China Pakistan Economic Corridor (CPEC) projects will accelerate trade links between Pakistan and China. It will reduce behind the border trade costs and bring about a shift in the means of transportation. It will bolster economic alliance with the world’s largest trading nation, China and give a boost to intra-country trade within Pakistan. The corridor will connect the country to the One-Belt-One-Road project and provide direct access to the markets of Central Asia and Europe as well. This will give a phenomenal expansion of trade of Pakistan’s trade with China.
More or less 86 percent of the Pakistan’s exports occur through sea the use of air and land transport is relatively less. Pakistan has access to the sea only through Karachi, its manufacturing is haphazardly distributed in the hinterlands.
Shipping a standard freight container’s load from Sialkot and Multan or Lahore to Karachi involves internal transportation of more than 1,000 kilometers. These high costs of internal transportation possibly act as a tax on exports and put firms at a comparative adverse position in international markets.
The CPEC project will provide a network of road and railways to link faraway manufacturing facilities to the Karachi and Gwadar seaports. This will reduce the costs of transportation and cut back travel time.
Moreover not only will it heighten competitiveness of current firms, it will also spur exports. There will be the development of the export product set.
The CPEC will link the northern areas to airports in Peshawar, Rawalpindi, and Lahore. This will give an encouragement to the export of agricultural commodities.
A large part of Pakistan’s trade with China occurs through the sea route. Almost 97 percent through sea, 2 percent by air and 1 percent by land. A substantial portion of trade with China will be diverted to the land route following the completion of the project.
China has appeared as one of the largest trading nations in the world. Last year, of the total world trade of $19 trillion, China alone accounted for more than 10 percent.
Due to China’s emergence as a factory of the world, most developed and developing countries have reestablish their trade towards it. In the wake of Brexit, the UK is keen to expand its trade relations with this large economy.
Distance and travel time between China and Pakistan is going to fall dramatically due to this land route, and the GDP of both economies will rise strongly.
The acceleration in trade will occur not only from the cut in distance and travel time but through the channel of commitment with the larger market of China as well.
Pakistan’s firms sell almost two-third of their output in the local market. This pattern will change with the improvement in regional connectivity.
The CPEC will curb the cost of doing business in Pakistan and ameliorate competitiveness of its firms. This reduction in behind-the-border trade costs will give a boost to trade flows and increase alliance with China.
In order to tap the full potential of the CPEC, Pakistan needs to focus on reducing trade costs at the border by rationalizing tariffs, and those beyond the border, by negotiating trade agreements.
CPEC is the biggest foreign investment in Pakistan from China. The projects related to energy and high profile infrastructure will oblige Pakistan to operate it with lucrative articles. Pakistan would be able to get more than 17,000MW power with the help of CPEC. Therefore, it is designed to be biggest ever foreign investment in Pakistan.
Gwadar port with Kashgar in China is predicted to connect more than 3 billion of population of region as Gwadar itself would be able to connect with three provinces under CPEC in Pakistan. The project that saves a huge amount of expenses in trade may found to be essential for both countries due to the biggest investment in history.
The Chinese vision of reviving the historic Silk Road through its One-Belt-One-Road initiative across Eurasia holds the prospects of revolutionizing connectivity in terms of trade, energy and logistics
China’s high growth cannot now be supported by its own market and exports to the markets of the countries pivoting towards Asia Pacific under the leadership of the US. It is shaping a new path of centering towards the Indian Ocean where some of the largest potential markets are waiting to be connected.
FAVOR TO OTHER COUNTRIES
In its lifeblood CPEC is a geo-economic project, with economic conclusion not just for the two direct participants, China and Pakistan, but also for those countries that are not part of the $46 billion investment. Road, rail, air and optical fibre links between Kashgar in China and Gwadar port in Pakistan would create pressures and incentives for trade diversion as well as creation.
It will give openings for China’s industrial surpluses and providing outlets for the chain of industrial zones being planned along the corridor in Pakistan.
The CPEC would link the entire belt consisting of China, Central Asia, South Asia, West Asia, North Africa and Gulf states.
The media reports also claim UK showing desire to join CPEC. This would definitely give a huge ascent to the CPEC. Other European countries have also expressed desires such as France. This could have a good effect on the other European states which might feel tempted to follow suit.
France and Germany are already in the news regarding this. Italy, Spain and others could soon be joining in.
Last year in November, Jean Marc Fenet, head of the Embassy of France’s Regional Economic Department for India and South Asia, expressed his country’s interest in becoming part of the China-Pakistan Economic Corridor.
France views Pakistan as a huge and prosperous market for business. France is keen to further strengthen bilateral trade and economic relations between the two nations and views the CPEC as an opportunity to creating many business and investments.