Minister Planning, Development and Reform Prof Ahsan Iqbal’s speech delivered on the CPEC during his official visit to China to attend JCC meeting
Ni hao and Good Afternoon Ladies and Gentlemen
Nian Xinnian Kuaile (Happy new year)
2015 has been termed by us as the Year of Friendly Exchanges between China and Pakistan and this year of the sheep will also stand and prove to be a year of promise and prosperity for deepening cooperation between our two brotherly countries China and Pakistan.
I am grateful to your Excellency for providing me with this opportunity of being with all of you here in this august Institute and sharing thoughts on the grand initiative of the China Pakistan Economic Corridor (CPEC) undertaken by our countries. I hope this opportunity shall further the understanding on the development of the Corridor in addition to addressing your question and queries.
Ladies and Gentlemen
The Corridor is a fusion of multiple developments in the global, regional, bilateral and domestic contexts. The ultimate objective is peace, prosperity and well being of the people of the two countries, the region and the world.
Let me first of all touch upon the global context:
The global economic landscape has changed dramatically. The main drivers of this change has been technology, trade liberalization, freer capital movements, advances in communication and transportation infrastructure and creation of cross border supply chains. The centre of gravity of the world economy has shifted east with the emerging economies growing at a much faster pace than the developed economies. Their share of GDP doubled in the last 50 years or so. In the last decade 70 percent of global growth is ascribed to the emerging economies. These shifts find reflection in changes in global governance and responsibilities that arise from these shifts. The integration of the global economy has enveloped all areas of trade, service and movement of capital. Regional cooperation agreements have proliferated and strengthened in recent times to capture this change especially in the global economic landscape.
Ladies and Gentlemen
Regional and sub regional economic integration as a means to bolster growth, investment and trade in countries has a long chequered history. However, recent history of regional economic integration has had some unmistakeable successes. In fact this has been one of the major successful developments after the Second World War. The regional integration in Europe brought success in terms of regional growth, economic development, investment & trade and more importantly fostered peace in the region. The interest in regional integration in Asia has taken root more slowly but recent developments have intensified interest in Asian regional economic integration: first, it is being projected that the Asia and Pacific region’s share in world GDP between 2010 and 2050 would rise from nearly 28 to more than 52 percent, with China accounting for 20 percent and India for 16 percent both neighbouring Pakistan-in manufacturing China is already producing 25 percent of global manufacturing output; second, complementary to the first is the faster economic growth in the region and its intra regional trade than the rest of the world-trends that are likely to continue- Asia today is already producing 46.5 percent of global manufacturing output; third, the imbalance in world trade is creating an environment for greater domestic and regional investment by trade surplus countries, which are countries in Asia, providing an opportunity to relatively slower growing and investment deficit countries to attract FDI and raise their growth levels; fourth, the region includes both energy importing and energy exporting countries and thus providing room for cross border trade in energy products; fifth, regional economic integration increases efficiencies in production especially in products with value chains spread across the region because of proximity and thus reduced connectivity costs; sixth, after the recent economic and financial crises in the west there has been strengthening of the belief that Asian economic integration would make for more resilient economies to external shocks- a belief earlier fostered during the 1998-99 crises.
Ladies and Gentlemen
The bilateral context of the China-Pakistan is rooted in the friendship of our two countries that matches the proverbial saying that it is a friendship as pure as water, as deep as Mariana Trench and as high as Himalayas. The bond of friendship and trust between our two beloved countries have stood the test of time and forms the foundation of cooperation in the entire spectrum ranging from trade, investment and energy to defense, transportation, science and technology. There is convergence of views and interests in global and strategic affairs. The support that each other provides in the international arena is legendary.
Recently, both governments have made a conscious effort to focus on expanding the economic dimension of the relationship and bring it up to par with the excellent cooperation the two countries enjoy at the strategic and political level. This impetus towards enhancing economic and trade cooperation has gained strength since the near-simultaneous change of leadership in China and Pakistan. The new governments in both countries have signaled their commitment to strengthening Pakistan-China relations very early in their terms of office.
Chinese Premier Li Keqiang’s decision to include Pakistan in his first foreign trip in May 2013 after assuming office in March underscored the importance leadership attaches to our relationship. Prime Minister Muhammad Nawaz Sharif’s visit to China in July 2013 – his first official overseas trip since assuming office – marked a new phase in the development of the relationship by putting economic cooperation and connectivity squarely at the centre of the bilateral agenda.
Ladies and Gentlemen
Now let me touch on the domestic context of the China-Pakistan Economic Corridor
Pakistan’s Vision 2025 seeks to position itself from a lower middle income country to high middle income country by achieving the target per capita GDP of $4200 . In order to achieve this goal and create employment opportunities for new entrants into the labor force, it aims to target a growth rate of 8 percent between 2018 and 2025 with single digit inflation. The Vision has other macroeconomic targets as well. It seeks to increase exports from the present $25 billion to $150 billion, tax-GDP ratio to 16-18 percent, investment rate in the range of 22-25 percent of GDP through domestic saving of 18-21 percent and foreign saving of 3-4 percent of GDP in the long run.
While this is a tall order, Pakistan’s case is relatively unique in gaining from connecting seamlessly to its border regions and beyond as it borders both the largest and fastest growing economies in the world; it provides access to the warm water ports to the landlocked countries in the North and Central Asian States; it links energy importing and energy exporting countries; it is rich in untapped mineral resources; it has a demography which provides a large and growing young labor force that has great potential to harness the opportunities in the region; and, it has a diverse and rich culture potentially able to absorb and cooperate with all communities and nationalities. A study found that an investment in regional transport infrastructure gives Pakistan benefits worth US$37 billion during 2010-2020 and another US$66 billion post 2020 period. These total benefits of US$ 104 billion from regional transportation infrastructure investment may increase to US$118 billion if the investment is made both in regional transportation and communication, and to US$143 billion for investment in regional transport, communication and energy infrastructure development. Pakistan Vision 2025 therefore expects China, which now has the pressure of rising wages, a strong potential source of financing development, improving technology, upgrading labor skills and finding export markets.
