CHINA’S ONE BELT ONE ROAD INITIATIVE

CPEC stands for ‘China Pakistan Economic Corridor’ and is part of the grand ‘OBOR (One Belt One Road)’ initiative of China. OBOR was initiated by the Chinese President in 2013 and is the largest public infrastructure project in modern history.

There will be two main routes of the OBOR. On land, there are several routes or corridors in work. The Initiative will focus on jointly building the new Eurasian Land Bridge from China via Kazakhstan on to Rotterdam. Other OBOR land rail corridors include developing China-Mongolia-Russia, China-Central Asia-West Asia, China-Pakistan, Bangladesh-China-India-Myanmar, and China-Indochina Peninsula economic corridors.

To date, China has signed memoranda of understanding with 56 countries and regional organizations regarding OBOR and the Chinese president has personally visited 37 countries to discuss implementation of OBOR.

China Railway Group and China Communications Construction Company have signed contracts for key routes and ports in 26 countries.

Power plants, electricity transmission facilities and oil and gas pipelines, covering 19 countries along the “Belt and Road” in some 40 energy projects have begun.

China is presently in negotiations with 28 countries China is in talks with 28 countries including Russia, on high-speed rail projects.

CHINA PAKISTAN ECONOMIC CORRIDOR

CPEC investment will exceed all FDI received in Pakistan since 1970 and will be equivalent to around 17% of Pakistan’s 2015 GDP. It is expected to result in creation of 0.7Mn new jobs between 2015 & 2030 and is anticipated to add 2 – 2.5% to country’s growth rate.

CPEC is planned to be implemented in the following 4 phases:

Phase

Expected Completion Year

Early Harvest 2018
Short Term 2020
Medium Term 2025
Long Term 2030

The current estimated value of CPEC (excluding long term projects) is around USD 51.5 Bn with the early harvest projects amounting to USD 18 Bn. Break-up of the same is as follows:

 

Type of Projects

Short  Term

Early Harvest

Count

Estimated Value

Count

Estimated Value

Energy

21

USD 35.0Bn

11

USD 11.4Bn

Infrastructure

4

USD 15.5Bn*

2

USD 6.1Bn*

Gawadar Port/ Others

8

USD 1.0Bn

4

USD 0.5Bn

TOTAL

33

51.5Bn

17

USD 18Bn

*Estimate recently increased by USD 5.5 Bn due to higher estimated cost of Railway project

 Out of the above-mentioned early harvest projects, the following 2 projects stand completed as on Oct-16:

 

Quaid-e-Azam Solar Power Project to the extent of 100 MW with a cost of USD 137Mn

Digital Terrestrial Multiband Broadcast at a cost of USD 2Mn

 

CPEC will mostly be financed through subsidized loans with major contributions by:

Exim Bank of China

China Development Bank

Industrial & Commercial Bank of China (ICBC)

Asian Development Bank (ADB)

Gawadar Port & Allied Projects

The Gawadar Port development includes:

Upgrade/ expansion of port capacity for larger ships with deadweight tonnage of upto 70,000

Construction of breakwater, berthing areas & channels at the port with a total cost of USD 182Mn

Construction of a floating LNG storage facility of 500 Mn cubic ft

A ‘Free Trade Area’ is also being developed at the premises:

Covering a land area of 2,282 acres

Will offer 20-40 years tax holiday

Will be completed in 3 phases, to be completed by 2030 and will cost over USD 32Mn

Has been leased to ‘China Overseas Port Holding Company’ for 43 years

Includes development of an international airport:

To be completed by Dec-17

Will be spread over an area of 4 acres

Will cost approx. USD 230Mn

A 300 MW coal power plant is also being built at the premises

Other planned projects at Gawadar include

Desalination plant (will cost USD 130Mn)

A 300-bed hospital costing USD 100Mn

A 19-km expressway costing USD 130Mn, connecting Gawadar port to Makran Coastal Highway

Technical & vocational institute with a cost of USD 10Mn

Cross-border optical fiber cable costing USD 44Mn

Digital Terrestrial Multimedia Broadcast costing USD 2Mn

Road Projects

There will be 4 road projects under CPEC with a total estimated value of USD 10.6Bn. These are to be developed in different phases out of which the early harvest projects will have an estimated cost of approx. USD 6.1Bn. The roads would include the following:

Route Description
 

Northern Route

·      Involves Karakoram Highway (KKH) reconstruction project with a total stretch of 887 Km.

·      It will originate from Khunjerab and will pass through Raikot and Thakot before reaching Abbottabad

 

Eastern Alignment

·      Stretching over a distance of 1,152 Km from Lahore to Karachi

·      It will cost USD 6.6Bn.

·      It will be divided into 4 sections and will be a 4-6 lane highway.

·      The major cities at this road will include Lahore, Multan, Sukkur, Nawabshah, Hyderabad and Karachi.

