CPEC— game-changer for world trade

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Situationer

M. Ziauddin

When completed the China Pakistan Economic Corridor (CPEC) is anticipated not only to be a game changer for Pakistan and China but also for world trade. However, the US is still looking at the CPEC as an early sign of the beginning of the end of its global hegemony on the economic front. Japan is worried that with the completion of CPEC any competitive edge that it currently has in world markets over China would simply disappear as while the physical distance between China and its markets would shorten by as much as 9,000km, its cost of producing exportable surpluses would as a consequence come down steeply.
India, on the other hand, is worried about the safety and security of its oil supplies that pass through the Strait of Hormuz at the mouth of which is located Gwadar, the entre-port of CPEC and where New Delhi fears in due course of time China will set up a Naval Base. India seems also concerned about the future of Chahbhar sea port that it is helping build in Iran along the Strait of Hormuz about 72 km from Gwadar for which it is contributing as much as $20 billion. It had perhaps wanted to deny Pakistan the Afghan and Central Asian markets through Chahbhar.
While the US and Japan still seem to be engaged in getting China to bog down in the South China imbroglio, India appears to have already finalized a stratagem to counter the self-perceived threats to its sovereignty and integrity emanating from CPEC. Indian Prime Minister Narendra Modi set the ball rolling from Lal Qila on August 15, 2016 by openly declaring his country’s intentions to foment trouble in Balochistan believing perhaps that once an insurgency in the province heats up uncertainty that would engulf the region as a result would make it impossible for the CPEC project to take off. It is also objecting to the Corridor passing through Gilgit Baltistan which in its opinion is a disputed territory and claims that the region cannot be used for any purpose without prior permission from New Delhi. India fears that China would set up its military base in GB in collaboration with Pakistan making it doubly dangerous for India’s occupation of Held Kashmir.
India also fears that once CPEC takes a final shape it would render the Chahbhar sea port redundant, its supplies of oil from Iraq, Iran and Saudi Arabia would become totally dependent on the good will of Pakistan and China and its plans to capture the Central Asian market would be nipped in the bud as China would be able to access in the shortest possible time the CA states through CPEC while India would be left with its round-about route going through Afghanistan which is still in the grip of a wasteful civil war.
However, some politically influential quarters in India believe that with the completion of CPEC Pakistan would be focusing its attention more on the economy which they think would create conditions conducive for those currently indulging in militancy to adjust in gainful employment which in turn would vastly lessen the threat of cross-border terrorism. These quarters also believe that India too could take advantage of CPEC by linking itself with the project which in turn would neutralize the threat it believes it would face with the Chinese Navy stationed in Gwadar and its Army massing troops in GB. Perhaps Pakistan could take the initiative in this regard by offering Afghanistan and India transit trade route through Pakistan which the two countries have been longing for decades. This move would perhaps neutralize India’s plans to foment trouble in Balochistan and its objections to GB becoming a part of the CPEC.
Meanwhile, it would be advisable to keep our respective domestic objections and complaints that we have all succeeded in discovering in the fine print of the project documents from turning into unnecessary and wasteful controversies. There are immense benefits for the entire country in the CPEC. Some regions would benefit immediately and some would benefit with a lag of couple of years but in the final analysis the entire country would be the gainer.
Gwadar port, the South most point of CPEC has total traffic of 0.5 million tonnes of Cargo today. But by 2017 it is expected to handle 1.0 million tonnes of Cargo. When completed and fully functional, it will handle 300-400 million tonnes of cargo per annum as against India’s total port capacity to handle 500 million tonnes of cargo. The Long Beach Port of the United States is the largest port of the US. It handles 80 million tonnes of cargo each year which is just 20% of Gwadar’s future capacity.