Ladies and Gentlemen, I don’t have to delve deeper into China’s world view and context. China’s Western development strategy to accelerate development in the western region of China and President Xi Jinping’s Silk Road Economic Belt and 21st Century Maritime Silk Route are the pivot for balancing and maintaining the growth momentum in China’s economy. The establishment of the Asian Infrastructure Investment Bank and Silk Road Fund are initiatives that would bolster achievement of these objectives. Increasing investment and trade with countries to the West of China including Central Asia, Middle East and Africa would contribute immensely to the development of this region to catch up with its eastern and coastal areas. These strategic initiatives are a considerable advance on China’s development agenda.
The China-Pakistan Economic Corridor lies at the heart and soul of the Silk Road Vision both maritime and land based as it provides a land route upto Gwadar.
Having given this global, regional, bilateral and regional context, let me say that CPEC is the manifestation of our two leadership’s vision to unlock our mutually beneficial potential for peace and prosperity for not only our countries but also for the region.
The MoU on China-Pak Economic Corridor (CPEC) was signed in July 2013. The aim of the MoU was to enable the Governments to cooperate in the planning and development of China-Pak Economic Corridor and facilitate and intensify economic activity along the Corridor. It envisages connectivity and expansion of trade and investment through a network of roads, rail, fiber optic cables, and energy pipelines. The MOU also provides for the creation of special economic zones, industrial parks and trade centers and development of energy and technical cooperation. The objective is to enable the Governments to cooperate in the planning and development of CPEC and facilitate and intensify economic activity along the Corridor.
Thus, CPEC is a comprehensive package of cooperative initiatives and projects, which covers the key areas including connectivity, information network infrastructure, energy cooperation, industries and industrial parks, agricultural development and poverty alleviation, tourism, financial cooperation as well as livelihood improvement including municipal infrastructure, education, public health and people-to-people communication.
Ladies and Gentlemen
The China-Pakistan Economic Corridor would connect the nodes of growth centers. Significant nodes along the corridor would be Kashgar, Taxkorgan, Khunjerab, Peshawar, Islamabad, Lahore, Multan, Sukkur, Quetta, Karachi and Gwadar etc and such other nodes/growth centers which may fall within the CPEC in future. It will also be connected with trade facilitation corridors, dedicated freight corridors, energy corridors, trade logistics corridor, telecommunications corridor etc. Both sides are committed that the fruits of the development of this corridor should benefit all areas of Pakistan consistent with scientific planning parameters.
Ladies and Gentlemen
We have come a long way since the signing of this MOU. We are having our 4th Joint Cooperation Committee today in the afternoon since the signing of the MOU. Working groups and experts from both sides on long term plan, energy, transport infrastructure and Gwadar have had numerous meetings and visits that have provided an opportunity for developing close institutional linkages between various organizations of the Governments and a deeper understanding of each others constraints and opportunities. Chinese and Pakistani companies and investors are engaging very closely with each other for identifying and capitalizing on opportunities that appear on the horizon. This will provide a fillip to the already existing 10000 Chinese working on 200 projects of varying sizes.
After intense consultation among government functionaries of both governments and Chinese companies we finalized plans to add 10400 MWs of electricity capacity through early harvest energy generation projects spread all across the country to be completed by the year 2017/18 and another 6645 MWs of early harvest projects for energy on the actively promoted list. After completing all the requisite regulatory and other facilitation requirements we are nearing financial close for 200 MW wind power projects, 3300 MWs of coal based power generation projects, 870 MW hydro power project, 900 MW solar project and 3.8 MTPA coal mining project.
Ladies and Gentlemen
Similarly, we have agreed on infrastructure projects valued at $6 billion approximately that would upgrade connectivity from Khunjerab on the western border of China to the South of Pakistan to Gwadar in the first phase. These also include an airport and an expressway that provides connectivity to the port with the north bound road and rail network. We hope to start these projects soon. Simultaneously, the land for the Free Zone at Gwadar has been acquired for transfer to the Chinese company operating the Port for development as an industrial area. A large number of investors have shown interest in establishing units in the industrial areas. We are hoping that with these concomitant developments, economic activity along the corridor will flourish and more industrial activity will be generated in industrial zones and estates in Pakistan through forward and backward linkages. Pakistan would be keen to use this opportunity to set up enterprises that become part of the global value chain of products traded internationally.
Ladies and Gentlemen
This is only the beginning. There are consultations for upgrading and developing the rail network from Khunjerab to Gwadar and Karachi, importing electricity from the West of China, laying of gas piplines from south to north, establishing LNG jetties and regasification equipment, adding to the portfolio of energy projects and investing by companies in industrial parks and zones.
Ladies and Gentlemen
I am certain that as we continue in this spirit, CPEC will absorb the global and regional changes engulfing the world and meet the objectives set forth in their domestic imperatives that provide the impetus to the CPEC. The bilateral relationship will only grow from strength to strength with the success of the Corridor.
Ladies and Gentlemen
The governments of both the countries are keen to help with planning and providing an enabling environment but the actual success of this Corridor will happen when people of China as well as Pakistan own the development process relating to the Corridor and work with each other for opening up all the cooperation fields . I am personally very grateful to the Chinese investors and other stakeholders including Pakistani private sector who have taken a very positive active role in steering forward the vision of our leaders and materializing this grand dream which I am very certain shall prove to be a game changer for future of our countries and is our common goal. I further hope that sometimes in future we all shall share this
Thank you