Here is why CPEC never reached its full potential

[GeraltofRivia]

The primary goal of CPEC is never really about transporting China export through Pakistan. It is simply impossible to move that much volume through the mountainous road. The only goal is to develop Pakistani economy as it can become a substantial trading partner China in the next decades or so. To have the level of trading power that is considered as substantial for China, which is still growing, Pakistan economy needs to be expanded in multiple times in size. CPEC is simply the process that China has managed to lift itself out of proverty over the last 40 years. Yes it is proven and will deliver the result for Pakistan and arguably any developing country. It happens that Pakistan is China's closest friend and its economy needs a major uplift.

The fundamental idea of CPEC and BRI in general is not to build more trade routes so it can ship more goods westwards. Instead it tries to reduce it. China sees the concentration of trading relationship in terms of volume with western nations as a strategic risk and is keen to diversify its trading relationship by actively developing economies of friendly developing countries eg Pakistan. As a result, Pakistan and other developing countries can be more capable of trading with China and enabling China building a more diversified and robust trading portfolio. Put it a different way, China doesn't want all the trade coming from Europe or US, it wants a sizable portion of ttade to be done with its friends. To be able to achieve this even in a moderate success, Pakistani economy needs to expand 5-10 times as of today.

CPEC and BRI needs to be looked at from a long term and strategic angles. A lot of criticism on CPEC is simply due to short sighted view.

 

[GeraltofRivia]

Why do China private companies will relocate their business in Pakistan with the present of long road and rail track between China and Pakistan where most of the CPEC road and train will pass less populated areas in both nations with really very long route to reach masses in each country ?

They have already got Vietnam already who sit near the border of South China ( where main industry and business located and also many Chinese are residing ). This is why Vietnam gets so many China investment despite many Vietnamese hates Chinese.

China investment in Indonesia though is more related to nickel since we ban exporting our nickel so they are forced to build refinery here and also stainless steel company is forced to build the factory in Indonesia or they cannot get raw material to sustain and grow their business

Private companies doesnt care whether Pakistan is China iron brother or not, that is not how business people think, unless if Pakistan have similar competitive advantage with Vietnam.

You ste right that there are a lot of Chinese direct investment in Vietnam but they are only private investment due to its geographical amd cultural proximity.

The difference between what is going on in Vietnam vs Pakistan is that CPEC is a project that has strong strategic motivation from Chinese state which is to build Pakistan into a strong and substantial trading partner in a scale that can substitute western countries to some extent. This means want China state like to achieve in Pakistan is far more grand and sophisticated in host countr's economy. What it seeks to achieve is a "real" industrialization that has highly sophisticated industry, competitive product range, and vibrant and self sustainable domestic market. An economy that does not compete on cheap labour but on value adding products. A country without real industrialization will not

Private capital may not have a homeland and only chase the profit. Chinese ones are not exception and they should not. However, State capital does know and it plays strategically. it is also played at a far greater timespan that private ones don't. This is what we are seeing in CPEC.

 

[The Accountant]

Sorry my friend it does not means anything. international trade is a lot more complex then this. Air fright are much more expensive than any transportation mode but are still being used, why? By your definition there should be no trade via air.

Cost of transportation is a complex matter and cannot be achieve by just saying one is doing more trade with sea therefore it must be cheaper.

Land route between China and Pakistan can be as short as a week v/s three weeks transportation cost of sea at minimum, so its not just about container to container shipment cost but cost of holding inventory for thrice as long in comparison to sea. Then there is a geopolitical cost, for example in sea route you dont need to go to multiple countries and you can always change routes but land routes are fixed and feasible for countries having a consistent a minimum amount of trade and have direct borders.

For example a rail link cannot be feasible for just one train a week but if same gets increased to 4 trains a week than rail link income will increase by 4 times, on the contrary in sea route there is no infrastructure investment is required so cost is fixed irrespective you have one ship per week or 4 ships per week.

There are lot of studies which proves that land rail routes are most economical (not cheaper) in long run then ship routes.

Russia is literally the furthest country in the world from China by sea.

Look at a map, a container shipped by sea has to go through the straits of malacca, the suez canal, the bosphorous strait, to Russia, or straits of malacca, the suez canal, the strait of gibralter, the north sea, and then to roughly St. Petersburg.

