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Pak-China Industrial Corridor to Spark Industrial Revolution in Pakistan

Industrial parks and special economic zones are part of the China-Pakistan Economic Corridor memoranda of understanding recently agreed between the leaders of the two countries. The key pre-requisites for  the establishment of these zones are resolution of the energy crisis and building of a competitive infrastructure in Pakistan.

Energy and Infrastructure:

The first phase of the economic corridor is focused on $45.6 billion worth of energy and infrastructure projects. China's state-owed banks will finance Chinese companies to fund, build and operate $45.6 billion worth of energy and infrastructure projects in Pakistan over the next six years, according to Reuters. Major Chinese companies investing in Pakistan's energy sector will include China's Three Gorges Corp which built the world's biggest hydro power project, and China Power International Development Ltd.

Under the agreement signed by Chinese and Pakistani leaders at a Beijing summit recently, $15.5 billion worth of coalwind, solar and hydro energy projects will come online by 2017 and add 10,400 megawatts of energy to the national grid.  An additional 6,120 megawatts will be added to the national grid at a cost of $18.2 billion by 2021.

The transport and communication infrastructure—roads, railways, cable, and oil and gas pipelines—will stretch 2,700 kilometers from Gwadar on the Arabian Sea to the Khunjerab Pass at the China-Pakistan border in the Karakorams.

Starting in 2015, the Chinese companies will invest an average of over $7 billion a year until 2021, a figure exceeding the previous record of $5.5 billion foreign direct investment in 2007 in Pakistan.

Special Economic Zones:

Beyond the initial phase, there are plans to establish special economic zones in the Corridor where Chinese companies will locate factories. Extensive manufacturing collaboration between the two neighbors will include a wide range of products from cheap toys and textiles to consumer electronics and supersonic fighter planes.

The basic idea of an industrial corridor is to develop a sound industrial base, served by competitive infrastructure as a prerequisite for attracting investments into export oriented industries and manufacturing. Such industries have helped a succession of countries like Indonesia, Japan, Hong Kong,  Malaysia, South Korea, Taiwan, China and now even Vietnam rise from low-cost manufacturing base to more advanced, high-end exports.  As a country's labour gets too expensive to be used to produce low-value products, some poorer country takes over and starts the climb to prosperity.

Once completed, the Pak-China industrial corridor with a sound industrial base and competitive infrastructure combined with low labor costs is expected to draw growing FDI from manufacturers in many other countries looking for a low-cost location to build products for exports to rich OECD nations.

Key Challenges:

While the commitment is there on both sides to make the corridor a reality, there are many challenges that need to be overcome. The key ones are  maintaining security and political stability, ensuring transparency, good governance and quality of execution. These challenges are not unsurmountable but overcoming them does require serious effort on the part of both sides but particularly on the Pakistani side. Let's hope Pakistani leaders are up to these challenges.


Pak-China economic corridor is a very ambitious effort by the two countries that will lead to greater investment and rapid industrialization of Pakistan. Successful implementation of it will be a game-changer for the people of Pakistan in terms of new economic opportunities leading to higher incomes and significant improvements in the living standards for ordinary Pakistanis. It will be in the best interest of all of them to  set their differences aside and work for its successful implementation.

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Comment by Riaz Haq on December 12, 2014 at 10:13pm

ADB provides loan to Pakistan to improve power transmission
Dec 12,2014
ISLAMABAD, Dec. 12 (Xinhua) -- The Asian Development Bank (ADB) and Pakistan signed a 248-million-dollar loan agreement Friday to upgrade the country's power transmission operation and management in a bid to boost energy security, officials said.

The loan, which is the fourth under ADB's multitranche financing facility for the Power Transmission Enhancement Investment Program, will fund 10 subprojects, the ADB said.

They include providing upgrading systems to evacuate power generated from new thermal, wind and hydro power plants and to reduce power losses, and measures to strengthen network safety and security requirements.

This is the final tranche of the 800-million-dollar financing facility which was originally approved in December 2006. The state- owned National Transmission and Dispatch Company will continue as the executing and implementing agency for the program.

The infrastructure to be built or upgraded includes 281 kilometers of 500-kilovolt (kV) transmission lines from the Muzaffargarh grid station in eastern Punjab province, four new 220- kV grid stations, and an extension of 500-kV grid stations at Jamshoro in southern Sindh province and Gujranwala in Punjab.

