FAQs

CPEC FAQs (Frequently Asked Questions)

CPEC FAQs (China Pakistan Economic Corridor Frequently Asked Questions)

Q 1: Is CPEC becoming another East India Company?

• Pakistan and China are all weather and time-tested friends. CPEC is a fusion of Vision 2025 and China’s One-Belt One-Road philosophy. This is not the first time we are partnering in any front. We had been tied into a strategic partnership for decades. CPEC brings forth a transformational paradigm, moving from geostrategic to geo-economic partnership between the two countries. China’s huge investment in energy, infrastructure and suggested industrial sectors doesn’t provide any extraordinary mileage to either of the partnering countries rather it offers win-win situation and equal opportunities to both China and Pakistan. Hence, no question to compare CPEC with East India Company. China is putting into a lot of sincere efforts to help Pakistan to improve socio-economic indicators in Pakistan.
• In the 18th century, Indo-Pak GDP share was quite higher as compared to Britain’s share in global GDP. This was the main attraction to capture the higher share, however at this moment China is holding the largest share in global GDP, i.e. 18.3% (23T USD, PPP) Whereas, Pakistan is at 0.3 trillion USD GDP.
• We might be able to better understand how China operates by looking towards its involvement in other regions, specifically Africa. While East India Company cemented its power in the sub-continent through brutal force and with no regard to the well-being of the local population, China’s approach has been to expand its influence around the globe through economic prosperity rather than military might.

Q 2: Are we expecting some industries to relocate from China to Pakistan in coming years?

  • 85 million job’s worth of work has been saturated in light engineering sector and is expected to be relocated in the regions where they can enjoy low CAPEX and OPEX. So, light engineering sector’s industries may be relocated from eastern/central China towards western China, Pakistan and other regional countries.
  • No obsolete and end of life plants would be allowed for relocation as per BOI package for priority SEZ’s 2017.

Q 3: What will be estimated annual growth and revenue to be accrued to Pakistan through various agreements made under the CPEC with project wise breakup?

  • Under CPEC, Pak and China have initiated projects of 17,045 MW of electricity, national level modernization of roads and rail infrastructure, new optical fiber connect with China, development and commercialization of Gwadar port and smart port city, 4 urban mass transit projects in major cities and 9 SEZs. Due to development initiatives of the government, the economic growth rate of 5.3% a decade high was achieved in 2017.
  • Concerning the real returns on CPEC we also need to look at other additional benefits.
  • Positive impact on GDP growth rate which is expected to rise to 7% by 2020 from 5.2% in 2017; industry relocation from other regions as well as the rapid growth in service industry catering to transit trade etc.
  • The annual revenue from toll collection is projected at around $5bn by 2022, which would counter the balance of payment issues in the future (CE, PD&R).
  • 9% gross revenue of Gwadar port and 15% gross revenue of Free trade zone of Gwadar.
    SEZs would be a major contributor to growth and revenue.

Q 4: Why do we need to develop SEZs?

  • Yes, there is dire need to develop new SEZs to attract the FDI and local investments.
  • Pakistan has an abundance of endowments but lack; investment, technology, enterprising and global orders, which could be addressed by attracting export-focused global enterprises in the SEZs.
  • Successful SEZs usually develop on Ease of doing business (EODB) indicators e.g. one window operation, undisrupted cheap power, waste management plants, endowment based clusters etc. which are mandatory for any investor to do investment.

Q 5: China is dictating terms to Pakistan and the federal government is not consulting the provinces, is this correct?

  • No the given notion is not true.
  • China and Pakistan work jointly in cordial environment making an overall planning for a unified development of CPEC projects. In this regard, the Joint Cooperation Committee (JCC), 5 Joint Working Group (JWGs), Long Term Plan, Transport
  • Monographic Study and respective MoUs are few examples of collective working.
  • All provinces have been consulted and invited to all meetings within Pakistan and abroad and the CMs participated in the
  • JCCs for their recommendations and review of CPEC projects.
  • Even president FPCCI was part of 7th JCC.

