China
Pakistan Economic Corridor (CPEC)
China–Pakistan Economic Corridor also known as (CPEC) is a collection of infrastructure projects currently under construction
throughout Pakistan. Originally valued at 46 billion dollars, the value of CPEC projects
is now worth 54 billion dollars.
CPEC is intended to speedily modernize Pakistani
infrastructure and strengthen its economy by the construction of modern
transportation networks, various energy projects, and special economic zones. On
13 November 2016, CPEC became partly operational when Chinese cargo was
transported overland to Gwadar Port for onward maritime shipment to Africa and
West Asia
A huge network of highways and railways are to be built
under the CPEC that will span the length and breadth of Pakistan.
Inefficiencies stemming from Pakistan's mostly dilapidated transportation
network are estimated by the government to cause a loss of 3.5% of the
country's annual gross domestic product. Modern transportation networks built
under CPEC will link seaports in Gwadar and Karachi with northern Pakistan, as
well as points further north in western China and Central Asia. A 1,100
kilometre long motorway will be built between the cities of Karachi and Lahore
as part of CPEC, while the Karakoram Highway between Rawalpindi and the Chinese
border will be completely reconstructed and overhauled. The Karachi–Peshawar
main railway line will also be upgraded to allow for train travel at up to 160
km per hour by December 2019. Pakistan's railway network will also be extended
to eventually connect to China's Southern Xinjiang Railway in Kashgar. The
estimated $11 billion required to modernise transportation networks will be
financed by subsidized concessionary loans.
Over $33 billion worth of energy infrastructure are to be
constructed by private consortia to help alleviate Pakistan's chronic energy
shortages, which regularly amount to over 4,500MW, and have shed an estimated
2–2.5% off Pakistan's annual gross domestic product.[18] Over 10,400MW of
energy generating capacity is to be 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. Electricity
from these projects will primarily be generated from fossil fuels, though
hydroelectric and wind-power projects are also included, as is the construction
of one of the world's largest solar farms.
Announcement
of CPEC
During the state visit of Xi Jinping to Pakistan in April
2015, he wrote in an open editorial stating: "This will be my first trip
to Pakistan, but I feel as if I am going to visit the home of my own
brother." On 20 April 2015, Pakistan and China signed an agreement to
commence work on the $46 billion agreement, which is roughly 20% of Pakistan's
annual GDP, with approximately $28 billion worth of fast-tracked "Early
Harvest" projects to be developed by the end of 2018. As a gesture of
friendship, the Pakistani capital at that time was dotted with slogans and
signboards such as "Pakistan-China friendship is higher than the
mountains, deeper than the oceans, sweeter than honey, and stronger than
steel" – an oft repeated phrase coined by the Chinese to describe their
deep ties to Pakistan.
Projects in
Gwadar city
China will grant Pakistan $230 million to construct a new
international airport in Gwadar which is to be operational by December 2017.
The provincial government of Balochistan has set aside 4000 acres for the
construction of the new $230 million Gwadar International Airport which will
require an estimated 30 months for construction, the costs of which are to be
fully funded by grants from the Chinese government which Pakistan will not be
obliged to repay.
The city of Gwadar is further being developed by the
construction of a 300MW coal power plant, a desalinisation plant, and a new 300
bed hospital. Plans for Gwadar city also include construction of the East Bay
Expressway – a 19 kilometre controlled-access road that will connect Gwadar
Port to the Makran Coastal Highway. These additional projects are estimated to
cost $800 million, and are to be financed by 0% interest loans extended by the
Exim Bank of China to Pakistan.
In addition to the aforementioned infrastructure works, the
Pakistani government announced in September 2015 its intention to establish a
training institute named Pak-China Technical and Vocational Institute at
Gwadar, which is to be developed by the Gwadar Port Authority. The institute is
to be completed by March 2016 at the cost of 943 million rupees, and is
designed to impart to local residents the skills required to operate and work at
the expanded Gwadar Port.
