CPEC A road to an economic problem

China Pakistan Economic Corridor (CEPC) is an initiative taken by a Chinese and Pakistani Govt.
It a part of China’s One Belt One Road initiative (OBOR), CPEC is creating to boost trade between China and Pakistan and by this route, China can by-pass oceans.
The CEPC plan involves constructing a network of transport, energy, industrial and agricultural projects that will stretch around 2,700 KM. from Gwadar port in Pakistan to Chinas Xinjiang.
CPEC can help Pakistan to increase its export and boost its economy, as the trade between China and Pakistan can become more comfortable. It will connect two ports of Pakistan with China via roads and rails. CPEC will make across Pakistan and connect to China.
So why did these projects will create problem to Pakistan we will discuss this in the Blog.

1.      Overspending on CEPC –

                                           CEPC is not a small project it will cover all of Pakistan and it not only have roads and railways which will cost there are various energy and agricultural projects proposed in CEPC.

CPEC is approximately worth $62 Billion as of 2017.
China’s Exim bank will be giving a loan to Pakistan of $11 Billion at a rate of 1.6%
                    $7 billion of the planned $8.2 billion overhauls of the Main Line 1 railway is to be financed by concessionary loans, which extended by China's state-owned banks.

The long-planned 27.1 km long $1.6 billion Orange Line of the Lahore Metro is regarded as a commercial project and does not qualify for the Exim Bank's 1.6% interest rate. It will instead be financed at a 2.4% interest rate.
The $44 million Pakistan-China Fibre Optic Project, an 820 km long fibre optic wire connecting Pakistan and China, will be constructed using concessionary loans at an interest rate of 2%, rather than the 1.6% rate applied to other projects.
China in August 2015 announced that concessionary loans for several projects in Gwadar totalling $757 million would be converted 0% interest loans. The projects which are now to finance by the 0% interest loans include: the construction of the $140 million East Bay Expressway project, installation of breakwaters in Gwadar which will cost $130 million, a $360 million coal power plant in Gwadar, a $27 million project to dredge berths in Gwadar harbour, and a $100 million 300-bed hospital in Gwadar
$15.5 billion worth of energy projects is to be constructed by joint Chinese-Pakistani firms, rather than by the governments of either China or Pakistan. The Exim Bank of China will finance those investments at 5–6% interest rates, while the government of Pakistan will be contractually obliged to purchase electricity from those firms at pre-negotiated rates
Asian development bank announced $195 million to upgrade N70 and N50 highway. UK’s Department for International development also given a loan of $72.4 million
The M-4 Motorway between Faisalabad and Multan is not to be financed by the Chinese government as part of CPEC, but will instead be the first infrastructure project partially funded by the Asian Infrastructure Investment Bank, and will be co-financed along with the Asian Development Bank for a total of approximately $275 million. Portions of the project will also be funded by a $90.7 million grant announced in October 2015 by the government of the United Kingdom towards the construction of the Gojra-Shorkot section of the M4 Motorway project.
There might be more loans taken for making of CPEC which I didn’t mention here.

Pakistan should be more conscious while taking loans.

2.      Economic problem –

                                     CPEC is proposed to give a boost to the Pakistani economy, but the way CPEC is evolving can create a problem for Pakistan’s economy in the future.

·Problem for small business in Pakistan –

                                                                  CPEC is creating to boost trade between China and Pakistan, and CPEC will do it but for another half.
Pakistan has to understand that they are trying to increase trade relations with an export giant.

                                                                                                                   -          In USD in 2017 (Est.)

This is a graph of both countries. It’s seen that which country will dominate the exports.
Chinese companies are relatively more advanced and more cost-efficient than their counterparts. Chinese goods can easily give a headache to small-scale industries in Pakistan.
This will be a massive problem for the upcoming years. If Pakistan opens its economy to Chinese goods then its high chances that Pakistan’s small-scale industries will not able to face competition.
Pakistani Govt. have to think twice before allowing China. Because I believe China will get a new market for their goods than Pakistan.
I think the Pakistani Govt. should prioritize the small-scale industry.

·         No training to Pakistani workers –

                                                         When Pakistan visualized the path for CPEC, they thought people of Pakistan would get jobs and workers will be trained. So this will create jobs, and Pakistani goods will reach new markets, but this is not going as per the plan.
China is giving work to its citizens than Pakistan’s citizens.
China is making a Chinese only colony near Gwadar which will provide a home to 5 lakh workers.
This is bad as those 5 lakh Chinese workers will take 5 lakh jobs which meant for Pakistan’s citizen.

·         More order to Chinese companies –

                                                                        This is real Chinese companies are getting more projects than Pakistani companies.
The government has allocated only four projects to the local constructors under the China-Pakistan Economic Corridor (CPEC), and those too under strict conditions.
The condition, to sign a joint venture (JV) with a local partner in mega projects has also been revoked by the government for the Chinese in CPEC-related projects, despite that a 70-30 per cent JV was mandatory for foreign firms to develop the local sector, ensure technology transfer and human resource development, Sikandar Hayat Khattak, chairman, Constructors Association of Pakistan (CAP), said.
If Chinese companies are getting orders, then they will give Chinese people jobs, and this is not good for Pakistani companies its people and Economy as well.

 ·   Resettlement problem –

                                       There is a resettlement problem face by the people in Pakistan due to CPEC. As their lands taken for CPEC but not given proper resettlement. Due to this tension is rising within a country.

3.      Strategic problem –

                                           CPEC is also having a strategic effect within and outside Pakistan.

·    Raising Chinese involvement –

                                                    As I said earlier, there is an increase in the number of Chinese workers and companies in Pakistan and after completion of CPEC China will be involved more in Pakistan.
Due to CPEC There will always some Chinese goods or people in the country, and China is also starting to prepare Chinese only homes in Pakistan this will only lead to a problem for Pakistan in the future.
Pakistan has an example of Sri Lanka that how China has taken its port.

 ·   Chabahar port–

                           This CPEC will create a problem in future for India defensively as China can easily use this road for military purposes.
To counter this India have contact with Iran to use their one port near to Gwadar and relatively on more strategic position named as Chabahar port.
If India and Iran were able to start this port, then it will be a massive blow for CPEC as Chabahar port is relatively more convenient and in a strategic position.
There are various other factors also which can cause the problem to Pakistan such as there are protest against CPEC in Pakistan and people are attacking workers etc.

 Conclusion –

                       CPEC is a good concept, but Pakistan has selected the wrong partner for it. If Pakistan is not able to repay its loan taken for CPEC, then it will be a massive problem as Pakistan have to ask for loans from IMF in the last couple of weeks and IMF have given some strict conditions for it.
India is trying to counter it by Chabahar port it will be a difficult task for Pakistan in upcoming years.