What is CPEC

The deal covers one of the world’s largest overseas projects which will connect Kashgar’s Xinjiang in China with Balochistan’s Gwadar in Pakistan

Khalid Fayaz Mir / Khair-ul-Samar
Srinagar, Publish Date: Mar 16 2017 11:14PM | Updated Date: Mar 16 2017 11:14PM
What is CPECFile Photo

In April, 2015, China signed a US $ 46 billion investment deal with Pakistan. The deal covers one of the world’s largest overseas projects which will connect Kashgar’s Xinjiang in China with Balochistan’s Gwadar in Pakistan: China Pakistan Economic Corridor (CPEC). The project is not only about the revival of the ancient land silk route with maritime silk route which connected Indus valley civilization to the Southern Asia. Apart from 3000 Km highway and railroad that will give China direct access to Indian Ocean, which will reduce China’s 12 days time of oil and coal imports to 36 hours, the project includes US $ 33 billion investment in energy sector alone. 

Besides Beijing’s expanding its political influence across the South Asia, the project will enhance China’s global trade by reducing the time and cost of the transportation of raw materials. The highway is also expected to connect Northwest China with Central Asia and Russia –making it intercontinental in range. By getting most of the contracts, Chinese companies have already started reaping benefits from the construction of the highway, railway, tunnels (one of them 70 Km long and another 10Km), nuclear power plants, wind mills and hydropower projects.

The benefits to Pakistan are overwhelming though. Apart from the creation of the social overhead capital, Pakistan’s electricity shortage –which is seen as the biggest bottleneck for country’s production lines and it accounts for nearly 10% of citizen’s monthly expenditure –is expected to reduce to zero. Pakistan spends US $ 3.5 billion annually on imported fuel needed to keep the country’s 9000MW thermal power plants running. This expense accounts for 35% of country’s imports. Country’s current energy generating capacity is 24,830MW; however, it faces energy shortfalls of over 4500MW on regular basis which has shed its annual GDP by 2-2.5%. 

However, as part of the “Early Harvest” scheme of CPEC, an estimated 10,400MW of electricity are slated for generation by March 2018. Among the total capacity, the in-progress power plant at Neelam and Jehlum river confluence is expected to produce 969 MW; Karot Dam 720MW, Diamer-Basha Dam 4500MW; Karachi Nuclear Power Complex is expected to generate HPR 1000; Qaid-e-Azam Solar Park near the city of Bahawalpur has an estimated capacity of 1000MW; Jhimpir Wind Power Plant is being built with an estimated 300 MW power generating capacity. Besides that, 2.3 million new jobs will be created across Pakistan by 2030. Country’s 1100 Km coastal line is seen as a new tourism industry potential, moreover. We will mention the benefits of CPEC to Gilgit-Baltistan and Balochistan as the two regions enjoy the strategic position in the project.

Benefits to Gilgit-Baltistan

The region of Gilgit-Baltistan, which is engulfed with Karakoram, Hindukush and Himalayas, saw the reduction of poverty in late 1960’s after Field Marshall Ayoub Khan came to Hunza and signed the agreement of building the Karakoram highway. That Highway which cuts through the mountain pass like a ribbon is an essence of the CPEC. Khunjerab –where the highway connects with china –is seen as Economic Gateway by the Gilgit-Baltistan authority. Pakistan has potential hydropower capacity of 60,000 MW of which 40,000 falls in this area. As per the authorities, CPEC will provide a starting point to harness the pent up energy in the region. Due to its being most peaceful area –as per International Peace Index 2016 –in Asia, the highway’s security contract was assigned to the local military of Gilgit Baltistan. 

As per the Karakoram International University students, the US $ 44 million worth optic fiber cable project (which can resist the lowest temperature) will enhance the connectivity and hence the education sector of the region. As part of CPEC, two technical institutes, Engineering University and a medical college, have already been allotted to the region. Moreover, a food processing plant would be set up to enhance the export of fresh apricots, cherries and apples which the region produces on an average of 100,000; 40,000 and 20,000 metric tons respectively. The market options have already multiplied, thereby increasing the traders’ bargaining power.  As per experts, eco-friendly plans for Attabad Lake and mountaineering will take the tourism industry to its peak.  

It is pertinent to mention two hydropower projects here which also fall in the erstwhile J&K. Kohala Hydropower project, a proposed 316 meter run-of-the-river is located near Kohala (40Km from Muzafarabad) in Azad Kashmir, is expected to produce 1100 MW annually. On 28 September 2016, the federal and Azad Kashmir authorities signed an implementation agreement with a Chinese consortium for development of Karot hydropower project planned on Jhelum River which will generate 720 MW per year. 

Benefits to Balochistan 

The Vast region of Balochistan, which covers 44% of Pakistan’s landscape, is rich in mineral resources and owing to its geostrategic position it is considered the gateway of world economy. Livestock is the backbone of the economy, amounting to Rs 20,000 crore to province’s exchequer annually. However, 70% of its working population is fishermen. Currently, only Makrani fishermen bring Rs 15,000 crore revenue per annum. Tides of opportunity are rising high for the fishing business vis-a-vis CPEC. MNA, Minister of State for Petroleum and natural Resources, Mr Jam Kamal Khan, reportedly said, “After the completion of the port, we will bring fiber optic boats from china equipped with in-built cold storage through which our fishermen will export directly to different markets of the world.” 

The arid region also produces, on an average, 1 million tons of fruit annually. The exports will boost as the CPEC is expected to introduce modern packaging system and fruit processing units and international standardization system in the region. Balochistan also houses Asia’s largest coal mine (worth US $ 500 Billion) and is pregnant with 200 million tons of iron ore and 420 million tons of untapped gold, silver and copper worth US $ 1 trillion. Due to its enormous marble resources, it is also nicknamed as marble capital of Pakistan. CPEC will not only help in the utilization of the resources but is anticipated to fetch better prices as well. Three coal power projects, Gwadar Coal Power Project, HUBCO Coal Power Plant, Gaddani Power Park Project, are near completion with cumulative electricity production capacity of 2940 MW. 

New Gwadar International airport which will be completed in July 2018 along with a concessional loan of US $ 2.8 billion for Dredging of Berthing Areas and a multi-purpose terminal in Gwadar are just seen as a beginning in the area. Gwadar Free Zone Plan, Southern Commercial Logistics Area and Northern Manufacturing Area are the game changers which will develop household appliances, logistics, garment and textile processing machinery and exhibition and sales industries in the area. 

Modern modes of farming and education institutions established via CPEC are set to make unimagined economic revolution in the province. The prime example being the establishment of Gwadar Technical Institute which provides three year diploma for the matriculation pass-outs and has already started supplying the human resources needed for the construction of Gwadar port. Consequently, 98% of the staff working with Gwadar port authority is local. Above all, Balochistan sees china as a potential market for fish, marble and coal after the new beginning set to be marked by CPEC. 

 

Khalid Fayaz Mir is Economics Postgraduate from Kashmir

Khair-ul-Samar, postgraduate student of economics at International Islamic University of Islamabad, Pakistan