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Past five years of CPEC in review

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Past five years of CPEC in review

By Tang Mengsheng
Published: May 6, 2019
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PHOTO: REUTERS

BEIJING: The China-Pakistan Economic Corridor (CPEC), as a

pilot project of the Belt and Road Initiative, was officially
launched in 2013. President Xi Jinping, during his visit to
Pakistan in April 2015, noted that CPEC construction should
play a leading role in the practical cooperation between the
two countries and determined the ‘1+4’ layout of cooperation
centring on CPEC construction supported by Gwadar Port,
energy, transportation infrastructure and industrial
cooperation.

Practices in the past five years have proved that the CPEC
construct is not targeted at specific regions or groups, but is
aimed at the whole country of Pakistan and benefits all the
people of Pakistan.

Fruitful achievements in CPEC construction

CPEC has played a flagship leading and demonstration role in

the Belt and Road construction. It has become a platform for
all-round pragmatic cooperation between China and Pakistan.

 Improving macroeconomic conditions in Pakistan

CPEC has driven the development of Pakistan. The two-gap

model proposed by economist Hollis B Chenery posits that
developing countries must introduce foreign investments and
stimulate exports to boost growth of their national economy.

CPEC has solved the problem of limited investment capacity

caused by insufficient savings and shortage of foreign
exchange in Pakistan and provided a high-quality source
of impetus for Pakistan’s economic development.

As of January 2019, CPEC included nine completed early

harvest projects and 13 projects under construction, with a
total investment of $19 billion. It drove Pakistan’s economic
growth by one to two percentage points every year and
created 70,000 jobs in Pakistan.

The Chinese government provided $5.874 billion in

concessional loans to Pakistan, with a consolidated interest
rate of only 2%, far lower than the average interest rate. The
Chinese government also provided $143 million in interest-free
loans for the Gwadar East Bay Expressway project and free
assistance for some livelihood projects in Pakistan.

Thanks to favourable factors such as the CPEC construction,

Pakistan’s macroeconomic conditions have been improving
and its economy has maintained a momentum of rapid growth.
Over the past five years, Pakistan’s GDP grew by an average of
4.77%, especially in the 2017-2018 fiscal year, when
Pakistan’s GDP grew by 5.8%, the highest rate in recent 13
years.

Pakistan’s annual foreign direct investment grew from $650

million to $2.2 billion and the per capita annual income rose
from $1,334 to $1,641.

 Alleviating Pakistan’s energy shortage

Energy shortage is a hard nut to crack that restricts the

economic development of Pakistan. It is a problem that
previous Pakistani governments attached great importance to
and most wanted to solve.

The electricity gap cost Pakistan an annual average loss of

$13.5 billion in GDP, according to a study by PwC in 2012.
Power shortage left Pakistan in the dark for a long time, with
rolling blackouts across the country lasting about 10 hours a
day in major cities and up to 22 hours in rural areas.

CPEC has regarded the alleviation of energy shortage in

Pakistan as one of the important areas of construction since its
launch. Currently, 12 projects with a total installed capacity of
7,240MW have been started or put into operation. Through five
years of construction, energy projects under the CPEC
framework added 3,340MW of electricity to Pakistan by early
April 2019, accounting for 11% of the country’s total installed
electricity capacity, thus greatly alleviating the power shortage
in Pakistan.

In addition to power generation projects, China built the

Matiari-Lahore ±660kv HVDC transmission line in Pakistan –
the second HVDC transmission line in the world – to address
the aging of Pakistan’s power grid.

 Improving infrastructure connectivity in Pakistan

The China-Pakistan cross-border economic belt, linked by the

China-Pakistan Karakoram Highway, has taken shape under
CPEC. Through international logistics nodes such as Gwadar
Port, Karachi and Peshawar, Pakistan serves to transport
products from western China to countries in the Middle East
and the Indian Ocean via transit transport.

Therefore, infrastructure connectivity is also one of the

important areas in the early harvest projects of CPEC. The
Karakoram Highway Phase-2 (Havelian-Thakot section) is
118.124km long, including 39.305 km of expressway and
78.819 km of secondary highway. The project officially started
on September 1, 2016. Currently, more than half of the project
has been completed.

The section from Sukkur, Sindh in the south to Multan, Punjab

in the north, of the Karachi-Peshawar Expressway, is 392km
long, with a total investment of $2.89 billion. The construction
was undertaken by China State Construction Engineering
Corporation.