Q 6: What is the anticipated time for completion of each SEZ?

  • Feasibility studies of all 9 SEZs are completed and handed over to the Chinese side.
  • Few of the 9 SEZs are already under development and development on remaining SEZs would also commence very soon.

Q 7: Why don’t the government extend equal incentives and facilities to existing industrial zones so as to keep them at par with the global competition?

  • Enterprises in these zones would have the edge of access to international markets as Government is mainly looking to relocate the international industries in proposed priority 9 SEZs. Government is also trying to encourage the international enterprises for forming joint ventures with local industries to support the existing industries. Now existing industries have to do their homework to identify their positioning in the supply chain so as to take the advantage of being the first to develop the forward and backward linkages with the enterprises of 9 SEZs.
  • The industries in SEZs have the competitive advantage in terms of improved infrastructure and facilitation services but the spillover effect and the positive externalities will affect the existing industries positively in long run.

Q 8: Why CPEC energy projects mostly include coal power plant and what measures are taken to avoid pollution arising from these projects?

  • Pakistan was facing the worst electricity shortage in 2013.
  • Coal is the quickest and relatively cheaper source and by now 40% of global electricity is generated through coal. Ours was 0% share and would be around 20% by the next few years.
  • Use of Supper critical technology and other environmental safeguards are under adoption.

Q 9: Is Environmental Aspect Assessment conducted prior to development of each project under the banner of CPEC?

Each project has to pass through Environmental Impact Assessment.

Q 10: What is the financial obligations and terms of repayment?

It’s a mixed grant, long-term government concessional loans, zero interest loans and simple partnership or investment mode.

Q 11: What tax concessions are being offered?

To attract the investors especially in SEZs tax concessions are offered to the developers and enterprises in order to improve the industrial sector growth, exports and generate new employment which is much needed.

Q 12: Pakistan has long relation with China, when was CPEC formalized?

  • Initially, KKH was completed in 1974.
  • National Trade corridor concept has been under discussion for research since last ten years.
  • CPEC concept was first evolved during Chinese Premier visit to Pakistan during May 2013.
  • MoU on CEPC Long Term Plan and Action Plan was signed on 5th July 2013 during Prime Minister Nawaz Sharif’s visit to China.

Q 13: Historically CPEC routes have been finalized earlier?

Various routes may have been under discussion prior to signing of MOU in July 2013, but the routes were formalized following various discussions after formalization of MOU and it was agreed in November,2015 in the form of monographic study on Transport Planning, which specifies highways/railways network, benefiting all region of Pakistan.

Q 14: CPEC is mainly related to cooperation in transport, energy & industrial parks?

As the name suggests, CPEC in totality relates to the evolvement of Economic activities. Presently, CPEC mainly relates to cooperation in energy, transport infrastructure (road, railways, airports), Gwadar port & city projects and Industrial parks, which are building blocks to an economy. In long-term, there are other fields of cooperation including, agriculture, industries, tourism, Human resource development and financial cooperation etc.

Q 15: Lack of transparent planning on part of PC viz-a-viz CPEC?

There is no final plan. Planning Commission can only highlight those plan segments which are finalized by mutual agreement.

Q 16: Western route was finalized historically and no other route was mentioned?

Various routes may have been under discussion prior to signing of MOU in July 2013, but the routes were formalized following various discussions after formalization of MOU

Q 17: Installation of Power projects under CPEC is not balanced through out provinces ?

The energy projects are recommended keeping in view the source, load centers, and the investor’s proposal considerations. Regardless of the location, power generated from these projects is added to the national grid for nation-wide distribution

Q 18: How will less developed provinces will benefit from economic zones?

Joint Working Group on industrial cooperation between China and Pakistan under CPEC framework formation is in the process, which shall finalize new industrial zones under CPEC. BOI, in consultation with provincial governments, is in process of finalizing the zones. These industrial zones will uplift underdeveloped areas.

Q 19: Why cheap hydro-power sources are being ignored in CPEC by focusing on costly fuel for generation of electricity?

