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A Boost to Regional Economies
The construction of the China-Pakistan Economic Corridor accelerates
By Bai Shi | NO. 19 MAY 11, 2017

President Xi Jinping delivers a speech at the Nazarbayev University in Astana, Kazakhstan, on September 7, 2013. In his speech, Xi put forward the Silk Road Economic Belt (XINHUA)

Khyber Pakhtunkhwa (KP), a province in Pakistan that borders Afghanistan, was considered to be remote and isolated due to its disadvantageous geographical location. The lack of electricity and investment hinders local development.

However, after the inception of the China-Pakistan Economic Corridor (CPEC), KP is now eying opportunities for economic growth and modernization as China and Pakistan work together to build an economic corridor between them.

To attract foreign investment, a delegation of officials from the province's public and private sectors paid a visit to Beijing in mid-April. During that period, representatives from around 400 Chinese companies participated in a road show displaying KP's economic potential. A total of 86 projects from 13 sectors were open to tender for Chinese companies during the two-day occasion.

"This is a very important event for the province to promote economic cooperation with China," Pervez Khattak, Chief Minister of KP Province said at the road show.

The CPEC is a 3,000-km long route that connects the city of Kashgar in China's northwest Xinjiang Uygur Autonomous Region to the port of Gwadar in Pakistan's southwest Balochistan Province. Along the route, the two countries are building networks of roads, railways, infrastructure and industrial parks, with total investment of $62 billion. The CPEC is planned to be completed by 2030.

Khattak said that his visit would help lay a solid foundation for a durable relationship between the two countries. He also highlighted the incentives being provided to investors and underscored the improved security situation in the country. Khattak expects more Chinese companies to tap into the province's potential and promote local development.

During the delegation's visit to Beijing, 11 memorandums of understanding (MoUs) in different sectors were signed between Chinese enterprises and the government of KP Province. These MoUs also signal the further development of the consensus reached on cooperation projects during the Sixth China-Pakistan Joint Coordination Committee Meeting which was held at the end of December 2016.

More jobs

With the launch of the CPEC initiative, more and more Chinese enterprises are expanding their investment in Pakistan. For example, over the past decade, China National Electric Engineering Co. Ltd. (CNEEC) has become a competitive contractor in Pakistan's energy sector. The company has completed 12 construction projects so far, including power plants and power grids throughout the country.

Wu Guisheng, Vice President of CNEEC, told Beijing Review that the company is working with its Pakistani partners to build the Rashakai Special Economic Zone (SEZ) in KP, which is set to be the first industrial park under the frame of the CPEC.

Both the local government of KP and the Pakistani Government have approved the plan, and the Chinese Government also supports this project, said Wu. According to Wu, the project's construction is expected to start in June.

Wu said that the CPEC is not only a transport route, but also a basket of comprehensive solutions to support the sustainable development of the local economy and people. Rashakai is less than 50 km away from a planned CPEC railway and Peshawar, capital of KP, according to CNEEC.

The SEZ is designed to cover an area of 4.04 square km. It will become a new home to manufacturing and hi-tech innovation companies and a land hub of trade and logistics, said Wu.

"Besides construction, we will run the SEZ and provide companies in the zone with all-around services, including training for local employees," said Wu, adding that locals are concerned about access to job opportunities.

Wu said that CNEEC, like many other Chinese companies in Pakistan, gives priority to efforts to employ locals.

Local talents account for the majority of employees at a CNEEC subsidiary established last September in Lahore—the capital of Pakistan's Punjab Province.

Zhao Yao, Managing Director of CNEEC Pakistan Engineering Co. Ltd., told Beijing Review that the new subsidiary has around 1,000 Pakistani employees, but only 20 Chinese staff members.

Zhao has worked in Pakistan for 13 years and is also vice president of the association of Chinese enterprises in Pakistan. He is therefore acquainted with local conditions and the importance of recruiting and training local employees.

"It is unfeasible to maintain a large Chinese construction team in any foreign country. So we made efforts to recruit local people and offer them training in electronics, construction and management," said Zhao. He said that training locals has helped CNEEC's bids for projects in Pakistan.

Responsible players

"Chinese companies have paid more attention to fulfilling their social and environmental responsibilities when doing business overseas, compared with in the past," Fang Yanshui, Vice President of China Machinery Engineering Corp. (CMEC), told Beijing Review.

CMEC is participating in the construction of the Thar Engro Coal Power Project (Thar-II), which is the first coal mining and electricity production project undertaken by China and Pakistan under the framework of the CPEC. The financing agreement for the project was signed in Beijing at the end of 2015, with investment expected to exceed $2 billion.

The Thar coalfield is situated in the southeast part of Pakistan's Sindh Province. With a coal reserve of 175 billion tons, Thar is the 16th largest coalfield in the world.

"Shortages in the supply of electricity are a big problem that hinders Pakistan's economic development," Fang said.

"The Thar project will benefit local people in three aspects," Fang said. "It can meet people's demand for power; it can help Pakistan upgrade its mining industry; and it can improve local people's livelihoods by building infrastructure and creating job opportunities."