Mohammad Saleem Sethi, secretary of economic affairs division for the Government of Pakistan and Werner E. Liepach, ADB's country director for Pakistan signed the loan agreement.

"Expanding and upgrading the transmission backbone will provide reliable and high-quality energy supplies to meet increasing demand from industrial, commercial, agricultural, and domestic customers," said Liepach. "It will support the government's strategy to provide people with better access to affordable electricity."

Comment by Riaz Haq on December 16, 2014 at 8:24pm

MOSCOW, December 10. /TASS/. Russian Technologies State Corporation’s representative Andrey Korobov and Pakistan’s Prime Minister Mian Muhammad Nawaz Sharif had a meeting on Tuesday, Pakistan’s information department reported.
At the meeting, which took place in London, Pakistan’s prime minister said his government initiated energy projects to overcome the energy crisis.
The information department does not publish details about projects, but a source close to the Russian corporation told TASS the Russian and Pakistani sides already had several meetings, including in London and in Moscow. The Russian-Pakistani intergovernmental commission in early December agreed on implementation of infrastructure projects in Pakistan’s oil and gas sector.
The source said the Russian corporation had signed a preliminary agreement with Pakistan’s state-run Inter State Gas Systems on implementation of several projects in the oil and gas sector.
“Next year already, the Russian company will begin projects on construction of oil and gas infrastructures, which are strategic for Pakistan,” the source added.

Comment by Riaz Haq on February 17, 2015 at 8:40am

APC rejects changes in Pak-China Economic Corridor (PCEC) route -

The All Parties Conference (APC) here on Tuesday rejected the proposed changes in the Pakistan-China economic corridor route from Khyber Pakhtunkhwa to Punjab and asked the Pakistan Muslim League-Nawaz (PML-N) led-federal government to rollback its decision in this regard. The APC was held under Awami National Party (ANP) in Islamabad. Leader of the opposition in the national assembly, Syed Khursheed Ahmed Shah Asfandyar Wali Khan, vice chairman Pakistan Tehreek-e-Insaf (PTI) Shah Mehmood Qureshi, Mehmood Khan Achakzai, Aftab Ahmed Khan Sherpao and other leaders participated in the conference. ANP chief Asfandyar Wali Khan has said that changes in the trade corridor will increase sense of deprivation among the people in Khyber Pakhtunkhwa, FATA and Balochistan. He said that it is not only trade route but many other development projects are also related with this. The ANP chief said that the corridor can play major role in curbing the menace of terrorism. He said that if the government is serious to strengthen Pakistan, they needed to strengthen provinces. He asked the government not to reverse the mistakes committed in the past. Asfandyar Wali said that following the terrorists brutal attack on Army Public School (APS) in Peshawar the whole nation united. He said that all the political parties supported Prime Minister Nawaz Sharif in war against terrorism. It is mentioning here that the proposed change in the route of Pakistan-China Economic Corridor drew stiff resistance from political parties despite its immense economic potential The 45 billion US dollars Pakistan-China Economic Corridor (PCEC) is believed to be the game changer for the region. It will connect Gwadar with Kashgar town in the autonomous Xinxiang region in China through highways, railroads and pipelines of gas and oil, boosting the economy in all the towns that would become part of this mega economic project. The PCEC is likely to serve as gateway for trade between China and the Middle East and Africa. The project is to cut a 12,000-kilometre route between Middle East and Chinese ports. The two countries, Pakistan and China, have already signed agreements for constructing an international airport at Gwadar, upgrading a section of 1,300-kilometre Karakorum Highway and laying a fibre-optic cable from the Chinese border to Rawalpindi. In November last year, Chinese government announced financing companies to build energy and infrastructure projects worth $45.6 billion under the PCEC. The project has hit controversy after major political parties in Khyber Pakhtunkhwa and Balochistan launched protests against the change in the original route, which is believed to deprive a major portion of Khyber Pakhtunkhwa, Balochistan and Fata of an opportunity of development, business and jobs. Major political parties in Khyber Pakhtunkhwa and Balochistan are still opposed to any change in the route of the Pakistan-China Economic Corridor. The opposition parties have expressed anger over change in the route in the Upper House by staging walkouts twice in a single session. The Khyber Pakhtunkhwa Assembly unanimously rejected any change in the route by the federal government. The Awami National Party has also written a letter to the Chinese envoy to Pakistan, seeking a meeting to discuss how the change in the route is to affect the two already backward provinces and Fata. -

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Comment by Riaz Haq on February 17, 2015 at 9:17am

The gesture of a few senators follows China and Pakistan’s decision to re-route the Corridor mostly through Punjab – Nawaz Sharif’s home province – and thus avoiding some of the country’s most restive areas in both Khyber-Pakhtunkhwa and Balochistan – where the Gwadar port is.

