Since the adoption of the CPEC, about $18.832 billion has been invested in a total of 22 projects under CPEC – 11 of which have been completed and another 11 are under construction. A total of 20 more project are in pipeline as well.
Chinese embassy in Pakistan provided the latest progress on the CPEC – affirming that CPEC is a major and pilot Belt and Road project and serves as platform for the comprehensive and substantive cooperation between China and Pakistan.
ENERGY PROJECTS
Chinese companies and their partners have so far invested $12.815 in a total of 15 planned energy projects with a generation capacity of 11,110MW. With a total capacity of 6,910MW – 7 projects have been completed and another 6 are under way.
Investing companies will finance these energy projects through their own equity or commercial loans at about 5% interest rate. So, any debt arising from CPEC energy projects will be borne by the Chinese investors and not by Pakistan.
Energy projects under CPEC have sharply reduced per unit cost of electricity from Rs. 16-18 to around Rs. 8 per unit. In addition, these projects have also lessened Pakistan’s reliance on gas and LNG power plants, easing pressure on foreign exchange reserves.
In his paper last year, Dr. Ishrat Hussain noted that the priority of CPEC is very much responsive to meet the economic needs of Pakistan as $35 billion of the initially approved $46 billion is directed towards energy projects.
INFRASTRUCTURE PROJECTS
China has also provided Pakistan concessional loans of $5.874 for transportation infrastructure projects at the interest rate of around 2%. The repayment of the loans will start from 2021 and will be repaid in 20-25 years.
Realizing the importance of efficient transportation network for economic development, Havelian-Thahkot, Karachi-Lahore Motorway (Sukkur-Multan section), and Lahore Orange Train are the three infrastructure projects under construction.
CPEC projects are missing a mega ML-1 Railway project of $8 billion. The project for the upgradation of Karachi-Torkham track is still under discussion between China and Pakistan. Once completed, ML-1 will provide easy and low-cost cargo and passenger transport for 70% of the people of Pakistan across the ML-1.
GWADAR PORT
The government China has additionally provided interest-free loan of $0.143 billion for Expressway East Bay in Gwadar.
China has also committed to provide grants for several new projects in Gwadar including the establishment of new airport, vocational training centre, and friendship hospital.
Both the countries are discussing over the implementation of grants. The financial details of Chinese grants for Gwadar are yet to be finalized.
Gwadar port is the heart of CPEC. China Overseas Ports Holding Company (COPHC) was handed over the operations of Gwadar port for 40 years lease period. The planned development of Gwadar free Zone is 15 years – from 2015 to 2030.
To date, COPHC has invested $250million in port renovation. An additional 30 companies have also invested around $474 million in Gwadar free zone. From the first consignment, Pakistan will get 9% of the revenues from Gwadar operations.
INDUSTRIAL COOPERATION
In November 2015, Pakistan requested and China agreed on industrial cooperation in the areas of steel, cements, automobile, other construction materials, home appliances, textile and apparel, and light industry.
After studying China’s development in Special Economic Zones (SEZs), Pakistan proposed to setup nine (9) SEZs in November 2016. The feasibility of all 9 SEZs have been completed and the first of them – Rashakai SEZ – will be inaugurated in the first quarter of 2019.
JOB CREATION, INCREASE IN EXPORTS AND FDI ARE TIGHTLY LINKED WITH SEZs
Job creation and increase in exports and Foreign Direct Investment (FDI) are closely linked with the establishment of SEZs. The SEZs in China have created 30 million jobs and have contributed 22% of GDP, 45% of FDI, and 60% of exports.
International Labor Organization (ILO) and Deloitte estimate that the SEZs in Pakistan can create 400,000 and 700,000 jobs respectively in Pakistan by 2030. CPEC-centre working paper says that more than1.2 million jobs can be created through CPEC – out of which 9 SEZs alone may provide over 1 million job opportunities.
CPEC projects, up to now, have created more than 75,000 jobs for the people of Pakistan. But these estimates show that the dream of creating abundant job opportunities cannot be realized without the establishment of SEZs in Pakistan.
IS CPEC A DEBT TRAP?
A recent media report claimed that Pakistan will have to repay $40 billion debt to China under CPEC projects. Chinese embassy in Pakistan responded strongly to the claim, stating that this number is ‘wrong and misleading’.
It clarified that since all the energy projects ($18.832bn) are of purely investments in nature – therefore until now, Pakistan’s foreign debt on account of CPEC projects has only been raised by only $6.017bn ($5.874+$0.143) and its interest.
Earlier, former governor State Bank of Pakistan, Dr. Ishrat Hussain also castoff any threats of debt trap to Pakistan over the ongoing CPEC projects.
He quoted IMF that at its peak, the repayments on both debt and investment account would be $2.5bn to $3bn annually, which can easily be absorbed by various financial measures such as increasing exports, savings in imports of fuel, and transit fee etc.
CPEC BACKGROUND
CPEC is the largest project under the Chinese Belt and Road Initiative (BRI) and will extract political, economic, and social benefits to the people of both countries.
Proposed by Chinese Premier Li Keqiang in May 2013 during his visit to Pakistan, CPEC was signed by China and Pakistan in April 2015 – termed as 1+4 economic cooperation, featuring CPEC and cooperation in four areas including energy, transportation infrastructure, the Gwadar Port, and industry.
The projects under China-Pakistan Economic Corridor (CPEC) were originally billed at $46 billion however with the induction of some additional projects during the implementation phase; total outlay was elevated to $62 billion.
Joint Cooperation Committee (JCC) is supervisory body of the CPEC under which is also overseeing the operations of 7 Joint Working Groups (JWG) including planning, energy, transportation infrastructure, Gwadar port, industrial cooperation, social economic development, and international cooperation.