Developing Pakistan’s economy through CPEC

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In the middle of media reports of CPEC budget diverted to Cabinet Division’s grant, the government ensured protection of allocated budget for CPEC. Meanwhile, the nationalist political parties of KP and Balochistan expressed consensus over CPEC in the 1st meeting of Joint Consultation Mechanism’s (JCM).Also, with improved security, the government came forward to inaugurate work on CPEC western route’s alignment.

These were the major findings of the quarterly monitoring report on CPEC, covering January to March 2019. Some salient ones are summarized below:-

Economic development of Pakistan under CPE

There is continued optimism pinned on the results of the CPEC. Two global rating agencies have confided in the potential of CPEC for developing Pakistan’s economy. Fitch[1]projected decline in political threats to CPEC and said CPEC-linked debt concerns will be diminished with improved transparency. Moody[2]believed that infrastructure investment and increased energy supply under CPEC will tackle the financial problems Pakistan faces. Standard Chartered Bank (SCB)[3] projected that CPEC will add around 3.5 per cent to Pakistan’s gross domestic product (GDP) growth rate. The Pakistan Economy Watch (PEW), an independent forum on economy, claimed CPEC execution is not vulnerable to domestic politico-economic problems.[4]

Meanwhile, the first quarterly report of the State Bank of Pakistan (SBP) said the completion of CPEC early harvest projects have caused “decline in external borrowing by the private sector (mainly the power sector firms).”[5]

Audit of CPEC budget

During the first quarter of the year, reports emerged that the federal government is least concerned about financing of CPEC projects. In a meeting of the Senate Standing Committee for Cabinet Secretariat, members of PML-N, the largest opposition party, lamented that the federal government had diverted around Rs24of the 27 billion from CPEC and other initiatives to Cabinet Division’s grant. It shows that only Rs3 billion would be left for CPEC related grant, affecting CPEC. However, government rejected[6] such reports and ensured protection of allocated budgets for CPEC. Besides, Islamabad High Court rejected PML-N’s petition against the government in this regard and said the parliamentary issues should not be brought to the Court.[7]

It is also important to note that government has closed Sindh Board of Investment (SBI) and formed a new Investment department that may affect coordination with CPEC investors.[8]According to media reports, the new Investment department, which is yet to be operationalized, will abolish the concept of one-window facility for investors.

Moreover, the Auditor General of Pakistan (AGP)[9] agreed to set a separate branch for audit of CPEC projects. The National Accountability Bureau (NAB)[10] has joined hands with China to ensure the transparency of CPEC projects. 

Provincial and regional concerns

For long now, Balochistan remained concerned of its due share in CPEC. It aggrieved that only 3per cent[11]of total CPEC investment is being used in Balochistan. Apart from KP and Balochistan, people of newly merged tribal areas[12] have also asked for their due share in CPEC.

The government has tried to address provincial and regional grievances. In Quetta, it has set up a facilitation center at the Balochistan Civil Secretariat to support local and foreign investors of CPEC.[13] Process of repayments to the landowners whom land was acquired for CPEC related projects in Mansehra have also been initiated.[14]

In addition to that, nationalist political parties of KP and Balochistan expressed consensus over CPEC in Joint Consultation Mechanism’s (JCM) first meeting held between political parties.[15]

Progress on CPEC linked projects

Socio-Economic and Human Resource Development

In the second phase of CPEC, government is committed “to focus indigenous production and industrialization.”[16]It will focus on socio-economic and human resource development. Pakistan-China Joint Chamber of Commerce and Industry (PCJCCI) called the government to revamp technical trainings to promote Human Resource Development (HRD) under CPEC.[17]

Pace of CPEC projects

Projects under CPEC are progressing in a smooth way. Thar coal[18] power plant has started generating power and supplying it to the National grid. Government launched work on the new Gwadar international airport and held groundbreaking of Balochistan Health Complex and Quetta-Zhob Dual Carriageway under CPEC.[19]Various mega projects are scheduled to be completed soon within and by the end of this year, included Thakot – Havelian Section of Karakoram Highway, Hub coal-fired power plant and Sukkur-Multan M-5 motorway.[20]

Nonetheless, Senate Standing Committee on Maritime Affairs noted the slow pace of development projects in Gwadar and suggested to expedite process to ensure the interests of local and private investors in Gwadar.[21] On the other hand, Senate Special Committee on CPEC urged to ensure transparency in execution of CPEC projects.[22]

Western route development

Major development of this first quarterly is the inauguration of development work on CPEC western route.