The decision to re-route the Corridor signals that security is the main obstacle to the realization of the project. Chinese ambassadors in Pakistan have repeatedly stressed the need for Pakistan to guarantee the safety of Chinese workers in the country, while the difficulties of conducting business in Pakistan has brought to the cancellation of several contracts, and to the delayed completion of many other projects. Perhaps the most notorious incident involving Chinese citizens in Pakistan is the 2007 kidnapping which led to the Lal Masjid (the Red Mosque) conflict. A year before, in 2006, three Chinese engineers were killed by in an attack claimed by the Baluchistan Liberation Army in Hub, a town west of Karachi. Since then regular incidents have threatened the good relations between the two countries, and led to numerous apologies and promises by the Pakistani authorities to their Chinese counterparts. Many have started to question the feasibility of the China-Pakistan Economic Corridor as well, often highlighting the troubles in managing the already builtGwadar port.

Political instability in Pakistan is another major concern for the realization of such mega-projects. In September Chinese President Xi Jinping’s visit to Pakistan was cancelled in light of the ongoing protests in Islamabad led by Imran Khan’s Tehrik-e-Insaf (PTI) and Pakistan Awami Tehrik (PAT). Officially postponed, the visit has not been rescheduled yet, while recently Pakistan Minister for Railways suggested that Prime Minister Nawaz Sharif could visit China in November to urge investments in infrastructure development programmes, thus highlighting once again how unbalanced this relation is.

China is also concerned with potential Islamist spill-over in its Muslim province of Xinjiang. Although, since the early 2000s, Beijing continuously evoked the Pakistan-based East Turkestan Islamic Movement (ETIM) – which was listed as a terrorist organization by the United Nations in 2002 – as responsible for most incidents in Xinjiang, it remains to a certain extent still unclear whether such organization effectively exists.  In fact, despite a Uyghur population of about 3,000, Pakistan seems largely unmoved by the East Turkestan cause, and the number and capability of Uyghur militants in Pakistan remain very limited. Although, at least in public, China has refrained from openly blaming Pakistan for Xinjiang’s escalating violence, it seems inevitable that those events have an impact of the two countries’ relations, and thus on China’s willingness to invest in Pakistan.

The recent protests, moreover, come from senators from the provinces of Khyber-Pakhtunkhwa and Balochistan. If the situation in Khyber-Pakhtunkhwa is relatively well known, China has several reasons to worry about Balochi groups, thus far some of the keenest opponents to Chinese investments – which in Balochistan are concentrated particularly in mineral resources. In most cases those groups do not seem to oppose Chinese companies per se, but rather intend to use them as a threat to force Pakistan’s central government to deal with their requests. Many Baloch nationalists are also afraid that projects such as the Gwadar port might represent an effort to drown out their call for independence. For Beijing, on the other hand, the major concerns lie with Pakistan’s apparent incapacity to limit the capacity of Baloch insurgents to attack its interests in the region, thus jeopardizing future projects and investments.

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Comment by Riaz Haq on September 18, 2016 at 7:54pm

Published: 27 Jun 2016
Pakistan Vision 2025 seeks to enhance the national transportation infrastructure by establishing an efficient and integrated transportation and logistics system. Establishing industrial parks and developing SEZs along the China–Pakistan Economic Corridor (CPEC) will strengthen the transportation network and logistics infrastructure. Road freight transportation contributed over 90% of the goods transported by land. Rail freight is likely to gain share due to modernization and expansion. High priority is given to road network development. Private sector participation in logistics infrastructure development is likely to gain momentum, and transportation and warehousing are likely to lead logistics industry growth during 2016–2020.

