CPEC and Socioeconomics

February 7, 2017 Dr. Nadeem Javaid, Chief Economist,

Government of Pakistan

One  Belt  One  Road  Ini.a.ve  -­‐  OBOR  •  China’s   awakening   strategy   –   Counter  measure   to  manage  US-­‐led   Trans-­‐Atlan.c  alliance   and   balance   the   Trans-­‐Pacific  containment  against  China.  

 •  OBOR   is   going   to   serve   as   connec.on   of  policy,   roads,   trade,   currency   and  especially  of  hearts      (5  Goals  by  President  Xi)      

CPEC-­‐  Principal  Strategic  Component  

²   21st  Century  Mari.me  Silk-­‐road  :  An  Infrastructure  Development  Strategy;  stretching  from  Asia  to  Europe.    

²   60  Countries    

²   900  deals  underway  ²   Asian  Infrastructure  Investment  Bank  -­‐100  Billion  $  

 

3  

CPEC    Coopera@on  Fields  

China  Pakistan  Economic  Corridor  Long  Term  Plan  :    Timeframe  2014  –  2030  Components:  I.  Energy  (Coal,  Hydel,  Wind,  Solar,  LNG  ,  Transmission)  II.  Infrastructure  (Road,  Rail,  Avia.on,  Data  connec.vity)  III.  Gwadar  Port  (Socio-­‐economic  development)  IV.  Industrial  Coopera.on  (Gwadar  Free  Zone  and  other  industrial  

parks  to  be  finalized)  

Nodes:  All  provincial  capitals  are  included  as  nodes,  the  key  corner  stones  of  CPEC  on  which  it  will  be  constructed.  

1st Target（2020）: Period of market cultivation. To develop commercial logistics and other industries with local resources.

2nd Target（2025） : Per iod of expansion and development . Processing and manufacturing industries will be developed.

3rd Target（2030） : Per iod of Maturity. Enlarge the scale and scope of Free Zone.

Development Targets

CPEC  PorHolio-­‐Projects  PROJECTS   US$  Millions  

Energy   33,793    

Transport  and  Infrastructure  Roads   3,500    

Rail  Network   3,690    

Gwadar  Port   622  

Others   4044  

Total   45,649    

Other  (LNG  &  Power  Transmission)   5000  6  

 1|  CPEC;  Energy  

Mi@ga@ng  Energy  Constraints…  

Hydel  31%  

Gas  22%  

Oil  38%  

LNG  4%  

Other  1%   Nuclear  

3%  

Wind  1%  

Current  Fuel  Mix  

Solar  2%  

Import  2%  

Hydel  26%  

Gas  12%  

Oil  14%  

LNG  13%  Coal  

Local  4%  

Coal  Imported  

20%  

Nuclear  3%  

Wind  4%  

Fuel  Mix  2019-­‐20  

Improving    Fuel  Mix    

 9.69      9.63    

 9.55    

 9.17      9.15      9.10    

2014-­‐15   2015-­‐16   2016-­‐17   2017-­‐18   2018-­‐19   2019-­‐20  

Genera@on  Basket  Cost  

17582  

23107  

17582  

23500  

18402  

25145  

19690  

26905  

21068  

28788  

12140  

17285  14174  

23434  20213  

27094  22940  

28168  25077  

30803  

-­‐5442  -­‐5822  -­‐3408  

1811   1949   3250  1263  

4009  2015  

JAN-­‐16   JUL-­‐16   JAN-­‐17   JUL-­‐17   JAN-­‐18   JUL-­‐18   JAN-­‐19   JUL-­‐19   JAN-­‐20   JUL-­‐20  

Power  Demand  and  Supply  

Peak  Demand   Available  Genera.on   Gap  

-­‐3000  MWs    FO  Plants  

2|  CPEC;  Infrastructure  

 Western  China  to  Eastern  Europe  

 

EUROPE

13845 MILES

16507 MILES Shanghai Port

AFRICA

EUROPE

MIDDLE EAST

WESTERN CHINA

LONG DISTANCE & HIGH COST

11845 MILES

EASTERN EUROPE TO WESTERN CHINA EXISTING DISTANCE 19132 MILES

TRADE ROUTE FROM EUROPE TO CHINA

17820 MILES Central China

19132 MILES Kashgar

CENTRAL ASIA

 

Exis@ng  Distance  :  19132  Miles  

 

Distance  Saved  :    9535  Miles  

9597 MILES

SHORT DISTANCE & LOW COST

Pak-China Economic Corridor Intermodal Transport Network

AFRICA

EUROPE

MIDDLE EAST

WESTERN CHINA

INTERMODAL ROUTE FROM EUROPE TO CHINA

10910 MILES

EASTERN EUROPE TO WESTERN CHINA DISTANCE SAVED 9535 MILES

Karachi Port 7847 MILES

Kazakistan Kazakistan

CENTRAL ASIA Kashgar

Central China

 Western  China  to  Eastern  Europe  

 

 Western  China  to  Eastern  Europe  

Time  Saved  -­‐-­‐-­‐  26  to  11    

INTERMODAL ROUTE FROM EUROPE TO CHINA EASTERN EUROPE TO WESTERN CHINA

DISTANCE SAVED 9535 MILES

9597 MILES

AFRICA

EUROPE

WESTERN CHINA

Central China

Karachi Port 7847 MILES

Kazakistan Kazakistan

CENTRAL ASIA

EUROPE

13845 MILES

16507 MILES Shanghai Port

11845 MILES

10910 MILES

MIDDLE EAST

Pak-China Economic Corridor Intermodal Transport Network

19132 MILES

17820 MILES

Kashgar

EASTERN EUROPE TO WESTERN CHINA EXISTING DISTANCE 19132 MILES

Indian Occupied Kashmir

INDIA

CHINA

AFGHANISTAN

IRAN

ARABIAN SEA

Pak-China Economic Corridor

M-2 (250 Km)

