CPEC to benefit Pakistan in both short- and long-term

LAHORE: The China-Pakistan Economic Corridor (CPEC) is a mutually beneficial project for both Islamabad and Beijing, and its immediate benefit to China would be the drastic reduction in the transportation cost to Europe and Middle East.

The short term benefit for Pakistan would be the fee it would charge for transportation of goods through this trade corridor. The benefits would be similar to those that are available to Panama from Panama Canal and Egypt from the Suez Canal. If we succeed in providing a suitable environment to China in relocating its labour intensive industries, we would gain more.

Long-term benefits are linked to improvement of education, health and skill indicators of the country. This would pave the way for investments in higher tech industries.

Currently, goods shipped to Europe from central China travel a cumulative distance of 19,132 miles of which 16,507 is by sea, and 2,625 miles by land (distance from Shanghai port to central China).  After completion of CPEC, the goods from Central Asia to Europe would have to travel a cumulative distance of 9,579 miles, of which 7,847 miles will be through sea, and 1,750 by land (distance from Karachi to central China).

Besides reduction of mileage, the time required to transport the goods from the current route to the CPEC route would reduce by 50 percent from 50 days to 25 days.

The current freight charges of a 40 feet container Hamburg to Shanghai ranges from $2,500-$3,000. After CPEC becomes operational, the cost of 40 feet container would reduce to $1,000. This means the saving would be of 50-65 percent in freight charges. The Chinese exporters would get their payments in half time.

The shipment to and from Middle East would also gain substantial benefits in transportation costs and time. Currently, the goods dispatched from central China to Middle East have to travel a cumulative distance of 12,537 miles, of which 9,912 miles is by sea, and 2,625 miles through road.

After completion of the CPEC, the distance would be drastically reduced to 2,295 miles, of which 545 miles would be through the sea, and 1,750 miles on road. The distance between central China and Middle East would thus be reduced by 80 percent.

The reduced distance would also cut the cost of transportation. For now, freight charges from Abu Dhabi to Shanghai are $2,000 for a 40 feet container. It takes 16 days to reach the destination from this route. These charges would reduce to $200-250 per 40 feet container when CPEC route becomes operative, and the time taken to reach the destination would be 2-3 days.

CPEC would also provide the shortest and most cost effective route for landlocked Afghanistan to China, India and Indian Ocean. The distance would be approximately 600 kilometres less as compared to the other nearest port of Chabahar.

It may also be noted that port charges at Chabahar would be much higher, as the port would need regular dredging to keep it operational for bigger ships carrying 4,000-6,000 containers of 40 feet. CPEC would also help in making Afghanistan a transit route for energy rich Central Asia and energy starved South Asia.

According to experts, the $46 billion Chinese investment would result in additional GDP growth of 1.5 percent. The total investment in CPEC was increased to $56 billion recently after the addition of few more projects.

The indirect impact would be the rise in the GDP potential of the country. The CPEC projects would attract incremental private sector investment; both domestic and international. Pakistan can expect to take its overall GDP growth to above 6-7 percent in the medium term.

Benefits for Pakistan are also immense if the proposed special industrial zones are established along the CPEC route. After completion, the CPEC related projects would add over 16,000MW in the national grid, of which over 10,000MW would be available by the first quarter of 2018.

The Chinese would be financing 832km of roads, 1,736 km of railway line. They would also make Gwadar fully operational and lay cross border optic fibre all along the CPEC route.