The potential opportunities in the logistics industry in Pakistan, is estimated at approximately US $ 30.77 billion in 2015. Key targets set in the national development initiatives for the transportation sector include reduction in transportation costs, effective connectivity between rural areas and urban centres, inter-provincial high-speed connectivity. Also high priority is given for the development of integrated road/rail networks between economic hubs (including air, sea and dry ports) and high capacity transportation corridors connecting with major regional trading partners

Up-gradation of all major airports to trans-shipment hubs, development of cargo villages, modernization of rail transport, E-commerce, CPEC related investments in industrial centres and Special Economic Zones (SEZs) will serve as primary macro drivers for logistics sector growth. CPEC related projects intend to upgrade and modernize road transport and related logistics infrastructure such as logistics park and establishment of cargo villages at major airports. Hence, high priority is given for road network development; private sector participation in logistics infrastructure development is likely to gain momentum.

Storage and Warehousing demand from CPEC related industrial corridors are likely to derive increased storage and warehousing requirements including cold chain logistics, establishment of Cargo Villages Ports will facilitate goods traffic to central Asian countries and evolve as a major transhipment hub in the region.

Freight forwarding opportunities expected to increase due to increasing trade activities through Karachi and Port Qasim. Trade reforms expected to increase volume of trade with increase in inter and intra-regional trade. Development of new port at Gwadar generates demand for warehousing, special economic zone, road and railway infrastructure network. As the connectivity and linkage improves, this port will emerge as one of the major transhipment hub in the region - transhipment goods to China, Central Asian countries

Energy and Transportation sectors are expected to see high growth due to increased investment relating to CPEC and National Transportation Plans between 2016 and 2020. This is expected to growth of transportation and warehousing segments between 2016 and 2020.

Comment by Riaz Haq on May 15, 2017 at 10:47pm
#China and #Pakistan sign US$50 billion MoU for #Indus River Cascade. #Bhasha #Dasu #Patan #Thakot Dams. #CPEC China and Pakistan signed a US$50 billion memorandum of understanding (MoU) on May 13 to develop and complete the Indus River Cascade, according to information from the China-Pakistan Economic Corridor (CPEC). The MoU was one of several signed related to improving and developing Pakistan’s infrastructure.
Yousuf Naseem Khokhar, Pakistan’s Water and Power Development Authority (WAPDA) secretary for Water and Power, and Chinese Ambassador in Pakistan, Sun Weidong, signed the MoU under the CPEC agreement during the Diamer-Bhasha Project Conference hosted by China’s National Energy Administration (NEA) in Beijing, China.
Under the MoU, China’s NEA would oversee building and funding the five hydropower projects that have an estimated total installed generation capacity of 22,320 MW and according to WAPDA, the Indus River has a potential of producing 40,000 MW.
The Indus River Cascade begins from Skardu in Gilgit-Baltistan and runs through Khyber Pakhtunkhwa, both located in the northwestern portion of Pakistan. Overall, Pakistan has identified a potential of 60,000 MW from hydropower projects.
The planned cascade includes the 4,500-MW Diamer-Basha project, which is already being constructed and four additional projects being developed: 2,400-MW Patan; 4,000-MW Thakot; 7,100-MW Bunji; and 4,320-MW Dasu.
In April, WAPDA awarded a pair of contracts to perform resettlement works associated with construction of the two-stage Dasu hydropower project to China's Zhongmei Engineering Group, worth about $18.56 million combined. The work includes the resettlement of Barseen, Kaigah, Khoshe, Logro, Nasirabad and Uchar.
WAPDA said the resettlement package includes utilities, roads and other amenities including schools, livestock accommodations and recreational areas.
In February, WAPDA announced it finalized the main contracts for civil works for stage-1 of the Dasu project, which is 2,160 MW. The Dasu hydropower stage-I project is estimated to cost about $4.2 billion and is located on the Indus River in the Kohsitan district of Khyber Pakhtunkhwa. Its location is about 240 km upstream of the 3,480-MW Tarbela hydropower complex and 74 km downstream from the Diamer-Basha site.
According to CPEC information, funding the Indus River Cascade represents China’s second-largest investment in Pakistan following $57 billion already committed to several infrastructure improvements under the CPEC.
Comment by Riaz Haq on September 20, 2017 at 8:44pm

Long term plans to be finalised in 50th CPEC review meeting

The long term Pakistan-China cooperation plan (2015-2030) will be finalised in the 50th China-Pakistan Economic Corridor (CPEC) 'review meeting' scheduled to be held today (Thursday) under the chair of Ahsan Iqbal, federal minister for planning and interior, a statement said on Wednesday.