KKH (335 Km)

M-3 (53 Km)

M-4 (241 Km)

N-85 (835 Km)

N-65 (100 Km)

KLM (387 Km)

KKH (437 Km)

KHUNJERAB

PESHAWAR

LAHORE DI KHAN

QUETTA

FAISALABAD

SUKKUR

MULTAN

Dera Allah Yar

JACOBABAD

KHUZDAR

GWADAR

DG KHAN

ISLAMABAD

Raikot

GILGIT

Pak-China Economic Corridor 1 Highways & Motorways

Gwadar – Kunjrab Total Length: 2,688 km

KLM (296 Km)

KLM (136 Km)

HYDERABAD

KARACHI

China’s  Dependence  !!!  •  Its  dependence  on  foreign  oil  is  around  60%.    •  China   imports   from;   KSA,   Iran,   Russia,   Oman,  Iraq,  Sudan,  Kazakhstan  and  Kuwait.    

•  China’s   merchandise   exports   account   for   12.6%  of   the   world’s   trade   merchandise   exports   and  10.4%  Imports.      

       (i.e.  total  Trade  Volume=  US$4,477  Billion)  

8%  of  the  Global  Trade    

•  Total  Vessels:  17,483  

•  998.65  Billion  Tons    

•  Total  Revenue  2015  :  $  5.176  Billion  (5.3%  

Less  then  2014)      

Source:  Suez  Canal  Traffic  Sta1s1cs  (2015)  

 3|  CPEC;  Gwadar  Port  

Legend  Energy  Hub  Refinery  /  Gas  Processing  

Exis@ng  Pipeline  Oil  Gas  

Proposed  Pipelines  Kazakhstan-­‐Turkmenistan-­‐Uzbekistan-­‐  Tajikistan-­‐China-­‐Pakistan  Oil  Pipeline  Kazakhstan-­‐Uzbekistan-­‐Turkmenistan  Tajikistan-­‐China-­‐Pakistan  Oil  Pipeline  Uzbekistan-­‐Turkmenistan-­‐Afghanistan-­‐  Pakistan-­‐India  Gas  Pipeline  Iran-­‐Pakistan  Gas  Pipeline    with  china  Qatar-­‐Pakistan-­‐India  gas  Pipeline  Pakistan-­‐China  Oil  Pipeline  

Source: Ministry of Petroleum and Natural Resources

Pakistan: Asia’s Emerging Energy Hub Proposed  Energy  Pipelines  

 

Gwadar Port City as the Asian

Energy Hub for receipt, storage, processing and

trans-shipment to S.E. Asia, Far East

Free  Zone  -­‐  Incen@ves  Long Term Lease for the investor  

99 years Lease for Sub-lease / Investors

20 years complete tax holiday from all Federal, Provincial & Local taxes

Exemption from import duties on materials and equipment.*

Exemption from import / export duties on bunker oils.**

Complete suspension of trade union activities.

Opp

ortuni.e

s  Packaging Businesses

Distribution Centers

Container Freight Stations / Yards

Warehousing & Cold Chains

Manufacturing / Oil Refineries

Tourism / Old Age Care Institutions

4|  CPEC;  Industrial  Coopera@on  

Industrial  Parks    

Punjab  (7)   KPK  (8)  

Sindh  (3)   Baluchistan  (7)  

ICT  &  GB  (2)  

Industrial  Coopera@on  Province/    Federa@ng  Unit   Loca@on  for  Industrial  Zone  

KPK   Rashakai  Economic  Zone  :  Hakar  Phase  VII  Industrial  Zone  

Sindh   Dhabeji  :  Ke@  Bunder  

Balochistan   Bostan  Industrial  Zone  :  Khuzdar  Industrial  Zone  

Punjab   M-­‐2  Sheikhupura  :  M-­‐3  Faisalabad  

North  Area   Moqpondass,  Gilgit  SEZ  ,  Bhimber  Zone  or  Barakot  SEZ  

Federal  Area   ICT  Model  Industrial  Zone,  Islamabad  &  PSM-­‐Port  Qasim  

FATA   Mohmand  Marble  City  

Pakistan  -­‐  China  FTA  

•  China   managed   to   export   along   57%   of   the  lines   in   which   it   had   a   preference   under   the  FTA.    

•  Pakistan’s   u.liza.on   was   merely   5%   along  lines   in   which   Pakistan   had   managed   to  “nego.ate  concessions”.    

 •  Looming  Risk  of  Deindustrializa.on  !!!    

Employment  Projec@on    

Unemployed  (Million)   3.77   4.44   4.93   5.25   5.39  

Unemployment  rate   6.25   7.14   7.69   7.95   7.93  

Way  forward  !!!    

•  Sufficient  Condi.ons    a)  CPEC  Investments  b)  Infrastructure  

•  Necessary  Condi.ons  for  tangible  dividends  ?  a)  Absorp.ve  Capacity  (HRD)  b)  Trickle  down  mechanism      

²   Designing  high-­‐poten.al,  cost-­‐effec.ve  and  feasible  Policy  Solu.ons  

32  

Thank  You