Roadway
projects
The CPEC project envisages major upgrades and overhauls to
Pakistan's transportation infrastructure. Under the CPEC project, China has
announced financing for $10.63 billion worth of transportation infrastructure
so far; $6.1 billion have been allocated for constructing "Early
Harvest" roadway projects at an interest rate of 1.6 percent. The
remainder of funds will be allocated when the Pakistani government awards
contracts for construction of road segments which are still in the planning
phase.
Three corridors have been identified for cargo transport:
the Eastern Alignment though the heavily populated provinces of Sindh and
Punjab where most industries are located, the Western Alignment through the less
developed and more sparsely populated provinces of Khyber Pakhtunkhwa and
Balochistan, and the future Central Alignment which will pass through Khyber
Pakhtunkhwa, Punjab, and Balochistan.
Karakoram
Highway
The CPEC projects call for reconstruction and upgrade works
on National Highway 35 (N-35), which forms the Pakistani portion of the Karakoram
Highway (KKH). The KKH spans the 887 kilometre long distance between the
China-Pakistan border and the town of Burhan, near Hasan Abdal. At Burhan, the
existing M1 motorway will intersect the N-35 at the Shah Maqsood Interchange.
From there, access onwards to Islamabad and Lahore continues as part of the
existing M1 and M2 motorways. Burhan will also be at intersection of the
Eastern Alignment, and Western Alignment.
Eastern
Alignment
The term Eastern Alignment of CPEC refers to roadway
projects located in Sindh and Punjab provinces - some of which were first
envisioned in 1991.
As part of the
Eastern Alignment, a 1,152 km long motorway will connect Pakistan's two largest
cities, Karachi and Lahore with 4 to 6-lane controlled access highway designed
for travel speeds up to 120 kilometres per hour. The entire project will cost
approximately $6.6 billion, with the bulk of financing to be distributed by
various Chinese state-owned banks.
The entire Eastern Alignment motorway project is divided
into four sections: a 136 kilometre long section between Karachi and Hyderabad
also known as the M9 motorway, a 296 kilometre long section between Hyderabad
and Sukkur, a 387 kilometre long section between Sukkur and Multan, and a 333
kilometre section between Multan and Lahore via the town of Abdul Hakeem.
The first section of the project will provide high speed
road access from the Port of Karachi to the city of Hyderabad and interior
Sindh. Upgrade and construction works on this section currently known as Super
Highway between Karachi and Hyderabad began in March 2015, and will convert the
road into the 4-lane controlled access M9 Motorway which will be completed in an
estimated 30 months. In February 2017, a completed 75 kilometre stretch of the
motorway was opened for public use by Prime Minister Nawaz Sharif.
Western
Alignment
The Western Alignment of CPEC is depicted by the red line.
The 1,153 kilometer route will link the Brahma Bahtar Interchange of the M1
Motorway with the city of Gwadar in Balochistan province. The portion depicted
by the orange line between Basima and Shahdadkot is sometimes regarded as part
of the Western Alignment.
The CPEC project envisages an expanded and upgraded road
network in the Pakistani provinces of Balochistan, Khyber Pakhtunkhwa, and
western Punjab Province as part of the Western Alignment. The Western Alignment
project will result in the upgrading of several hundred kilometres worth of
road into 2 and 4-lane divided highways by mid-2018, with land acquisition
sufficient for upgrading parts of the road to a 6-lane motorway in the future.
In total, the CPEC project envisages re-construction of 870 kilometres of road
in Balochistan province alone as part of the Western Alignment. Of those 870
kilometres of road, 620 kilometres have already been rebuilt as of January 2016.
The Western Alignment roadway network will begin at the
Barahma Bahtar Interchange on the M1 Motorway near the towns of Burhan and
Hasan Abdal in northern Punjab province. The newly reconstructed Karakoram
Highway will connect to the Western Alignment at Burhan, near where the new 285
kilometre long controlled-access Brahma Bahtar-Yarik Motorway will commence.