The fact that it's still usually cheaper to transport things to European Russia by Sea instead of by train is what makes my point so obvious.

China and Russia has a shitload of rail connections since soviet times.

 

[nahtanbob]

CPEC is simply the process that China has managed to lift itself out of proverty over the last 40 years.

If Pakistan followed China's process Pakistan would be forcing Chinese companies to share technology with Pakistani firms and have Pakistani firms build the dams, power plants and roads
@GeraltofRivia

 

[The Accountant]

We face the same problem, we are on the farthest western side.

Anyways had this been the goal priority would have been ML1 not motorways. Even the ML1 the only rail project envisioned in CPEC does not extend to Gawadar.

Is there any plan or project ongoing to connect Gawadar by Rail?

The chance of us taking full advantage of CPEC is by transferring of manufacturing ( low end atleast) that is economic zones, there in lies our only hope.

Our guage caliber is different than China. We need a full overhaul and expansion.
( Motorways is the least economically sustainable mode of transport for goods for longer distances than rail and shipping).

In our mind CPEC was used as a credit card for projects that are not economically viable and too for political reasons.

We could have planned it a lot better. The most import sustainable energy. Even if by arguments 'Thar coal' was more expensive (which is not true as it relates to economy of scale) we would have saved billions in forex and the amount paid would have ended up in our economy contributing to our GDP and creating employment not ending up in Qatar (RLNG) and on coal imports.

This is where we messed up. ( 90% of CPEC is mostly vanity projects and IPP's). Even motorways and gawadar port is a small fraction of it.

Without competitive energy rates only industries that are heavily reliant on cheap labour like textile have a chance to offset the cost, other limited industrial investment will be geared towards our own market. ( Which in turn most of the profits will be going to Chinese shareholders of these companies).

What China envisioned and expected from us through CPEC was making sensible decisions and making progress. We used it for political reasons, kickbacks and corruption. This was a brotherly gift to develop ourselves and to emerge as a strong country an ally along Chinese borders ( That's what they wanted all along).

At least from a military and strategic perspective it worked. We ourselves messed up the economic side ( still trying to salvage what we can and these industrial parks are a part of it to atleast generate some revenue (dollars) to pay for the IPP's).

Motorways should be never be for mass transit, they are for making a road infrastructure to connect far fledge areas of Pakistan. The production being done in villages were not connected with the other parts of Pakistan are now connected. Consider for exmple the fruit production in northern areas of gilgit, kashmir and swat valley was never capable of reaching the cities and exports but now motorway is at a distance of few hours from these villages so now they can increase there local production of milk, agriculture and animals and sell them to cities which will increase the production capacity of Pakistan.

On overall basis the real objective of CPEC was to increase the production capacity of Pakistan which was never implemented till last couple of weeks. Now we have start working on CPEC 2.0 which means chinese companies are coming to invest in production capacity in pakistan but there is a long way to go.

 

[Patriot forever]

Motorways should be never be for mass transit, they are for making a road infrastructure to connect far fledge areas of Pakistan. The production being done in villages were not connected with the other parts of Pakistan are now connected. Consider for exmple the fruit production in northern areas of gilgit, kashmir and swat valley was never capable of reaching the cities and exports but now motorway is at a distance of few hours from these villages so now they can increase there local production of milk, agriculture and animals and sell them to cities which will increase the production capacity of Pakistan.

On overall basis the real objective of CPEC was to increase the production capacity of Pakistan which was never implemented till last couple of weeks. Now we have start working on CPEC 2.0 which means chinese companies are coming to invest in production capacity in pakistan but there is a long way to go.

I agree . My comment was in relation of preference given to Motorways as compared to the emphasis on rail network in perspective of goods transport aspect of CPEC.
That part alone validates the true nature of CPEC objectives.

 

[The Accountant]

I agree . My comment was in relation of preference given to Motorways as compared to the emphasis on rail network in perspective of goods transport aspect of CPEC.
That part alone validates the true nature of CPEC objectives.

U r right my friend. Infact in terms of preference i think even rail network is secondary the the people skill development.