Prime Minister has formally inaugurated work on CPEC western alignment i.e. Quetta-Zhob Dual Carriageway and formed a committee to rationalize the land acquisition cost. However, Executive Committee of the National Economic Council (ECNEC) has yet to approve it formally.[23]

The committee allocated Rs79 billion for dualization of Kuchlak-Zhob section N-50 (305km) of CPEC western route.[24]In addition to that, National Highway Authority (NHA) said Hakla-D.I.Khan part of CPEC western route is under construction and will be completed by the end of this year.[25] 

Mainline-1 development

Financial crisis halted execution of ML-1 under CPEC as Pakistan Railway could not provide Rs7 billion for its designing.  However, ML-1 execution is still under discussion with China.[26]Also, CPEC Cabinet Committee has formed an implementation committee to review and improve the financial viability of the project.[27]

Meanwhile, Ministry of Planning and Development agreed to execute ML-1on previously agreed mode i.e. Engineering, Procurement and Construction (EPC) than Build, Own and Transfer (BOT) mode offered by recent government. Report said that China didn’t agree[28] ML-1 execution via BOT mode.

Revival of Karachi Circular Railway (KCR) project

Sindh provincial administration lamented that Pakistan Railway failed to support revival of Karachi Circular Railway (KCR)[29] and Sindh Assembly urged federal government to ensure revival of KCR as promised.[30]

Development of Special Economic Zones (SEZs)

The CPEC progress review meeting has stated that out of 4 prioritized SEZs, three will be launched in June 2019.[31] The Government is interested in the smooth development of SEZs. The Economic Coordination Committee (ECC) instructed Ministry of Energy to expedite execution of CPEC SEZs by resolving issues in administrative structure of SEZs and committee also tends to empower provincial government on SEZs by amending SEZ Act.[32]They have yet to do so. Pointedly, SEZ Act is a national law; how the SEZs go with the provinces is yet to be seen.

Moreover, Finance Ministry ordered the Board of Investment to reduce the duration of approving interested SEZs investors’ applications from 90 days to 45 days.[33]

Improved security of CPEC

Not a single incident on CPEC projects or worker has been noted in first three months of year 2019. It illustrates improved CPEC security. During the 6thmeeting of Pak-China Joint Working Group on CPEC security, a comprehensive plan for CPEC stability was formed and both sides ensured to enhance the security of CPEC projects and Chinese workers.[34]

Provincial and regional administration has been working actively to ensure CPEC security. Sindh Counter-terrorism Department (CTD) claimed that a Balochistan Liberation Army (BLA) member, who supported the attack on Chinese Consulate in Karachi was arrested in Sharjah, with the help of information provided by the Sindh CTD.

Also, five BLA suspects[35] from Karachi and Balochistan were arrested for their alleged involvement in the attack on the Consulate.

In Mansehra, police arrested 5 terrorists who had planned to sabotage CPEC related projects in the region.[36] Also, district administration initiated survey to collect data of Afghan refugees living around CPEC project areas to reposition them to ensure CPEC security.[37] 

International context of CPEC

On the regional front, Qatar, Kyrgyzstan and Iran have expressed their interest to join CPEC. In order to weigh CPEC linked opportunities, United Kingdom’s (UK) parliamentarians tend to form a CPEC cell.[38] Pakistan reiterated that CPEC is primarily a bilateral project and offered “project based participation” of third world countries including Saudi Arabia in the development of CPEC”.[39]

On regional integration under CPEC, World Bank[40] report said the CPEC has potential to improve regional integration among countries including Afghanistan, Iran and Central Asia.

