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How Your Company Can Benefit from China’s Belt and Road Initiative

I like to keep company with savvy international people with expertise that complements mine. My longtime friend, David Baxter, is one of those people. He is a South African who now lives in the Washington, D.C. area but routinely travels all over the world to advise governments and companies as an international development consultant. I call him “Mr. PPP” (Public Private Partnerships) because one glance at his LinkedIn profile makes that clear. As Mr. PPP, David specializes in public development projects in Africa, the Middle East, Asia, and everywhere else, which gives him insight into how governments are fostering international business, which governments are serious about international development, and which ones are smart about it. When speaking with David recently, we concocted a series of blog posts about the impact of China’s Belt and Road Initiative from David’s boots-on-the-ground perspective.

Many of these BRI countries will need increased economic activities to pay back their Chinese debt and will welcome U.S. and foreign companies that want to use their new infrastructure in both import and export ventures.

The goal of this and the future connected blog posts is to help U.S. and international companies understand what China is doing in target international markets so that they can benefit from utilizing Chinese-funded or Chinese-built infrastructure. As David put it, “Increased traffic using those facilities is in the national government’s interest, and those facilities are ready doors to enter into many regions. Why aren’t companies looking at opportunities where they’re using Chinese infrastructure in these foreign markets?”

Since 2013, China has been busy making friends through its Belt and Road Initiative (“BRI”). China aims to encircle countries in the historical overland Silk Road and new maritime Silk Road in interconnected infrastructure to bring them closer into China’s realm of influence and provide a host of mutual benefits to China and the involved countries. China provides long-term, low-interest loans to governments and often provides the lowest priced skilled labor required for those projects.

As of May 2019, over 60 countries have agreed to or expressed interest in BRI projects, and those countries encompass about 2/3 of the world’s population, representing both potential markets for Chinese goods and potential labor pools for lower-cost labor. They represent a large portion of the world’s natural resources, which can provide raw materials to feed China’s manufacturing complex. These countries include Pakistan, India, Sri Lanka, Malaysia, Philippines, Thailand, Cambodia, Vietnam, Myanmar, Laos, New Zealand, Iran, United Arab Emirates, Saudi Arabia, Qatar, Turkey, Egypt, Ethiopia, South Africa, Russia, Poland, Ukraine, and many more (see CFR’s Belt and Road Tracker for the full map, and CSIS’ interactive map is also excellent). These countries include many of the global energy producers (Middle East and Russia) and energy consumers (developing nations). Because China is an export-focused economy, it cannot let up its current pace of development. It needs to keep its SOEs and workers busy, either on domestic or international projects, or both.

But like all friendships that come with strings attached, many countries have started to feel uneasy about chummying up too close with their lender. In China’s BRI, in which China shows up with a checkbook, an open handshake, and a Xi Jinping-worthy smile (especially when that relationship sometimes mandates Chinese firms be included in the bidding process) those strings can feel more like chains. Debt trap diplomacy is a term that has been used to describe China’s BRI projects because China has been willing to extend loans on outwardly favorable terms with plenty of recourse for China if the borrowing nation defaults.

Due in part to this type of heavy-handed diplomacy, U.S. and foreign companies have opportunities to make inroads into these countries and markets. The Chinese are building ports, roads, rails, and power plants, along with cables and pipelines, but they do not control who uses the infrastructure. And because China’s BRI investments often bring additional cultural and political baggage, some target countries are loathe to fully engage with China. China’s “big brother” oversight through both technology and individuals on the ground and Chinese information (and disinformation) networks disguised as cultural enrichment programs, together with the prospect of Chinese colonization by leaving its workers in-country are just some of the concerns of BRI partner countries. Many of these BRI countries will need increased economic activities to pay back their Chinese debt and will welcome U.S. and foreign companies that want to use their new infrastructure in both import and export ventures. Those countries with ports, energy infrastructure, and a willing (trained or trainable) labor force will be most attractive to companies in maritime countries like the U.S. who know that maritime transport is a fraction of the cost of overland transport.

In sum, China is looking at the long game, and so should your company. (For instance, China’s state-owned Chinese Overseas Ports Holding Company has a long-term lease on Pakistan’s Gwadar Port through 2059, but in Chinese consciousness, anything less than 1,000 years is shot-term planning.) If your company does not have a 40- or 50-year plan, it should start to think in those terms. China’s long-term BRI infrastructure development is a boon to companies who are looking to engage with new international markets for raw materials, a deeper labor pool, and potential consumers. In our future posts, we’ll do our best to help you recognize and utilize the most promising BRI markets, including identifying potential legal issues.