The motorway will terminate near the town of Yarik, just north of Dera Ismail
Khan. Groundbreaking for the project took place on May 17, 2016. The motorway
will traverse the Sindh Sagar Doab region, and cross the Indus River at
Mianwali before entering into Khyber Pakhtunkhwa province. It will consist of
11 interchanges, 74 culverts, and 3 major bridges spanning the Indus, Soan, and
Kurram Rivers Total costs for the project are expected to be $1.05 billion
Railway
projects
Phase 1 of the ML-1
overhaul and reconstruction is highlighted black between Peshawar and Multan.
Overhauling and reconstruction of the line will allow trains to travel at up to
160 kilometres per hour.
Phase 2 of the ML-1
overhaul between Multan and Hyderabad is marked in orange. Phase 3 of the
project is indicated by the green line between Hyderabad and Karachi.
The CPEC project emphasises major upgrades to Pakistan's
ageing railway system, including rebuilding of the entire Main Line 1 railway
between Karachi and Peshawar by 2020;] this single railway currently handles
70% of Pakistan Railways traffic. In addition to the Main Line 1 railway,
upgrades and expansions are slated for the Main Line 2 railway, Main Line 3
railway. The CPEC plan also calls for completion of a rail link over the
4,693-meter high Khunjerab Pass. The railway will provide direct access for
Chinese and East Asian goods to Pakistani seaports at Karachi and Gwadar by
2030.
Procurement of an initial 250 new passenger coaches, and
reconstruction of 21 train stations are also planned as part of the first phase
of the project – bringing the total investment in Pakistan's railway system to
approximately $5 billion by the end of 2019. 180 of the coaches are to be built
at the Pakistan Railways Carriage Factory near Islamabad, while the Government
of Pakistan intends to procure an additional 800 coaches at a later date, with
the intention of building 595 of those coaches in Pakistan.
Energy
sector projects
Pakistan's current energy generating capacity is 24,830 MW,
though the country currently faces energy shortfalls of over 4,500MW on a
regular basis with routine power cuts of up to 5 hours per day, which has shed
an estimated 2–2.5% off its annual GDP. Energy generation will be a major focus
of the CPEC project, with approximately $33 billion expected to be invested in
this sector. As part of the "Early Harvest" scheme of the CPEC, an
estimated 10,400 MW of electricity are slated for generation by March 2018 as
part of CPEC's "Early Harvest" projects.
The energy projects under CPEC will be constructed by
private Independent Power Producers, rather than by the governments of either
China or Pakistan. The Exim Bank of China will finance these private
investments at 5–6% interest rates, while the government of Pakistan will be
contractually obliged to purchase electricity from those firms at
pre-negotiated rates
Renewable-energy
Pakistan aims to produce 25% of its electricity requirements
by renewable energy resources by 2030. China's Zonergy company will complete
construction on the world's largest solar power plant – the 6,500 acre
Quaid-e-Azam Solar Park near the city of Bahawalpur with an estimated capacity
of 1000MW is expected to be completed in December 2016. The first phase of the
project has been completed by Xinjiang SunOasis, and has a generating capacity
of 100 MW. The remaining 900 MW capacity will be installed by Zonergy under
CPEC.
The Jhimpir Wind Power Plant, built by the Turkish company
Zorlu Enerji has already begun to sell 56.4 MW of electricity to the government
of Pakistan, though under CPEC, another 250MW of electricity are to be produced
by the Chinese-Pakistan consortium United Energy Pakistan and others at a cost
of $659 million. Another wind farm, the Dawood wind power project is under
development by HydroChina at a cost of $115 million, and will generate 50 MW of
electricity by August 2016.
SK Hydro Consortium is constructing the 870 MW Suki Kinari
Hydropower Project in the Kaghan Valley of Pakistan's Khyber Pakhtunkhwa
province at a cost of $1.8 billion, SK Hydro will construct the project with
financing by China's EXIM bank.
The $1.6 billion 720 MW Karot Dam which is under construction
is part of the CPEC plan, but is to be financed separately by China's Silk Road
Fund.
Pakistan and China have also discussed the inclusion of the
4,500MW $14 billion Diamer-Bhasha Dam as part of the CPEC project, though as of
December 2015, no firm decision has been made – though Pakistani officials
remain optimistic at its eventual inclusion.
