In November 2014 Pakistan and China signed 19 agreements and Memorandum of Understandings (MoUs) to further boost the bilateral ties between the two countries in various fields, including energy and basic infrastructure sectors. Earlier a meeting between Prime Minister Nawaz Sharif and his Chinese counterpart was held in Beijing where both the leaders discussed bilateral relations and the regional situation.
These
agreements signed between the two countries include solar power production at
Quaid-e Azam Solar Park, easy loan for laying optic fibre between the two
countries, mining of 65,00,000 metric tons of coal in Thar Block-2, a 870 MW
SukhiKinari hydropower project, a 1320 MW Sahiwal power project and MoU for 100
MW Jhimpir wind power project.
Speaking to
media representatives after the meeting, Nawaz Sharif said the Pakistan-China
Economic Corridor Project will prove a game changer in the region. He also
expressed the confidence that his visit to China would help resolve energy
crisis in the country, adding that resolution of energy problem will bring
progress and prosperity to Pakistan.
The projects
include coal, solar and wind based electricity generation units. An investment
of US$35 billion is anticipated in the energy sector. These projects would
generate 23,000 MW whereas the total generation of electricity in the country
till date is only 21,000 MW.
China
intends to invest US$50 billion in energy and infrastructure projects in
Pakistan till 2017 of which $15 billion investment is anticipated in
infrastructure projects only. These included Lahore-Karachi Motorway, Karakorum
Highway and expanding the capacity of Gawadar Port. In the transportation
sector, the railway line from Karachi to Peshawar would be modernized and
upgraded.
In a
briefing minister for planning and development informed the cabinet that during
the visit of the prime minister of Pakistan to China in July last year, an
agreement was reached on the establishment of an "Economic Corridor".
He added that because of hard work during the last six months and confidence of
the Chinese government on Pakistani leadership, the number of projects has
increased.
Pakistan-China
economic corridor project is likely to get funding from the Asian Infrastructure
Investment Bank (AIIB).The bank is being set up on the proposal of Chinese
President to support the developing countries for construction of their basic
infrastructure. In this connection, twenty-one countries including Pakistan are
willing to join AIIB and have signed a memorandum of understanding (MoU). The
countries signing the MoU includes Bangladesh, India, Kazakhstan, Kuwait,
Malaysia, Oman, Pakistan, Qatar, Singapore, Sri Lanka, Thailand and Uzbekistan,
besides Pakistan and China.
The name ‘Corridor’ suggests a gateway or a passage that connects the two
countries, continents or regions. This ‘economic corridor’ will not be the
first in history. The use of sea and land routes has assisted in the
globalization process of opening Asia, as early as the 19th century. Suez
Canal, opened in 1869, acted to aid the empires of great powers during the
time. The canal through the Sinai Peninsula made trade and empire faster but
also economical. The world’s superpower of the time, Great Britain, made great
strategic use of it, by transport of goods, officials and soldiers to Bombay
and other key colonial hubs in an easier and affordable manner. Similarly,
Pakistan and China’s economic corridor sets out to achieve the same goals in a
cooperative and democratic manner.
The project
received a major boost when control of Gawadar was transferred to China’s
state-owned China Overseas Ports Holding in February 2013. Built by Chinese
workers and opened in 2007, Gwadar is undergoing a major expansion to turn it
into a full-fledged deep-water commercial port. Pakistan and China have signed
agreements for constructing an international airport at Gwadar, upgrading a
section of the 1,300-Kilometre Karakorum Highway connecting to Islamabad and
laying a fibre-optic cable from the Chinese border to the Pakistani city of
Rawalpindi. With the development of the corridor Central Asia, traditionally an
economically closed region owing to its geography and lack of infrastructure,
will have greater access to the sea and to the global trade network. The
Pak-China Economic Corridor Secretariat was inaugurated in Islamabad on August
27, 2013.
Physically,
the corridor is a 2,700-Kilometre highway that stretches from Kashghar to
Gwadar through Khunjrab. But in essence, these road and rail links will further
strengthen the bond of brotherhood, as highlighted by the two governments.
China Pakistan Economic Corridor from Kashgar to Gwadar will integrate the
economies of the two friendly countries. The project envisages establishing
several economic zones and physical links connecting Pakistan and China. Both
the countries believe that this economic corridor will benefit new emerging
regional cooperation in South Asia. This project is set out to transform the
future of the region, driven by economy and energy, and the building of
pipelines and ports with roads rail infrastructure.
Pakistan
serves as an important ally for China in the South Asian Region. Pakistan’s
geographical location puts it on the main route connecting China and the Middle
East and China and Central Asia. For economic and strategic connectivity with
these regions, China requires safe passage through Pakistan especially after
China’s growing share in world trade.
Chairman of
the Pakistan-China Institute, Senator Mushahid Hussain Sayed believes that the
economic corridor will play a crucial role in regional integration of the
‘Greater South Asia’, which includes China, Iran, Afghanistan, and stretches
all the way to Myanmar. A strong Pakistan is valuable as it warrants that Indian
claim of regional hegemony will not go unchallenged. He opined that the
Pakistan-China Economic Corridor is of immense importance for the revival of
Pakistan’s economy, resolution of energy crisis and strengthening the
Federation through development and infrastructure.
