CPEC

According to Pakistan Economic Survey 2014-15, the volume of trade

between Pakistan and China has increased to $16 billion. Chinas exports to
Pakistan increased by ten percent during the five years from 2009- 10 to
2014-15. As a result, Chinas share in Pakistans total exports has gradually
picked up from four percent in 2009-10 to nine percent during the fiscal year
2014-15.The most recent milestone achieved in this bilateral relationship is
the signing of Memorandum on the construction of China-Pakistan Economic
Corridor (CPEC).
The CPEC is an ongoing development mega project which aims to connect
Gwadar Port of Pakistan to Chinas northwestern region of Xinjiang, via a
network of highways, railways and pipelines. The economic corridor and will
run about 2700 km from Gwadar to Kashghar.
China-Pakistan Economic Corridor and its connectivity with Central Asia,
Middle East and Africa will help to shape entire region. CPEC has been
divided in three phase short term project are estimated to be completed by
2017, midterm by 2025, and long term by 2030 Overall construction costs
are estimated around $51.5 billion.
The first phase comprises development at Gwadar Port and the construction
of an international airport. It will be completed in 2017. The Karakoram
Highway connecting the two countries will also be widened, while the rail
network between Peshawar in the north and Karachi in southern Pakistan will
be upgraded. The two countries also have a plan of fiber-optic
communication links.
The Corridor is an extension of Chinas proposed 21st century Silk Road
initiative. The corridor will be a strategic game changer in the region and
would go a long way in making Pakistan a richer and stronger entity.
The investment on the corridor will transform Pakistan into a regional
economic hub. The corridor will be a confidence booster for investors and
attract investment not only from China but other parts of the world as well.
Other than transportation infrastructure, the economic corridor will provide
Pakistan with telecommunications and energy infrastructure.

MAIN COMPONENTS OF CORRIDOR:

a. Gwadar ( including port and city and Gwadar region socio-economic
development)
b. Energy (Coal, Hydel, Wind, Solar, LNG , Transmission)
c. Transport Infrastructure (Road, Rail, Aviation)
d. Investment & Industrial Cooperation (Gwadar Free Zone and other
industrial parks to be finalized)
DIVERSE INVESTMENT OPPORTUNITIES
Industrial Cooperation
Financial Cooperation
Agricultural Cooperation
Tourism
Educational linkage
Human resource development
Health Care
People to people contact
Increase in livelihood opportunities
Enhance Security and stability of the region

Key points:
It is estimated that if all the planned projects are implemented, the
value of those projects would exceed all foreign direct investment in
Pakistan since 1970 and would be equivalent to 17% of Pakistan's 2015
gross domestic product. It is further estimated the CPEC project will
create some 700,000 direct jobs during the period 20152030 and add
up to 2.5 percentage points to the country's growth rate.
An additional 1.4 million indirect jobs will be added in supply-chain and
service sectors to support the projects. An example of indirect jobs is
the massive expansion in Pakistans cement production
Almost 80% of the Chinas oil is currently transported from the Middle
East through the Strait of Malacca to Shanghai, (distance is almost
16,000 km and takes 2-3 months). With Gwadar port in Pakistan
becoming operational, the distance would reduce to less than 5,000
km.
after the completion of 21 energy projects, their wiil be the potential to
produce 10,400 MW by March 2018
As part of infrastructure projects worth approximately $11 billion and
1,100 kilometer long motorway will be constructed between the cities
of Karachi and Lahore, while the Karakoram Highway between
Rawalpindi and the Chinese border will be completely reconstructed
and overhauled.
The KarachiPeshawar main railway line will also be upgraded to allow
for train travel at up to 160 kilometers per hour by December 2019.
Pakistan's railway network will also be extended to eventually connect
to China's Southern Xinjiang Railway in Kashgar.
A network of pipelines to transport liquefied natural gas and oil will
also be laid as part of the project, including a $2.5 billion pipeline
between Gwadar and Nawabshah to transport gas from Iran.
Compare it with the largest US port of Long Beach which handles 80
million tons of cargo, about a quarter of what Gwadar will handle upon

completion of the project. Gawadar port will be capable of handling the

world's largest container ships and massive oil tankers.

Significance of Gwadar
Gwadar is the port on the southwestern Arabian Sea coastline, in the
Balochistan province of Pakistan. It is about 635 km from Karachi and 120 km
from the Iranian border by road. Gwadar Port is located just outside the Strait
of Hormuz, Under CPEC, the Gwadar Port is strategically (economically)
important for China because it will bring closer the Middle Eastern ports to
China through Karakoram Highway (KKH) linking Gwadar with Kashgar. Under
CPEC, Gwadar Port is considered as Gateway of CPEC and Gwadar city as one
of the pivotal cities of the corridor. The first Special Economic Zone (SEZ) of
CPEC is being developed in Gwadar city.
Gwadar port, offer opportunities to prospective investor for development of
infrastructure such as storage, warehouses, hotels, marine workshops,
container freight stations, seafood, dates processing and export and offices
spaces for banks, clearing agents, ship agents. Chinese investors have taken
keen interest in establishing Marine Silk Route and establishment of heavy
industries in the industrial zone as per the Gwadar Port Master Plan (2006)
For China, it provides diversity, security and enhancement of energy
supplies. Currently, oil tanker takes approximately 20 - 30 days to reach from
Gulf to Shanghai, while through Gwadar, it is likely to take much lesser time
(may be less than a week) and also avoid choke points like Straits of Malacca
etc. In the strategic domain, the port is likely to serve China more than
Pakistan, as it provides a land based oil supply port under a trusted ally.
CPEC will also enable Pakistan to bypass Afghanistan to trade with Central
Asia through China across China's borders with Tajikistan, Kyrgyzstan and
Kazakhstan.
Gawadar vs Chabhar:
As an economic enterprise, for the CPEC, the greatest challenge comes from
competitors. The most significant is the Iranian port of Chabahar. India

