January 14, 2022 (MLN): Navigating new dynamics of the country under the CPEC, China has expressed interest to hire nearly 150,000 Pakistani employees with IT skills in the next year and a half as many companies are planning to locate to the technology zone being established in Islamabad, Special Assistant of Prime Minister on CPEC Affairs Mr. Khalid Mansoor said while briefing media on the latest development on CPEC projects on Friday at Pakistan Stock Exchange (PSX).
Of the investments flowing in, three new working groups have been identified: Science and Technology, Agriculture, and Information technology. Pertinently, he informed that the last two are getting the most attention.
Consequently, an area near Gwadar has been selected for cotton cultivation as its soil is ideal for the same. Pakistan is currently importing 50% of the yarn it uses for textile exports and this may be replaced.
The assistant to PM apprised that so far power plants with a capacity of 5,300 MW have been completed under China Pakistan Economic Corridor (CPEC) project, according to the key takeaways covered by Arif Habib Limited (AHL).
The energy sector has also been strengthened by adding 4,445 MVA through the construction of Matiari-Lahore +660 kV HVDC Transmission Line of a total length 880 km (4,000 MW) for evacuation of additional power generation.
Talking about the future outlook of power plants, he highlighted that 3,500MW power plants would be established within the next 6 to 8 months while an additional 4,000MW under the planning stage,
“And finally, our focus will be on renewable energy,” he added.
With regards to the timeline of projects, he mentioned that the execution of CPEC phases spans between 2015 to 2030 with many projects providing benefits over a much longer period.
To recall, Pakistan faced its worst energy crisis in 2013 with several hours of load-shedding every single day. Moreover, the country’s power mix was inefficient as a major quantum of electricity was being produced from the more expensive fuels, he noted.
It was during this time that China was contacted to help Pakistan exploit its indigenous coal reserves. At the same time, China was looking to achieve its age-old dream of a silk route for trade and transportation.
Hence came into fruition the China Pakistan Economic Corridor (CPEC) which was a project targeting bilateral and regional connectivity under China’s One Belt One Road project.
The Early Harvest phase of 2015 to 2020 focused on alleviating Pakistan’s energy problems and removing major bottlenecks for industrialization. At the same, several industries of China moved to the Western province, which the country wants to develop under its regional connectivity target.
The medium-term phase till 2025 is currently ongoing with a focus on expansion via industrialization and pick up in manufacturing.
Whereas the last and final (long term) phase till 2030 will primarily involve developing mechanisms for sustainable growth.
On the transportation front, 1,800KM long Karakoram Highway and 820KM optic fiber line have been laid, an International Gwadar airport is being developed (26% completion achieved) and an ML-1 railway line will be laid. Apart from this, USD 3.8bn will be spent on Karachi Comprehensive Coastal Development Zone.
Pertinently, USD 25bn has already been invested under the umbrella of CPEC while another USD 28bn is expected under upcoming infrastructure projects.
Moreover, the briefing was given on industrial cooperation between the two countries. These 9 special economic zones (SEZs) are being developed alongside a free zone in Gwadar. The current focus is on 4 SEZs, one for each province (Allama Iqbal Zone in Punjab, Rashakai in KPK, Dhabeji in Sindh and Boston in Baluchistan) and the free zone in Gwadar.
Within these SEZs, there is a strong presence of local and international investors. Although the general consensus is that these have been formed for China, contrary to this belief, other countries such as Germany and Netherlands too have invested here.
“Vision of the ongoing phase relates to proper implementation of the SEZs and “export orientation plus import substitution” in order to make Pakistan a manufacturing hub, ” he said.
In terms of numbers, the new silk route will grant China a net saving of 21 to 24 days on average which will help the country serve international clients better and save time and money both, the report by AHL said.
Moreover, other land-locked countries in the region (such as Tajikistan) will also benefit from the improved road network under CPEC.
In particular, the focus will be on Pakistan’s export market whereby its textile sector is set to reap foremost benefits. At present, Pakistan’s textile exports have an under 2% share globally and planning is being undertaken to increase this by improving value-added products.
Additionally, Mr. Mansoor also discussed the prospects of the China-Pakistan Free Trade Agreement – II. He said that it was finalized in Jan’20 with a total of 313 items selected for exports. To recall, 3,394 tariff lines were already zero-rated under phase I whereas another 2,471 tariff lines will become zero-rated in the next 3 to 8 years.
Highlighting a key component of CPEC that is the development of Gwadar City, Port and free zone, he said that 10 companies are already operating in the free zone despite limited water and electricity. The second phase of this project was inaugurated by PM Khan in Jul’21. This zone offers a tax holiday for a period of 23 years.
Apart from this, fiscal incentives offered by Pakistan are far better than those offered by other countries. However, the only problem remains execution.
Speaking of the risks and concerns, he said that the biggest concern for the Chinese is security which has been overcome by the Army and Navy. A special security cell is being created for Gwadar alone, it underlined.
Finally, he said that an enabling environment for investment has been created. From 37 approvals previously required, a one-window operation will aid flows in the country. A compliance regime is being implemented whereby investors are mandated to follow the rule of the land and if they fail to do so, a penalty will be imposed. This will slash approval time and deliver a sense of urgency which was much needed.
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