MICRO-ECONOMIC PROJECT I

The CPEC and its economic consequences on

TEAM SMITH
1. AMEER INSHA RIZVI
2. AYMAN RAHIL
3. NUSRAT SATTAR
4. DILAWAZE

SUBMITED TO
MS.SUBEKA FATIMA
RIZVI
(Everything is worth what its purchaser will pay for it ;) 786/110/92
 MAIN AGENDA’S

 INTRODUCTION TO CPEC

 AIMS AND OBJECTIVES

 GLOBAL VALUE

 RELATIONSHIP BETWEEN BOTH COUNTRIES

 CABINATE OF CPEC

 TOTAL INVESTMENT

 TIME DURATION

 TRADE POLICY

 FOREIGN EXCHANGE REGIME

 ECONOMIC VALUE

 ECONOMIST REMARKS

 CONCLUSION

 AERIAL VIEWS
  LINKS AND SOURCES

INTRODUCTION:

CHINA PAKISTAN ECONOMIC CORIDOR

The massive China-Pakistan Economic Corridor (CPEC) project intends to improve Pakistan's

infrastructure for regional integration and improved trade with China. The project was formally

launched on April 20, 2015, when Chinese President Xi Jinping and Pakistani Prime Minister

Nawaz Sharif signed 51 agreements and memorandums of understanding totaling $46 billion.

The goal of CPEC is to expand Pakistan's road, rail, aviation, and energy transportation networks

while also linking China's Xinjiang province to the deep-sea Pakistani ports of Gwadar and

Karachi. (Xinjiang, which is surrounded by the countries of Mongolia, Russia, Kazakhstan,

Kyrgyzstan, Tajikistan, Afghanistan, and Pakistan, was a stop along the ancient Silk Road.)

Shipping supplies of goods and energy, such as natural gas, to China would be quicker and less

expensive if the Straits of Malacca and the South China Sea were avoided. The announcement of

joint satellite and space efforts between China and Pakistan was made in 2016, motivated by the

CPEC. CPEC is a part of the larger Belt and Road Initiative, introduced by China in 2013 with

the goal of fostering greater connectivity, trade, communication, and cooperation among the

countries of Eurasia. CPEC has been compared to the Marshall Plan for the reconstruction of

post-World War II Europe in terms of its potential influence on the region, and other countries

have expressed interest in participating in the project.

 Global Connectivity:

Through this wide corridor not only benefit China and Pakistan but will have positive

impact on Iran, Afghanistan, Central Asian Republic, and the region.

 Ideal Transport Infrastructure:

China-Pakistan economic corridor is the ideal trade route and transportation

infrastructure, which shows the wise and mutual thinking of developed and under

developing countries.

 Energy Hub & flow’s:

China has so far concentrated its energy investments in Pakistan on coal and hydropower

projects. But a number of wind projects financed by China are currently under progress.

 Wind Energy:

The Jhimpir region of Sindh, Pakistan's southernmost province was a dry, desolate area

previously populated by nomadic tribes. Currently, there are roughly 20 wind farms

there, each with hundreds of enormous whirling blades. The largest "wind corridor" in

Pakistan is located in Jhimpir, which is about 90 kilometers from Karachi and has the

capacity to generate 11,000 megawatts (MW) of clean energy. The China Three Gorges

Corporation, a state-owned power corporation in China, which is managed by an

investment holding company called China Three Gorges South Asia Investment Limited,

was one of the first investors.

Pakistan yearned to put an end to its protracted, incapacitating power shortages in the

years before to the start of CPEC in 2015. However, multilateral finance institutions were

not interested in helping the government develop its underutilised domestic coal reserves

in the Thar Desert. In 2013, China offered to lend enormous sums for coal mining and

infrastructure development.

 Green CPEC:

Chinese government representatives have supported the idea of a "green" CPEC as

Beijing strives to reposition the BRI as an environmentally beneficial venture. The

Sustainable Development Policy Institute (SDPI), a think tank in Islamabad, however,

points out that "in the energy sector, it has meant a stronger reliance on hydro rather than

wind and solar. “In addition to investing substantially in wind energy, China Three

Gorges Corporation, the business responsible for the Three Gorges Dam in China, the

largest power plant in the world, is also doing so in Jhimpir. It finished a 720 MW project

in Karot, northern Pakistan, in June 2022. A 1,124 MW hydropower plant near

Muzaffarabad is making progress, and a third project in Mahl, with a capacity of 640

MW, was been given the green light. Both initiatives are being carried out by the same

business.
 Educational Development :

The improvement in education is the most significant aspect of it. The installation of

various research and development wings, the construction of universities for professional

education, and the provision of technical education and training to increase the human

resource pool are all included in the education sector. Until Pakistan's workforce is fully

prepared to manage those projects independently, the Chinese infrastructure development

teams will assist and train Pakistan's workforce. Chinese colonialism and hegemony

rumors are untrue. Catch me a fish, and I'll eat for a day, goes a Chinese saying. I can eat

for the rest of my life if you teach me how to catch fish. China is allowing Pakistan to

learn how to fish and consume fish for the rest of their lives as part of the China-Pakistan

Economic Corridor.

