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CPEC to revolutionise trade among South, Central Asia, China: Iqbal

BEIJING: Minister for Planning and Development Ahsan Iqbal Wednesday said that completion of China-Pakistan Economic Corridor (CPEC) would revolutionise trade ties between the Asian states by linking South and Central Asia, and China.

He expressed these views while meeting with Meng Fengchao, chairman of China Railway Construction Corporation here in Beijing.

Iqbal maintained that both sides reviewed progress on CPEC infrastructure projects including upgradation of Pakistan Railway’s ML-1 project.

The minister said that his government prioritises projects linking Gwadar to rest of the country and establishment of rail links from Quetta to Peshawar. Infrastructure projects would transform these remote areas into new urban centres, ensuring inclusive growth across Pakistan, he added.

Iqbal urged China Railway to ensure participation of Pakistani institutions in infrastructure projects. “China Railway Corporation should utilise existing industrial base and local production capabilities in railways and infrastructure projects,” he maintained.

China Railway Construction Corporation guaranteed to work in collaboration with Pakistani institutions and organisations. It was assured that Pakistani engineers would be given priority at every stage of the projects, and that Chinese side would work in line with Vision 2025 and CPEC Long Term Plan.

The minister maintained that Pakistan and China have agreed to upgrade and dualize Pakistan Railway’s main line (ML-1) from Karachi to Torkham, which would support fast-moving trains in future.

The first phase of the project is expected to hit the ground this year. The upgradation of the ML1 would not only improve existing railway infrastructure but would double the current speed and facilitate huge cargo transportation.

Earlier, while addressing the CEOs at Boao Forum on Monday, the minister said that CPEC is proving to be oxygen for Pakistan as the country’s economic growth increased due to the huge investment being made in infrastructure and energy sectors under the mega project.

He said that there is a broad consensus among all groups and political parties in the country to ensure the success of the CPEC.

Iqbal said under the CPEC, nine industrial zones were being constructed across the country which will create numerous new jobs.

Trade with China

Betting our economic future on the China-Pakistan Economic Corridor was always going to come with a certain amount of risk. The infrastructure development required for various projects required Pakistan to take on loans from China to import capital goods that would eventually have to be repaid. The only way we can afford to repay these loans and reduce our growing trade deficit is by increasing our overall exports. Naturally, we are now looking to China, with whom we have a large trade imbalance, to be more receptive to Pakistani exports. The two countries have now reportedly finalised the second phase of the China-Pakistan Free Trade Agreement, which is expected to be signed next month and provides Pakistan with the same tariff concessions which are given to Asean nations. Our aim is an immediate increase in exports, something the country desperately requires as an engine of economic growth. In the 10 years since the first free trade agreement between the two countries was signed, overall trade has ballooned from $4 billion to $13.7 billion. In that time, Pakistan’s imports from China have increased $2.5 billion to $12 billion while exports to China have only gone from $570 million to $1.7 billion. Our worldwide trade deficit stands at almost $18 billion for the six-month period from July to December and will almost certainly be higher than the annual target of $25.7 billion projected by the government.

Since such a large percentage of Pakistan’s trade deficit is caused by trade with China, the revised free trade agreement should help in improving that. The Pakistan Business Council has estimated that tariff concessions could increase the country’s exports to China by more than $3 billion a year, although a more accurate estimate will only be possible once the details of the agreement are made public. While that would be a good start, it is not sufficient to come close to eliminating our trade deficit. Pakistan does need to try and get whatever trade concessions it can – be it from China or other countries – but the entire rationale behind taking loans for CPEC projects is that it would put the country in a position to massively increase exports. Should that not materialise, there will be serious questions asked about why we have indebted ourselves to such an extent for economic gains that are marginal at best. With the international price of oil continuing to rise, there is little opportunity to reduce imports and so the only economic strategy that makes sense right now is to maximise exports