By  on 

Source: China Law Blog

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CPEC: Awakening the Giant

Only a drop is needed to make barren fields fertile. One such corroboration is the China-Pakistan Economic Corridor (CPEC) that, despite all odds, is becoming a reality. Since its dawn, it was unnecessarily criticised for its nature and has been inculpated to have shady dealings. Yet, it has stood firm in its certitude.

Roll back to the days when Pakistan was not only unsafe for investments but also accused to be a safe haven for harvesting and fostering violent activities. From the economy to the social strata, all was desolated and no less than a barren piece of land that lacked any productive capacities. However, fast forward to April 2014, China kept its promises and proved that Pakistan-China friendship could weather all.

When no one was willing to even support Pakistan’s stance, China came up with the investment. Since then, these investments, commonly known by the umbrella term CPEC, are proving to be that much-needed drop, which is fertilising the obscured potential in Pakistan.

Today, no one can deny the fact that although Chinese would bag massive benefits from the CPEC, it still has a lot to provide Pakistan.

he CPEC is unveiling itself as a blessing in disguise. Just as the slow but persistent can lead to triumph, the gradual progress has brought a lot of eyes to Pakistan, which is fast becoming the pivot of attention in the region. Since the very beginning of the CPEC, it has procured a great deal of investment for Pakistan whether it be the Saudis or the comrades in Russia. Everyone seems intrigued by the thriving development on the lands of Pakistan.

The world has always acknowledged the geo-strategic importance of Pakistan. However, with CPEC, it is being highlighted even more. The CPEC is comprehensive and substantive cooperation between China and Pakistan, which has the potential to unfold flairs of development in Pakistan.

The drop of CPEC aided the social and economic segment of Pakistan to bear fruits in the form of various projects. These fruits, upon their ripening, would bring holistic benefits for Pakistan. In other words, these perks would not be restricted to specific parts or provinces of Pakistan but the whole country, including each segment of society, would be benefited.

One key aspect of CPEC is its connectivity and integration. It is not only inter-connective but also intra-connective, which reflects it would connect provinces with each other as well as cities within these provinces with each other. From the gateway to the Arabian Sea, the road network climbs up to the peaks of Karakoram.

The CPEC not only covers a route of 2700 kilometres, its aura shadows all. Moreover, CPEC’s development in the western part of Pakistan, including Gwadar port, would create a favourable environment for doing business, which would ultimately attract the investors from across the globe to the much-deprived province, Balochistan.

From the railway network to road infrastructure, the CPEC covers all basic contours required to uplift the socio-economic fabric of Pakistan. The systematic development and organized. structure makes it a progressive project

Locations for the development of Special Economic Zones (SEZs) are chosen in a certain fashion, which would benefit not only each province but also parts like Kashmir and Gilgit-Baltistan. In these SEZs, industries would be established to further contribute to the economics of Pakistan.

Pakistan has fought a decade-long skirmish with terrorism, which, most of the time, has forced Pakistan to direct its state potential to security, thus, neglecting other sectors of the society. Pakistan’s economy was getting ravaged by this fact. When Pakistan’s potential and productivity was wizened by the security concerns, China stood with Pakistan and supplied what was required. China trusted Pakistan when no one else was willing to even bat an eye on Pakistan.

For both countries, CPEC has a lot to give. China would get easy and secure access to the market for its products whereas the giant within Pakistan has just awakened. Nonetheless, it still needs true and upright conviction and intellect from the Pakistani side to fully manoeuvre CPEC in its favour and ascend from the ashes. Also, if Pakistan extracts maximum benefits out of CPEC, it would become a centre of global economic attention.

The writer is a research associate at the Islamabad Institute of Conflict Resolution (IICR)

Source: Daily Times
Date: July 7, 2019
Author: Syed Nasir Hassan
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Why CPEC Could Change Pakistan, China And Asia Forever

The energy crisis in Pakistan is growing, and in spite of efforts by the government it does not seem to solvable. However, thanks to the intervention of China and the formation of CPEC, the country may see some relief in the coming years.

CPEC Defined

CPEC stands for the China Pakistan Economic Corridor, and it is just one link in a chain that the Chinese are forming in the Asian region. The goal of the joint effort is to improve Pakistan’s infrastructure with updated roads, highways, and bridges. It also includes investment into energy projects, which could help solve the problems that Pakistan faces in that area. The local media and politicians praised Xi Jinping when he announced that the Chinese would invest $46 billion into the project.

China vs Pakistan: What are the risks?

The Chinese do not invest in a country unless there is a guaranteed return on that investment. Profit and risk are carefully calculated by experts before a proposal is drawn up, and there is rarely an investment made that does not heavily favor the Chinese government. This is one of the driving factors in the ongoing US vs China trade war, and is one reason Donald Trump refuses to give in on his demands to Beijing. Pakistan will have to consider very carefully what accepting CPEC could mean in the future.

