Writer: Hassan Daud
Subject: CPEC engine of growth
THE arguments of whether China Pakistan Economic Corridor (CPEC) is a game changer or not and whether it has national consensus have perhaps outlived their lives. CPEC is indeed a game changer with an unprecedented national consensus. The stage is now set to capitalize on the deliverables of the Early Harvest Projects and accrue optimal benefits from the low hanging fruits. Countless opinion pieces and messages on social media have been circulating to weave myths and ambiguities around CPEC and fire brand critics of CPEC have been hell bent to prove that CPEC is a ‘game-over’ while this is far from truth.
CPEC is an engine of growth that is strengthening Pakistan’s economy by supporting our quest to achieve economic revitalization. CPEC will further mobilize Pakistan’s potential of location advantage, demographic dividend and other economic elements. In recent years, Pakistan’s economic development has grown steadily in terms of both the speed and quality. During the Belt and Road Forum held in Beijing this April, Pakistan remained the center of attention. During the thematic sessions, regional connectivity, policy articulation and speed with which CPEC projects are being executed was appreciated by Chinese and delegates of other participating countries. The Forum made Pakistan’s strategic importance clearly evident.
The impacts of improved economic growth are tangible. Today, investors across the world from Americas, Europe and UK eye Pakistan as a lucrative investment destination. The international financial institutions are optimistic about the economic outlook for Pakistan. The magazine “Economist” recognizes Pakistan as the world’s fastest growing Muslim economy. The Standard & Poor’s and Fitch have upgraded Pakistan’s credit rating from “B-” to “B”. Pakistan is among this year’s global top 10 improvers, says Doing Business 2017: Equal Opportunity for All released recently by World Bank.
These consistent positive indicators and outcomes manifest the continuous trail of benefits coming along CPEC. Such positive vibes leave no room for the self created myths by a specific group of naysayers. Among the many myths, it is wrongly believed that CPEC will solely benefit Chinese. While I have laid bare the benefits, it may pertinently be explained that CPEC being a flagship project of China’s Belt and Road Initiative (BRI) is rooted in the Silk Road spirit of peace, cooperation, openness, inclusiveness, mutual learning and mutual benefit, follows the principle of extensive consultation, joint contributions and shared benefits. The economic cooperation under the ambit of CPEC is also rooted with the aim of ‘forging a shared destiny’ for mankind.
CPEC is not the name of a single route or alignment, rather it is a comprehensive package of cooperative initiatives and projects encompassing regional connectivity, information network infrastructure, energy cooperation, industries and industrial parks, agricultural development and poverty alleviation, tourism, financial cooperation as well as livelihood improvement including municipal infrastructure, education, public health and people-to people communication which will result in thousands of new ventures and millions of jobs in every part of country. The ultimate objective is peace, prosperity and well-being of the people of the two countries, the region and the world.
The development of transport infrastructure under CPEC is primarily meant to eliminate connectivity bottlenecks in order to ensure seamless connectivity across the two countries and region at large. Roads are imperative for development of national economy. Improved transport infrastructure leads to economic growth as it links up markets, enhances trade and integrates the supply chains. Given this, development of roads network under CPEC will reap mutual dividends and benefits for Pakistan and China. Pakistan will be able to utilize the road network for connecting to regional markets that will boost our trade and thereby lead to enhanced economic growth. The approved projects in the 6th JCC will further augment the inter-provincial connectivety. The Naukundi-Mashkel-Panjgaur Road, CPEC link road from Chakdara to Gilgit via Chitral and Mirpur-Mazaffarabad- Mansehra road link will connect less developed parts of Balochistan, KP and AJK with main corridor, bringing a new era of development in these areas.
Energy sector projects form a major chunk of CPEC projects. Currently, 15 energy projects are under implementation and by 2019, 7000 MW of energy will be available to support the industrial developments and ensure revival of the existing Industrial infrastructure. While Chinese companies are building and operating these plants, it is wrongly being assumed that Chinese will sell energy at exorbitant profit rates. Investment in energy sector amounting to USD 35 billion (approx) in Independent Power Producer (IPP) mode is the biggest private sector investment regulated through rules and regulations defined by Private Power Infrastructure Board (PPIB), NEPRA and the IPP Policy laid out by Government. It needs no clarification that upfront tariff is determined by NEPRA which is an autonomous body and no private power plant is allowed to establish operations unless agreement with NEPRA on upfront tariff is made. The Chinese companies have taken loans against their own balance sheets and will service the debts from their accounts and there will be no obligation or debt liabilities on part of Government of Pakistan.
With development of transport infrastructure and completion of energy projects in early harvest phase, CPEC has entered a critical phase of Industrial Development. Industry cooperation between China and Pakistan will provide excellent opportunity for Pakistan to strengthen industrial capability and national domestic economy. In order to achieve the vision of economic, structural transformation and sustainable growth, it is being endeavored to work on the Industrial Cooperation under CPEC by developing Special Economic Zones (SEZs) and attracting foreign investors. Currently, 9 potential sites in all provinces including AJK, GB and FATA have been approved. Each economic zone will target specific products and services, based on the availability of local raw material, workforce and other such factors.
While planning and development of SEZs is underway, it is pertinent to understand that SEZs will provide equal business opportunities for all domestic and foreign investors. A holistic incentive package has recently been approved by Federal Cabinet which ensures broad based incentives for all investors, enterprises and developers. Business opportunities resulting from CPEC will be equally available to all Pakistani businessmen, Chinese businessmen, enterprises, and foreign investors from other countries, either separately or in joint ventures depending on nature of investment. It may be highlighted that these incentives are over and above the incentive package laid down in 2013 SEZ Act.
A final word on the much hyped alleged tax exemptions being offered to Chinese companies. No blanket tax exemptions have been granted to Chinese companies nor are they getting any preferential treatment. State-owned Chinese companies working on CPEC projects have only been granted exemption from duties/taxes on import of construction or related machinery required in the construction/operation of the power and infrastructure project.
Gwadar, as we all are aware, is the lynchpin of CPEC. It will transform Pakistan’s geo-strategic and geo-economic standing in the region. Developing Gwadar will provide tremendous economic opportunities for the people of the Baluchistan and it may significantly help to establish peace in the area. With work on the East Bay express way and New Gwadar Airport and the 300 MW Power Plant commencing soon this year, the outlook of Baluchistan and the employment ratio will transform for better.
All in all, CPEC will integrate Pakistan with the region as well as with rest of the world. The increase in trade, investment and financial flows would bring peace and prosperity to the region through enhancement in the competitiveness of the economy, and contribute to reducing regional disparity and social inequality. We must capture this window of opportunity and deny the false propaganda being harnessed by the foes. We must remember that denying the truth does not change the facts and the fact is that CPEC is truly a game changer for Pakistan.