PAKISTAN - CHINA ECONOMIC CORRIDOR

Introdution: 

Sixty years ago, thanks to a strategic choice made in the history of China-Pakistan relations, two countries with different cultural backgrounds and social systems were brought together. Since then, China and Pakistan have adhered to the Five Principles of Peaceful Co-existence, respected each other, acted in good faith, shared weal and woe, and supported each other, laying a solid foundation for the bilateral friendly relationship. Over the last sixty years, China-Pakistan friendly relations have withstood international vicissitudes and got rooted in the hearts of the two peoples. Under the attention and care of state leaders from the two countries, China-Pakistan relationship has yielded fruitful results. Through the friendly cooperation over the last 60 years, the two countries became all-weather good friends, acting as an example for the peaceful co-existence between  countries with different social systems.

In May 2013, Premier Li Keqiang paid a visit to Pakistan and reached an important agreement with Pakistani leaders on planning and constructing the China-Pakistan Economic Corridor connecting Kashgar in Xinjiang and Port of Gwadar in Pakistan from north to south. Located at the juncture of “New Silk Road Economic Belt” and “Maritime Silk Road in the 21st Century”, the corridor connects Pakistan to South Asia and the Indian Ocean.

The China–Pakistan Economic Corridor (CPEC) is a development mega project which aims to connect Gwadar Port in southwestern Pakistan to China’s northwestern autonomous region of Xinjiang, via a network of highways, railways and pipelines to transport oil and gas. The economic corridor is considered central to China–Pakistan relations and will run about 3,000 km from Gwadar to Kashgar. Overall construction costs are estimated at $46 billion, with the entire project expected to be completed in several years. The Corridor is an extension of China’s proposed 21st century Silk Road initiative. According to a First post report, “this is the biggest overseas investment by China announced yet and the corridor is expected to be operational within three years and will be a strategic game changer in the region, which would go a long way in making Pakistan a richer and stronger entity than ever before.

Overview:

CPEC is the name of a portfolio of projects that has four part utilization of Gwadar Port, energy portfolio in which Chinese companies would initiate more than 16,000 MW projects in Pakistan, infrastructure development connecting roads, railways and airports with the corridor establishment of industrial parks across the corridor. 

• CPEC was kick-started in July 2013 when PM Nawaz Sharif visited China to sign the MoU between the two countries

• CPEC has ushered in era of geo-economics

• CPEC is not a single road but multiple networks of sea, air, roads linking Gwadar to China and the region

• CPEC is mega-developmental project that will link Kashghar in Western China with the deep sea Port in Gwadar, Pakistan through a mesh of communication networks

• CPEC communication networks will include a world-class seaport, commercial sea lines, an airport, highways, railways, fibre optic cables as well as oil and gas pipelines.

• Under CPEC, joint cooperation committee has been formed with Ministry of P,D & R and NDRC China.

• Pak-China Joint working groups have been meeting since past year to shortlist and approve projects. 
• Media reports that only discussed us a terrorism haven are now talking about Pakistan as a safe haven for 46 bil $ Chinese investment The investment in various projects of CPEC has generated positive signals across globe for our economy

Game changer:

Pakistan and China are not only the atomic powers of the world, but also they have good economic relations. China has invested in many projects in Pakistan, for the development of Pakistan. China always wants a strong and developed Pakistan. For making this friendship relation more strong, the Chinese President Xi Jinping is coming to Pakistan in the month of April, 2015. During his tour to Pakistan, many mega-projects will be signed between the governments of both sides, in which one of the most important and valued project is the project of China-Pakistan Economic Corridor

The Pakistan-China Economic Corridor (PCEC) has been rightly termed a game changer. A careful cost-benefit analysis is required to assess for whom it will be the game changer. The key parameters should be additional business and additional savings.

Every day, China spends around $18 million on import of 6.3 million barrels of oil as shipment costs from the Middle East, accounting for 80% of its all oil needs, routing through the Strait of Malacca covering a distance of 9,912 miles. By cutting a corridor directly from Kashgar to Gwadar, it will bring these costs significantly down to one-third of the current levels as new distance will be 3,626 miles to Central China, whereas only 2,295 miles till West China.

Even if China were to use PCEC only for 50% of its current level of oil supplies, it will save around $6 million every day, almost $2 billion every year.

It is true that these savings are peanuts to the Chinese economy, however, the greater gain may lie in the strategic outreach via Gwadar as its Maritime Silk Route.