According to the Organization for World Peace, investments from China have not always worked out in favor of countries they have invested in. Sri Lanka was unable to make re-payments on Chinese investments in the country. In retaliation, the Chinese government seized control of Hambantota Port for a period of 99 years. Pakistan will need to consider possibilities like this, as CPEC becomes part of their plan to move forward.

Pakistan’s Obstacles

Pakistan is a country in distress at the least, and in some people’s opinion it is a failed state altogether. There is conflict and division in various regions of the country, as well as growing tension with India. All of this coupled with an increasing energy crisis could be the fuel for a fire that can’t be easily put out. The country is desperately in need of help to sort out its mounting problems, and it is possible that CPEC and China could be the answer they have been looking for. Overcoming the hurdles to make CPEC profitable for both sides will be difficult.

Moving Forward

Pakistan welcomed the investment from China, as a means of eliminating the strain on their nation. However, they must treat China as an equal partner in the endeavor, or they may soon find themselves in even worse straits than they are now. Caution is a must as CPEC is implemented, in order to protect the Pakistani’s from inadvertently giving up territory to a foreign government. Already some issues have been reported with projects, as Dawn noted that Pakistani contractors and companies were denied access to the jobs. Instead, equipment and manpower was sourced from China, leaving the Pakistani’s outside the inner circle. The Diplomat reports that one official complained “labor is also coming from China. There are no restrictions on Chinese firms to involve Pakistani contractors and use local equipment and labor as they take the lion’s share of infrastructure projects.”

CPEC – Is it the solution?

If CPEC proceeds as Pakistan intended for it to, it could indeed be the salvation the people have been hoping for. Already 17 energy projects have been finalized, and 4 more are being considered. They include plans that involve coal, solar, hydropower, and natural gas to help improve the country’s energy situation. The addition of better roads to connect trade cities will also aid Pakistan’s ability to generate income. Additionally, China intends to connect the port of Gwadar in Pakistan’s Balochistan province with its own western province of Xinjiang via the Indian Ocean. This will help facilitate trade between the two nations.

The energy crisis in Pakistan is acute, with power outages lasting from 6-8 hours at a time and occurring all across the country. These outages cost the nation more than $18 billion in 2015 alone, and left the country crippled without power. The problem arises due to the outdated design of Pakistan’s power plants, which fall short of the necessary output to power the homes and businesses. On average they miss the mark by more than 7,000MW, leaving people to depend on diesel generators to provide power. CPEC could change all of that with the energy projects proposed by China. The plan calls for $35 billion to be invested in updating the infrastructure surrounding Pakistan’s power supply.

China Has The Power

China has proven that it has the technology to help Pakistan pull through its energy crisis. The country has managed to keep its own population supplied with power, and maintain economic growth and population increase. Most of their power supply is provided through coal, in spite of their commitment to finding clean energy sources. CPEC could help improve the situation in Pakistan. However, if the country is intent on clean energy as its main resource, then following China’s lead may not be the right choice. If CPEC is properly implemented, it could change the entire region forever. It would also prove that working together for the common good is profitable, and could encourage other countries to do the same. For now, we will have to wait and see how it turns out.

Source: Value Walk

Author: Joshua Rarrick

Date: 19/6/2019

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CPEC to help addressing Pakistan’s long term economic constraints: Moody’s

Source: Business Recorder

Author: Shoaib Ur Rehman

Date: 14 December 2018.

ISLAMABAD: In its annual credit report released on Thursday, Moody’s has said that infrastructure and power projects under China Pakistan Economic Corridor (CPEC) will address Pakistan’s long-term economic constraints an strengthen its growth potential.

“Pakistan’s longer-term economic prospects remain robust, in part because of improvements in power supply, infrastructure and national security that have raised the country’s growth prospects and hence business confidence,” said the report Moody’s-a credit rating agency.

It said institutional reforms planned by the new government, if effectively implemented, would also bolster institutional strength, which has increased in recent years with greater central bank autonomy and monetary policy effectiveness.

“However, the reforms will be challenging for any government to navigate because of the country’s large bureaucracy and complex federal-provincial politics and administrative arrangements,” it added.

Neverthless, Moody’s said in short time, it expects the country’s real GDP growth to slow down to 4.3-4.7 percent in fiscal 2019 and 2020, from 5.8 percent in fiscal 2018, in part due to policy measures taken to address the external imbalance.

It said that the credit profile of Pakistan (B3 negative) reflects the country’s high external vulnerability, weak debt affordability, and very low global competitiveness.

“Significant external pressures driven by wider current-account deficits have reduced foreign-currency reserves, which are unlikely to be replenished in the near term unless capital inflows increase substantially,” the report stated.