Various Hydel projects totaling more than 9000 MW are being planned (CPEC and other than CPEC).

All energy projects are in IPP mode. Federal Government welcomes the initiation of energy projects as per energy policy, which is open to all Provinces/ investors

Q 20: Fiber optic cable is a very crucial component of CPEC. What is the exact route where this cable will be installed?

It covers Gilgit-Baltistan, Khyber Pakhtunkhwa and Islamabad-Rawalpindi (SCO Headquarter). It will provide alternate connectivity and redundancy for Pakistan and will open up huge telecom, data connectivity and other related opportunities

Q 21: Lack of environment assessment studies regarding CPEC projects ?

All the projects have been approved after ESIA (Environment and Social Impact Studies).

Q 22: We are now in early harvest phase of CPEC, which is around US$ 46 Billion. What are the details about the allocation of this budget and the share of federating units of the country in this phase, since taxpayers will eventually pay for such project financing?

CPEC is at least 15 year long term project to be completed in phases. Our development goal is to have balance regional development in phases. The US $ 46 Billion is a broad commitment of investment and concessional loans have been principally committed by China in the early harvest phase.

Q 23: Liquefied natural gas (LNG) pipelines are being planned for installation on the Corridor. What are the details about the budget of LNG, location of the pipelines and the ultimate beneficiaries of this crucial system of energy?

There is no LNG project in the approved list of CPEC project portfolio. However efforts are being made to include an LNG pipeline and terminal project.

Q 24: We all know that Pakistan will have a corridor for the first time. Since no institute of the country has expertise in the matters pertaining to establishment of corridor, so a representative and competent authority Is needed to make this dream a reality. Which authority/body is dealing with this gigantic project, and what is there expertise in the concerned subjects?

According to the MOU signed between Pakistan and China, Ministry of Planning, Development and Reform is the focal point and lead agency on CPEC from Pakistani side and National Development and Reform Commission is the lead agency from Chinese side. CPEC Secretariat have been established on either side. The capacity of Pakistan Secretariat has been continuously enhanced to meet the requirement.

Q 25: The transmission system of electricity in Pakistan is obsolete and responsible for huge line losses annually. In CPEC US $ 3000 Million has been earmarked to upgrade this system. What are the details of utilization of this amount? In which area, route of CPEC this budget will be utilized?

The transmission line was included in the actively promoted energy projects list. It was included in prioritized projects for the transmission line from Mitiari to Lahore and Matiari to Faisalabad for evacuation of power more efficiently and more reliability and redundancy through HVDC lines. This is in ITC (Independent Transmission Company) mode. Government of Pakistan is not liable to pay back loans and its business model is like IPP mode power plants.

Q 26: The orders of priority in which each of the said routes is planned to be executed indicating also the names of the routes on which work has already been commenced?

Work on priority base has been started on Western route

Q 27: How Thar is part of CPEC lying so much away from the road network?

Thar having indigenous coal supply is chosen for power project. Its evacuated energy will be part of national grid.

Q 28: What will be the Terms and Conditions / Pre-requisites for establishment of industrial parks and trade zones along the corridor?

The terms and conditions/ pre-requisites will be finalized by the Joint Working Group which is yet to be set up. However, in 5th JCC Ministry of Planning, Development and Reform shared with Chinese side 27 potential sites identified by provincial Governments.

Q 29: What are the details about the criteria, allocation, and installations of energy projects along the route of CPEC. Which constitutional body decided these projects?

All energy projects are in IPP mode. These projects are not located along any corridor passage. These are located either close to the source or to load-centre. Needless to add, regardless of location all power goes to the national grid.

Q 30: Railway is integral part of CPEC. What will be the route of the railways of CPEC and by whom and when this decision was done?

Expansion and up gradation of ML-I line from Peshawar to Karachi is being undertaken which is expected to be completed by 2018. This decision was done by JCC after approval by Joint Working Group of experts from both countries.

Q 31: Pakistan will get 9% of Gwadar Port’s Income. Is it a good deal?