There is another benefit that will accrue to China. As half of Chinese exports are destined on its Western side, it will also gain tremendously by saving on its containerised traffic costs.

China is one of Pakistan’s largest trading partners; the two-way trade exceeded $16 billion last year, marking an annual growth of 12.57%. While our exports to the United States and European Union earn us trade surplus, our imports from Chinese contribute to enlarging the trade deficit.

China will make Gwadar, an economic hub of Pakistan and also of the whole the region. China is also upgrading the Karakorum highway, which was built in 1979. Many development projects are completed and many are being started by China in Pakistan, like metro bus service in Islamabad-Rawalpindi, Multan, Gujranwala, Faisalabad and Karachi, Orange-Line metro train in Lahore etc. The project of Karachi-Lahore motorway is under-construction and it will be completed in the near future. The length of this motorway is 1240 km and China is cooperating Pakistan in the construction of this motorway. The Islamabad-Hazara motorway is being constructed with the cooperation of China. Moreover, the route of China-Pakistan Economic Corridor will be the reason of development in the areas adjacent to it.

This project is strategically very important and beneficial for the economies of both the countries. After its completion, China would have access to the Middle East and Africa, through the Gwadar Port of Pakistan. In exchange, China will start the development projects in Pakistan and will help Pakistan to get rid of the energy crisis. Hence, the economy of Pakistan will get established

Maps and Graphs:

Pakistan enjoys special geographical advantages. It is boarded by South Asia, Central Asia, the Arab World and China, and connects the Indian Ocean and Persian Gulf. But, due to factors like volatile geopolitics, inadequate transportation systems, and energy shortage, the Pakistani economy has fallen short of its full potential.

The China-Pakistan Economic Corridor (CPEC) was initially intended to promote mutual development of China and Pakistan by enhancing bilateral exchanges and cooperation in transportation, energy and marine sector.

The corridor would be an economic linkage to connect Kashgar in China’s northwestern autonomous region of Xinjiang to Gwadar Port in Pakistan.

The CPEC, which will be constructed from 2014 to 2030, talks about integrated links to Chinese One Road, One Belt and 21st Century Maritime Silk Route. With active consultation of Chinese authorities, Pakistan has prepared a plan to construct three corridors, the western alignment, the central alignment and the eastern alignment. The last one has been picked for development in the first phase.

Article 3 of July 2013 MoU on Long Term Plan of CPEC explains the rationales behind picking the eastern corridor. “Long-Term Plan should be developed under the principle of scientific planning, steadily developing, and take the easiest the first,” it states.
It was on China’s demand for security and early completion of the route that led to the finalisation of the eastern corridor. The western route, where the Pakhtoon and Baloch belts lie, cannot be developed at a faster pace and is riskier in terms of security. However, there is a counter argument that development would address the security concerns.
The eastern alignment will pass through Thakot-Mansehra-Islamabad-Lahore and Multan. From Multan, the route will be linked to Hyderabad through Rohri and Dadu. The Hyderabad-Karachi portion will be linked through M-9. Karachi will then be linked to Gwadar through N-10 East Bay Express Way along the coastal line.

The work on central alignment will be completed later whereas construction on some parts of Gwadar-Dera Ismail Khan via Quetta route – western alignment – has already begun.
The argument that some parts of the country are being deprived off may be true in the short-term but, in longer term all these cities will be connected to the corridor. All provincial capitals are included as nodes, the key corner stones of CPEC on which it will be constructed. These nodes are at Peshawar, Islamabad, Lahore, Sukkar, Karachi, Gwadar and Quetta.

Routes: Three routes have been marked:-

Western route originating from Gwadar will pass through Turbat, Panjgur, Naag, Basima, Sohrab, Kalat, Quetta, Qila Saifullah, Zhob DIK, Mianwali, Hasanabdal, Isbd.

Central route will originate from Gwadar, Quetta, and reach DIK via Basima, Khuzdar, Sukkar, Rajanpur, Liya, Muzaffargarh, Bhakkar, DIK.

Eastern route will include Gwadar, Basima, Khuzdar, Sukkar, RYK, Bwp, Multan, Lahore/Fsbd, Isbd, Mansehra.

Importance of Gwadar. Gwadar is one of the least developed districts in Baluchistan province. It sits strategically near the Persian Gulf and close to the Strait of Hormuz, through which 40 per cent of the world’s oil passes. Work on Gwadar deep-seaport had started in 2002 with China’s investment. In 2013, management of the seaport which was in the sloppy hands of Singapore PSA International was handed over to China’s Port Holdings. It is planned to develop Gwadar into free trade zone with a modern airport on the model of Singapore or Hong Kong and a gateway to CPEC. It will be largest, deep seaport, overshadowing Chahbahar and Dubai seaports.

