China-Pakistan Economic Corridor, or China-Pak Economic Corridor (CPEC) is an ongoing megaproject between China and Pakistan. The name is given to a route that would eventually join the Gwadar Port in southwestern Pakistan to China autonomous region of Xinjiang in the northwest. The two regions will be connected via an extensive network of railways, highways and, oil and gas pipelines. The China-Pak Economic Corridor will run a length of 2,442 kilometers with an overall construction cost of $46 billion. The entire project is expected to complete several years from now. China-Pak Economic Corridor is China’s largest foreign investment. While the corridor itself will be completed within the next three years, as per the guidelines, the other projects entailed within the project will take longer. China-Pak Economic Corridor is set to be a game-changer within the region.
The projects formulated around the corridor will telecommunications and energy infrastructure to the country. China hopes that the project will transform Pakistan into a regional economic hub and will boost intelligence sharing, and relationship between the two countries. The China-Pak Economic Corridor will effectively grant China short trade routes into the resource-rich Middle East via the Arabian Sea. Earlier, they would have to take the much longer and expensive route through the Strait of Malacca.
The Chinese are not just offering to build much-needed infrastructure but also make Pakistan a key partner in its grand economic and strategic ambitions.
History of China-Pak Economic Corridor
This megaproject was first proposed in May 2013 by China’s then Premier Li Keqiang during his visit to Pakistan. The Pak-China Economic Corridor Secretariat was inaugurated on the 27th August, 2013 in Islamabad, Pakistan. In October of the same year, Prime Minister Nawaz Sharif met with China’s premier to further the plans. In November 2014, the government of People’s Republic of China announced that several companies were ready to finance $45.6 billion worth of infrastructure and energy projects in Pakistan as part of CPEC. According or reports by Reuters China promised to invest an estimated $33.9 billion in several energy projects and around $11.8 billion in projects regarding infrastructure. Majority of these projects are set to complete in year 2017. The deal also includes the development of the world’s largest deep-sea port Gwadar, costing $622 million. The agreement under CPEC will provide 10,400 MW of energy to Pakistan’s national grid at a cost of $15.5 billion. Moreover, the deal includes a $44 million fiber optic cable, and major updates to transport infrastructure including but not limited to Karakorum Highway, Karachi-Lahore Motorway, Gwadar International Airport and Gwadar Port Easy Bay Expressway.
Pakistan and China signed an agreement to commence work on the China-Pak Economic Corridor worth $46 billion on the 20th of April in 2015. The investment amounts roughly to 20% or Pakistan’s annual GDP.
Strategic Importance of China-Pak Economic Corridor
The corridor, upon completion, will expands trade routes between Africa, the Middle East and China. China is also the world’s biggest oil importer, and presence of oil and gas pipelines thought Pakistan would eliminate ocean travel through Southeast Asia entirely. According to the Asian Development Bank,
CPEC will connect economic agents along a defined geography. It will provide connection between economic nodes or hubs, centered on urban landscapes, in which large amount of economic resources and actors are concentrated. They link the supply and demand sides of markets.
Talking about the corridor, Bloomberg Business stated,
The move represents a shift toward greater economic cooperation between Pakistan and China, which have long had close security ties amid common disputes with neighboring India. The corridor would give China access to the Indian Ocean and lead to investments that would help ease power shortages that are hindering economic growth in Pakistan.
China also plans to build oil storage facilities, along with refineries, at Gwadar Port. This will allow safe and short passage of oil into China via highways and pipelines. Currently, 60% of China’s oil is imported from the Middle East, 80% of which is transported through Strait of Malacca. The strait is dangerous, filled with pirates, and of course the presence of water makes everything more complicated. The presence of pipelines and highways leading through Pakistan into China, will prove much safer and quicker. It will also cost less to the country. Pakistan on the other hand gets refineries and other infrastructure to process oil on their own.
The corridor is vital to the economy of Pakistan when it comes to growth. The project was dubbed as ‘credit positive’ by Moody’s Investors Service. However, the agency was quick to relate that most of the benefits associated with the project will not bear fruit until at least 2017 however, few of them may be reaped before that time. Furthermore, a study conducted at Pew Research Center found that 78% Pakistani’s have a positive take on the China-Pak Economic Corridor.
Projects Under the China-Pak Economic Corridor
China and Pakistan signed a total of 51 Memoranda of Understanding (MoU) during Chinese President’s visit to Pakistan. While there are loads of power projects to be constructed in Pakistan under CPEC umbrella, there are various other development and infrastructure plans to be carried out, few of which are listed below:
- Gwadar Port – Formalities completed, land handed over to China on lease for 40 years.
- Upgradation of Karachi-Peshawar main railway line – Feasibility stage.
- Khunjerab Railway – Feasibility stage.
- Karachi – Lahore Motorway – Approved and under-construction.
- Havelian to Khunjrab Railway – Approved.
- Hazara Motorway – Approved and under-construction.
- Iran-Pakistan Gas Pipeline – Under-construction, Iran’s part of the line completed.
- Gwadar-Ratodero Motorway – Under-construction.
- Economic Corridor Support Force – Completed; armed division of army created for security of the workforce costing $250 million.
- Havelian Dry Port – Feasibility stage.
- Upgradation of Gwadar International Airport – Approved.
- China-Pakistan Joint Cotton Bio-Tech Laboratory – Approved.
- Cross-border fiber optic communication line – Approved.
There are many controversies and strategic implications revolving the China-Pak Economic Corridor. The prime countries concerned are India and the U.S. U.S. feels threatened by the corridor owing to it providing China ease-of-access to the Middle East and eventually Europe. On the other hand, India has invested greatly in Iran’s Port of Chabahar which lies 170 kilometers west of Gwadar. Upon completion of the corridor, Gwadar Port will overshadow the Port of Chabahar significantly and that effectively results in a loss for Pakistan’s rival, India. India continues to maintain tense relations with Pakistan and has viewed the project with much objections. Those objections were raised by India’s Prime Minister, Narendra Modi, during his to China, which were dismissed almost immediately by the Chinese President. Amidst much controversy, and security risks owing to the militants, the development of the corridor is smoothly underway. Upon completion, the China-Pak Economic Corridor, could potentially transform Pakistan’s economy for the better and significantly boost prosperity.You can follow us on Facebook, Twitter, or Google+ for more updates. Otherwise fill in the subscription box above, or subscribe to our RSS Feed.