The $2.4 billion, 1,100 MW Kohala Hydropower Project being
constructed by China's Three Gorges Corporation predates the announcement of
CPEC, though funding for the project will now come from CPEC fund.
Table of Projects
Energy
Projects
|
Capacity
|
Location
|
1,320 MW (2 x 660 MW plants)
|
Sindh
|
|
Thar-l Project
|
1,320 MW (4 x 330 MW plants)
|
Sindh
|
Thar-ll Project and coal mine
|
1,320 MW (2 x 660 MW plants)
|
Sindh
|
1,320 MW (2 x 660 MW plants)
|
Punjab
|
|
Rahimyar Khan coal power project
|
1,320 MW (2 x 660 MW plants)
|
Punjab
|
1,000 MW
|
Punjab
|
|
870 MW (expected completion in 2020)[207]
|
Khyber Pakhtunkhwa
|
|
720 MW (expected completion in 2020)[208]
|
Punjab
|
|
China Power Hub Generation Company
|
2X660 MW
|
Balochistan
|
660 MW (2 x 330 MW plants)
|
Sindh
|
|
Gwadar coal power project
|
300 MW
|
Balochistan
|
UEP Windfarm
|
100 MW
|
Sindh
|
50 MW
|
Sindh
|
|
Sachal Windfarm
|
50 MW
|
Sindh
|
Sunnec Windfarm
|
50 MW
|
Sindh
|
Matiari to Faisalabad transmission line
|
660 kilovolt
|
Sindh and Punjab
|
660 kilovolt
|
Sindh and Punjab
|
Other areas
of cooperation
The CPEC announcement encompassed not only infrastructure
works, but also addressed areas of co-operation between China and Pakistan.
Agriculture
The long-term plan for the period 2025-30 during the CPEC
summit held in Islamabad on August 30, 2016. The plan includes coperation over
livelihood, water resources, livestock, people-to-people communications and
financial matters. Under the plan, agricultural information project, storage
and distribution of agricultural equipment and construction project,
agricultural mechanisation, demonstration and machinery leasing project and
fertiliser production project for producing 800,000 tons of fertiliser and 100,000
tons of bio-organic fertiliser will be implemented.
Science and
technology
As part of CPEC, the two countries signed an Economic and
Technical Cooperation Agreement, as well as pledged to "China-Pakistan
Joint Cotton Bio-Tech Laboratory" The two countries also pledged to
establish the "China-Pakistan Joint Marine Research Center" with
State Oceanic Administration and Pakistan's Ministry of Science and Technology
Also as part of the CPEC agreement, Pakistan and China have agreed to
co-operate in the field of space research.
In February 2016, the two countries agreed to establish the
"Pak-China Science, Technology, Commerce and Logistic Park" near
Islamabad at an estimated cost of $1.5 billion. The park will be situated on
500 hectares, which will be provided by Pakistan to China's Xinjiang Production
and Construction Corps, with all investments expected to come from the Chinese
side over the course of ten years.
In May 2016, construction began on the $44 million 820
kilometer long Pakistan-China Fiber Optic Project, an optical fiber cable that
will enhance telecommunication in the Gilgit-Baltistan region, while offering
Pakistan a fifth route by which to transmit telecommunication traffic.
Other fields
The two nations also pledged co-operation in field ranging
from anti-narcotic efforts, to co-operation in an effort to reduce climate
change. The two nations also agreed to increase co-operating between the
banking sectors of the two countries, as well as to establish closer ties
between China Central Television and the Pakistan Television Corporation
Impact of
CPEC to Pakistan & Region
The importance of CPEC to China is reflected by its
inclusion as part of China's 13th five-year development plan. CPEC projects
will provide China with an alternate route for energy supplies, as well as a
new route by which Western China can conduct trade. Pakistan stands to gain due
to upgrade of infrastructure and introduction of a reliable energy supply.
