The China-Pakistan Economic Corridor (CPEC) project since its launch on April 20, 2015, by President Xi Jinping during his visit to Islamabad has become a topic of much discussion and debate.
China initially had earmarked $46 billion investment for the project with its target completion date by 2030. Since the initial announcement, the amount has increased few times already and as of 2022, Chinese total investment has reached $65 billion. After its completion, CPEC will contribute 20% to Pakistan’s GDP.
Since its debut, the CPEC has become the framework and platform for comprehensive and substantive cooperation between China & Pakistan. CPEC is termed the “Flagship” project of the BRI and sometimes it is also called as the “Crown Jewel” of the BRI. During the signing ceremony speech in 2015, President Xi had said that the CPEC is a “gift” to Pakistan.
CPEC is a long-term project with one of the major aims to connect China’s western region to Pakistan’s Gwadar Port through a network of highways, bridges, tunnels, railways, and pipelines.
This will transform the landlocked cities of China into robust and vibrant economic centers like the coastal cities of the country. For Pakistan, the project has been hailed as a game changer. Now, China refers to this project as revival of the Silk Road!
To-date, the CPEC has made remarkable success in several of its fast-track projects, namely power generation, infrastructure (roads, bridges, tunnels, port, economic zones, etc.), transportation, and telecom.
With the speedy progress of several projects over the years, the CPEC has undoubtedly brought significant benefits to Pakistan’s economy. It has created numerous job opportunities, increased foreign investment in the country, and improved infrastructure.
The project has also helped address Pakistan’s energy crisis by adding thousands of megawatts of electricity to the national grid. According to State Bank of Pakistan report, the CPEC has already contributed about 2% growth to the country’s GDP.
One of the most significant benefits of CPEC for Pakistan has been the investment in infrastructure. The project has helped build new highways, railways, bridges, tunnels, and ports, which have improved connectivity within the country and with China. This has led to increased trade and investment opportunities, which have boosted economic growth and created new higher paying jobs.
Another benefit of the CPEC for Pakistan has been the investment in energy projects. The project has helped address Pakistan’s chronic energy shortages by building new power plants and upgrading existing ones. This has led to a significant increase in electricity generation, which has improved the quality of life for millions of Pakistanis and boosted economic activity.
However, there have been concerns about the debt burden on Pakistan due to this mega development project. According to reports, Pakistan’s external debt has increased by $25 billion since the start of CPEC, with most of it being owed to China.
While there are concerns about the long-term sustainability of this debt, it is important to note that CPEC has also accrued significant economic benefits to Pakistan. The challenge for Pakistan is how to manage this debt while continuing to reap the benefits of this project.
Gwadar port through its network of maritime logistics ecosystem will provide connectivity to Eurasia with vast untapped natural resources and consumers. The port will be the perfect gateway to these markets and beyond all the way to central China.
This is a golden opportunity for the Eurasian countries to expand their trade and commerce, particularly with the Belt & Road Initiative (BRI) member countries. Many of them like Iran, Turkey, Russia, Oman, the UAE, Afghanistan, and other Middle Eastern countries have already expressed their interests in joining the CPEC.
There are several potential benefits for these countries that the CPEC will bring to them such as making their transit time significantly shorter to reach the faraway markets and making maritime & inland transportation costs much less than their current cost structures.
According to maritime research, trading through Gwadar port to Asia will reduce maritime voyage by 3000 kilometers compared to current voyage of 12,000 kilometers through the Strait of Malacca.
This confirms that by using CPEC maritime ecosystem the overall costs will be reduced, including the voyage time. This will make the bilateral trade & commerce more robust, resilient, and sustainable for all the CPEC members.
It means that Pakistan’s BRI member neighbors will be able to offer their products and services more competitively and reaping the benefits immediately. For example, Iran could benefit from improved access to the Chinese market through the Gwadar port.
Russia and Afghanistan could also benefit from increased trade with China and Pakistan, while Oman, the UAE, Turkey and others could benefit from improved connectivity with Central Asia.
According to an International Monetary Fund (IMF) report, if all these countries join the CPEC, it could add up to $38 billion to Pakistan’s foreign exchange reserves by 2030 and up to $90 billion by 2050. This would be a significant boost to Pakistan’s economy and would help to address some of the concerns about the debt burden on the country. That is why CPEC is called a “game changer” for Pakistan!
However, it is important to note that joining CPEC is not a silver bullet for these countries. They will need to address their own economic challenges and ensure that they can take advantage of the opportunities presented by CPEC.
In terms of Pakistan’s debt repayment, in one of its reports, IMF projects that by 2050 Pakistan will be able pay-off its debt.
However, this will require sustained economic growth and prudent management of the country’s finances. Pakistan will need to continue to attract foreign investment, boost exports, and implement structural reforms to ensure steady economic growth.
In conclusion, CPEC has brought significant benefits to Pakistan’s economy, including investment in infrastructure and energy projects, increased trade and investment opportunities, and job creation.
While there are concerns about the debt burden on Pakistan, it is important to note that the CPEC has also brought significant economic benefits. By joining the CPEC, other countries in the region can also benefit from improved connectivity and increased trade and investment opportunities.
However, sustained economic growth and prudent management of finances will be crucial for Pakistan to ensure long-term sustainability and payoff its debt by 2050.
Copyright Business Recorder, 2023