New phase of CPEC to look after socio-economic development


Political developments

China-Pakistan Economic Corridor (CPEC) has now entered into the second phase with focus on socio-economic development. Though Pakistan’s political landscape has changed since the new government came into power, it has prioritized and reaffirmed support to timely completion of CPEC.

A bicameral parliamentary committee on CPEC was constituted, comprising of 21 members, of which 14 arefrom National Assembly and 7 from the Senate. Senate’s special committee on CPEC, which is already functional, has expressed displeasure over the formation of the new committee, saying that members of the Senate are already part of the existing Senate’s committee. The senators did not send any nomination to the new committee. Despite this, the new committee has elected Sher Ali Arbab as the chairman.

CPEC budgeting and financing

According to some reports, the government has diverted Rs 24 billion meant for CPEC and other initiatives towards another scheme meant for parliamentarians. This diversion may affect CPEC, critics warn. Government responded that the funds diverted are not solely from CPEC funds, but from other sources.[1]

However, government has merged three CPEC projects under one banner of CPEC Secretariat, headed by Planning Ministry, reducing the total cost from Rs2.877 billion to Rs 2.618 billion. The role of Secretariat will be coordination and implementation of CPEC projects.[2]

More than 80 of CPEC projects are using direct Chinese investment or grants, while the rest are using Chinese loans.[3]Besides providing $1 billion for the socio-economic uplift projects of CPEC, China has set an aid agency, the State International Development Cooperation Agency (SIDCA), which, like USAID, provides grants without repayments for the socio-economic development projects under CPEC.

Fitch, a rating agency, is optimistic about the pace of CPEC projects and hinted Pakistan’s economy is likely to grow under CPEC.

The 2019-2020 budget has earmarked Rs 5 billion as special provision for completion of CPEC projects. These are the inauguration of prioritized Special Economic Zones (SEZs), that is the Rashakai SEZs in KP and Allama Iqbal Industrial City in Punjab. A Pak-China business forum will also be established to promote the interaction of investors under CPEC.

Few parliamentarians raised concerns over low budget allocation of CPEC western route, asking for increasing Rs. 20 billion each for D.I.Khan to Zhob and Zhob to Kuchlak part of western route.

The government also said it is unable to provide total allocation for CPEC projects, due to ongoing negotiations with China and projects being in various stages.

On provincial front, Balochistan National Party – Mengal Group (BNP-M) is not yet satisfied with federal government over development of Gwadar under CPEC. However, government claimed to be addressing the political parties reservations linked to CPEC projects in Balochistan and hinted the work on CPEC western route is initiated. Meanwhile, both countries, China and Pakistan have ensured employment opportunities for locals under CPEC in Pakistan. The Federal Cabinet instructed Planning Commission to draft a policy[4] ensuring employment of local workers on CPEC projects, rather than depending on Chinese professionals.[5]

CPEC security

The security of CPEC has been improved. During second quarter of the year, one incident linked to CPEC security has been noted.[6]A terrorist group tried to attack PC hotel Gwadar but the security forces in Balochistan foiled terrorist’s attempt.  Two security guards were killed followed by two injured. The Balochistan Liberation Army (BLA) claimed the responsibility of this attack. Reports said BLA targeted Chinese and foreign investors in hotel while government denied presence of Chinese or any foreigner in hotel due to Ramzan.

Nonetheless, China expected Pakistan to set effective measures to provide security guarantees for bilateral cooperation and exchange under CPEC. Even government of Pakistan is committed to ensure security of CPEC projects and workers, specially the Chinese nationals. It has earmarked around Rs287 million[7] in next fiscal year’s budget to set a Special Security Division comprising rangers to ensure security of Chinese workers of CPEC.  Also, Punjab police has ensured security of Chinese experts working on CPEC projects in region. Total 470 personnel of special protection unit (SPU)[8] of CPEC have finished their 6 months training to fulfill their duty more effectively.

Advancement of CPEC projects

Government said none of the CPEC project is facing delay.[9]

As to new projects, it also inaugurated the 660 megawatts Thar coal power plant in Tharparkar.[10]The Prime Minister of Pakistan, Imran Khan, also visited China, where he underlined the implementation of socio-economic development projects under CPEC.

There are reports that this government is prioritizing the CPEC western route. The Hakla-Dera Ismail Khan Motorway project of CPEC’s western route is expected to be complete by the end of 2019. Same is the case with Zhob-Mughal Kot section of the route, whereas Havelian-Thakot Motorway is due in February 2020.

Development of Karachi Circular Railway (KCR) and up gradation of Mainline-1

In May 2019, the Supreme Court has issued some guiding principles for revival of KCR, allowing provincial government to take over the project. The court also ordered removal of the encroachment along KCR route and urged Pakistan railway to accommodate people affected by the encroachment. The provincial government agreed to the court instructions but could not remove all the encroachments successfully due to undecided mode of compensation. Nonetheless, it criticized the federal government for talking high about revival of KCR and simultaneously being reluctant to support it due to lack of resources and not providing same concession provided to the Orange Line project under CPEC. Government agreed in principal for inclusion of Mass Transit System as part of CPEC and a working group was asked to work on the projects based further studies and consultations with groundbreaking to be expected in 2019.  But half year past, and no major development on the front of KCR revival is noted.

In addition to that, the preliminary design for up gradation of phase-I of ML-1 (Karachi-Peshawar) railway, the only strategically important project of CPEC, is completed while its financial details are likely to be finalized in upcoming fiscal year. The project will be completed in 2 phases and expected to be functional in 2022.

International dynamics of CPEC

On international front, China hinted that a third party can be a part of CPEC but it did not clarify the role and responsibilities of the third party. However, Pakistan has invited Uzbekistan to invest in Special Economic Zones (SEZs) of CPEC and offered African Union a cost effective access to the regional markets of Asia by joining the CPEC.

For peaceful execution of CPEC, Pakistan government has proposed Afghan living along CPEC route to return voluntarily. To avoid forced relocation, government offered them either to get 3 months food with $200 in cash or shift to refugee camp in Haripur or move to refugee camp in Khaki area, Mansehra.

Regarding Indian continued opposition to CPEC, China retreated that CPEC should not be linked to the historical territorial dispute between two countries (India and Pakistan). The project is an economic initiative and got nothing to do with sovereignty of any third country.












Click here to download: CPEC Quarterly Report: April-June 2019