On January 8, 2017, Forbes claimed that CPEC is part of
China’s vision to write the rules of the next era of globalization and help its
export and investment engines run for years to come. Writing in January 2017,
Arun Mohan Sukumar of India's Observer Research Foundation claimed that
"CPEC is an important enough project whose economic and strategic
consequences require methodical assessment," adding that "CPEC may be
a bilateral endeavour, but New Delhi cannot ignore its spillover effects on
regional governance." Concluding that "India would be ill-advised to
rely on the false comfort that profits alone will drive China’s business with
Pakistan.
Pakistani
economy
The CPEC is a landmark project in the annals of history of Pakistan. It is the largest investment Pakistan has attracted since independence and largest by China in any foreign country. CPEC is considered economically vital to Pakistan in helping it drive economic growth. The Pakistani media and government have called CPEC investments a "game and fate changer" for the region, while both China and Pakistan intend that the massive investment plan will transform Pakistan into a regional economic hub and further boost the deepening ties between the two countries. Approximately 1 year after the announcement of CPEC, Zhang Baozhong, chairman of China Overseas Port Holding Company told The Washington Post that his company planned to spend an additional $4.5 billion on roads, power, hotels and other infrastructure for Gwadar's industrial zone, which would be one of the largest ever sums of foreign direct investment into Pakistan.
Pakistan currently faces energy shortfalls of over 4,500MW on a regular basis with routine power cuts of up to 12 hours per day, which has shed an estimated 2-2.5% off its annual GDP. The Financial Times notes that Pakistan's electricity shortages are a major hindrance to foreign investment, and that Chinese investments in Pakistani infrastructure and power projects will lead to a "virtuous cycle" that will make the country more attractive for foreign investment in a variety of sectors. Poor availability of electricity is considered by the World Bank to be a main constraint to both economic growth and investment in Pakistan.
Pakistan's large textile industry has also been negatively affected by several-hour long power cuts, with almost 20% of textile factories in the city of Faisalabad shutting down on account of power shortages. The CPEC's "Early Harvest" projects are expected to resolve shortages in power generation by 2018 by increasing Pakistan's power generation capacity by over 10,000 megawatts. As a result of improved infrastructure and energy supplies, the Pakistani government expects that economic growth rates will reach 7% by 2018.
Former Pakistan Prime Minister Shaukat Aziz also stated in May 2016 that predicted economic growth from CPEC projects would result in stabilization of Pakistan's security situation, which has also been cited by the World Bank as hindrance to sustained economic growth in Pakistan.
According to Chinese Foreign Ministry Spokesperson Hua Chunying, the corridor will "serve as a driver for connectivity between South Asia and East Asia." Mushahid Hussain, chairman of the Pakistan-China Institute, told China Daily that the economic corridor "will play a crucial role in regional integration of the 'Greater South Asia', which includes China, Iran, Afghanistan, and stretches all the way to Myanmar. When fully built, the corridor is expected to generate significant revenue from transit fees levied on Chinese goods – to the tune of several billion dollars per annum. According to The Guardian, "The Chinese are not just offering to build much-needed infrastructure but also make Pakistan a key partner in its grand economic and strategic ambitions.
Moody's Investors Service has described the project as a "credit positive" for Pakistan. In 2015, the agency acknowledged that much of the project's key benefits would not materialise until 2017, but stated that it believes at least some of the benefits from the economic corridor would likely begin accruing even before then. The Asian Development Bank stated "CPEC will connect economic agents along a defined geography. It will provide connection between economic nodes or hubs, centered on urban landscapes, in which large amount of economic resources and actors are concentrated. They link the supply and demand sides of markets. On November 14, 2016, Hyatt Hotels Corporation announced plan's to open four properties in Pakistan, in partnership with Bahria Town Group, citing the investment of CPEC as the reason behind the $600 million investment.
On March 12, 2017, a consortium of Pakistani broker houses reported that Pakistan will end up paying $90 billion to China over a span of 30 years with annual average repayments of $3–4 billion per year post fiscal year 2020. The report further said that CPEC-related transportation would earn $400–500 million per annum to Pakistan, and would grow Pakistani exports by 4.5% a year till fiscal year 2025
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