Pak-China Industrial Corridor to Spark Industrial Revolution in Pakistan

[Riaz Haq]

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 coal, wind, 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.

Summary: 

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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[Riaz Haq]

The federal government has decided to go ahead with the China Pakistan Economic Corridor (CPEC) amid the watchful eyes of international entities. The federal cabinet has approved the commencement of the second, and most important, phase of the CPEC project for industrial development of Pakistan.

https://profit.pakistantoday.com.pk/2023/03/23/despite-internationa...

According to reports, the industrial cooperation agreement between the two neighboring countries will be effective till 2025, with the possibility of further expansion. They elaborated that under the agreement, there will be capacity building and skill development of Pakistan’s CPEC workforce. The Ministry of External Affairs and Ministry of Law jointly endorsed the draft agreement, sources claimed.

To clarify, BoI is the lead agency of the Joint Working Group (JWG) on industrial cooperation under CPEC from the Pakistani side. On the other hand, the Chinese counterpart of the BoI is the National Development & Reform Commission (NDRC), China.

A framework agreement was also signed between both parties in 2022, which besides other matters of significance, also aims to foster skill development and capacity building of the local workforce. This shows the potential skilling and economic advancement that Pakistan anticipates would result from the current endeavor.

Here is what happened in the pursuance of the consensus reached in the Framework Agreement and the 10th JCC meeting of CPEC, held on 23rd September 2021, the NDRC– China has proposed that an MoC between BoI and the All-China Federation of Trade Unions (ACFTU) is likely to be signed, in order to strengthen workers’ exchange under CPEC Industrial Cooperation.

Sources further hinted that the proposed MoC envisages to conduct exchange programmes of Government officers and workforce associated with CPEC projects, through capacity building and skill development, Chinese language courses, and any other mutually agreed mechanism to promote people to people ties.

According to sources, BoI and ACFTU have reached consensus on the text of the draft MoC, which has been duly vetted by the Law Division, as well as been concurred by the Ministry of Foreign Affairs.

Based on the draft copy, available with Profit, of the MoC between the ACFTU of China and the BoI of Pakistan, there will be an agreement between the two entities to promote industrial cooperation, within the framework of the China-Pakistan Economic Corridor Industrial Cooperation (CPEC IC).

In the foreseeable future (2023-2025), and keeping in mind the COVID-19 pandemic, both sides will, on the basis of mutual consent, hold online workers symposiums at regular intervals, as well as, carry out relevant exchanges and cooperation. The online symposium will be designated for the workforces of both countries that are actively engaged in and contributing to the construction of CPEC. This will provide a platform to augment people to people exchanges through experience sharing and suggestions for the future development of CPEC.

Moreover, online seminars based on the Chinese’s successful experience in development for Special Economic Zones (SEZs) shall also be organized for the concerned stakeholders in Pakistan. Following the same timeline, in the next three years, both sides shall initiate an exchange programme by arranging activities in their respective countries to foster practical people to people and cultural exchanges on ground.

To provide first hand experience of the successful industrial models in China, the Chinese stakeholders shall facilitate the field visits of the concerned teams from Pakistan, including the Chinese SEZs, sources told Profit. Likewise, in order to mitigate the language barrier between the two countries’ workforces associated with CPEC, while promoting brotherly relations and cultural ties, both sides shall arrange exchange programmes by holding language learning courses in their respective countries.

[Riaz Haq]

CPEC Results According to Wang Wenbin of China

https://twitter.com/bilalgilani/status/1677391745112477696?s=20

Bilal I Gilani
@bilalgilani
CPEC projects are creating 192,000 jobs, generating 6,000MW of power, building 510 km (316 miles) of highways, and expanding the national transmission network by 886 km (550 miles),” Foreign Ministry spokesman Wang Wenbin told reporters in Beijing."


Associated Press of Pakistan: On July 5, Prime Minister Shahbaz Sharif while addressing a ceremony to mark a decade of signing of the China-Pakistan Economic Corridor (CPEC), said that CPEC has been playing a key role in transforming Pakistan’s economic landscape. He also said that the mega project helped Pakistan progress in the region and beyond. What is your response?

Wang Wenbin: The China-Pakistan Economic Corridor (CPEC) is a signature project of China-Pakistan cooperation in the new era, and an important project under the Belt and Road Initiative. This year marks the 10th anniversary of the launch of CPEC. After ten years of development, a “1+4” cooperation layout has been formed, with the CPEC at the center and Gwadar Port, transport infrastructure, energy and industrial cooperation being the four key areas. Projects under CPEC are flourishing all across Pakistan, attracting USD 25.4 billion of direct investment, creating 192,000 jobs, producing 6,000 megawatts of electric power, building 510 kilometers of highways and adding 886 kilometers to the core national transmission network. CPEC has made tangible contribution to the national development of Pakistan and connectivity in the region. China and Pakistan have also explored new areas for cooperation under the framework of CPEC, creating new highlights in cooperation on agriculture, science and technology, telecommunication and people’s wellbeing.

China stands ready to work with Pakistan to build on the past achievements and follow the guidance of the important common understandings between the leaders of the two countries on promoting high-quality development of CPEC to boost the development of China and Pakistan and the region and bring more benefits to the people of all countries.

https://www.fmprc.gov.cn/eng/xwfw_665399/s2510_665401/2511_665403/2...

[Riaz Haq]

The mega undertaking (China-Pakistan Economic Corridor or CPEC) has created nearly 200,000 direct local jobs, built more than 1,400 kilometers (870 miles) of highways and roads, and added 8,000 megawatts of electricity to the national grid, ending years of blackouts caused by power outages in the country of 230 million people.


https://www.voanews.com/a/top-china-official-visits-pakistan-markin...


Chinese Foreign Ministry spokesman Wang Wenbin told reporters in Beijing earlier this month that CPEC projects "are flourishing all across Pakistan," making a "tangible contribution" to the national development of the country and to regional connectivity.

But critics say many projects have suffered delays, including several much-touted industrial zones that were supposed to help Pakistan enhance its exports to earn much-needed foreign exchange.

The country's declining dollar reserves have prevented Islamabad from paying Chinese power producers, leading to strains in many ties.

Pakistan owes more than $1.26 billion (350 billion rupees) to Chinese power plants. The amount keeps growing, and China has been reluctant to defer or restructure the payment and CPEC debts. All the Chinese loans – both government and commercial banks – makeup nearly 30% of Islamabad's external debt.

Some critics blame CPEC investments for contributing to Pakistan's economic troubles. The government fended off the risk of an imminent default by securing a short-term $3 billion International Monetary Fund bailout agreement this month.

Security threats to its citizens and interests in Pakistan have also been a cause of concern for China. Militant attacks have killed several Chinese nationals in recent years, prompting Beijing to press Islamabad to ensure security measures for CPEC projects.

Diplomatic sources told VOA that China has lately directed its diplomats and citizens working on CPEC programs to strictly limit their movements and avoid visiting certain Pakistani cities for security reasons.

"They [Chinese] believe this security issue is becoming an impediment in taking CPEC forward," Senator Mushahid Hussain, the chairman of the defense committee of the upper house of the Pakistani parliament, told VOA in an interview earlier this month.

"Recurring expressions of concern about the safety and security of Chinese citizens and investors in Pakistan by top Chinese leaders indicate that Pakistan's promises of 'foolproof security' for Chinese working in Pakistan have yet to be fulfilled," said Hussain, who represents Prime Minister Shehbaz Sharif's ruling party in the Senate.