In Pakistan, power supply is highly dependent on imports of natural gas and petroleum which account for nearly 65 percent of all its energy supply. Thermal power plants only supply 0.1 percent of Pakistan's energy needs, according to statistics released by CMEC.

"Because of its underdeveloped mining industry, Pakistan is lacking in terms of its technology and capacity to exploit the Thar coalmine, even though reserves had been discovered as early as in 1991," Fang said.

CMEC has found that local people near the Thar coalfield live in poverty and that medical care conditions are also insufficient. CMEC therefore decided to help improve local medical conditions by donating medical equipment and vehicles to local hospitals.

A Chinese instructor teaches Chinese to local Pakistanis on December 31, 2016, in order to facilitate better communication between the two peoples (XINHUA)

Beyond expectation

Zhou Rong and Chen Xiaochen are researchers from the Chongyang Institute for Financial Studies at Renmin University of China. They made a field survey on the progress of the CPEC in Pakistan and released their survey report in China Business News on April 25.

After visiting CPEC projects, the researchers concluded that "CPEC's construction has gone beyond expectations. The two sides have achieved remarkable progress in the energy, transport infrastructure and industrial sectors—as well as the Gwadar Port."

The power plants to be built under the framework of the CPEC will have the capacity to produce over 10 million kilowatts. At present, half of these power projects are under construction. With such progress, Pakistan is expected to meet its domestic power demand by 2018, according to the report.

The survey claims that power shortage has hampered Pakistan's development for decades. If this problem is solved, Pakistan's economy will improve significantly. Moreover, the security situation in Pakistan has also shown progress.

Few signs of major unrest have surfaced in Pakistan over the past four years. After a number of counterterrorism actions launched by the Pakistani Government, terror attacks and casualties have been reducing year on year. In 2016, terror attacks decreased 75 percent compared with 2013.

Pakistani Prime Minister Muhammad Nawaz Sharif launched the National Action Plan in 2015 to crack down on terrorism and to supplement the anti-terrorist offensive in northwest Pakistan. The plan received great support across the country and achieved definite results.

Recently, attacks by Balochistan separatists have also reduced dramatically. The survey claims that some separatist groups have returned to mainstream society as a result of the improved economy.

Pakistan's annual economic growth rate has been above 4 percent in the last four years, marking the country's fastest growth period in the last 10 years. Meanwhile, its inflation rate has continued to drop to around 3-4 percent, the lowest in the past decade. The rapid growth of Pakistan's economy should be partly attributed to the CPEC, says the survey.

Pakistani workers construct a portion of an expressway linking Peshawar and Karachi on April 22, which is so far the largest infrastructure project under the CPEC framework (XINHUA)

Far-reaching effects

Since its implementation in April 2015, the construction of the CPEC has been pushed forward steadily.

"So far, 18 early harvest projects have either been fulfilled or are under construction. Investment has reached $18.5 billion," Chinese Ambassador to Pakistan Sun Weidong said in a recent interview with People's Daily.

"The CPEC has achieved the most progress among all cooperation projects under the Belt and Road Initiative. This should be mostly attributed to the solid foundation of China-Pakistan relations. Furthermore, the CPEC is planned reasonably and comprehensively," Sun said.

With the CPEC, Pakistan is able to take advantage of its geographic location, serving as a trade hub in the South Asia region, Sun said.

Pakistan harbors great markets and human resource potential, as Pakistan has a population of 200 million and around 65 percent of the population is below the age of 35, said Sun.

As for the Belt and Road Forum for International Cooperation which is set to be held in Beijing in May, Pakistani Prime Minister Sharif was one of the first foreign state leaders to confirm attendance at the forum.

An engineer speaks in a training session for local workers before they start to work at a project site in Sindh Province of Pakistan on April 10 (FILE)

"The CPEC has become a national development consensus of Pakistan and all different political parties and groups in the country have agreed on it unanimously," said Sun.

"More importantly, the CPEC has a regional effect that is beyond the scope of bilateral cooperation."

The CPEC's progress has caught the attention of other countries interested in participating in the Belt and Road Initiative, Sun added.

Wang Yiwei, a professor with the School of International Studies at Renmin University of China, told Xinhuanet that the CPEC has a far-reaching effect on regional development.

"The CPEC will encourage more countries to take China's development pattern as the reference for their own national development," Wang said. "The CPEC will lead another wave of industrial transfer to South Asia, which will help economic growth in South Asian countries."

"The CPEC will offer a good example for the world to seek better global governance. In particular, it will help solve transnational problems of poverty, violence and terrorism which have long bothered Pakistan and Afghanistan," Wang said.

Wang believes that with the CPEC and other initiatives between China and South Asian nations underway, there will be a broad framework for regional cooperation in the future. He added that South Asia will benefit from this regional cooperation in terms of economic development, security and regional governance.

Copyedited by Bryan Michael Galvan

Comments to baishi@bjreview.com

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