“While Pakistan’s public external debt repayments are modest, low reserve adequacy threatens the ability of the government to finance the balance of payments deficit and roll over external debt at affordable costs.”

Moody’s said its assessment of Pakistan’s susceptibility to event risk is driven by external vulnerability risk. Current-account deficits will remain wider relative to 2013-16 levels, with near-term prospects for a marked and sustained reversal unlikely unless goods imports contract sharply, it pointed out.

“Absent significant capital inflows, the coverage of foreign-exchange reserves for goods and services imports will remain below two months, below the minimum adequacy level of three months recommended by the International Monetary Fund,” the report stated.

The government’s narrow revenue base restricts fiscal flexibility and weighs on debt affordability, while its debt burden has increased in recent years, it observed.

“At around 72 percent of GDP as of the end of fiscal 2018, the government’s debt stock is higher than the 58% median for B-rated sovereigns, and Moody’s expects the burden to rise further and peak at around 76pc of GDP in fiscal 2020 — in part because of currency depreciation — before gradually declining as the twin deficits gradually narrow.

The moderate but rising level of external government debt also exposes the country’s finances to sharp currency depreciation.

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Belt and Road Initiative: The String of Economic Pearls

Source: Pakistan Observer

Writer: Athar Rashid

According to the estimates of some economists, by 2050, the contribution of Asia in the global GDP will be more than 50%. So, this is an opportunity for Pakistan being in Asia (South East Asia) to benefit from it in the next two decades. Pakistan is a significant partner in the Chinese grand Belt & Road initiative (BRI) also known as One Belt, One Road (OBOR) with CPEC as the flagship project of this massive initiative. CPEC is a framework of regional connectivity which consists of a series of bilateral agreements on multiple projects.
CPEC is an umbrella term used for various projects that have the potential to feed into the larger BRI structure. CPEC is a great economic opportunity for Pakistan to capitalize. As a flagship project of BRI, CPEC churns out experience, opportunities, and expertise for not only Chinese and Pakistani people but also for the other BRI partner countries. CPEC experience can benefit all stakeholders who want to avail the fruits of BRI. Chinese Belt & Road Initiative (BRI) spans around sixty-eight countries over multiple continents and covers about seventy percent of the world’s population in its grand design.
CPEC is a significant part within that large network of BRI. So, in the larger scheme of BRI, Pakistan is one of Sixty eight countries, China is working with to create the potential for sustaining what President Xi Jinping refers to as the “Chinese Dream.” BRI is a framework under which all participating countries enter the fold to help create a community that shares its destiny with China’s. The “Chinese Dream,” referred by President Xi entails sustained growth for China through trade. Therefore, the BRI framework is to achieve “Chinese Dream” through creating a community of countries linking their economic destiny to that of China. Chinese progress and development would mean mutual growth of all stakeholders.
Through Chinese ambitious BRI, Beijing is struggling to build up partners who are willing to align their future with its own. The people’s Republic of China is hoping to create a community where everyone wins through market access, trade relationships and adopting Chinese cultural as well as business norms.As BRI enters its fifth year of implementation it is believed to have some of the largest infrastructure and investment projects in history.Opponents of the BRI claim that the vast global network of new road, rail and pipeline projects will benefit primarily China. Securing sea lanes, ports and refueling stations will help China’s exporters reach overseas markets and give China uninterrupted access to energy imports.
Establishing overland connections to the Indian Ocean will open new trade routes and make Chinese military and commercial vessels less vulnerable to strategic choke points such as the straits of Malacca and Hormuz. On the other hand Chinese President Xi in his keynote address at the 2017 Belt and Road Forum for International Cooperation, specified that the central objective of BRI is to build “land, maritime, air and cyberspace connectivity” and create “networks of highways, railways,and sea ports.”
Numerous studies on the BRI provide evidence that many Chinese development projects accelerate economic growth in partner countries. Nonetheless, it is uncertain who benefits the most from such projects. China committed $50 billion to be invested in Pakistan under the umbrella of CPEC, of which $35 billion will be invested in energy projects and $15 billion in infrastructure, Gwadar development, industrial zones, and mass transit schemes. In the next five years, it is expected that it will be more than $55 billion. This project primarily creates a huge amount of foreign direct investment for Pakistan, at the same time, it will also create greater trade opportunities to China by giving access to a new market for its trading goods.
By building connectivity infrastructure that helps local residents and businesses reach more distant markets, these investments could spread economic activity to rural, remote and disadvantaged areas of the countries along the BRI route. The Belt and Road Initiative (BRI) is based on the win-win philosophy of Confucius. With the successful execution of many CPEC energy and infrastructural projects, both Pakistan and China are going to benefit. China will have all that it needs at the moment to make its presence felt in every corner of the world; more seaports and direct routes to connect with different parts of the world, cutting down the shipping costs etc. Pakistan will see phenomenal growth in its infrastructure, energy and telecommunication sectors.
Pakistan is also doing concentrated efforts to integrate CPEC to its greater network of society. The Planning Commission of Pakistan is trying to improve the academic circle in the country by aligning the vision of Higher Education Commission of Pakistan (HEC) to produce faculty members abreast with the knowledge and expertise of the BRI/CPEC Initiative. This capacity building will certainly help in the human development in shape of skilled students and professionals to serve the long term project of CPEC in a befitting manner.
Chinese investment in BRI countries is around $50 billion and is growing with the passage of time. There are around fifty six economic zones planned in twenty countries, out of which nine are in Pakistan. In the next five years, China will add twenty five hundred, short term research visits for foreign scientists, and train five thousand and four hundred engineers. Most significantly there will be the relocation of twenty five million jobs worth of industry for the people of countries along the BRI. BRI is a great chance and opportunity for countries like Pakistan.
There are many other competitors alongside Pakistan to benefit from the enormous opportunities offered by the grand BRI initiative like Laos, Cambodia, Vietnam, Indonesia, and Malaysia who are looking forward to receiving their share of industrial relocation, jobs, and other economic opportunities. Pakistan needs to work hard in a planned manner to obtain maximum benefit out of this tough competitive opportunity. The Policy makers and shakers in Islamabad should use BRI as an opportunity for global connectivity and trade. Through CPEC and BRI at large, Pakistan can get market access to all the BRI partnering countries which will be a great opportunity for the investors and exporters. The land and maritime routes can effectively be used by Pakistani entrepreneurs and companies to export their products and services to the countries along the BRI route. In order to facilitate that Pakistan needs to renegotiate the visa facility for Pakistani tourists and businessmen with Chinese authorities.
Chinese tourists and businessmen get on arrival visa in Pakistan, the same facility should be extended to the Pakistanis to make the mutual partnership even stronger. Moreover, exporters from Pakistan face a tough time in China because their competitors enjoy zero-rated tax thus leaving Pakistani goods uncompetitive. Pakistan and China should work together for a better free trade agreement (FTA) in order to further strengthen their bonds.