intends to invest significantly ($85 million) in the development of Chabahar,

which lies a few miles away from Gwadar and is part of its efforts for access
to landlocked Afghanistan and Central Asia while bypassing rival Pakistan.
Chabahar will effectively be a way for energy imports coming from the Gulf
region and destined for Afghanistan and Central Asia. It will also be a
gateway to the Middle East, and possibly Europe, for exports originating from
Afghanistan and Central Asia.
The fact remains that Gwadar holds an edge over Chahbahar for its utility,
geographic location to dominate the maritime waters, and its proximity with
China due to the road link. Chabahar is not located in the Indian Ocean
Region where Indias other functional ports like; Mumbai, Kolkata and Goa
are located having the cover of the Indian Navy to ensure their maritime
operations. Whereas, the proximity of Gwadar to Chahbahar (only 72 kms).
Gwadar port's planned capacity when it is completed will be 300 to 400
million tons of cargo annually. It is comparable to the capacity of all of
India's ports combined annual capacity of 500 million tons of cargo. It is far
larger than the 10-12 million tons cargo handling capacity planned for
Chabahar.

Corridor Routes:
Pakistan has prepared a plan to construct three corridors after active consultation
with the Chinese authorities; these are the eastern alignment, the central alignment
and the western alignment.
Western alignment was the original alignment which the government says has been
deferred until the eastern alignment of the corridor is completed.
The western alignment will have an additional regional connectivity link to
Afghanistan through Chaman and will connect with Iran through Quetta. The work
on central alignment will be completed later.
The argument that some parts of the country are being deprived of the corridors
benefits may be true in the short-term but, in the longer term all these cities will be
connected to the corridor.

Challenges:
There are numerous internal and external challenges for Pakistan over Pakistan
China One Belt One Road Project. Here some very serious challenges have been
described.

Various

separatist leaders of the Balochistan province are opposing the

China-Pakistan Economic Corridor (CPEC). There have been occasional

kidnappings and killings of Chinese workers in Baluchistan.

 Some

political parties in KPK also have some issues with CPEC which is a big

challenge for this multibillion dollars project. The reason behind this
opposition is changes being made in the original plan of this corridor by the
federal government which will divert economic benefits to Punjab only,
however, China is also most interested to work on Eastern route first because
of some security concerns.

KPK

government believe that the original route will connect the under

developed areas of KPK and Fata to the Corridor and will generate economic
activities in the entire region but with adoption of new the alignment, these
areas would remain ignored.

Gwadar

is the tail of the Silk belt, which will connect at Kashgar through

different communication networks. The security of the whole corridor and

Gwadar is a real concern for China. After the military operation in different
parts of Pakistan, the terrorist infrastructure still exists inside and outside of
the borders which will continue to pose a threat

Chabhar vs Gwadar (as mentioned earlier)

China has raised serious concerns over the

issue of tax, power tariff and

electricity price with Pakistan along with the implementation process of the
China Pakistan Economic Corridor (CPEC) energy projects in Pakistan.
According to the agreement, under the CPEC, the imported equipment would
be exempt from sales tax and withholding tax. However, the approval
procedure from FBR is proving time-consuming, which is negatively impacting
on project construction timelines in Pakistan

Benefit to Pakistan:
Here are some benefits which Pakistan will take after the completion of CPEC.
Overcoming Energy crises: CPEC is the ideal project which will help rid
country of the energy crises. Energy availability in country will revive existing
industries, such as textile to full production and add an estimated 2 percent
to Pakistans GDP growth. CPEC will cover four areas; energy sector is one of
them. In the energy sector, project will be completed by 2018. These projects
would be based on wind, solar, coal and hydropower generation of 10,400
MW as well as the transmission system and would be located in all the
provinces and Azad Kashmir.

Infrastructure development including the development of roads, ports and

highways is another important segment of CPEC. This project basically will

improve Pakistans infrastructure connection with all sub regions in Asia, and
between Europe Asia and Africa step by step and will remove all investment
and trade barriers for the creation of a sound business environment within
the region and in all related countries.
The areas adjacent to the corridor would become attractive locations for

manufacturing, agricultural and services industries, Small and medium

enterprises would be special beneficiaries. Employment and economic growth
expand significantly
Balanced environment in South Asia: CPEC Project will also bring an

opportunity to Pakistan for normalization of ties with India, Iran and

Afghanistan which will keep balance, strengthen prospects of peace and
improve socio-economic status of the people of the region.
CPEC is a game changer project which will lift millions of Pakistanis out of
poverty and misery. The project embraces the construction of textile
garment, industrial park projects, construction of dams, the installation of
nuclear reactors and creating networks of road, railway line which will
generate employment and people will also take ownership of these projects.
Fully equipped hospitals, technical and vocational training institutes, water
supply and distribution in undeveloped areas will also improve the quality of
life of people.