  • Yes, it’s a reasonable deal for Pakistan through which we will get 9% of total revenue (not profit) of Gwadar port operations during the next 40 years of lease period and similar concessional agreement was done with Port of Singapore Authority (PSA) in 2007 on Built-Operate-Transfer (BOT) modality, however, PSA was not able to commercialize the port.
  • Right from the 1st consignment, the GPA of Pakistan will be getting 9% of the revenue from COPHCL, China for the port operations, whereas the expected breakeven for the COPHCL is around 7 years after which the Chinese portion of profit would surpass its investments.

Q 32: Due to rising trade deficit with China, Pakistan might become a colony/province of China, isn’t this worrisome?

  • China’s competitiveness in exports is universal and not idiosyncratic to Pakistan. Pakistan’s current trade deficit with China is around $11 billion. In comparison, India’s trade deficit with China stands at $47 billion. The US trade deficit with China is $347 billion. Based on these trade deficit numbers, is it appropriate to infer that the US or India are becoming colonies/provinces of China? Certainly not.
  • Similarly, it is ludicrous to make such claims about the Pakistan-China relationship. Both countries respect the sovereignty of each other since their foundation and CPEC is based on the shared vision of both countries: Vision 2025 and OBOR.
  • The CPEC SEZs have potential to attract FDI and enterprises which could substitute imports and promote exports and could overcome the trade deficit with China and the world at large.

Q 33: What is the anticipated time for completion of each SEZ?

  • Feasibility studies of all 9 SEZs are completed and handed over to the Chinese side.
  • Few of the 9 SEZs are already under development and development on remaining SEZs would also commence very soon.

Q 34: How many Chinese are working on CPEC projects?

  • There are around 19,000 Chinese working in Pakistan, out of which around 9,500 are working on CPEC related projects, whereas remaining are mostly associated with companies and projects already working in Pakistan

Q 35: Why don’t the government extend equal incentives and facilities to existing industrial zones so as to keep them at par with the global competition?

  • Enterprises in these zones would have the edge of access to international markets as Government is mainly looking to relocate the international industries in proposed priority 9 SEZs. Government is also trying to encourage the international enterprises for forming joint ventures with local industries to support the existing industries. Now existing industries have to do their homework to identify their positioning in supply chain so as to take the advantage of being the first to develop the forward and backward linkages with the enterprises of 9 SEZs.
  • The industries in SEZs have the competitive advantage in terms of improved infrastructure and facilitation services but the spillover effect and the positive externalities will affect the existing industries positively in long run.

Q 35: Why CPEC Energy Projects mostly include coal power plant and what measures are taken to avoid pollution arising from these projects.

  • Pakistan was facing worst electricity shortage in 2013.
  • Coal is the quickest and relatively cheaper source and by now 40% of global electricity is generated through coal. Ours was 0% share and would be around 20% by next few years.
  • Use of Supper critical technology and other environmental safe guards are under adoption.

Q 36: Is Environmental Impact Assessment conducted prior to development of each project under the banner of CPEC?

Each project has to pass through Environmental Impact Assessment.

Q 37: Is there any quota for Chinese employees mandatory hiring in the projects related to CPEC?

  • There is no specific quota for Chinese employment in CPEC project and they would only be engaged on project need basis.
  • More than 78,000 jobs (direct) have been generated up till now (CE, PD&R).
  • 38,000 jobs have been generated in five NHA road projects alone, (36,000 Pakistani, 2,000 Chinese) and a accordingly a total of 120,000 families are associated with these projects (due to its indirect and induced spill over impact)
  • Based on the GDP rise projection, more than 800,000 new jobs are expected to be added in medium to long term.

Q 38: Is Chabahar port a threat to Gwadar port or CPEC in general?

  • Gwadar is a natural deep sea port which can dock the large ships, whereas Chabahar’s depth is limited and can receive small ships.
  • Hence, Chabahar can be supported by Gwadar port and there is no competition rather complementation
  • Using Gwadar Port, ships can clearly avoid the detour of Strait of Hormuz.

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