Simulation ExerciseCHINA-PAKISTAN ECONOMIC CORRIDOR (CPEC)

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“PRIME MINISTER’S TASK FORCE ON TIMELY COMPLETION OF INFRASTRUCTURAL AND ENERGY

PROJECTS OF ECONOMIC CORRIDOR”

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PRIME MINISTER’S TASK FORCES. M. Afzal Zaidi, PAS

Arsalan Qudoos Bukhari, IRSAshar Shahzad, FSP

Ashfaque Ali, ISIImtiaz Bhatti, Ex-PCS

Surriya Khanum, OMG

Faculty AdvisorMr. Abdul Samad Channa

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SEQUENCE OF PRESENTATION• Introduction• Timeline • Challenges/ Constraints• Strategies/

Recommendations• Impact Analysis• Mobile Application• Conclusion

Afzal ZaidiArsalan BukhariAshar ShahzadAshfaque Ali

Imtiaz BhattiSurriya KhanumAfzal Zaidi

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INTRODUCTION

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CPEC• President Xi Jinping’s visit• 51 MOUs• Infrastructure and Energy Sectors• USD 46 billion• ‘Game Changer’

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THE CORRIDOR

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ADVANTAGES

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BENEFITS• Efficient and shortest access to Global Markets• Socio-Economic Growth• Peace and Stability

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CONRTOVERSIES• Which ‘route’ to take?– Eastern– Western– Central

• ‘One Corridor, Multiple Sectors’• Regional challenges • Foreign Debt

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TimeLine

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CPEC ProjectsPROJECTS US$ Millions

Energy 33,793

Transport and Infrastructure

Roads 6,100

Rail Network 3,690

Gwadar Port 786

Others 44

Total 44,413

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Energy – Coal Projects (Phase I)Sr. No Projects Cost (US$ M) (COD)

1 1320 MW Sahiwal Coal-fired Power Plant, Punjab 1,600 June 2018

2 1320 MW, Port Qasim Electric Company Coal Fired, Sindh 1,980 Jan. 2019

3 1320 MW Engro Thar Coal-fired Power Plant, Sindh 3,470 Jan. 2019

4 1320 MW SSRL Mine Mouth Power Plant, Thar, Sindh 2,000 Jan. 2019

5 1320 MW Thar Mine Mouth Power Plant Oracle, Thar, Sindh 1,300 2nd Quarter of

2019

Total 12,290

Source: http://www.ppib.gov.pk/N_upcoming_ipps.htm

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Energy – Coal Projects (Phase II)Sr. No Projects Cost (US$ M) (COD)

1 300 MW Gwadar Coal Power Project, Gwadar 360 Under Consideration

2 1320 MW Muzaffargarh Coal Power Project, Punjab 1,600 Under Consideration

31320 MW Rahimyar Khan Coal Power Project, Punjab 1,600 Under

Consideration

1320 MW Gaddani Power Park Project 2640 Under Consideration

4 525MW Combined-cycle Power Plant, Punjab 550 Under Consideration

5 300 MW Salt Range Mine Mouth Power Project including mining, Punjab 800 Under

Consideration

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Total 8,870

Energy – Wind ProjectsSr. No Projects Cost (US$ M) (COD)

1 50 MW Dawood wind Farm, Bhambore, Sindh 125 October 2016

2 100MW United Energy Pakistan wind Farm, Jhimpir, Sindh 250 October 2016

3 50 MW Sachal Wind Farm, Jhimpir, Sindh 134 October 2016

4 50 MW Sunnec wind Farm, Jhimpir, Sindh 125 October 2016

5 Pakistan Wind Farm II (Jhampir, Thatta, Sindh) 150 June 2017

Total 784

Source: Pakistan Institute of Legislative Development and Transparency

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Energy – Other ProjectsSr. No Projects Cost (US$ M) (COD)

1 1000 MW Quaid-e-Azam Solar Park, Bahawalpur, Punjab 1,350 December 2016

2 Transmission Line - Matiari to Lahore 1,500 January 2018

3 Transmission Line – Matiari to Faisalabad 1,500 January 2018

4 Suki Kinari Hydropower Station, KPK 1,802 June 2022

5 Karot Hydropower Station, AJK & Punjab 1,420 December 2020

Total 8,122

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Transport Infrastructure ProjectsSr. No Projects Cost (US$ M) (COD)

Roads

1 KKH Phase II (Raikot – Islamabad Section) 3,500 Dec, 2018

2 Peshawar-Karachi Motorway (Multan-Sukkur Section) 2,600 Dec, 2018

Other projects

1 Expansion and reconstruction of existing Line ML-1 3,650 Dec, 2019

2 Havelian Dry port 40 Dec, 2019

TOTAL 9,79017

Gwadar Port Related ProjectsSr. No Projects Cost

(US$ M) (COD)

