CEPC: Positives for Pakistan’s Transportation Network and Economy

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Authors: Ali Farooqi & Yasir Arrfat*

Pakistan’s vision of 2025 is “To make the country the next Asian Tiger”.  In this vein, the China Pakistan Economic Corridor (CPEC) is rightly calibrated with the vision of Pakistan-based in its whole portfolio including road, rail and port projects, and is this the right cure for Pakistan to get rid of its economic and development woes. Additionally, along with other benefits, CPEC is also helping Pakistan in improving its road and infrastructure networks.

A reliable and efficient transportation infrastructure is crucial in the development of any economy. In 2011, the Government of Pakistan (GoP) estimated that the transport sector constituted around 10 percent of the country’s GDP, contributing towards up to 6% increase in employment in the country. However, due to poor transport network and logistics, the inefficiencies have cost the economy more than 4%of its GDP per annum. In addition, the State Bank of Pakistan (2011) has estimated that logistical bottlenecks increase the cost of production of our goods by about 30 percent.

Obsolete infrastructure, technology and equipment cause the railway network to experience severe delays and safety hazards. It is estimated that the total freight carried has decreased from 7.7 million tons (1995) to 4.6 million tons (2013).  These inefficiencies have cost the economy about Pkr Rs.150 Billion per annum, severely reducing the country’s regional competitiveness.

China’s rail freight volume in February 2017 was 281.21 million tons, which is substantially higher than Pakistan’s decreasing volume (Reuters, 2017). It is expected to generate over US$ 48 billion in China’s economy in 2017 (IBIS World, 2017). Approximately 279 industries operate in the industry creating employment for 723,682 people. That seems to be a small amount when compared to the massive population of China and the revenue generated from other industries. However, other than the obvious direct impact, there is the other indirect impact on trade and development. If Pakistan seriously spends time and energy in in this area, it is bound to help the country take off economically.

The introduction of CPEC and OBOR has addressed two major concerns. Firstly, the energy crisis that crippled the country and had a massive impact on the economy was addressed. Second, the inefficient transportation network received investment for up-gradation and construction of new linkages.

Industrial growth occurs in regions with good market access, low transportation costs and a skilled labor force. Development of transportation infrastructure lowers the price of transport and the cost of production. Without the CPEC , chances were slim that the government would have spent such huge amounts of development of road and railroad networks. This development, thus, is also indirectly helping in creation of more jobs, and improving the productivity of transportation and logistical channels. .

Under CPEC road portfolio there are currently 4 main projects planned or are under way; the Northern, Western, Central Alignments and the Peshawar-Karachi Motorway. These four main networks are made up of 53 different road projects (7,302 KM) which include up-gradation, expansion, complete overhauls and brand new constructions (NHA, 2017). The aim of these projects is to provide the infrastructure needed to support the CPEC initiative and provide a viable transportation network to all regions under CPEC.

The Gwadar-Quetta 650km long road was completed by December 2016 transforming what was previously a two day journey to merely eight hours. Without roads, there can be no movement of goods, trade, people and knowledge. With the completion of the CPEC routes, underdeveloped regions would witness a new era of development and prosperity. Tapping into valuable resources of which people have always been an integral part of is the first step towards a brighter future for Pakistan.

The CPEC initiative has the potential to eventually reduce import bill by USD $5 billion and improve export bill significantly. However, this can only be done if there is an efficient supply chain network to facilitate the movement of goods by road, rail and port. Not only will the CPEC initiative help our local businesses to grow and tap previously inaccessible resources and markets, but it will also create more than 700,000 jobs (The Nation, 2016). A proper, efficient transportation network will lower costs and improve our regional competitiveness and drive future investment. Having a good foundation is crucial to our long term prosperity.

CPEC has already shown that it will have a positive impact on Pakistan’s transportation network. CPEC has improved Pakistan’s global rank in supply chain infrastructure around 12 points from 105 (2017) to 93 (2012) out of 136 countries. Pakistan has closed its gap with China around 22 points in overall infrastructural development in the last half decade. It will make trading quicker and cheaper by reducing cost of transportation and the burden on economy.

 

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About the Authors:

AliAli Farooqi is currently working in Centre of Excellence, CPEC as a Research Assistant. Recently graduated with a Masters (MSc.) specializing in Global Supply Chain Management from Cass Business School, City University London, United Kingdom.
Yasir Yasir Arrfat is an Acting Thematic Head of Regional Connectivity under CPEC at Center of Excellence China Pakistan Economic Corridor (CE- CPEC) since 2016

 

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