 Poverty Alleviation:

Poverty plays a vital role in the declining or fall of one’s economy. When there is skilled

and educated work force there was no poverty. China Pakistan economic corridor was

one of the best path ways to alleviate poverty at huge, providing training to uneducated

people, providing basic skills to those who are unaware of advancement and technology,

Providing jobs and great opportunity to maintain higher standard in life. There was huge

amount of people from Pakistan went abroad for become a professional in their

respective fields. As part of CPEC, China would relocate its heavy industry to Pakistan

and teach Pakistani labor to manage and operate such industries. Pakistani citizens will

therefore have numerous more opportunities to support themselves. China has a

generating opportunities.

Global Value:

By constructing an economic corridor that encourages bilateral connectivity,

construction, exploration of possible bilateral investment, economic and trade, logistics,

and people-to-people contacts for regional connectivity, the lives of the people of

Pakistan and China will be improved.

The global value of China Pakistan Economic Corridor enhances their regional

cooperation through mutual development skills. There are some main sectors where we

have to work together.

 Develop transportation and information technology system merging Road, Rail, Port, Air

& Data Communication Sector.

 Industries and Industrial parks.

 Tourism development.

 Training work force campaign.

 Cooperation in livelihood areas.

 HR development.

 Financial sector.

 Health sector
 International Trade sector.

 Social-Economic Acts.

Relation between Both Countries:

China and Pakistan are friendly neighbors and year-round partners in strategic

cooperation. The affectionate nickname "Iron Pak" given to Pakistan by the Chinese

signifies that the two countries' friendship is as strong as iron. In 1951, the two nations

established diplomatic ties. China and Pakistan have established an unbreakable alliance

over the past 70 years, thanks to the personal dedication of leaders spanning several

generations and the unwavering support of the people in both nations.In order to explore

the prospect of enlisting China's help in constructing a highway along the historic Silk

Road, the then-Pakistani president dispatched a political adviser to Beijing in the 1960s.

Without hesitation, Chairman Mao Zedong and Premier Zhou Enlai agreed that China

would work with Pakistan on it. It is the 1,224-kilometer-long Karakoram Highway, as it

is now commonly known. It is the only land route connecting the two nations, with more

than 600 kilometer’s in Pakistan constructed with Chinese help. It passes across the

Pamir Plateau, Hindu Kush, Karakoram, and Himalayan Mountains.

True relationship endures the test of time. The friendship between Pakistan and China is

praised by the locals as being "higher than the mountain, deeper than the sea, and sweeter

than honey." Pakistan is viewed as "a good friend, good neighbor, a good partner, and a

good brother" by the Chinese people. The 70th anniversary of China and Pakistan's

diplomatic ties will occur in 2021. The two nations have always understood and
 supported one another over the past seven decades, evolving from "friends in need" to

"friends of common growth," providing a positive example of state-to-state relations.

CABINET OF CPEC:

INTRODUCTION OF THE COMMITTEE:

S.NO Name & Designation with Department, POSITION

Organization

1 Mr. Abdul Razak Dawood, Advisor to Prime Minister for Chair & Member Steering
Commerce & Investment Committee
2 Chairman, BoI Member Steering Committee

3 Lt. Gen (R) Asim Saleem Bajwa, Chairman, CPEC Authority Member Steering Committee

MEMBERS
Mr. Muhammad Ali Tabba, CEO, Lucky Infrastructure
Cement

Mr. Murtaza Hashwani, CEO, Pakistan Tourism

Mr. Musaddiq Zulqarnain, Chairman, Textile

Mr. Asif Peer, CEO, Systems Limited Information Technology

Mr. Sultan Ali Allana, Chariman, HBL Banking & Financial Services

Mr. Fawad Mukhtar, CEO, Fatima Group Agriculture/Agri Inputs/Livestock

Mr. Shahryar Chishty, CEO, Daewoo Automobile/Low Tech

Mr. Faisal Afridi, CEO, Haier & Ruba Consumer Electronics

Mr. Khalid Mahmood, Managing Director & Pharma

TOTAL INVESTMENT:

China had already acquired control of Gwadar Port on 16 May 2013. Originally valued at

$46 billion, the value of CPEC projects was worth $62 billion as of 2020. In 2022, the

Chinese investment in Pakistan rose to $65 billion.