1 Eastbay Expressway 140 Dec. 20172 Gwadar International Airport 230 Dec. 20173 Construction of Breakwaters 130 Dec. 20184 Dredging of berthing areas & channels 27 Dec. 2018

5 Infrastructure for Free Zone & EPZs port related industries 35 Dec. 2018

6 Necessary Facilities of Fresh Water Treatment and Supply 114 Dec. 2018

7 Hospital at Gwadar 100 Dec. 2018

8 Technical and Vocational Institute at Gwadar 10 Dec. 2016

Total 78618

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Constraints/ Challenges

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1. Regional Challenges• BCIM Economic Corridor (On December 18, 2013)

• Pakistan’s commitment to other regional projects?

• India’s Formal Objections on CPEC

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Regional Challenges ( Contd.)

World Bank Ease of Doing Business ranking 2016: 138/189

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2. Security Challenges• Major Challenge

• Chinese Need foolproof security

• Personnel & Physical Sites

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3. Political Challenges• Political Unity and Consensus required

• CPEC route controversy has been resolved? ( Completion Date Deadline Controversies)

• Establishment of industrial parks along motorways/highways?

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4. Administrative and Legal Challenges

Coal & Gas Provincial Subject( 18th

Amendment – Legal lacunae)

Land issues Bin Qasim Coal Power Plant

Land issues Sukkur-Multan Motorway

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Administrative and Legal Challenges (Contd.)

• Complexity of Administrative Procedures at all tiers

• Real Time Monitoring and Evaluation of PSDP projects is not done

• Track Record of Monitoring Mechanism at all tiers is Poor

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5. Capacity Building Challenges• Need to increase PSDP size ( 2018- deadline) • IMF- concerns-PSDP 3.5% GDP annual

average

• Need to prioritize the PSDP allocations to focus on CPEC

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6. Financial Burden/ Viability Challenges• Cost Benefit Analysis is essential- Public

Money.

• Are CPEC projects politically motivated-2018 Elections?

• WB concerns over medium term financial risks ( Loans + Sovereign guarantees FDI for CPEC)

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Strategies/ Recommendations

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Recommendations – Long TermRegional Challenges • For better coordination

with Government of China

- MoPD&R Wing may be

established at Embassy of

Pakistan, Beijing

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RecommendationsRegional Challenges • India may be sensitized through

Foreign office regarding the nature

and scope of CPEC

• Pakistan should create an impression

of its commitment towards Regional

development especially Afghanistan

and India e.g. TAPI & IPI Pipeline

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Recommendations – Short & Medium Term

Security Challenges • Four layer security is proposed

for safety and security of CPEC

• Special Security Division (SSD)

comprising 32000 personnel

has been established.

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Recommendations – Short TermPolitical Challenges

• The high powered steering committee under

Prime Minister of Pakistan should meet on

regular basis.

• ‘Prime Minister’s Delivery Unit’ to generate &

monitor real time data

• Efforts may be continued at national level to

forge consensus on political issues that would

arise on the implementation of CPEC.

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Recommendations – Short TermAdministrative and Legal Challenges

• All Administrative procedures/ rules at

all tiers of government may be

simplified and streamlined by Task Force

in consultations with all stakeholders.

• For real time monitoring and evaluation

of CPEC projects a mobile application is

proposed.

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Recommendations – Short & Medium TermCapacity Building Challenges

• All Federal and Provincial

departments/executing agencies

capacity may be strengthened.

• The Government has to rationalize

its priorities for PSDP to achieve

the objectives of CPEC.

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Recommendations – Long TermFinancial Burden/ Viability Challenges

• The Finance Division should devise strategy

to address challenges in servicing USD

denominated debt in long term for CPEC.

• The industrial Parks/clusters may be

established on motorways to take maximum

economic benefits out of our investments

made in infrastructure under the CPEC.

