Tale of two CPECs

The Pak Banker - - 4EDITORIAL - Dr Niaz Mur­taza

Agame changer that will make Pak­istan an Asian Tiger is how the PML-N sells the CPEC. None of the Tigers rose sim­ply by build­ing cor­ri­dors with eco­nomic gi­ants. So, one must view such claims cau­tiously. Still, this is the big­gest eco­nomic op­por­tu­nity to come Pak­istan's way in decades.

That this is hap­pen­ing un­der an elected regime and au­toc­ra­cies could never con­jure sim­i­lar feats un­der­lines democ­racy's long-term po­ten­tial. The PML-N de­serves ku­dos for cre­at­ing this op­por­tu­nity. But the crit­i­cal ques­tion now is whether it can trans­form op­por­tu­ni­ties into re­al­ity. One feels com­pelled to raise some con­cerns, at the risk of be­ing branded un­pa­tri­otic even though the aim is pa­tri­otic in flag­ging pos­si­ble pit­falls af­fect­ing at­tain­ment.

Firstly, pro­ject de­tails re­veal that around $11 bil­lion (25pc) of the money is for port, road and rail­way link­ages be­tween Pak­istan and China. But the vast ma­jor­ity of the money - nearly 75pc - is for power plants which will not di­rectly con­trib­ute to the eco­nomic cor­ri­dor un­less they feed in­dus­tries whose out­puts travel on the cor­ri­dor.

How­ever, CPEC plans only con­tain vague ref­er­ences to es­tab­lish­ing in­dus­trial parks. Thus, there is not one in­te­grated CPEC but ac­tu­ally two un­con­nected CPECs presently: the China Pak­istan Eco­nomic Cor­ri­dor (25pc) and 'China Pak­istan Elec­tric­ity Co­op­er­a­tion' (75pc). Un­less PML-N in­te­grates the two, the chances of Pak­istan be­com­ing an Asian Cub, nary a Tiger, will be re­mote, though the two un­con­nected CPECs will still ben­e­fit it in­di­vid­u­ally.

The 'China Pak­istan

Elec­tric­ity Co­op­er­a­tion' con­tains 24 projects, as shown on the Plan­ning Com­mis­sion's web­site, to be built by Chi­nese com­pa­nies' FDI with Pak­istan ob­li­gated to buy their out­put at un­known rates. Thus, the first chal­lenge will be avoid­ing the ex­or­bi­tant rates Pak­istan faced ear­lier with IPPs and weaker states of­ten face with China. Given the se­ri­ous lo­gis­ti­cal and tech­ni­cal prob­lems with re­cent power plant con­struc­tion in Pak­istan, en­sur­ing suc­cess­ful ex­e­cu­tion will be an­other ma­jor chal­lenge.

There are re­gional is­sues too. Of the to­tal $35bn in­vest­ment in power projects, nearly $10bn is for Sindh, $7bn for Pun­jab, $8.5bn for Balochis­tan, $2.5bn for Azad Kash­mir, $1.8bn for KP, $4.5bn for projects in­volv­ing Pun­jab and an­other prov­ince and ap­par­ently zilch for GB, which iron­i­cally pro­vides Pak­istan ac­tual ac­cess to China on the eco­nomic cor­ri­dor.

Thus, Balochis­tan is the only back- ward re­gion with a high share. How­ever, given past his­tory, it will re­quire spe­cial ef­forts to en­sure that the em­ploy­ment and elec­tric­ity gen­er­ated by projects there ben­e­fit its res­i­dents equitably.

Fi­nally, en­vi­ron­men­tal is­sues are also salient as the big­gest chunk of the projects in­volves coal. Even if all th­ese chal­lenges are over­come, Pak­istan will only re­gain the pre-2005 sit­u­a­tion of ad­e­quate elec­tric­ity when its econ­omy was grow­ing but with­out be­ing trans­formed into a Tiger.

The more strate­gic el­e­ment is the ac­tual China Pak­istan Eco­nomic Cor­ri­dor which, if han­dled prop­erly, pro­vides the po­ten­tial to link Pak­istan's econ­omy with China and be­yond and re­sult in its struc­tural up­grad­ing. This com­po­nent cov­ers in­vest­ment of around $11bn, in­clud­ing $10bn loans by China to Pak­istan at highly con­ces­sional 1.6pc rate for roads and rail­way work, and around $1bn grant for Gwadar port, air­port and other projects.

High­way net­work planned for CPEC.-Cour­tesy: Plan­ning Com­mis­sion Even here, nearly $3.5bn is for the up­grad­ing of the Karachi-Pe­shawar rail­way tracks which can­not be im­me­di­ately con­sid­ered part of the eco­nomic cor­ri­dor un­til it gets linked to China, which is only planned by 2030. Thus, only around $7bn or around 15pc of the $46bn will ac­tu­ally go im­me­di­ately to­wards build­ing the real CPEC!

Even here, be­sides the Gwadar work, the com­mis­sion web­site only men­tions the Raikot-Is­lam­abad and Multan-Sukkur mo­tor­ways but not the western route or even a link from Sukkur to Gwadar. Even if a com­plete Gwadar-Khun­jerab mo­tor­way gets built, it will mainly yield tran­sit fees on Chi­nese traf­fic like on Nato con­voys and in­come for the ho­tels, work­shops and broth­els which in­vari­ably emerge on ma­jor truck­ing routes. It is yet un­known how much tran­sit fees Pak­istan will charge and earn an­nu­ally. Nor is there any study about the likely im­pact of mo­tor­ways con­struc­tion on broader lo­cal economies along their routes.

Ac­cru­ing higher re­turns from CPEC will re­quire strate­gic think­ing and projects to link Pak­istan's in­dus­trial out­put with China's mar­kets as it tran­sits to a con­sump­tion-led econ­omy fac­ing labour short­ages. The com­mis­sion has the eco­nomic, so­cial and political ex­perts to de­velop ideas, fea­si­bil­ity plans and tech­ni­cal re­ports for such strate­gic projects which also en­sure equity and sus­tain­abil­ity.

Un­for­tu­nately, its web­site till now re­flects lit­tle such use of th­ese ca­pac­i­ties, con­tain­ing only a skele­tal list of projects and a few maps. Un­til such strate­gic think­ing emerges, even Nawaz Sharif's less am­bi­tious plans to link Kash­gar with Gwadar will re­main dreams like Iqbal's de­sires to link Kash­gar with the Nile's banks.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.