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CPEC may invite hybrid warfare against Pakistan

Source: Asia Times
Author: ATTA RASOOL MALIK 
Date: 5th December,2018.

 

Wars are expensive in terms of blood and treasure. Through the ages, this fundamental truth has driven military strategists to search for a quick and inexpensive path to victory in battle. The ultimate aim of any contesting nation is to force an unwilling enemy government to accept peace on its terms. In democratic countries, the actions of that hostile government are generally based on the will of the people, so no victory can be complete until that “will” is reshaped or moulded.

Liddell Hart, a British military theorist, argued that a man killed is merely one man less, whereas a man unnerved is a highly infectious carrier of fear, capable of spreading an epidemic of panic. Hart argued that the resulting psychological pressure on the government of a country may neutralize all the resources at its command – so that the sword drops from a paralyzed hand. Therefore, a successful strategist thinks in terms of paralysis, not killing.

The mechanism for inducing or coercing a quick change in the government’s position can occur in at least three ways: first, key governmental leaders are killed and replaced by a more sympathetic group; second, the government is overthrown, either by a popular revolt or from a faction within; or, third, the country’s leaders are persuaded  to change their minds.

Every country enjoys at least four instruments of national power or influence. They are: political, economic, military, and informational. In the modern age, the preferred method is to selectively attack or threaten targets that most directly support the enemy‘s will to continue with its current behavior.

Hybrid warfare, a relatively new concept, is a multiple-prong effort aimed at paralyzing the enemy’s leadership through military and non-military clandestine activities, economic subversion and propaganda dissemination. These techniques have been around for ages, but now they incorporate modern-day technologies and are synergized in a scientific manner.

Confusion and disorder follow when weaponized information aggravates the perception of insecurity in the populace as political, social, and cultural identities are pitted against one another.

A hybrid war takes place on three distinct battlefields: the conventional kind, the indigenous population of the conflict zone, and the international community.

Sometimes all it takes is a small and dedicated group of provocateurs to spark clashes with the authorities, along with misleading reports that the security forces are attacking “hard-pressed peaceful protesters.”

The whole point of engineering a completely false narrative of “democratic freedom fighters” resisting a “tyrannical, incompetent and corrupt” regime is that it serves the dual purposes of encouraging more citizens to join in the growing riot and to generate support from abroad. Therefore, hybrid war could mean a synergized campaign of disinformation, terrorism, cyber-attacks on digitally dependent communication networks, criminal activities, proxy sponsorship,, rebellion, insurgency, or anything like that.

