CPEC update

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Naveed Aman Khan

THE China Pakistan Economic Corridor (CPEC), is a main platform for comprehensive cooperation between China and Pakistan. It is an important consensus obtained by these great friendly countries. Chinese Premier Li Keqiang in May 2013, proposed the initiative of CPEC during his visit to Pakistan, while President Xi Jinping, in his April 2015 visit, signed the agreement for a one plus four pattern of economic cooperation, featuring a central role of the CPEC and four key areas including the Gwadar port, energy, transportation infrastructure and industrial cooperation, so as to achieve successful results and common development. Both China and Pakistan agree on the principles of scientific planning, gradual implementation, consensus through consultation, mutual benefit and excellent results, as well as ensuring quality, safety and environmental protection. Both the countries have recently reaffirmed the future trajectory of the CPEC, timely completion of its projects and joint efforts for realisation of its full potential with a focus on socio economic development, job creation and livelihoods and accelerating cooperation in industrial development, industrial parks and agriculture.

The major avenues of focus of CPEC include energy, infrastructure, Gwadar Port and industrial cooperation. Energy is the driving force for economic development and a key factor to ease load shedding and improve the life of millions of people. Fifteen energy projects highlighted as the priority sector under the CPEC framework are planned as priority with a total generation capacity of 11,110MW, among which seven have been completed and are in operation while eight are under construction with a total capacity of 6,910MW. At present, Zonergy 300MW Solar Park, 50MW Dawood Wind Farm, Jhimpir UEP wind power project, Sachal 50MW Wind Farm, Sahiwal 2×660MW Coal fired Power Plant, Port Qasim 2×660MW Coal fired Power Plant and Three Gorges Second and Third Wind Power Projects have been completed. These projects have added 3240 MW to Pakistani national grid, amounting to more than 11pc of the total installed capacity of 29,000 MW in Pakistan. The project also includes alternate energy sources, while the total package is aimed at providing affordable energy to Pakistani consumers in a diversified manner.

Over the past five years, under CPEC, eleven projects have reached fruition and eleven are under construction. The total investment of the twenty two projects is around US $19 billion, with twenty more projects in the pipeline. For the execution of CPEC, both China and Pakistan have set up a ministerial level Joint Cooperation Committee on CPEC Long Term Planning . There are seven joint working groups, namely planning, energy, transportation infrastructure, Gwadar port, industrial cooperation, social economic development and international cooperation. Joint Cooperation Committee is responsible for overall planning and coordination under CPEC. The two secretariats are responsible for communicating and coordinating with the line ministries related to the projects of CPEC. Until now, Joint Cooperation Committee has convened eight meetings and since 2015 it is held on annual basis. The eighth meeting was held in Beijing on December 20, 2018.

In the infrastructure section, efficient transportation network is key to economic development. Currently, KKH Phase-II (Havelian-Thakot section), Karachi-Lahore Motorway (Sukkur-Multan section) and Lahore Orange Line are three projects very near to completion. The information highway for laying of optical fiber cable (OFC) from Rawalpindi to Khunjrab is in operation. These ongoing projects are funded by preferential loans from the Chinese government at around 2pc interest rate with a total amount of US$ 5.874 billion. The upgradation of ML1 railway and the KCR are under discussion.

The Gwadar Free Zone is in the northern part of Gwadar, about 7km away from the port. The planned development period is from 2015 to 2030 and is divided into four phases. The project of Gwadar East Bay Expressway was agreed by China and Pakistan during President Xi Jinping’s visit to Pakistan in 2015. The EPC contract of the project was signed in September and construction commenced in November 2017. The construction period of the project is three years with the designed speed of hundred kilometers per hour, which is implemented by the China Communications and Construction Company (CCCC). After inauguration, the project will become the main channel for the cargo distribution of Gwadar Port and a vital communication line to connect the Free Zone in southern and northern areas of Gwadar.

As far as industrial development is concerned, the federal government of Pakistan and each province have attached paramount importance to the construction of SEZs. The work has been in progress with the joint efforts of both sides. The mega project is endeavouring to create job opportunities and social responsibility. According to the preliminary statistics, CPEC projects have created more than seventy five thousand direct job opportunities for Pakistani people. To promote economic development and employment of Pakistan, Chinese companies also subcontract many projects to local Pakistani companies. This also develops relevant upstream and downstream industries, such as raw material processing, catering industry which also provide more employment opportunities for local people.

China and Pakistan signed the Long-Term Plan at the seventh JCC after obtaining consent of both federal government and all the Pakistani provincial government. The plan provided the macro guidance for implementation of CPEC in the next phase and could be adjusted based on the real situation as well as the consensus between the two parties during its implementation in the future. A lot of misreporting has been done about CPEC being a debt trap. Nothing could be further than the truth. The Chinese government provided concessional loans of US $ 5.874 billion for Pakistan government’s major transportation infrastructure projects, with a composite interest rate of around two percent in repayment period of twenty to twenty five years. The Pakistani government provides sovereign guarantee for the above loans and will start the repayment from 2021.

The Chinese Companies and their partners invested US $ 12.8 billion in energy projects in Pakistan. Among them, Chinese companies provide US $ 3 billion from their own equity. The rest US $ 9.8 billion is raised from commercial banks with interest rate of about five percent. The repayment period is twelve to eighteen years. All the CPEC energy projects are investment in nature, which is purely independent business behaviour of these companies. China provides interest-free loans for Expressway East Bay in Gwadar and grant for some livelihood projects. Pakistan provided funding for the feasibility study of ML-1 up gradation. Therefore, Pakistan will repay only US$6.017 billion (Category- I $5.874 billion and Category-III US $ 0.143 billion) and their interests to China. China and Pakistan are discussing how to use Chinese grant to implement new projects such as new Gwadar international airport, Gwadar Vocational Training Centre and Friendship Hospital.

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