1. It is estimated that renewable energy will rise at the rate of 25% of global gross power generation in 2018. 2011 global growth was at 20% and in 2006 it was 19%. This is good news.

2. Hydropower is the leader in global renewable generation and accounted for 16% in 2011.

3. Wind and solar power are the newest forms of renewable energy generation, but they are quickly moving forward with their production doubling to 8% of global renewable generation in 2018 from 4% in 2011.

4. Of all the places in the world, Germany is the leader in solar energy production as they have installed more solar then the rest of the world combined.

5. Iceland uses predominately hydropower, to the tune of 75%, and the rest comes from geothermal, solar and wind.

6. Global renewable generation exceeded the electric consumption of China in 2012.

7. China is the leader in hydropower production accounting for 40% of the growth in global power capacity through to 2018.

8. Wind power is the next leading form of renewable energy being deployed in 75 countries in 2018. China again is the leader in this form of renewable energy with US, Germany, Spain and India in the top 5 countries.

9. Six of the top 10 countries for wind power generation come from Europe and include Germany, Spain, UK, Italy, France and Portugal.

10. Even though renewable is on the rise in the US to the tune of 150% by 2040, it will only make up 16% of global generation mix by that point.

China will be able to address its strategic concerns, development activities will help propel growth in the country and could become a source for sustainable development. CPEC-related activities involve work worth $50.6 billion, although majority of the agreements will be settled in China.
The Chinese will provide a mix of concessionary and commercial loans to develop Gwadar Port, finance energy projects, build Infrastructure, and particularly industrial parks.
The role of the provinces remains critical as they will provide land for development projects and provision of allied facilities.
However, policymakers face significant challenges of creating synergy in leadership for ownership of CPEC, coordination among all organs of the state to realise projects in time, maintaining political stability and consensus and assuring security.

Energy projects:

If, due to any reason, Pakistan remains unable to complete its part of the work in a timely fashion, the Chinese will still have the option to opt for other routes by cutting the country out from its long-term strategic planSome of the significant energy projects being installed will yield around 10,400 megawatts of electricity. Those ventures include the Port Qasim Electric Power Company, producing 1,320 megawatts, Engro Thar coal-fired power plant, producing 660 megawatts, Sindh Sino resources power plant of Thar Coal (Block-1), producing 1,320 megawatts, Gwadar coal power project, producing 300 megawatts, Rahimyar Khan coal power, producing 1,320 megawatts, Muzaffargarh coal power, producing 1,320 megawatts, Sahiwal power plant, producing 1,320 megawatts, Suki Kinari power project, producing 870 megawatts, Karot Hydro power station, producing 720 megawatts, UEP wind power project, producing 100 megawatts, Sunec wind power project, producing 50 megawatts, Sachal wind power project, producing 50 megawatts, Dawood ning.

• $34 billion investment in energy sector under CPEC.

• 10,400 MWs capacity will be added to the national grid through early harvest energy generation projects to be completed by 2017/18.

• Energy projects include Coal, Hydel, Wind and Solar Plants spread across all provinces.

• Hydro power projects in Suki Kinari KP worth 870 MWs costing 1,802 Billion dollars.

• Hydro power projects in planned for AJK: Karot 720 MW and Kohala 1,100 MW worth 3,187 Bil dollars each.

• Coal Power Plants in South Punjab, Interior Sindh, Baluchistan by 2017/18.

• Coal plants in Interior Sindh including Thar, Jamshoro, Port Qasim.

• Power projects in Balochistan include Gaddani, Gwadar.

• Punjab energy projects in Sahiwal, RahimYarKhan.

• Solar Park in Baluchistan will be largest in the world producing 1000

• Thar coal reserves untapped for past 67 years, to be transformed into energy capital of the world.

    Pakistan’s Expected Gains:

• CPEC has opened vista of great opportunities for Pakistan and will greatly help in overcoming poverty, unemployment, inequities of smaller provinces and help Pakistan in becoming the next Asian tiger.

• CPEC from all counts will prove a game changer and will make China a real stakeholder in Pakistan’s stability and security. It is a win-win situation for both. It will greatly expand the scope for the sustainable and stable development of China’s economic development.

• Investments by China will boost Pakistan’s $274 billion GDP by over 15 %.