Pakistan through the China-Pakistan Economic Corridor (CPEC) guarantees China’s strategic freedom and flexibility in the face of the United States’ naval threats and nullifies all the trouble that it is causing along its southern maritime borderlands. Therefore, the US has a grand interest in disrupting, controlling, or influencing the Silk Road and CPEC.

Pakistan requires the rapid development of a communication network to facilitate cohesion and economic prosperity. However, the country is rife with historical, ethnic, religious, socio-economic, and geographic differences, which could be manipulated by the US and its arch-rival India to engineer violence and set a hybrid war scenario in motion. Many informed people in Pakistan are of the view that Pakistan is under hybrid attack by hostile forces.

In today’s world, apart from traditional media, popular social media platforms such as Facebook, WhatsApp, and YouTube are the primary means of disinformation and propaganda. On these media platforms, various activities related to hybrid warfare are challenging to detect and defeat.

It is most likely that the authorities will always be one step behind the hybrid war agents unless the target government outrightly bans these services. The permanent closure of such services is not a wise option as it can shatter the credibility of the democratic government. Imposing restrictions is best employed for short periods during critical times, such as a few weeks before general elections and similarly important events.

It is also true that information, fake or otherwise, homegrown or imported, will have no impact unless it is accepted as fact by the masses. Therefore, the timely provision of information and critical thinking are the antidote to “fake news and hostile propaganda.” The government should work to enhance online digital platforms that are‘efficient and credible, to ensure the timely provision of information for consumption by the masses and interest groups.

All Pakistani institutions must work together to ensure that the top leadership,  both civil and military, remains credible. It will help us beat back hybrid assaults against CPEC and the state of Pakistan.

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CPEC to help PR improve performance: PM

Prime Minister Nasir-ul-Mulk Tuesday said that with CPEC, there is a huge potential and scope for Pakistan Railways to further improve its performance and increase its share both in passenger as well as freight transportation sector by offer quality services to its customers.

During a briefing about the performance of Pakistan Railway, the prime minister directed that a comprehensive plan would be worked out to overcome the existing challenges for the consideration of the incoming elected government.

The briefing was attended by Minister for Railways Roshan Khursheed Bharucha, Secretary to the PM Suhail Aamir, Secretary Railways Muhammad Javed Anwar and senior officers of Ministry of Railways. The prime minister was informed that as a result of right mix in service the passenger share in Railways has increased from 13percent in 2013 to 31 percent in 2017.

Pakistan Railways recorded a revenue of Rs50 billion in 2017-18 as compared to revenue of Rs15.5 billion in 2011-12.

The prime minister was briefed about organizational structure, rail network, past performance and the future development strategy under National Vision 2025 in the Railways sector.

The prime minister was also briefed about the new business plan and various initiatives taken, both in freight as well as passenger transportation sector, for the revival of Railways and increasing its revenues. The prime minister was also briefed about the progress made in various rail network extension projects under the CPEC.  It was informed that Main Line-1 (ML-1) project from Karachi to Havelian was being upgraded as Early Harvest Project under the CPEC.

It was informed that feasibility study for upgradation of ML-2 (Kotri-Attock) project has also been completed. Similarly, feasibility studies were in progress on extension of ML-2 (Gwadar-Basima-Jacobabad and Basima-Quetta) and extension of ML-3 (Quetta-Bostan-Zhob-DI Khan-Kotlajam) projects.

The prime minister was also apprised about the challenges faced by the organisation including the issue of pension liabilities that contributed to 34 percent of the total expenditure of the organisation.

The prime minister appreciated the performance of Pakistan Railways especially various initiatives taken under the strategic business plan.

SOURCE:https://nation.com.pk/20-Jun-2018/cpec-to-help-pr-improve-performance-pm

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CPEC: the governance challenges ahead — II

Pakistan faces both internal and external security threats. The monster of modern terrorism, however, is a post-9/11 phenomenon. When General-cum-President Pervez Musharraf supported the US-led War on Terror (WoT) against the Taliban, the latter, in reaction, started targeting the Pakistani society and state. Resultantly, more than thirty thousand civilians and law enforcement officials have lost their lives in multiple acts of terrorism since 2003. Nevertheless, the overall number of causalities have dropped since 2014 owing to some legislative and executive measures taken by the government, but suicide bombers are still a real threat. Finding opportunity, any terrorist organization can strike. The country’s security apparatuses are the most tempting targets, while minorities are the most vulnerable.

Most of the people who died in terror attacks were ordinary Pakistani citizens, both Muslims and non-Muslims. But foreigners have also been targeted. For example, an American national was kidnapped and later killed in Karachi some years ago. Iranians have also been targeted.

