How Chinese money will transform Pakistan

The development of the China-Pakistan Economic Corridor (CPEC) has spurred debate in all quarters. Some perceive it as a form of neo-colonialism and criticise Pakistan’s government for promoting unethical business practices at the cost of ordinary citizens’ livelihoods. Others see the CPEC as an unprecedented opportunity for economic revival with potential for positive spillover effects including stronger local institutions.

The CPEC is a package of infrastructure projects worth US$ 46 billion (yuan 308 billion) . About two thirds of this funding, US$ 33 billion (yuan 221 billion), is committed towards establishing energy and power projects in Pakistan. Ahmed Zulfiqar Siddiqui, a senior executive at China Power, says these projects will help alleviate the country’s chronic energy crisis that cost the nation 7% of its annual GDP last year. “The Chinese have invested in power generation from coal and LNG as well as hydro, wind and solar power. A new transmission line funded by them will carry electricity from new power generation units in Sindh to load centres in Punjab. Shanghai Electric, a sister company of China Power, has also expressed interest in acquiring a major stake in K-Electric, which is the main provider of electric power to over 20 million people in Karachi. The Chinese are therefore covering the entire power sector value chain – from fuel extraction (mining) to end-user distribution.”

If everything goes according to plan

Improved energy supply could enable Pakistan to boost its flagging indigenous industries such as textiles, agriculture and manufacturing; increase exports and ultimately lead to sustained economic growth in the long term.

Deloitte study predicts that if everything goes according to the plan, the combined value of the CPEC’s infrastructure projects would be equivalent to 17% of Pakistan’s GDP in 2015. Moreover, the project is expected to create at least 700,000 direct jobs and serve as a springboard for the development of industries such as retail, tourism, hospitality, health and education. The expansion of these industries could potentially lead to synergies among various downstream sectors with benefits accruing to the larger population. But Siddiqui stresses the need for policies to ensure involvement of local unskilled labour and small contractors since the mega-construction projects will predominantly be executed by Chinese labour. He also highlights the need to protect established local industries against price competition from China because local firms may be unable to compete with cheaper Chinese industries.