concept and cooperative model to stimulate different sectors of the
economy. CPEC is a holistic approach to develop the national economy.
Moreover, it is a platform which provides important inputs for rapid growth in the
country.
CPEC has nothing to do with poor export performance of the country or low
productivity and a lack of competitiveness.
It surfaced because of an unfavourable trade policy environment, wrong economic
and financial assumptions and inconsistent policies of the government.
Furthermore, CPEC is not answerable to an overvalued exchange rate and
escalation of tariff on imported raw material and intermediate goods that

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resultantly contributed to a fall in exports, resulting in a consistently large trade
deficit, which stood at $32.8 billion in FY2019. On the contrary, CPEC stimulated
the energy sector and geared up infrastructural development and thus further
consolidated economic conditions of the country.
It may further enhance the manufacturing capacity of Pakistan. The current
economic meltdown is the result of various complicated reasons in which CPEC
does not play any negative role.
In addition to this, the increase in interest rates to 13.25pc in 2019 had
substantially raised the cost of capital to firms which may further dampen

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investment and exports. Thus CPEC does not have any role in the monetary policy
of the country.
It is suggested that the government should expedite the development of the nine
special economic zones (SEZs) planned along the CPEC routes and focus on
labour, capital, technology, knowledge, innovation and structural transformation
. Moreover, more focus should be given to the development of the agriculture
sector in CPEC phase-II so that a balanced economic policy would be
implemented.

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The said report indicated that urbanised and industrialised, challenges such as
infrastructure deficits, overstretched public services and environmental stress
should be addressed as soon as possible.
However, CPEC phase-II initiation of green projects, agriculture development,
climate change engineering and ecological development would provide an ideal
platform to curb these irritants of the economy in the country.
On the contrary, Pakistan and China signed a five-year Industrial Cooperation
Framework Agreement (ICFA) to re-energise the CPEC during the recent visit of
PM Imran Khan and thus successfully negated all misconceptions and
misperceptions about CPEC.

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According to the text of the ICFA, Pakistan has agreed to take responsibility of the
Chinese lives and property, in addition to providing “special beneficial support for
water and power supply that are necessary to develop SEZs and provide efficient
and favourable policy support for Chinese enterprises which are intending to
invest or have already invested in the Pakistani SEZs”.
The signing of the ICFA under CPEC is a first “serious” step by the government
during the past three-and-a-half years to put the multibillion initiative of President
Xi back on track.
Pakistan will facilitate the Chinese businesses in an efficient manner in accordance
with the domestic law.

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It will also improve the domestic business environment, provide policy support for
Gwadar Free Trade Zone, Rashakai SEZ and other SEZs, guard the safety of
enterprises and employees investing in the country, provide special beneficial
support for water and power supply which are necessary to develop the SEZs and
provide efficient and favourable policy support for Chinese enterprises which are
intending to invest or have already invested in the SEZs.
In wide-ranging talks with Chinese Premier Li Keqiang, Prime Minister Imran
Khan underscored the importance of Pakistan and China working together to
promote shared objectives of peace, stability and development in Afghanistan and
regional connectivity.

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During their meeting, the Premiers of Pakistan and China reviewed the entire
gamut of bilateral ties including discussions on the bilateral economic and trade
relations, onward march of CPEC and important issues of regional and global
concern.
PM Khan appreciated the transformational impact of CPEC on Pakistan’s
infrastructure, energy, socio-economic development and improvement in
livelihoods of the people.
He underlined that Pakistan was committed to high quality development of CPEC
through its mutually reinforcing industrial, trade, health, digital and green
corridors.

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To conclude, CPEC has become a strategic asset which badly needs a specific
national narrative to mitigate all false news. Healthy contribution of the Press, not
the puppetry journalists, sensible policy makers and not the pseudo intellectuals is
the need of the hour.
Economic flaws, financial crunch and imbalanced spells of development may be
streamlined with the successful completion of CPEC projects, especially in energy
(green), agriculture, social development, AI, ICT and health. Thus national unity
must be our mantra.
References
 Official CPEC website (Government of Pakistan)

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 Samrez Salik, Muhammad (2018). "China-Pakistan Economic Corridor: A
Perspective from Pakistan". Asian Journal of Middle Eastern and Islamic
Studies. 12 (2): 142–
154. doi:10.1080/25765949.2018.1481619. S2CID 158441766.
 Husain, Khurram (15 May 2017). "Exclusive: CPEC master plan
revealed". Dawn.com. Retrieved 15 May 2017.
 Rafiq, Arif, "The China-Pakistan Economic Corridor: Barriers and
Impact," United States Institute of Peace, October 2017.
 "China-Pakistan Economic Corridor: Opportunities and Risks", International
Crisis Group, 29 June 2018.

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