References:

[1]https://fp.brecorder.com/2019/01/20190129442991/

[2]https://fp.brecorder.com/2019/02/20190212446356/

[3]https://tribune.com.pk/story/1934475/2-cpec-likely-contribute-3-5-pakistans-gdp/

[4]https://dailytimes.com.pk/350954/chinas-economic-slowdown-will-not-hurt-cpec-pakistan-economic-watch/

[5]http://www.sbp.org.pk/reports/quarterly/fy19/First/Complete.pdf

[6]http://cpec.gov.pk/news/159

[7]https://www.thenews.com.pk/print/445911-cpec-funds-case-not-seems-good-to-bring-parliamentary-matters-to-court-says-ihc

[8]https://www.pakistantoday.com.pk/2019/02/13/sindh-govt-abolishes-sbi-jeopardising-cpec-projects/

[9]https://fp.brecorder.com/2019/02/20190213446654/

[10]https://en.dailypakistan.com.pk/pakistan/nab-signs-agreement-with-china-to-oversee-cpec-projects/

[11]Dawn, February 22, 2019

[12]https://fp.brecorder.com/2019/02/20190228450582/

[13]https://tribune.com.pk/story/1932406/1-cpec-facilitation-centre-set-civil-secretariat/

[14]https://www.thenews.com.pk/print/413577-cpec-payments-to-landowners-in-mansehra-to-begin-soon

[15]https://www.pakistantoday.com.pk/2019/03/24/nationalists-announce-support-for-cpec/

[16]https://www.dawn.com/news/1464524

[17]https://tribune.com.pk/story/1913485/2-government-urged-redesign-training-programmes/

[18]https://www.thenews.com.pk/print/446894-ppib-s-efforts-bear-fruit-as-thar-coal-starts-generating-power

[19]https://www.brecorder.com/2019/03/29/484219/pm-lays-foundation-stone-of-balochistan-health-complex-quetta-zhob-road/

[20]https://nation.com.pk/09-Feb-2019/key-cpec-projects-to-be-completed-soon-china-envoy

[21]https://www.dawn.com/news/1458026/senate-panel-resents-slow-pace-of-work-on-gwadar-port

[22]https://www.thenews.com.pk/print/444770-senate-special-panel-questions-hiding-of-cpec-information

[23]https://www.dawn.com/news/1471164/projects-worth-rs97bn-okayed

[24]https://www.dawn.com/news/1472526

[25]https://nation.com.pk/01-Jan-2019/nha-plans-to-expedite-zhob-quetta

[26]https://tribune.com.pk/story/1920440/1-talks-china-ml-1-still-underway-minister/

[27]https://tribune.com.pk/story/1928973/2-pakistan-sets-committee-review-ml-project/

[28]https://www.dawn.com/news/1469548

[29]https://www.dawn.com/news/1462459/centre-not-cooperating-with-sindh-for-kcr-revival-pa-told

[30]https://epaper.dawn.com/DetailNews.php?StoryText=22_01_2019_115_003

[31]https://www.thenews.com.pk/print/421363-government-asked-to-open-sez-under-cpec-in-islamabad

[32]https://tribune.com.pk/story/1903740/2-cpec-projects-ecc-agrees-speeding-work-two-sezs/

[33]http://www.xinhuanet.com/english/2019-02/05/c_137799827.htm

[34]https://e.dunya.com.pk/detail.php?date=2019-01-22&edition=ISL&id=4402638_91097373

[35]https://tribune.com.pk/story/1886030/1-raw-sponsored-attack-chinese-consulate-karachi-aig/

[36]https://www.thenews.com.pk/print/443722-terrorists-planning-to-attack-cpec-projects-police

[37]https://www.dawn.com/news/1459596/staff-shortage-at-rural-health-centre-protested

[38]https://tribune.com.pk/story/1918269/2-cpec-group-established-uk-parliament/

[39]https://www.thenews.com.pk/print/448077-defeating-terror-needs-regional-cooperation-qureshi

[40]https://www.worldbank.org/en/region/sar/publication/pakistan100-shaping-the-future

Click here to download: CPEC Quarterly Report: January-March 2019