Western Alignment ·      Stretching over 1,677 Km, it is expected to be completed by 2018 (Divided in 6 sections namely Hakla-DI Khan (288Km), DI Khan-Zohrab(205Km), Zohrab-Quetta(331Km), Quetta-Sohrab(211Km), Sohrab-Hoshab(449Km) & Hoshab-Gwadar(193Km).
Central Alignment ·      This will be a longer term project connecting KKH to Gawadar via DI Khan, Muzafargarh, Layyah, Rajanpur, Sukkur, Khuzdar and Basima

Railway Projects  

The Railway overhauling plan will basically include 5 projects:

S. No. Project Description
1 RL 1

(Karachi – Peshawar)

o Stretching over 1,687 Km

o Will be completed in 2 phases: Phase 1 ( Multan to Peshawar costing USD 3.65Bn; to be completed in 2017) & Phase 2 (Multan- Karachi costing USD 8.2Bn; to be completed by 2021)

o USD 8Bn loan already approved (USD 5.5Bn from Chinese banks and USD 2.5Bn from ADB)

2 RL 2

(Kotri – Attock)

o Distance of 1,254 Km
3 RL 3

(Bostan – DI Khan)

o Distance of 560 Km

o To be completed by 2025

4 Orange Line Metro (Lahore) o To be constructed inside Lahore by 2017

o Total distance covered will be approx. 27.1 km and project will cost USD 1.6Bn

5 Khunjerab Railway (Khunjerab – Havelian) o To be stretched over a distance of 682 km

o Will be completed by 2030 with an estimated cost of 12Bn

Energy Projects 

The total planned capacity under the envisaged energy projects under CPEC is 16,400 MW, out of which the early harvest projects (to be completed by 2018) will provide 10,400 MW & will cost USD 35 Bn. Major early harvest/ short term projects include:

Type Project Capacity Province Est. Cost (USD Mn) Est. Completion Date Status
Coal-based    (7,560 MW) Port Qasim

(2 plants)

1,320MW

(Imp. Coal)

Sindh 1,980 2018 Financial close attained
Engro Thar

(4 plants)

1,320 MW (Thar Coal) Sindh 3,470 2018/19 Financial close for 660MW attained
Thar-II (2 plants) 1,320 MW (Thar Coal) Sindh 3,300 2018/19
Sahiwal Coal

(2 plants)

1,320 MW (Imp. Coal) Punjab 1,600 2017
RYK Coal 1,320 MW Punjab
HUBCO 660 MW (Imp. Coal) Balochistan 1,200 2018/19
Gawadar 300 MW Balochistan
Wind-based (250 MW) UEP 100 MW Sindh 250 2016 Financial close attained
Dawood 50 MW Sindh 125
Sachal 50 MW Sindh 134 2017 Financial close attained
Sunnec 50 MW Sindh
Hydel

(1,590 MW)

Karot 720 MW Punjab 1,420 Financial close attained
SK Hydro 870 MW KPK 1,802 Financial close attained
Solar

(1,000 MW)

Quaid-E-Azam Solar 1,000 MW Punjab 1,350
Transmission Line Projects Matiari – Faisalabad 660KV Sindh & Punjab
Matiari – Lahore (878-KM) 660KV Sindh & Punjab 2,100 To be awarded to ‘China Electric power Equipment & Technology Co(CET)
TOTAL 21 Projects 10,400 MW      

              *Financial close attained for 3,720 MW till Nov-16 with COD expected before Dec-18

Benefits of CPEC to China & Pakistan

CPEC will open doors to immense economic opportunities not only to Pakistan but will physically connect China to its markets in Asia, Europe and beyond.

Almost 80% of the China’s oil is currently imported from Strait of Malacca to Shanghai, (distance is almost 16,000 km and takes 2-3 months). With Gawadar becoming operational, the distance would reduce to less than 5,000 km.

CPEC will act as a bridge for the new Maritime Silk Route that envisages linking 3 billion people in Asia, Africa and Europe, part of a trans-Eurasian project. When fully operational, Gwadar will promote the economic development of Pakistan and become a gateway for Central Asian countries, including Afghanistan, Uzbekistan, linking Sri Lanka, Iran and Xinjiang to undertake marine transport.

Pakistan’s present energy shortfall will be adequately met with a total added generating capacity of 16,400 MW (10,400 to be added to the national grid by 2018)

Pakistan will also be able to access Central Russian states bypassing Afghanistan. Central Russian states can also utilize the route for their trade.

CPEC will directly compete with Iran’s Chaubahar port

Implementation of CPEC will improve incomes of local people especially in backward provinces of KPK & Baluchistan, will create employment and will also result in improved law & order situation in the country.

Tourism which currently makes up an insubstantial part of Pakistan’s earnings is believed to be elevated by opening of this economic corridor.

The region of Baltistan is known for its fresh fruit exports. CPEC is expected to open fresh business opportunities for the region’s traders. Presently, fruits are being exported through air-cargo via Dubai however, it would be faster and cheaper if the same could be sent by road to China and rest of the world.

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