CPEC consists of “one belt, three passages, two axes and five functional zones” in terms of its spatial layout. “One Belt” refers to the belt which consists of zone area of the CPEC and the economic cluster area of industries, population and cities. It runs from Kashgar to Karachi and Gwadar on the Arabian Sea. “Three Passages” refers to the eastern, central and western routes. Eastern Route consists of railway-highway network from Islamabad to Karachi via Lahore, Faisalabad, Multan, Sukkur and Hyderabad and is considered as the main traffic artery of the corridor. Central Route starts from Islamabad to Karachi via Daria Khan, Jacobabad and Khuzdar through N25 or to Gwadar through M8. Western Route starts from Islamabad to Gwadar via D.I.Khan, Quetta, Basima and Hoshab. “Two Axes” refers to two east-west development axes in the corridor: Lahore – Islamabad – Peshawar” and “Karachi-Gwadar” development axes.
Once implemented CPEC has the potential of transforming Pakistan’s economy from a low growth mode (3-4%) to a higher and sustainable growth economy with low inflation, removing key infrastructural bottlenecks (energy, roads, highways, railways etc.), promoting balanced regional growth and development, shaping new industry clusters, improving living standards and social stability, and promoting regional connectivity.
The Corridor is expected to fuel economic growth of Pakistan by adding 2.0 percentage point to its growth between 2016 and 2020; another 1.5 percentage point between 2020 and 2030. It is likely to create 800,000 to 1.0 million new jobs. The length of newly built or upgraded roads and railways should reach 3871 km and 1529km, respectively. Power generated by newly built sources will reach 19.785 million KW, and length of optical fiber Cable will reach 2084km.
Under CPEC, various Pakistani industries will benefit.The garment and textile industry will be developed in Kashgar Economic Development Zone through importing raw materials from Pakistan. Textile and Garment Centers or EPZ will be built in Lahore and Karachi. To enrich cotton textile varieties, investment should focus in producing top grade cotton yarn, printing and dyeing fabrics, Jean fabric and Knitted fabric. Household Appliances Industry appears to have a bright future. Living conditions of Pakistani people will be improving gradually.
Some Chinese enterprises have already established plants in Pakistan. A household appliance industrial park will be established near Lahore through joint ventures. They will move from assembling imported parts to producing them locally. The demand for cement will continue to rise because of the rising construction activity. More investment can be made in cement industry to meet the growing demand for the CPEC – related construction projects. Mineral Exploration is another area where Chinese enterprises will have interest. Industrial Park Construction along the corridor should be considered by Pakistani-Chinese investors.
For food security, agricultural modernization should be promoted along the corridor. Key target is to increase per acre yield of rice, wheat, cotton and sugarcane and the output of livestock and dairy sectors including fish and shrimp. Organic and chemical fertilizer production should be developed around Lahore and Karachi. A modern agricultural demonstration zone should be built in the Quetta and Gwadar regions to lead local agricultural development. To increase farm employment along the corridor, efforts will be made to focus on developing agricultural product processing. By introducing modern agricultural product processing equipment and facilities, an agricultural industry cluster could be built around Islamabad, Lahore and Karachi. To reduce losses of fresh agricultural produce and increase local farm income, agricultural produce warehousing and logistics facilities be built in Peshawar, Islamabad, Lahore and Gwadar.
Gwadar Port infrastructure will be improved for fishery production. Epidemic disease prevention and control related to agricultural produce should be developed in Faisalabad and Lahore. Coastal tourism development has enormous potential under CPEC. Coastal tour line is Keti Bundar-Karachi-Somiani-Ormara-Gwadar-Jiwani. Landmark hotels, golf courses, high-end nursing homes, race courses and a hot air balloon facility along coastal city tourism zone are mostly likely to be built.
Financial cooperation will play an important role in economic corridor construction and operation. Multi-level cooperation includes Central bank cooperation for establishing bilateral payment and settlement to ease pressure on foreign exchange reserves. Business Organization Cooperation will take place where Chinese financial institutions can lead the syndicated loans of international financial institutions. And Cooperation in Financial Markets are likely where the two countries can open their bond market.