• Corresponding progress and prosperity in Pakistan and China’s patronage will help Pakistan in getting rid of the decade old labels of ‘epicentre of terrorism’, ‘most dangerous country’ and a ‘failing state’.

• Given the solid foundations of friendship at the people-to-people level between China and Pakistan, Chinese influence in Pakistan is destined to endure the test of time.

• Pakistan seems to have found a saviour in China, which has promised to stand by the country in its dark hour. Once Pak-China connectivity strike roots, Pakistan’s geo-strategic security interests whenever threatened will be guarded by China.

• China’s investment surpasses all foreign investments in Pakistan in the past. Win-win cooperation is based on trust, confidence and convergence of interests. The Chinese influence in Pakistan has touched an unprecedented high level and it has surpassed the US which has remained the most preferred ally since 1954.

• The US which has repeatedly betrayed Pakistan and is widely disliked by the public will have to negotiate with Pakistan harder than ever from now onward. The elites under the magic spell of the US are also inclined to change their western oriented mindset and change their orientation.

• Pakistan enjoys a more favorable fiscal budget situation compared to India by reducing its budget deficit to 4.7% of GDP in 2014 (as against India’s 7%) and Pakistan is much cheaper as an emerging market.

• China’s economic and military assistance will help Pakistan a great deal in narrowing its ever widening gap in economic-military-nuclear fields with India and in bettering its defence potential.

• Keeping strategic parity with India has now become an achievable goal for Pakistan.

• Revival of economy in the coming period is bound to make Pakistan an attractive destination for foreign investors and will greatly help in removing socio-economic inequities of smaller provinces and in squeezing the space for anti-Pakistan elements.

• The success of the Sino-Pak partnership is critically linked to the success of stabilization of the Afghan situation. China and Pakistan have a shared interest in the stabilization of Afghanistan, because the main threat to the realization of the “Belt and Road” projects in Pakistan come from the terrorist groups operating out of the Af-Pak region.

• Pakistan is far more comfortable with China as a facilitator of the Afghan peace talks than it is with the US, whose intentions are highly suspect.

• China’s investment in Pakistan has conveyed a big message to the other South Asian countries such as Sri Lanka, Bangladesh, Nepal to hurry and climb on board the Chinese “Belt and Road Initiative” to derive growth benefits.

• Pakistan’s gravitation in the direction of China and Russia at this juncture underscores a strategic realignment in the making.

• China is uniquely placed to pull the key regional states – Russia, Iran, Central Asian states to its side.

                      

China's Expected Gain:

• For China the corridor bring unlimited benefits,when the construction of the corridor will be completed, it will expand the number of trade routes between China,Africa and the middle east. Energy security is a prime concern for China, as it is the world’s biggest energy consumer and importer, and oil pipelines crisscrossing through Pakistan would reduce the travel time by a significant amount,not to forget it would also increase Chinese Energy security by bringing energy supplies directly from the middle east and Africa to China’s North west via a ally nation (Pakistan) bypassing the Indian ocean and South East Asia where Ships carrying Oil can be easily blockaded by the Americans or Indians.

• More than half of the worlds proven oil reserves are located in the middle east.middle east is one of the top suppliers of crude to the Chinese,so much so that almost half of China’s daily consumption of oil is met by middle eastern imports.Until this very moment all of this volume has was being moved by see borne oil tankers covering some 10,000 miles to reach the Chinese coast.The oil tankers in their journey to Chinese mainland have to go through vast oceanic territory ruled by hostile navies,not to forget the perilous choke point of the straight of Malacca which can be easily blocked by the Indian or US navies. This leaves Beijing in a very tough position on the energy security front,because more than half of Beijing’s crude is imported through sea and is still growing.US’s superior naval forces in the region can be used to shut this traffic down anytime & Beijing will not be able to do anything.

• This is where Pakistan comes in,once the corridor is completed it will expand the number of trade routes between China, the Middle East and Africa. Energy security,which is a primary concern for China will be addressed as oil pipelines through Pakistan would cut out ocean travel through Southeast Asia .The corridor will also provide China access to new markets for it’s goods in Southasia

                             

  Conclusion:

The CPEC connected to Gwadar has the potential to radically alter the regional dynamics of trade, development and politics. CPEC is a game changer for the entire region. It will uplift the lives of about 3 billion people across China, Central Asia, South Asia and the Middle East.

The time and tide is not in favor of the detractors. They will die their death in the hurricane of CPEC since China is determined to make Pakistan a success story. $46 billion economic package is Chinese gift for people of Pakistan.