TIME DURATION:

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. The entire portfolio is to be completed by 2030.

TRADE POLICY:
 The current account would be under pressure from external payments related to the

repatriation of profits and loan service for the CPEC projects. Exports must increase by at

least 15%. Remittances must rise at their historical rate or % yearly, to cover these

additional responsibilities. The exchange rate must be skillfully maintained to encourage

the development of new export commodities, businesses, and market penetration while

preventing import prices for capital goods, machinery, and equipment from rising to an

unattractive level. To guarantee an even playing field, Pakistani and other international

businesses who win competitive bidding should receive the same tax treatment.

Renegotiating free trade agreements is necessary to maintain Pakistani exporters'

comparative advantage, and tariff limits must be implemented to protect Pakistani

producers from tangible harm. To allow Pakistani businesses to participate in the global

supply chain, import tariff rates must be steadily reduced.

FOREIGN EXCHANGE REGIME:

For making on-time payments to suppliers, contractors, and lenders, the current foreign exchange

regime is becoming too onerous. Additional limitations would merely cause inflows to be

diverted toward unofficial routes, creating a vicious cycle. The State Bank of Pakistan (SBP) will

need to tighten external payments even more, delay the timing, and deny some real payments in

order to preserve reserves as inflows through official channels decline and the demand for

outflows through banking channels at interbank rates rises.

directed to the kerb market. The supply in the interbank market would decrease as exporters and

remitters channeled their revenues at the higher open market rate. There would be an imbalance

between supply and demand since importers and other consumers would seek more foreign

currency at the lower official rate.

Exchange rates are significantly influenced by market mood, and any indication that payments to

China may cause more restrictions on the free movement of foreign exchange will undermine the

trust of market participants.

ECONOMIC VALUE:

In the context of the China-Pakistan Economic Corridor, Pakistan has started a huge investment

program in the energy and infrastructure sectors (CPEC). Some of the anticipated advantages of

these investments are covered in this chapter, along with some possible macroeconomic effects.

The investments are anticipated to close Pakistan's energy gap, enhance the fuel mix of the

economy, lower energy costs, increase overall company productivity and trade connections, and

boost output and exports.

caused by increased loan repayments, the repatriation of FDI profits, and fuel imports, highlights

the need for a strong policy focus on increasing exports and establishing external buffers,

bringing the distribution sector to full cost recovery, smart management of project costs and

fiscal incentives, as well as careful phasing in of new external obligations.

The cost of these economic issues is estimated by the authorities to be around 2% of GDP

annually. Excessive reliance on furnace oil during a time of rising oil prices, combined with

operational and administrative inefficiencies and poor tariff setting, resulted in significant and

ongoing losses in the power sector, which in turn caused arrears to build up (so-called "circular

debt"), underutilization of available capacity, and underinvestment in new energy sources. In

FY2012/13, there were on average 10–12 hours per day of power disruptions as a result of the

energy supply–demand disparity. In addition, public investment was significantly lower than the

norm of over 6% of GDP in other rising economies, averaging just approximately 3.5 percent of

GDP.

ECONOMIST REMARKS

Pakistani officials predict that CPEC will result in the creation of upwards of 2.3 million jobs

between 2015 and 2030, and add 2 to 2.5 percentage points to the country's annual economic
growth. As of 2022, it has enhanced Pakistan’s exports and development capacity and is

providing 1/4th of total electricity.

CONCLUSION

The entire project plays a vital role in the development of both country, China and Pakistan, with

the upgradation of work force, trade and global economic value.

Some Aerial Views

Route before CPEC

GAWADAR PAKISTAN
XINJIANG CHINA

Bibliography
 Government of Pakistan, 2016, Economic Survey of Pakistan 2015-16, pp. (i), available at

http://finance.gov.pk/survey/chapters_16/Overview_of_the_Economy.pdf

China Pakistan Economic Corridor (CPEC) official website http://www.cpec.gov.pk/

National Electric Power Regulatory Authority (NEPRA), 2016, State of Industry Report, 2015

National Electric Power Regulatory Authority (NEPRA), 2017, Tariff determination (Generation),

available at:

Coal: http://nepra.org.pk/tariff_coal.htm;

Hydel: http://nepra.org.pk/tariff_hpg.htm

Solar: http://nepra.org.pk/tariff_solar.htm

Wind: http://nepra.org.pk/tariff_wpg.htm

Thermal: http://nepra.org.pk/tariff ipps.htm

MEETING LOG
The End