CPEC moves to second phase

The China-Pakistan Economic Corridor (CPEC) is a game-changer for the region and beyond. It is building strong roots to take economic growth to next level in the two countries and across the region and preserving peace at the regional and global level.

China had initially announced to invest – a mix of equity and cheaper debt - the colossal amount of $46 billion to develop the much-needed infrastructure and power projects in Pakistan over a period of 15 years (2015-30). Now, the estimated investment size has now grown to over $60 billion.

The projects - including roads and railways from Gwadar in Pakistan to Xinjiang in China - will cut short Beijing's trade routes with the world through sea approximately by 12,000 miles. This would save China billions of dollars in trade with the world.

On the other hand, "the annual revenue from toll collection is projected to stand at around $5 billion by 2022," said the government of Pakistan CPEC Authority on its official website. "(This)...would counter the balance of payment issues (making payment for imports and foreign debt repayments on time) in future."

The income to be generated through toll collection would also play a critical role in paying off the debt to China.

Pakistani officials anticipated that CPEC will enable the environment to creat 2.3 million jobs between 2015 and 2030 and add 2-2.5% points to the country's annual economic (GDP) growth.

"CPEC is the hope of a better region in the future with peace, development and growth of the economy," the CPEC Authority stated.

While addressing the historic Future Investment Initiative Conference (FIIC) held in Saudi Arabia in October 2018, Prime Minister Imran Khan had said, "CPEC is a great opportunity for Pakistan. CPEC connects us to China which is one of the biggest markets. Because of CPEC, we are developing Special Economic Zones (SEZs) which will invite investment from across the globe. China is a huge market and CPEC route will connect China and Pakistan located in a strategic position of the world."

Chinese President Xi Jinping in an official message on CPEC said, "We should advance our shared interests and achieve common development. We should use the China-Pakistan Economic Corridor (CPEC) to drive our practical cooperation with focus on Gwadar port, energy, infrastructure development and industrial cooperation so that the fruits of its development will reach both; the people in Pakistan and the people of other countries in our region...Let us work together to create an even brighter future for China and Pakistan.”

The two nations have initiated projects of 17,045MW worth electricity, national-level modernisation of roads and rail infrastructure, new optical fibre connection with China, development and commercialisation of Gwadar port and smart port city, four urban mass transit projects in major cities and special economic zones (SEZs) in different cities of Pakistan.

Over $33 billion worth of energy infrastructure is to be constructed by private consortia to help alleviate Pakistan's chronic energy shortages. Over 10,400MW of energy generating capacity has already been brought online by the end of 2018, with the majority developed as part of CPEC's fast-tracked 'early harvest' projects.

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 eventually transport gas from Iran.

The developments are set to contribute towards achieving sustainable higher economic growth rate in Pakistan. The SEZs and then industries relocation to Pakistan from other regions of the world, including China, as well as the rapid growth in service industry catering to transit trade via CPEC routes would pave the way for the desired gross domestic product (GDP).

The CPEC projects in Pakistan are divided into three phases. Pakistan has already set up early harvesting projects like power production plants under phase-I by 2020. It would develop medium-term projects under phase-II by 2025 and long-term projects under phase-III by 2030.

"By 2020, the CPEC strives to take the initial shape, major bottlenecks of Pakistan's economic and social development shall be addressed, and the CPEC shall start to boost the economic growth along with it for both countries," according to Long Term Plan for CPEC (2017-2030).

The long-term plan is approved by both the Pakistani and Chinese governments.

By 2025, the CPEC aims for: industrial system approximately complete, major economic functions holistically brought into play, the people’s livelihood along the CPEC significantly improved, regional economic development more balanced, and all the goals of Vision 2025 achieved, according to the long-term plan.

By 2030, CPEC strives to be entirely accomplished, have the endogenous mechanism for sustainable economic growth in place, the CPEC’s role in stimulating economic growth in Central Asia and South Asia brought into holistic play, and South Asia shall grow into an international economic zone with global influence, it added.

Federal Minister for Planning, Development & Reform and Special Initiative Asad Umar said in November 2019 that ongoing phase of CPEC will bring about socio-economic benefits for the welfare of the people, noting "that the bilateral framework agreements have now entered into the second phase with a focus on poverty alleviation, agriculture and industrial cooperation."

Earlier, former federal minister for planning, development and reform Makhdoom Khusro Bakhtiar had said, "Under CPEC’s next phase, the industrial base of the country would be expanded which would help in increasing the country’s exports.”

He said the government wanted to add new sectors including iron, mines and minerals, oil and gas sector, copper, pipeline, textiles and automobile sectors to exploit the potential of trade through CPEC.

“China had decided to invest $10 billion in the oil and gas sector and $4 billion in local steel sector through CPEC projects,” he said.

He said $9 billion projects were also approved for a railway line from Peshawar to Karachi for providing better transport facilities to the people.

He stated that the government had taken several important decisions that paved the way for finalisation of Gwadar Master Plan and preliminary design of ML-1 project, operationalisation of Gwadar Port and free zone.

According to CPEC Authority, all energy projects are in independent power producer (IPP) mode. These projects are not located along any corridor passage. "These are located either close to the source or to load centre. Needless to add, regardless of location all power goes to the national grid."

Besides, the transmission line was included in the actively promoted energy projects list. It was included in prioritised projects for the transmission line from Matiari to Lahore and Matiari to Faisalabad for the evacuation of power more efficiently and more reliability and redundancy through HVDC lines. This is in ITC (Independent Transmission Company) mode. “The government of Pakistan is not liable to pay back loans and its business model is like IPP mode power plants.”

Furthermore, Thar having indigenous coal supply is chosen for a power project. “The evacuated energy will be part of the national grid,” it said.

The writer is a staff correspondent