The Lahore Orange Line rail transit project was put into trial
operation on October 8, 2017. The line is 25.58km long and is
organised into five carriages, each carrying 200 passengers.
The train starts from Ali Town and terminates at Dera Gujran.

Over the past five years, 51,000 direct jobs were created in the
road infrastructure sector under CPEC projects, of which
48,000 were created specifically for local Pakistanis.
Furthermore, infrastructure projects are expected to spur the
development of Pakistan’s building-related industries and
attract more foreign investment.

 Gwadar Port on the fast track

Gwadar Port has taken on a new look in the past five years.
The port roads, storage yards, loading and unloading
equipment, seawater desalination, oil supply and port
monitoring facilities have been further improved.

Five new container bridge cranes; 100,000-m2 storage yards;

container scanning equipment; the 220,000-gallon
desalination plant; two sewage treatment systems; 80,000-m2
new green space; and the new LPG receiving station have
made the port capable of handling bulk cargo, containers, roll-
on roll-off cargo and LPG.

The container liner service was officially launched at Gwadar

Port on March 7, 2018. The Gwadar-Middle East Express was
opened, connecting Gwadar with other major ports in the
world.

The Gwadar Port Free Trade Zone covers an area of 923

hectares and is constructed in four phases in two zones, one
north and one south. On January 28, 2018, the Gwadar Free
Zone Phase 1 was formally completed and put into operation,
and the investment attraction was also completed
simultaneously.

 Cross-border fibre optic project completed and opened

The 820km China-Pakistan cross-border fibre optic project,

which is laid between the city of Rawalpindi, Pakistan in the
south and the Khunjerab Pass, China in the north, was
completed and opened on July 13, 2018.

Promising future of CPEC construction

2018 was an election year for Pakistan, when there was

concern at home and abroad about whether Pakistan’s attitude
towards CPEC would change due to the change of government.
Around the same time, there were some international opinions
questioning CPEC, saying that a large amount of Chinese loans
might plunge Pakistan into debt crisis.
Facts over the past year have proved that the determination to
build CPEC has not been shaken by the change of government
in Pakistan and the debt crisis theory has been in tatters.

In promoting the CPEC construction, China has always followed

the principle of consultation, contribution and shared benefits,
and given top priority to Pakistan’s economic development and
the vital interests of Pakistanis.

 Steadfast determination to build CPEC

At the very beginning of the new Pakistani government,

Foreign Minister Shah Mehmood Qureshi said, “The new
Pakistani government is advancing an ambitious reform
agenda, and is willing to learn from China’s experience in
economic development, poverty alleviation, disaster reduction,
anti-corruption and environmental protection. Advancing CPEC
is our top priority.”

Prime Minister Imran Khan made it clear that the completed

projects of CPEC are in the interest of Pakistan and will bring
enormous social and economic development opportunities to
the Pakistani people. Since China has lifted more than 700
million people out of poverty in the past decades, Pakistan is
willing to learn from the Chinese government’s poverty
alleviation and reduction measures. Pakistan also hopes to
strengthen cooperation in industry and agriculture to help
unleash its greater development potential.

New challenges to CPEC construction

Currently, CPEC construction has gradually shifted from energy
and transportation infrastructure cooperation to industrial
cooperation and industrial park construction. PM Imran has
given prominence to promoting industrialisation and
employment in Pakistan, and laid greater emphasis on the
western route of CPEC.

Meanwhile, the international situation has also changed. Given

the overall situation, we should be clear that old challenges
have not yet subsided and new ones are emerging in the CPEC
construction.

First, the complex international political situation, especially

the interference of external factors on CPEC, cannot be
ignored.

Second, Pakistan has a serious fiscal deficit, a huge foreign

debt and a heavy debt service burden. The capacity to provide
supporting funds for CPEC construction has declined sharply
and it is no longer feasible to expand infrastructure
construction. Pakistan’s new government wants to rein in huge
capital spending, especially on projects that require large
amounts of foreign exchange.

Third, the overall security situation in Pakistan has improved

year by year, but terrorist attacks still occur frequently. Over
the past year, violent and terrorist attacks launched by
Balochistan separatists occurred frequently, with changes in
form, geographical expansion and new features, and the threat
to Gwadar Port and CPEC has increased.
Despite many challenges to the CPEC construction, it is the
internal factors that are the root cause affecting the CPEC
construction. When we realise and successfully eliminate the
internal negative factors, external factors cannot really affect
the process of CPEC construction.

The writer is a professor at the Centre for Pakistan Studies of

Peking University, China