CPEC heading towards phase 2 to get economy running

CPEC or ‘one-belt one-road’ (OBOR) initiative is considered to be one of the best examples of bilateral economic relationships. It is a $46 billion investment project for two major corridors: The Silk Road Economic Belt and the Southeast Asian Maritime Silk Road. Initially, it started to promote relationship and cooperation between China and Pakistan in marine, transport and energy sector. But later it became much more than it was intended to be, it is focused on building social services, infrastructure and industrial sectors. Of these all, it all aims to serve the bilateral cooperation in projects facilitating the information and communication technology, and to set up more industrial parks and FTAs.

A glance at the past years

CPEC was launched in 2013 and it was planned that CPEC will be built in three phases. The first phase covered the energy and infrastructure. If we ponder over the past 7 to 8 year of the development of CPEC, it would be understood that this project did not target specific projects but is aimed to stimulate the economy and is launched for a better tomorrow. It has brought many developments in the macroeconomic environment of Pakistan. For instance, Pakistan’s GDP has grown by 4.5-5.5% over the years and foreign direct investment grew by $650 million in FY19. In the road category, 1544 KM have been constructed and 1456 KM are expected to be done in couple of years.

Energy crisis being one of the hardest nut to crack and problem almost all successive governments showed concerns and lacked efforts. With the help of CPEC in the first phase, 5320 MW of electricity has been added to the national grid while work. Moreover, 7 projects are under process and soon-to-be completed will add further 4170 MW of energy. Other than power generation, more projects like Matiari–Lahore ±660kV HVDC Transmission Line Project in Pakistan have been developed under the umbrella of CPEC.

Gwadar port, Peshawar and Karachi are important nodes since they are used for trading products between Pakistan and Western China and to the middle East. Due to the significance, infrastructure development has to be brought under phase 1. Many projects such as The highway Karakoram, Karachi-Peshawar Expressway, The Lahore Orange Line rail transit project and more than 50,000 jobs were created in road infrastructure under the CPEC phase 1 projects.

CPEC phase 2: Strategies to mitigate the economic challenges

Pakistan has been in the struggle to cope up with the economic and fiscal deficit and it kept on laggering due to energy shortage, infrastructure of the transport and the social costs which have always been neglected. After groundbreaking achievements and performance underr CPEC-phase 1, it has entered phase 2. Last year, Prime Minister Imran Khan announced the second phase with 27 new projects to be accomplished within next 2-3 years with a budget of $1 billion. The phase 2 will focus on promotion of tourists’ point of view, development of Special Economic Zones (SEZs), modernization of agriculture, industrialization, poverty alleviation and socio-economic development.

The second phase required different strategies and planning. For this purpose, the government has made a ‘business council’ under the chairman of Abdul Razzaq Dawood. To effectively involve business sector and implement the business strategies, it is important that the business council should be an independent body. Doing so, will let the council not to be confused with government bodies and work with a more practical approach.

Special Economic Zones:

For Special Economic zones, the priority will be given to Sindh, Islamabad, Balochistan and FATA. As for start, the first zone to be developed under CPEC is Allama Iqbal industrial zone. It is expected that this zone itself will create more than 30000 jobs in automobile, textile engineering, infrastructure, pharmaceuticals and food engineering. The ground breaking of this zone has been laid by prime Minister Imran Khan.

ML-1 railway project:

It also has been planned to start the most important project under this phase which is ML-1 railway. The inauguration of this railway track was decided in the 9th meeting on Joint Cooperation Committee after debate on debate. It is expected to start in 6 months from the date of JCC. The project will build a 1680 KM railway track which will increase speed form 65 Km/h to 105 Km/h.

SMEs and Exports

Apart from the council, the government aims to design a strategy to work for small to mid-sized enterprises. Inclusion of the SMEs in the phase 2 can play a very crucial role in getting the economy running. The SMEs help in generating revenue and escalating the exports. China Pakistan Free Trade Agreement II (CPFTA-II) is the major part of second phase of CPEC. The government initiated this projecton 1st January, 2020 according to which ASEAN countries’ traders will be allowed to export 313 products on zero duty. After the implementation of second phase, the exports from Pakistan to China has increased drastically to 1047 products on zero duty.

Socio-Economic Development:

China and Pakistan has showed the keen interest in developing the socio-economic sector since it leads to further development of the country. Due to this, China and Pakistan has established a Joint Working Group (JWG) particularly for this cause. They have signed a Memorandum of Understanding (MoU) on socio-economic development. The group will focus more on agriculture, education, health, poverty alleviation, water supply and vocational training for betterment of general public of Pakistan.

Food Industry:

As discussed above, this phase considers agriculture and food industry as a priority. This includes development and modernization of the agriculture industry. As a result, our supply chain and livestock products will be improvised and strengthened. The global market considers China as the biggest exporters in food industry. To make use of this market, a strong supply chain can back Pakistan food based exports needs to stay ahead of the competition. With the help of this, we can overcome the scarcity of resources and push our industry to its real potential.

Pakistan can also export halal foods and increase its share in this as it is currently pretty low. The experts quoted that with the help of right, planned and calculated strategies it could easily capture the $5-6 billion market. For this, the government needs to bring private companies on board who are interested in exporting products to Chin and have quality standards. This will not only leverage the economy but the company can take benefit by exploring and working in the International market.

Final thoughts

With all the work happening in the past years under phase 1 and the strategies made for phase 2, it is evident that CPEC is back with the full swing. It will help the Pakistan’s economy to get back on track and it is enjoying the full backing of the two countries. Although, there have been some backlashes and criticism such as the roll back or slowing down of this flagship initiative which is a mere propaganda and not based on ground reality and facts. This program has proven to be game-changer in the past years and is continuing to make the environment better. With the continuation of this program, China and Pakistan have maintained cooperative diplomacy not only in terms of cultural exchange but in economic policies as well and they plan on continuing the bond and benefiting the countries.

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