What will rail network do if people dont understand its usage and importance. We have a work force looking for job whereas on the other hand we lack production capacity ... So why we need to import food when we have so much land and workforce available. If deserts of saudia can produce agriculture goods then why cant green mountains of chitral? Why balochistan is all brown from satellite image despite dirt cheap availblity of solar energy then can be used to power tubewells in one of the most water scarce areas ?

CPEC should be used to transfer technology to the people of Pakistan not only at corporate level but people to people levels ...

 

[blueazure]

Official List of Energy Projects under CPEC

Pakistan urges China to soften terms for CPEC power deals

Yeah whatever ....

most of these power projects are wind or solar, have feed-in tariffs and their combined value is less than 2 BN USD


they ARE not capacity payment projects

1320MW Sahiwal Coal-fired Power Plant	1320	view details
2	1320MW Coal-fired Power Plant at Port Qasim Karachi	1320	view details
3	1320MW China Hub Coal Power Project, Hub Balochistan	1320	view details
4	660MW Engro Thar Coal Power Project	660	view details
5	1000MW Quaid-e-Azam Solar Park (Bahawalpur)	400 / 600	view details
6	50 MW Hydro China Dawood Wind Farm, Gharo, Thatta	50	view details
7	100MW UEP Wind Farm, Jhimpir, Thatta	100	view details
8	50MW Sachal Wind Farm ,Jhimpir, Thatta	50	view details
9	100MW Three Gorges Second and Third Wind Power Project	100	view details
10	Matiari to Lahore ±660 KV HVDC Transmission Line Project	4,000 MW Evacuation Capacity	view details

--------

yeah whatever ........

 

[Crimson Blue]

most of these power projects are wind or solar, have feed-in tariffs and their combined value is less than 2 BN USD


they ARE not capacity payment projects

Seriously asking a question, do you have comprehension issues?

In the list that you posted above, wind & solar projects are like 50 ,100 or 400 MW projects. Electricity generation capacity (and in turn payments to) of all of these wind & solar projects do not equal to even a single Coal-Powered-CPEC-Plant_Port_Qasim which is 1320 MW.

... and then you have conveniently ignores the coal powered projects witch are under construction, as if those CPEC plants would not need any payments from GoP.

Do you really believe that highlighting your text in red would made you look smarter when you cannot even compare the electricity generation capacity (in turn payments made to) of different type of power plants ?

..... and have you ever heard of self respect? Because first you post "CPEC has nothing to do with energy agreements, FFS " and then you come around and post the list of CPEC energy projects in your very next post.

 

[blueazure]

Seriously asking a question, do you have comprehension issues?

In the list that you posted above, wind & solar projects are like 50 ,100 or 400 MW projects. Electricity generation capacity (and in turn payments to) of all of these wind & solar projects do not equal to even a single Coal-Powered-CPEC-Plant_Port_Qasim which is 1320 MW.

... and then you have conveniently ignores the coal powered projects witch are under construction, as if those CPEC plants would not need any payments from GoP.

Do you really believe that highlighting your text in red would made you look smarter when you cannot even compare the electricity generation capacity (in turn payments made to) of different type of power plants ?

..... and have you ever heard of self respect? Because first you post "CPEC has nothing to do with energy agreements, FFS " and then you come around and post the list of CPEC energy projects in your very next post.

im not sure why are you posting just for the sake of posting

what is the tarriff regimen for all these projects ?

can you please tell ?

are these capacity ? cost plus ? feed in ?

whats all the noise about ?



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regarding CPEC and energy projects , the primary goal ( as per chinese) is infrastructure ( roads , gwadar, motorways, ML1 etc) . energy projects ( and those are ONLY as few) were added later and make a small percentage of CPEC

 

[KaiserX]

CPEC never reached its full potential because we never thought about it beyond China. We should have reoriented from CPEC towards a grander PAKISTAN NATIONAL ECONOMIC CORRIDOR with China providing the initial seed funding in the form of CPEC. Our govt should have thought of other project and opened them up to international financing from Japan, Korea, Europe, GCC, and the US. We should have used to interest rates leveraged from the Chinese to get better concessions wherever possible. China can only do so much for us. They have their own business interest as would ANY INVESTOR.

