12/25/2019 CPEC the game changer for Pakistan’s politics, economy

CPEC the game changer for Pakistan’s politics, economy

 Arooj Asghar  January 7, 2019  Cover Stories, Economy  1,444 Views 
Traditionally, Pakistan and China have cooperated closely at the strategic and political levels. Since 2014, the
two countries are now making efforts to expand their bilateral collaboration economically as well. The
construction of the China-Pakistan Economic Corridor (CPEC) is a milestone that clearly shows the shift. The
CPEC is a large-scale initiative to build energy, highway, and port infrastructure in Pakistan by Chinese
companies with the support of the Chinese government. China came forward at a time when no other country
was willing to invest in Pakistan. In order to make the economic corridor a success, control on terrorism and
improved security situation in Pakistan were prerequisites. China first proposed the corridor project in May
2013 and was given a name Pakistan China Economic Corridor which was later changed to China Pakistan
Economic Corridor. Chinese President Xi Jinping visited Pakistan in April 2015, and both sides agreed to elevate
their relationship to an “all-weather strategic partnership.” During President Xi’s visit, the two countries signed
fifty-one agreements at an estimated value of USD 46 billion.

CPEC is a collection of infrastructure projects that are currently under construction throughout Pakistan.
Originally valued at USD 46 billion, the value of CPEC projects is now worth USD 62 billion as of 2017.
Groundbreaking of first CPEC project was held in May 2016 in Sukkur, Sindh and construction began on a
section of Motorway between Sukkur and Multan. The road network is a major component of the CPEC.

The corridor will reduce sea-land route distance between Europe and Western China to less than half. One of
the major milestones in the history of Pakistan was achieved on 13 November 2016 when first large shipment
of Chinese goods went through Gwadar Port. Gwadar Port is a backbone of overall CPEC project. CPEC is one
component of China’s mega One Belt and One Road Initiative (OBOR), which is spread over a number of
continents and crosses through numerous countries. China wants warm waters of Indian Ocean of Pakistan
and CPEC can create a certain level of stability within Pakistan whereas in turn can also stabilize China’s
western areas, particularly the province of Xinjiang. Almost 80 percent of China’s oil is currently transported
from Strait of Malacca to Shanghai. Transportation time of oil imports from the Middle East and Africa will be

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12/25/2019 CPEC the game changer for Pakistan’s politics, economy

reduced from over 30 days to just 2 days after completion of pipeline projects and will not be dependent on
shipping through Straits of Malacca and the vulnerable maritime routes.

Pakistan realized that no other country placed such high strategic importance in its economic relationship with
Pakistan as China did. Pakistan greatly values the economic corridor and views it as mutually beneficial in
terms of politics and economic development.

A blueprint for economic development was published in 2014 by Ministry of Planning, Development and
Reform. Like in many other issues, various parties in Pakistan disagreed on the CPEC transportation routes
because of their vested interests and wanted to take their share. There are two routes considered for CPEC
transportation routes, eastern and western. In fact, since the initiative was first presented in 2013, the debate
over which route the CPEC would follow caused substantial delays.

Both Pakistan and China have started the second phase of CPEC. The next phase of CPEC includes agriculture,

culture, tourism, information technology, education and youth exchanges. If both governments negotiate a
mutually beneficial deal on Pakistani agricultural exports, especially cotton and sticky rice, that would sell very

well in China and fetch a high price. The second phase of the CPEC project includes building economic zones
and industrial estates across Pakistan to uplift industrial development and boost the economy. These include

constructing special economic zones (SEZ) in Dhabeji, Faisalabad, Rashakai, Hattar, Keti Bander and
Sheikhupura. Industrial estates will be built in Vehari, Chunian and Rahim Yar Khan.

The Chinese government has made abundant funds available for investments in Pakistan and Chinese
government is giving rebate in China to Chinese companies investing under CPEC. Similarly, Pakistan has also

offered sovereign guarantees, tax concessions and exemptions along with guaranteed revenue stream to
Chinese companies. In short, CPEC is a huge business opportunity for both sides. The private sector is required

to take the lead and explore areas where investment is required.

Trade with China will increase with the building of economic zones and industrial estates. Formulating a policy

for the second phase of CPEC would be a challenge for the policymakers. It is important to manufacture goods
in Pakistan in these industrial estates instead of using these industrial estates as assembly plants. Pakistan so

far only provides raw material which is very cheap as compared to finished goods. In the second phase of
CPEC, not only export quality finished good should be manufactured in Pakistan but also transfer technology

to Pakistan besides training human resource of Pakistan.

An easy approach would be to relocate some industry to Pakistan from China and this can boost the exports.
The real issue would be how to select the local partners, we all know how such businesses are negotiated and

who gets the share. There is a need to keep things transparent.

China has been a key driver of infrastructure investment and construction in Central Asia since the mid-1990s.

Chinese state-owned companies have built highways, railways, bridges, and telecommunication systems in 
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12/25/2019 CPEC the game changer for Pakistan’s politics, economy

Tajikistan, Kyrgyzstan, and Uzbekistan. CPEC would be a natural extension of that strategy. In order to move
forward, there is a need to add a third country in CPEC. There is discussion going on to include Saudi Arabia or

India in CPEC. Ideally, Afghanistan is the best option to add as a third country in CPEC.

CPEC is not free from problems as the Chinese are growing increasingly irritated by project delays and
problems mobilizing funds on the Pakistan side. Recently federal government made certain statements which

were not viewed positively by the Chinese authorities. China’s model of investment in infrastructure projects is
not particularly inclusive. They bring in a lot of their own labor and do not use local technology, capital, or

labor. Due to this, local skilled and semi-skilled workforce are not getting benefits of CPEC. Pakistan will not get

the true benefit from CPEC if this mega project doesn’t provide job opportunities for the local workforce.

CPEC linking Gwadar Port to the Chinese province of Xinjiang, will be a game changer not only for Balochistan
and Pakistan but also for the world trade. Pakistan has yet to figure out the sectors and industries in which

China should invest. Pakistan has an established textile and agriculture sector, therefore, it is better to offer
these two sectors to China as the first phase of the second phase of CPEC. Pakistan should produce high

quality of products now and if this phase is not properly negotiated then chances of getting another chance
would be very remote.

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