High hopes on CPEC

The China-pak­istan Eco­nomic Cor­ri­dor that has the Gwadar Port at its epi­cen­tre aims to trans­form the in­fra­struc­ture in Pak­istan, right from power to lo­gis­tics

Maritime Gateway - - Contents - By Omer Ahmed Sid­diqui

The China-pak­istan Eco­nomic Cor­ri­dor that has the Gwadar Port at its cen­tre aims to trans­form the in­fra­struc­ture in Pak­istan.

China and Pak­istan have been long-term al­lies with bilateral trade wit­ness­ing three­fold in­crease in the past few years, to $13.7 bil­lion in 2015-16, up from just $4 bil­lion in 2007. Today, China ac­counts for 40 per cent of Pak­istan's for­eign di­rect in­vest­ment, which is only around $2 bil­lion. A $600 mil­lion in­vest­ment by China in 2015-16 con­trib­uted to a 38 per cent rise in FDI in Pak­istan.

A ma­jor Chi­nese ini­tia­tive with Pak­istan is the China-pak­istan Eco­nomic Cor­ri­dor (CPEC) agree­ment that will help Pak­istan im­prove its lo­gis­tics in­fra­struc­ture and place the coun­try at the cen­tre of the new Silk route. With a to­tal out­lay in ex­cess of $62 bil­lion, CPEC is a key pil­lar of China's One Belt, One Road (OBOR) pro­gramme. CPEC is ap­prox­i­mately a 3,000-kilo­me­tre network of roads, pipe­lines and rail­ways to trans­port goods from Gwadar Port in Pak­istan to Kash­gar in the Xin­jiang Uygur Au­ton­o­mous Re­gion of China. The $52 bil­lion pro­ject in­tends to rapidly mod­ernise Pak­istan’s in­fra­struc­ture, im­prove en­ergy ecosys­tem and es­tab­lish special eco­nomic zones.

$35 bil­lion worth of en­ergy projects un­der CPEC span across re­new­able en­ergy, coal and LNG. This will help solve Pak­istan’s ex­ist­ing en­ergy short­fall of around 4,000MW. $11 bil­lion in­vest­ment will go in de­vel­op­ing high­ways and trans­port net­works. By cut­ting a cor­ri­dor di­rectly from Kash­gar to Gwadar can re­sult in ac­cess­ing $6.5 bil­lion per an­num of Chi­nese spend­ing on ship­ping of oil from the Mid­dle East cur­rently done via the Strait of Malacca. Thus, such op­por­tu­ni­ties present Pak­istan as a ma­jor lo­gis­tic hub on the global map.

Un­der CPEC, Chi­nese com­pa­nies will grow crops, build meat pro­cess­ing plants and de­velop free trade zones in Pak­istan. Chi­nese gar­ment fac­to­ries will, en masse, be trans­ferred to Pak­istan, while China will man­age and run tourism projects and SEZS along the south­ern coast, with rather am­bi­tious plans for even yacht clubs and hot spring ho­tels to de­velop an un­likely tourism hub in the restive Balochis­tan prov­ince.

Around 6,500 acres will be leased to China for agri­cul­tural demon­stra­tion projects. China has an­nounced 17 projects with a to­tal in­vest­ment of $35 bil­lion. These in­clude a fer­tiliser plant with an an­nual 800,000 tonne out­put, Veg­etable and grain pro­cess­ing plants with a 1

mil­lion tonne ca­pac­ity and a coal-pow­ered plant at Sahi­wal in the Pun­jab that is al­ready func­tion­ing.

In ad­di­tion to this, the Chi­nese are plan­ning to over­haul Pak­istan's road and rail in­fra­struc­ture, start­ing with up­grad­ing sec­tions of the Karachi-pe­shawar road and rail line. The Karako­ram high­way will be up­graded to serve as a key ar­te­rial link con­nect­ing Xin­jiang and Gwadar. it is al­ready be­ing used to ship goods trans­ported from Xin­jiang to West Asia.

Chi­nese com­pa­nies in col­lab­o­ra­tion with Pak­istani coun­ter­parts will build a three-level ware­hous­ing sys­tem (pur­chase and stor­age ware­house, tran­sit ware­house and port ware­house). A na­tional stor­age network of ware­houses will be con­structed, start­ing in Islamabad and Gwadar and then in Karachi, La­hore and Pe­shawar.

A cot­ton pro­cess­ing plant with a 100,000 tonne out­put has been planned and in the fu­ture China may shift its gar­ment in­dus­tries di­rectly to Pak­istan to lever­age on the lower wages, avail­abil­ity of land, and ex­port tar­iffs in Pak­istan. China is also plan­ning to de­velop Pak­istan's min­eral re­sources, par­tic­u­larly in Balochis­tan and Khy­ber-pakhtunkhwa, eye­ing gold re­serves as well as set­ting up mar­ble and gran­ite pro­cess­ing sites.

China sees the Gwadar Port as the heart of the CPEC and en­vis­ages a free trade zone and a man­u­fac­tur­ing hub there to serve as a launch pad for ex­ports to West Asia and Africa. China has al­ready se­cured a 23-year tax-free deal for its com­pa­nies that will op­er­ate out of Gwadar. An am­bi­tious an­nual cargo through­put of 300-400 mil­lion tonnes from the port is fore­cast when the pro­ject is through, which will be 10 times more than Pak­istan's cur­rent big­gest port in Karachi.

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