By: Azhar Azam
Enormous ruses have been arrayed to undermine the deep Pak-Sino relations but the ‘all-weather friendship’ remains free-of-spat. Though there have been rare frictions but the relationship between the two countries is pliant enough to absorb such minor shocks.
China-Pakistan Economic Corridor (CPEC) is the key component of China’s ambitious ‘Belt and Road (B&R) Initiative’ to envisage a greater plan of regional connectivity – to integrate land and sea routes across Eurasia.
The flagship project is set to propel a new era of trade and economic cooperation between China and Pakistan in several energy and infrastructure sectors alongside developing special economic zones (SEZs) and social sector development projects.
Already a number of mega energy and infrastructure projects are efficiently rolling under CPEC – some of those are near completion including five biggest projects – Gwadar Port, Karot Power Station, Transmission Line from Lahore to Matiari, Karachi Circular Railway, and Karakoram Highway.
The power dearth – the most vicious of all – will drop in Pakistan after 720MW Karot Hydropower Project – Xi’s first initiated Silk Road Fund project – connects to national grid by April 2021, chief information office of Chinese government said in a statement.
CPEC is divided into three different phases – which are expected to be completed by 2017-2018, 2020, and 2030. China legitimately prioritizes the first phase – to develop a new trade and transport route of 3,218km from Xinjiang, China to Gwadar, Pakistan.
The most-nattered mega project hinges on Gwadar port.
Work on Gwadar port has repeatedly been interrupted since 1998 and finally, the command of newly developed Gwadar port was handed over to China Overseas Port Holding Company (COPHC Pakistan) in 2013. COPHC officially took control of the Gwadar port for period of 40 years in April 2017.
Gwadar – gateway of CPEC – is a strategically located, deep sea port having deepest Birth of 14.5 meters (extendable up to 20 meters) and capable to accommodate large vessels of up to 70,000 DWT.
Also known as The Door of Wind, Gwadar can hugely develop the economy of Pakistan due to its presence at the convergence of three most important regions of the world – Middle East, Central Asia, and South Asia.
In addition, Gwadar is the closest Seaport from Western China – 2,395 kilometers, almost half of 4,500 kilometers through China’s East Coast from Xinjiang. It also gives transit trade route for landlocked Central Asian Republics (CARs) and Afghanistan.
Gwadar is supported by 923 hectares Large Free Zone, a number of Export Processing Zones (EPZs), and Trading Zones – operated by COPHC – that enjoys a tax holiday from federal, provincial, and local taxes of 20 years.
This massive area has the capacity to house bonded warehousing, manufacturing, international purchasing, transit and distribution, transshipment, commodity display, and supporting services such as business offices, custom, financial, information, hotels, restaurants, entertainment, medical etc. to prosper tourism sector in Pakistan.
China’ state-owned company (COPHC) will have a lion’s share in the revenues generated from Gwadar Port and Free Economic Zones (FEZs) until it runs into profitability after nine (9) years.
After nine (9) years of operational phase of this build, operate, and transfer (BOT) project – the Chinese company will retain 91% revenue of terminal and marine operations from Gwadar Port and also the 85% revenue of free trade activities.
Same as agreement with Port of Singapore Authority (PSA) – no share will be given to Pakistan during the operational phase. However after nine (9) years, Pakistan’s share from Gwadar Port and Free Trade Zones (FTZs) will be 9% and 15% respectively.
By the end of 2017, Gwadar will be capable to handle one million tons of cargo which is planned to reach 13 million tons within next five years, becoming largest South Asian port. After turning completely operational, Gwadar is expected to handle cargo of up to 400 million tons by 2030 that is close to ports of India's combined capacity of handling about 500 million tons a year.
What’s more CPEC route to Gwadar onwards would substantially reduce the transportation cost, distance, and travel time for Chinese goods to Europe and Middle East apart from extensive China’s dependence on Strait of Malacca as a waterway for its imports.
Gwadar port will help China to reduce sea distance by over one-half from Central China to Europe just through Central Asia by 7,847 – from prior 16,507 miles sea travel distance. The overland distance will also be confined to 1,750 miles through Karachi – from previous 2,625 miles through Shanghai.
As a result, the transit time of goods will also be dropped by 50% – from existing 50-days travel route to only 25-days through CPEC.
This reduction in travel distance and time will invariably cut the transportation cost of the Chinese goods as well. Currently, the fright from 40-ft container Hamburg to Shanghai is $2,500 to $3,000. Once CPEC is operational, this cost would be reduced to $1,000 and in a half time.
The Gwadar port location at the mouth of Persian Gulf will also give China the direct access to Arabian Sea and near the key shipping routes obliging 17 million barrels of oil per day and large quantity of bulk, bulk-break, and containerized cargo.
CPEC will also magically minimize the cumulative distance from central China to Middle East to from 12,537 miles to 2,295 miles (80%) – predominately narrowing distance by sea from 9,912 miles to 545 miles between the two regions.
Similarly on Abu Dhabi-Shanghai route – a 40ft container consumes 16 days and costs a freight of $2000 whereas CPEC would galvanize to transport the same container at either place in only 2-3 days, that too for freight of $200-$250.
CPEC can potentially provide landlocked Afghanistan the shortest and much cheaper route to China, India, and Indian Ocean – approximately 600 kilometers shorter distance as compared to Chabahar.
Through Afghanistan, CPEC can provide participating countries an easy access to Far-East and Australia, making both one of the most dynamic transit routes in the world.
Gwadar is much more conducive port than Chabahar as the port charges on the latter would be much higher due to regular dredging to keep the port operational for bigger ships carrying 4,000 to 6,000 40ft containers.
The fee on account of the goods transportation – toll tax – is the key short term benefit to Pakistan’s economy. Pakistan can generate princely revenue by levying $25/ton of toll tax from Khunjerab to Gwadar Road. Chinese exporters will also be saving $50/ton and a reduced transportation time of 15-days.
Similarly, the cost of goods transportation from Xinjiang to Dubai port costs through Eastern China costs $130/ton to Chinese exporters. If these goods are transported through Gwadar, it would cost them only $50/ton – saving $80/ton and lesser transportation time to them and indeed the most- needed revenue to Pakistan economy.
Apart from trade and economic gains, China can establish a naval base in Gwadar with the help of Pakistan for conducting joint naval patrols in India Ocean to increase influence in brines and to counter common adversary, India.
The CPEC projects are also helping Pakistan to curb its unemployment dilemma and mentoring a skilled labor and trained professionals. According to a data provided by Planning Commission, about 30,000 Pakistani engineers and workers are employed in CPEC projects as well as 8,000 workers and engineers from China.
Various domestic and international organizations and experts give variable estimates of job creation in Pakistan from 400,000 to 800,000 through 2020 in several CPEC projects, pushing country’s economic growth by 2% to 2.5%.
Pakistan can also capitalize on Gwadar port in future by building bulk storage of oil tanks, oil refineries, establishment of petrochemical industries, ship repair yard, shrimp farming, vessel building yards, cold storages and ice factories, and recreational water sports activities.
As all the CPEC projects are performed on fast-track basis to timely translate and truly embrace the durable advantages of this dream projects – Pakistan is making all efforts including provision of special security forces to encounter the menace of terrorism targeting workers, infrastructure, and trade routes of CPEC.
Although the first phase of CPEC is yet to be completed but the profile of Pakistan is already repairing – thanks to valiant military operations conducted by Pakistan armed forces which have actively secured another developing another strategic asset – CPEC – correspondingly ensuring peace and stability in the country, injecting all important investor friendly environment for national economy.