“The meeting will finalise the long term plan in consultation with federal ministries and provincial governments, while ministry of railways will brief the meeting about the upcoming financing plan for the up-gradation of Mainline-1 (ML-1) from Peshawar to Karachi will be discussed,” the ministry said in the statement. 

The ministry added that Pakistan and China were in the process of finalising the financing plan of $8.5 billion for the ML-1, whereas the next joint working group (JWG) meeting was expected to be held probably next month as the financing plan for the track was also expected to be finalised by November this year.

“Admitting the requirement for having overriding institutional framework to execute $46 billion China-Pakistan Economic Corridor (CPEC) under long term plan till 2030, Beijing and Islamabad have also agreed to build model industrial parks, each in all provinces, with Chinese financing of multimillion dollars,” the ministry said.

Moreover, it said that it was also under consideration to build model cities along the bank of Indus River, having a range of 300 kilometers, but it was yet to be seen as to how this ambitious plan was going to be finalised in a synergised manner.

“Officials from Chinese Embassy at Islamabad probably Chinese Ambassador, Chinese companies and officials from ministry of planning, line ministries and provincial governments would participate in the meeting,” the ministry said. It further said the forum would review progress on the ongoing projects including schedule and agenda of the next JWGs of energy, transport infrastructure, planning, and Gwadar. “It will further review the progress on consortium of business schools and Pakistan Academy of Social Sciences,” the statement said.

Comment by Riaz Haq on December 14, 2017 at 9:07am

Why Is Manufacturing More Expensive In India Than In China?

Why are manufacturing costs higher in India, compared to China? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Balaji Viswanathan, CEO of Invento Robotics, on Quora:

A number of my relatives run manufacturing plants in Tamil Nadu, a relatively developed state. My in-laws have also recently started importing from China (replacing their Indian suppliers) and I will tell you why costs are higher than in China.

Power availability: You start a plant and realize that power availability is not 24/7. In Coimbatore and other industrial places you get power for like eight hours a day. That means the machinery lies idle for sixteen hours and that wasted capacity adds to the cost.
Cost of power: In India, we subsidize the power to farmers so much (farmers are a huge political base to regional parties) that the electricity companies either have to go bankrupt or charge huge amounts for industries. Electricity cost is often higher than some developed countries.
Cost of labor: Getting good factory labor in places like Tamil Nadu has become extremely hard. Skilled people are already in high-paying industries. The unskilled ones are hard to deal with. When we get labor from the north, they often move out without much notice (go to Diwali on vacation and never return). Skill building is lacking. If you pay $250, the quality of labor you get in China is likely higher than what you get in India.
Cost of transportation: Given the poor roads, a shipment from India's north can take a week or more to reach India's south. Sometimes it is quicker and cheaper to actually get a shipment from Shenzhen than Kolkata. Time is money and all those delays add to your cost. If I could get something in two days, I could sell it immediately rather than wait two months to sell it (add up the interest costs).
Bureaucracy: Starting a new plant or to adding anything to an existing one is very costly in time and money. You need to fill out a huge number of forms and grease a lot of palms just to do something legal and useful. Shipping across states is also very delayed (this is why the industry is pushing for GST). Unless most of the Indian laws - especially the one dealing with factories and labor - are thrown out, corruption, delays, and inefficiencies will remain.
Anti-large enterprises: India grew up in the mindset that large industries are bad. While many laws have changed since 1991, some of our laws, especially in textiles, are structured around small enterprises. Small businesses do not have the scale to produce cheaply and take on massive factories in China or Bangladesh. Thus, in the huge lucrative market of ready-made garments, Bangladesh quickly took the number two spot - leading to huge improvements in women development, while Indians are clinging to outdated laws favoring small, cottage industries.
If India has to compete with China, we have to completely overhaul all of the economic laws - taxes, labor, factories - we have had in place since 1947. Otherwise we will continue to be costlier than Vietnam and Bangladesh.

This question originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

Manufacturing: Why are 53% of India's factories in only five states?
India: Is there a difference between Indian conservatism and American conservatism?
China: As an Indian what is your experience with China and its people?


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