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Time

Financial HR Technical Period

Ministry of Planning, Development and ReformsMinistry of Foreign Affairs

02Sensitization of India regarding CPEC

Ministry of Foreign Affairs MOFA MOFA MOFA

June 2016 – till completion

Will help ease Indian objections on CPEC

Ministry of Planning and DevelopmentMinistry of FinanceMinistry of Petroleum and Natural resources

MOPD&R MOFA

S.No. Activity ResponsibilityResources

Outcome

June 2016 – till completion

Effective Coordination

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Regional Development Accords (TAPI, Pak-Iran Gas Pipeline)

MOF MOPN MOPNApril 2016 – till completion

Will compliment CPEC and regional stability as well dependence on Pakistan

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Establishment of MPD&R desk at Chinese Embassy, Beinjg

MOPD&R

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Time

Financial HR Technical Period

Pakistan Army MOD MOD MOD

Provincial Governments PGs PGs PGs

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Prime Ministers’ Steering Committee on CPEC

Prime Ministers’ Secretariat

Cabinet Division

Cabinet Division

Cabinet Division

Quarterly – till completion

Effective coordination bwetween Federal and Provincial Governments)

06 Simplification of Rules anad Procedures

Prime Ministers’ Task Force on CPEC

PM Secretariat MOPD&R MOPD&R

Immediate – till completion

Will streamline administrative bottlenecks

04 Security Challenges

Immediate – till completion

Sceurity of CPEC

S.No. Activity ResponsibilityResources

Outcome

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Time

Financial HR Technical Period

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Monitoring and Evaluation through Mobile App

Ministry of Planning, Development and Reforms

MOPD&R MOPD&R MOPD&R

Immediate – till completion

Effective monitoring and timely completion of CPEC

Ministry of Planning, Development and ReformsMinistry of Finance Ministry of Finance MOF

State Bank of Pakistan SB

Immediate – till 2018

To achieve the objectives of CPEC infrastructural projects by 2018

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To develop fiscal space for servicing USD

MOF MOF Immediate – till date

Minimize external obligations in future

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To rationalize PSDP priorities

MOF MOPD&R MOPD&R

S.No. Activity ResponsibilityResources

Outcome

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Impact Analysis

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Economic windfalls: Higher GDP Growth Rate

• The CPEC will engender inter-sectoral and intra-sectoral dynamism in Pakistan’s economy

• The CPEC-stimulated socioeconomic activities may lift Pakistan’s current annual GDP growth rate of 4.2% well above 6%

• Even at the IMF’s (quite conservative) GDP growth estimates of 5.5%, the country’s economy will double by 2028

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Impact of the CPEC: Conservative Estimates

Year 2016 2018 2020 2022 2024 2026 2028 2030

Expected GDP growth rate 4.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%Pakistan's total GDP (USD billion) 297 327 364 406 451 502 559 622

GDP growth over 2015 4% 15% 28% 42% 58% 76% 96% 118%

Population growth rate 2.1% 2.1% 2.1% 2.0% 2.0% 2.0% 2.0% 2.0%Total Population (millions) 193 201 210 218 227 236 246 256

GDP per capita (USD) 1540 1628 1739 1858 1988 2127 2275 2434

GDP in 2015: $285 billion

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Additional CPEC-related benefits• Boost to bilateral and multi-lateral transit trade

Opportunities of enhanced trade with the Central Asian Republics

• The distance between the Chinese city of Kashgar and the Persian Gulf will shrink to about 2500 km Strategic and commercial importance of Pakistan will

substantially increase• A strong nudge to the government reform programs

The federal government and the provinces will be compelled to undertake institutional and governance reforms at a faster pace

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Impact of the CPEC: Optimistic Estimates• It would not be out of place to factor in other important variables

in our GDP growth estimation1. The optimistic CPEC-related direct growth estimates => 6.1% 2. Additional CPEC-related indirect/ spin-off benefits => plus 1%3. Topped up by other development and reform programs Pakistan is

supposed to initiate => plus 1%• In another scenario based on the more optimistic CPEC-related

direct growth estimates of 6.1%, the country’s economy will double in 2026

The country may hit an average growth rate of 8% and beyondPakistan’s economy may grow 300% by 2030

Mobile Data Gathering Apps

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Conclusion

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Benefits of CPEC: Media Perception• CPEC is a ‘Game Changer’• Timely completion

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Thank You

Sources• Government of Pakistan, Ministry of Planning, Development and Reforms.

http://www.pc.gov.pk• National Highway Authority, http://nha.gov.pk/• Developing the Pak-China Corridor to facilitate Sino-Europe Trade

http://www.intermodal-events.com/FILES/AASIM_SIDDIQUI.PDF• Impact of China-Pak Economic Corridor,

http://investorguide360.com/wp-content/uploads/2015/05/Impact-of-China-Pak-Economic-Corridor_-A-Birds-Eye-View.pdf

• IMF Country Report on Pakistan (October 2015), https://www.imf.org/external/pubs/ft/scr/2015/cr15278.pdf

• IMF and CPEC, http://ipr.org.pk/wp-content/uploads/2015/09/CPEC-IMF-Fact-Sheet.pdf