Similarly, the Islamic State (IS) abducted, as per media reports, two Chinese nationals who were Christian missionaries, near Quetta in 2017. The couple was eventually killed. This seemed like an attempt on the part of the terrorists to malign China-Pakistan relations, in general, and the China-Pakistan Economic Corridor (CPEC) project, in particular. Moreover, another Chinese national was also killed in Karachi, reportedly by extortionists. The deceased Chinese citizen, according to Pakistani officials, was working for a non-CPEC firm called Cosco Shipping Lines Pak (Pvt) Ltd, which has been doing business in Pakistan since the early 1990s. If analysed objectively, in both cases, the Chinese nationals were residing or working in Pakistan in their private capacity. Furthermore, they were not related to CPEC in any capacity. Noticeably, the missionary couple and the private-firm employee were provided due security by the government. However, in both incidents, the Chinese citizens seemed to have violated security protocols, which cost them their lives.

The overall number of terror-related casualties has dropped since 2014 owing to some legislative and executive measures taken by the government, but suicide bombers are still a real threat. Finding opportunity, any terrorist organisation can strike

Recently there have also been reports of some Chinese citizens involved in financial crimes such as ATM skimming. Such cases remain under investigation. In addition, in April 2018, a number of Chinese workers were filmed assaulting some personnel of the Punjab police in the Noor Pur camp (Khanewal, Punjab). Video footage of this shameful incident went viral on social media. At one point during the scuffle, the country project manager of the concerned company stood arrogantly on the bonnet of the police van with the Pakistani flag visible beside his shoes — this was not the first such incident.

Here, it is pertinent to mention that on December 8, 2017, the Chinese embassy in Islamabad issued a press release that read “the Chinese embassy has received some information that the security of the Chinese institutions and personnel in Pakistan might be threatened.  This Embassy would make it clear that Pakistan is a friendly country to China. We appreciate that Pakistan has attached much importance to the security of the Chinese institutions and personnel”. The preceding is a reflection of China’s growing security concerns vis-à-vis its CPEC related citizens. Even, the number of non-CPEC related Chinese nationals — working, for example, as journalists — have crossed fifteen thousands. Physical security of the Chinese residing and working in Pakistan has, therefore, emerged as a legitimate concern, which the Pakistani authorities need to take into policy consideration.

However, despite the mentioned cases of Chinese citizens being killed by terrorists, the fact of the matter is that CPEC has, thus far, not been targeted by a major terrorist attack on its infrastructure, machinery and work force. However, this should not discourage or devalue the significance of security enhancement on the part of Pakistani authorities. Rather, impending security threats ought to be responded to diligently. This will be easier said than done because it raises questions on the legal, institutional and administrative capacity of the government.

For example, is it the prerogative of the local, provincial, regional or federal government to provide material and physical security to, for example, transportation infrastructure (or to the proposed Special Economic Zones) and the Chinese work force and machinery involved at different stages of construction? If it is a combined arrangement on the part of the provincial and federal government, who will be responsible for implementing the security measures? Which government and at what level, will bear the financial and logistical cost of security? Moreover, if the provision of security is the responsibility of the provincial government, will the province be able to manage it logistically and institutionally? Significantly, will the Chinese companies and human resource be satisfied with the security arrangements provided by Pakistani authorities? These are some major security challenges that Pakistan will have to deal with for the sake of CPEC, which has been termed by both China and Pakistan, as a crucial component of contemporary bilateral relations. I will provide policy input, in this respect, in the upcoming articles in this series.

SOURCE:https://dailytimes.com.pk/255100/cpec-the-governance-challenges-ahead-ii/

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‘CPEC is not a gift’: Professor Jia Yu at the CPEC 2018 Summit

Pakistan should not take CPEC for granted, writes Dr. Jia Yu. Both public and private sectors must take ownership of the opportunities.

 

The economic relations between the two countries have been phenomenal, especially since the turn of the century. Early economic cooperation was based on political and security interests, like Karakoram Highway, nuclear capability, arms trade etc. Also, it was focussed on energy and mining, but there is now a need for diversification. Pakistan has to take advantage of China’s rise on the global scene. There is a tendency towards having even better economic relations based on market forces and there is a lot of under-exploited potentials.

When it comes to win-win cooperation, of course, there is a lot at stake for both countries. Pakistan’s interests lie in promoting growth, private sector investment, employment, exports, technology and transfer of skills as well as in the relocation of Chinese firms. China’s interests lie in overseas production bases, new export markets, energy cooperation, and its need for production capacity relocation.

A successful execution of CPEC will ensure economic progress and stability for both the countries, particularly along the border region.

