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CPEC will help make Pakistan’s construction, infrastructure markets better again

China-Pakistan Economic Corridor (CPEC) is around 3,000 kilometer long trade route from Pakistan’s Gwadar port to Kashgar city in northwestern China’s Xinjiang Uygur autonomous region. The route is comprised of a raft of mega construction and infrastructure projects set to be completed by 2030. The Chinese government promised to finance CPEC with $46 billion investment, out of which around $11 billion is estimated to being spent on building roads and railways infrastructure, while the remaining $35 billion would be poured in energy projects. Once fully completed, the route will provide China with rapid access to the Middle Eastern, African and Central Asian markets.

On 13th November 2016, CPEC became partly operational when a Chinese cargo was transported overland for onward maritime shipment to various parts of the world. The planned projects will revive the construction and infrastructure market in Pakistan, and ultimately increase demand for building materials such as steel, cement and wood.

China will finance most of the mega projects in various lending forms, though Pakistan needs to repay the money with over $30 billion in interest over the next 30 years.

Energy is a key part of the CPEC. The work on Port Qasim Electric Power Company (Private) Limited in Sindh started in 2015, and so far 65 percent of the plant and 70 percent of the Jetty has now been completed. The plant is planned to start its commercial production by 2018. Another major power-related project is Gwadar Coal-fired Power Project, where works on the project are expected to commence in the first half of 2017. Kohala Hydel Project is also at its feasibility stage and is projected to start operating by 2023 with the estimated cost of $2.4 billion.

A number of other power-related projects are lined up including Port Qasim Power Plant, Thar Power Plant, HUBCO Coal Project and Sahiwal Power Plant. The other main planned infrastructure projects include New Gwadar International Airport, Development of Free Zone, Orange Line, Lahore and Gwadar Smart Port City Master Plan. There is also a plan to build an oil pipeline for supplying crude oil from Gwadar, Pakistan to China.

ATTRACTION FOR STEEL, CEMENT INVESTORS

CPEC is also attracting domestic investors to invest in construction related industries such as steel, cement, electric cable and glass.

Nishat Group is setting up a cement plant in Balochistan to satisfy the growing demand for cement. Younus Brothers, the owner of Lucky Cement, is building a new cement plant in Punjab, as well as establishing a coal power plant in Karachi. A steel mill in Karachi, which also supplies steel to the Lahore Orange Line Metro Train project, is also planning to expand its production capacity. Fast Cables, which produces electric cables, has expanded its manufacturing facility to meet the future demand of CPEC-linked projects and is planning to advance it further.

There will be further small steel rolling mills for longs steel around the CPEC route.

Beginning of construction projects under the China Pakistan Economic Corridor (CPEC) would lead to an increase in Pakistan’s cement industry.

Experts have already stated that CPEC will create cement demand of 1.5- 3 million tons per annum. Decreasing coal prices and electricity prices are favorable for cement manufacturers which would lead to increased production.

With the launch of a series of mega development and power projects in the country under China-Pakistan Economic Corridor (CPEC), the annual demand for steel products will increase by more than thirty percent to 6 million tonnes from 4 million tonnes. As a result of the increasing demand, new steel units would be set up. Thus, more job opportunities would be created and the government would get more taxes.

The government should take every possible step to promote local industries including steel one and strengthen them enough to compete in the regional and international markets.

Investment shall come, only when safety of the investors and their money is guaranteed. Investment as well, for setting up new steel units to meet the increasing demand of steel in the country and for promoting other potential industries towards national economic prosperity.

Certain tax related issues with Federal Board of Revenue (FBR) need to be immediately resolved for the growth of steel sector. Instead of importing steel products from China, the focus should be on import of steel raw materials from there.

Pakistan and China are working towards early finalization of a Long-Term Plan (LTP) for the China-Pakistan Economic Corridor (CPEC), a Chinese diplomat confirmed. The LTP, which covers the projects to be undertaken till 2030, has been behind the timeline set for its adoption.

Currently, short-to-medium term projects are being pursued under CPEC, which relate to energy, infrastructure and connectivity. The LTP, officials defines the overall direction, ideas and goals of cooperation from present till 2030.

Political and Press Counsellor at the Chinese Embassy Jian Han, speaking at a roundtable conference on ‘OBOR and CPEC from the Prism of China-Pakistan Bilateral Relations’ organized by the Strategic Vision Institute (SVI), recently said that the LTP “would set the focus for CPEC construction in future”.

CPEC project director Hassan Daud Butt on the occasion said that Pakistan had already shared the draft LTP with China’s National Development and Reform Commission (NDRC) for approval and consideration for signing during the Belt and Road summit. Mr Butt is also hopeful that Pakistan and China would soon conclude agreements for financing and construction of the Gwadar International Airport and East-Bay Expressway.

A Chinese diplomat separately told that PC-1 for both projects had been approved and an agreement was now being negotiated by the two governments.

At the seminar, the CPEC director said that the project was set to enter the industrialization phase.

Nine economic zones have been identified to be set up in different parts of the country. Currently feasibility studies are being undertaken and financial agreements are expected to be concluded by the next Joint Cooperation Committee meeting to be held later this year.

By 2018 about 7,000MW of energy would be added to the national grid and linkages of eastern and western routes would be completed. The western route would be completed by July 2018, whereas eastern route would be ready by December 2018.

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