The China-Pakistan Economic Corridor, or CPEC, will be a game-changer and its major beneficiaries will include Pakistan, China and Gulf countries, Pakistan’s Ambassador to the UAE Asif Ali Khan Durrani (in pic, right) told Khaleej Times during an interview.
Last year, the Chinese government committed to spending $45.6 billion over the next six years to build the corridor, which will include the construction of highways, railways and natural gas and oil pipelines connecting China to the Middle East.
The 3,000km economic corridor is an under-construction mega project to connect Gwadar Port in southern Pakistan to China’s northwestern city of Kashgar.
“Basically this will shorten the distance for China but this is just not the distance, it will also encourage a lot of economic activities within the region,” Durrani told said on the sidelines of a one-day conference entitled “Investing in Gwadar” held in Dubai recently. The conference was organised by Swiss-based Academy and Finance.
When the corridor is constructed it will serve as a primary gateway for trade between China and the Middle East and Africa. In particular oil from the Middle East could be offloaded at Gwadar and transported to China through the Balochistan province in Pakistan. Such a link would vastly cut the 12,000km route that Middle East oil supplies must now take to reach Chinese ports.
Apart from shortening the distance for the Chinese exports and imports it will enhance the trade volume in the whole region, the ambassador explained.
“Definitely, the direct beneficiary would be Pakistan because of the transit facilities Pakistan is going to offer. At the same time the services sector, infrastructure and industrial sector is going to get a boost in Pakistan. Therefore, the CPEC is considered economically vital to Pakistan in helping it drive economic growth,” he said.
Earlier this month, Moody’s Investors Service has described the project as “credit positive for Pakistan. The agency acknowledged that much of the project’s key benefits would not materialise until 2017, but stated that it believes at least some of the benefits from the economic corridor would likely begin accruing even before then.
“The government’s support for the implementation of the China-Pakistan Economic Corridor is credit positive for Pakistan because it will spur investment activity, boost bilateral trade flows and help ease the country’s growing energy shortages,” Moody’s said in a note.
“Apart from boost to bilateral trade between Pakistan and China this will also enhance Pakistan’s capacity to produce more and that extra surplus is going to be exported that will fetch more markets,” the ambassador said.
An immediate effect of construction of the CPEC will be a boost in foreign investment flows. China is the largest foreign investor in Pakistan, with inflows totalling $696 million in the fiscal year ended 30 June 2014.
Besides increasing foreign direct investment, the project will support Pakistan’s external position by bolstering trade flows between the two countries, which have already doubled since 2009 to $8.6 billion in 2014.
The UAE’s investment in Pakistan is estimated more than $20 billion mainly in the telecom, financials, real estate and energy sectors. Greater economic growth in Pakistan results in greater UAE investment in other sectors such as mining, export-oriented industry, IT and software.
The ambassador mentioned that the CPEC would also boost the economies of the Gulf states by increasing the trade volume and huge savings in freight.
Once developed, Gwadar Port will also offer to Gulf nations the opportunity to invest in Gwadar, especially in oil storage facilities, he said.
Saudi Arabia is the largest oil supplier to China and also has undertaken joint construction of oil refineries in China. It would be convenient for Saudi Arabia and other Gulf states to use Gwadar Port not only for transportation of their oil and other trade but also to invest in the envisaged oil city in Gwadar.
As of now, 60 per cent of China’s imported oil comes from the Middle East, and 80 per cent of that is transported to China through the dangerous Strait of Malacca.
China is now Dubai’s biggest non-oil trade partner. Last year, Dubai’s trade with China totalled Dh175 billion, up from Dh135.7 billion in the previous year. China-UAE trade touched $22 billion mark in the first six months of 2014, while the trade between the two countries crossed $46 billion mark in 2013.
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