The two countries signed the FTA in 2006 which came into effect a year later. The FTAs play a major role in the general tendency of increasing trade. Surprisingly, the trade has been relatively low compared to the other neighbors (India, Vietnam, Philippines etc.). And there is a large and widening trade imbalance that needs to be worked on.

There has been a considerable increase in FDI since 2014 which is a positive sign for both China and Pakistan. The main FDI sectors by priority are: power, construction, financial services, and communication. There is, however, very little FDI in the light manufacturing sector.

The Belt and Road Initiative (BRI) is a $900 billion investment, with finance channels targeting green development. It connects more than 60 countries, 60pc of the global population, 30pc of global GDP, and 35pc of global trade.

CPEC, a central link of BRI, cuts 10,000 miles of shipping by sea, and connects ports from Shanghai to Africa and Europe through Gwadar.

PAKISTAN AND CPEC

If things work out smoothly, Pakistan could use the FDI in its power and transport infrastructure and then in the manufacturing sector with the experience of leveraging SEZs to unlock this trio’s potential for rapid gains in job-rich industrialization. This can be done without unrealistic pre-requirements as the work to lay the foundations for industrialization has already begun.

The potentials are outlined below along with policy options needed to convert them into actions. At a regional level, Pakistan has been growing steadily in terms of GDP per capita since 2010, according to the World Bank. Investors are very keen to a growing economy. Consistent growth of purchasing power (GDP per capita) really matters for domestic consumption; therefore the growth rate must be maintained to catch up with competitors.

Pakistan is one of the world’s largest reservoirs of human capital and has a tremendous potential consumer base. In 2016, the country was home to 193,203,476 people, being the world’s 6th most populous country. World Economic Forum estimates that it will be among the top five populous countries in the world by 2060.

However, a large population is necessary but not sufficient to attract investors. The population has to be equipped with adequate skills to meet industrialization needs. An effort is also needed to attract global buyers.

Thirdly, China and Pakistan have long hailed each other as “all-weather friends”, or “iron brothers” as close as “lips and teeth” in the words of The Economist. There is already solid trust between the two countries, but the Pakistani officials need to visit China more often to convince the private investors for investment opportunities in Pakistan.

The CPEC will improve road, air, sea, and energy infrastructure. It will ensure land, sea and air security. It will enhance trade and investment facilitation and will establish free trade areas that meet high standards, maintain closer economic ties, and deepen political trust. Also, it will enhance cultural exchanges and promote mutual understanding, peace, and friendship between the people of the two countries.

Having said that, the CPEC should not be considered just a ‘gift’ from China, but the Pakistani government should also establish an FDI Advisory Board that shall promote the new image of the country. This includes visiting China more often and ensuring that investors understand the opportunities and benefits available under the CPEC.

Besides, according to the State Bank of Pakistan in November 2017, the country received net FDI worth $207 million out of which $206 million came from China. Potential investors pay significant attention to first movers, other Chinese investors may follow and eventually stay in Pakistan if the government helps the pioneers to be successful.

In terms of binding constraints, a study case of Malaysia estimates that FDI can effectively contribute to growth if it is at least 3.14pc of GDP. Pakistan should be able to compete. This requires overcoming the binding constraints by addressing security issues and risks, hard infrastructure challenges, especially SEZ-specific constraints like energy, roads to SEZs etc. Soft infrastructure challenges include corruption, rule of the law, coordination among institutions, inadequate capacity and cultural biases. Absorption capacity can be adjusted by setting yearly realistic targets of FDI amount.

There are six steps to identify the right industries, as narrated by Prof. Justin Lin. They include identifying countries with consistent growth, with GDP per capita three times as Pakistan’s or was at the same level as Pakistan 30 years ago.

Next comes investigating the existing private investment in those target industries and encourage its development by leasing the market regulations. Attracting global investors into the target industries which lack existing domestic private investment is the third step, followed by paying attention to new enterprises and supporting innovation in the target industries.

Establishing and developing SEZs to eliminate entering barriers, attracting foreign investment, and encouraging industrial cluster. And, finally, providing policy incentives for the first movers, including tax reduction, foreign exchange access, etc.

THE WAY FORWARD

Development can start from ‘low-hanging fruit’ through SEZs. The government should attract first movers to invest and help the pioneers succeed.

CPEC should not be taken for granted. A proactive and systematic approach is needed for attracting investors, together with strong market factors.

Despite long-term and solid trust at the government level, more mutual dialogues and exchanges need to be enhanced in the private sector. Let the peoples get to understand each other.

CPEC and SEZs are open for all investors, including those from other countries beyond China.

The writer is a professor at the Institute of New Structural Economics (INSE), Peking University, China.

SOURCE: https://www.dawn.com/news/1409721