Pakistan-China
Economic Corridor is strategically important for both China and Pakistan
keeping in view the growing regional trade and investment collaboration. It is
a win-win opportunity for Pakistan and China and the agreements of early
harvest projects during Prime Minister Nawaz Sharif visit to China have great
significance. These projects would be completed within a span of two to three
years time and these include rail, road network besides several long and short
term energy projects.
Pakistan is
the first South Asian country to sign a free trade agreement and currency swap
agreement with China and is also the largest destination of Chinese investment
in South Asia. China is Pakistan’s second largest trading partner and fourth
largest export market. China-Pakistan Economic Corridor has the potential to
turn Pakistan into a hub of regional cooperation. If Pakistan uses this
opportunity wisely and is able to reap the economic benefits this corridor has
to offer, it can greatly enhance its regional power and prestige and prove a
more valuable long-term ally for Beijing.
Beijing
would be investing between $30 billion and $40 billion in Pakistan to develop
the much-awaited Pak-China Economic Corridor (PCEC) which the logistics experts
believe would enable China to significantly reduce the cost of its
70-million-TEUs containerized trade with Europe.
According to
All Pakistan Shipping Association (APSA) Chairman Aasim Siddiqui once developed
the proposed corridor would cut the conventional 19,000-mile Sino-Europe
shipping route by thousands of miles.
Rendering
PCEC to be of “immense importance” for the economy of Pakistan, Siddiqui told
an intermodal Europe exhibition held recently in Rotterdam, Netherlands, that
if transported through PCEC, the shipment of containerized cargo from Europe to
western China would take about 9,000 miles only.
“Sino-Europe
bilateral trade involves around 225 million TEUs. If only 10 percent of this
huge containerized trade goes through Pakistan we would see our transport
industry grow by three fold,” said Aasim.
The APSA
chief says this 10 percent, which would add at least 7 million TEUs to
Pakistan’s containerized trade, was a conservative figure and the potential
figure might be up to 20 plus percent.
Work on the significant
project, however, had been lingering for quite some time because the Chinese
government had been planning to link Gwadar Port with western parts of China
through constructing a new road network.
Pakistan has
suggested to Chinese that instead of building new one they should tape
Pakistan’s existing communication network and build an expressway to link
Gwadar-Ratodhero Road to the national highway.
The two
sides have decided the formula to make a matching investment on the expressway
project. Under the formula a third lane would be added to the two-lane national
highway road network to save money to be spent on the development of a new
trade route. Matching funds would be made as the economic interest of two
countries is common.
To reap the
“trickled down” dividends of the Sino-Europe future trade, Pakistan would have
to build local infrastructure through developing cargo villages, dry ports,
attracting fresh investment in trucking field and so on.
It is
believed that even Kazakistan is pro-actively working to benefit its
geo-strategic location by developing a rail network to link Shanghai with
Eastern Europe. They have run the train which would take 16 days to commute
between the two destinations.
The corridor
would have a “slow trickle-down effect” on Pakistan’s economy. The APSA
chairman during the Rotterdam’s event claims to have received “encouraging”
response from international intermodal transport service providers to establish
business alliance with Pakistan for the development of PCEC.
Prof GaoJianlong,
president of the Xinjiang Academy of Social Sciences, told reporters at a
seminar held in Urumqi, (Xinjiang Autonmous Region) that AIIB was supposed to
finance the mega projects like Pak-China economic corridor, which is a development
project that would connect Gawadar Port to China’s northwestern region of
Xinjiang via highways, railways and pipelines to transport oil and gas.
Chinese
Prime Minister was among the first advocates of the project. As per policy of
the Chinese government wants to offer equal development to all the regional
countries. After completion, the Pak-China economic corridor will serve as a
primary gateway to trade among China, Middle East and Africa through Pakistan.
Particularly, the oil from the Middle East could be offloaded at Gawadar, which
is located just outside the mouth of the Persian Gulf.
The oil
would be transported to China through Pakistan. Such a link would vastly cut
the 12,000-kilometres route that Mideast oil supplies must now take to reach
Chinese ports. According to a deal signed in July, the project includes
construction of 200 kilometers long tunnel, which will link both the countries
and facilitate trade and commuters.
As per the
plan, special economic zones would be established along the economic corridor,
and Chinese companies have shown willingness to set up industries in the zones.
The MOU
specifies that the authorized capital of AIIB is 100 billion US dollars and the
initial subscribed capital is expected to be around 50 billion dollars. AIIB
will be an inter-governmental regional development institution in Asia. It is
expected that the Prospective Founding Members will complete the signing and
ratification of the Articles of Agreement (AOA) in 2015 and AIIB will be
formally established by the end of 2015. The proposed Asian Infrastructure
Investment Bank will bring benefits to all parties involved.
China could
contribute 50 per cent of the bank's capital. This shows China's determination
to establish the bank but the final investment is open to adjustment, depending
on how many countries participate. By economic weight, China is still expected
to hold the biggest share.