To think the US invested in Europe or Japan via the marshal plan to provide aid is pure BS. Demand from Europe/Japan was stimulated for US exports via the development loans that were provided. Eventually Europe/Japan were able to learn manufactering processes to create cheaper/better quality items. As some members here have pointed out eventually it will be up to Pakistan and Pakistani enterprises to leverage the opportunities created by CPEC

Sure the Chinese will dump their products into any market. Eventually either the local business people will be FORCED TO COMPETE AS THE JAPANESE/GERMANS did or the Chinese will get rich enough to where it makes FAR more business sense to settup plants in Pakistan itself. Why not? esp when there is sky hand demand for their products within Pakistan and even left over demand that can be exported else where? Its a win win proposition either way. You cant move up the next level in business without building your relationships, logistics, infrastructure first. So in the end CPEC is MUCH MUCH better than NO CPEC regardless of the loans.

As with any infrastructure project the results of CPEC wont be seen for atleast another decade. People think that once a road is built that it will be jammed with traffic the next month. Infrastructure investment has amongst the slowest returns in the world. In the short term we have seen Pakistans power crisis/Exports improve signficantly in the last 2 years. If this continues say for another decade then Yes Pakistan will be able to more than double/triple its exports with an abudance of energy which can be exported.

Lastly China's western hinterland being underpopulated/underdeveloped is a huge concern for the China esp as they are fast gaining more influence in central asia than the russians. If the Chinese play their cards right all of central asia will be virtually in their lap. Their investment in CPEC is somewhat a gauranter of that. They will play the long game. Even if it takes decades to show the results.

 

[Crimson Blue]

The primary goal of CPEC is never really about transporting China export through Pakistan. It is simply impossible to move that much volume through the mountainous road.

If you have good knowledge of Chinese point of view of CPEC, would you care to answer a question?

In the early days of CPEC & BRI projects there was talk of revival of Silk-Route from within China. Most of World literally understood that infrastructure being built under BRI & CPEC would be used to transport goods from and raw material to China (just like silk-route). There was also intentions expressed from China to connect western China to Pakistan. Since such connectivity & transport of goods via land route has not taken place, most of critics (Indian, western etc) are labeling CPEC a failure.

So what is Chinese point of view regarding BRI/CPEC acting as new Silk-route and connecting western China to Pakistan & beyond.

 

[nahtanbob]

If you have good knowledge of Chinese point of view of CPEC, would you care to answer a question?

In the early days of CPEC & BRI projects there was talk of revival of Silk-Route from within China. Most of World literally understood that infrastructure being built under BRI & CPEC would be used to transport goods from and raw material to China (just like silk-route). There was also intentions expressed from China to connect western China to Pakistan. Since such connectivity & transport of goods via land route has not taken place, most of critics (Indian, western etc) are labeling CPEC a failure.

So what is Chinese point of view regarding BRI/CPEC acting as new Silk-route and connecting western China to Pakistan & beyond.

the problem with land routes is that two countries Russia and Iran can shut down the connectivity. It beats me why anyone wants to rely upon those countries
global trade took off when Europeans sailed the oceans bypassing your rent collectors on land

 

[KaiserX]

the problem with land routes is that two countries Russia and Iran can shut down the connectivity. It beats me why anyone wants to rely upon those countries
global trade took off when Europeans sailed the oceans bypassing your rent collectors on land

In those days highways, railroads, and trucks did not exist

Like it was stated multiple times on this forum. The utility is CPEC is that it is the initial seed funding to kickstart growth and investment which was lagging in many sectors of the economy. In some ways it has worked. In many others way we will not know until 2030.

Much will depend if Pakistan is able to leverage the development. So far with the initial energy projects the results are there. Exports have increased. Energy production is at an all time high. Energy costs are up but right now there is significant global inflation.

Can this be leveraged to incentive China manufactering and eventually even other countries? of course.

 

[nahtanbob]

In those days highways, railroads, and trucks did not exist

before Vasco da Gama pioneered his maritime route to India, goods flowed from the east to west even without highways, railroads and trucks
there is a difference between modern merchant ships and ships of 15th-16th century.