South Asia poised to cash in on CPEC opportunity | China-Pakistan Economic Corridor (CPEC)

South Asia poised to cash in on CPEC opportunity


Category : Opinion Editorial   Source : Business Recorder   Date : 05-10-2017   By : Secretary General FPCCI 

Countries in South Asian region are surviving on their flourishing services industry and the contribution of industrial expansion in GDP growth has been nominal. It is expected that with the establishment of One Belt One Road projects China’s trade will exceed $ 2.5 trillion with OBOR countries. CPEC being the main component of OBOR will connect Gwadar with Kasghar in western China. CPEC has become crucial because of its geostrategic and economic importance. South Asian countries need to connect with CPEC to derive benefits of the project which is yielding economic opportunities for the South Asian Nations.

South Asia poised to cash in on CPEC opportunity

History reveals that South Asia and China are closely associated with each particularly for trade and commerce activities. The oldest trading route Silk Route was the major link which has provided strong connection between South Asia and China. The revival of old route with the name OBOR (One Belt One Road) indicates that both are economically indispensible for each other.

The current status of South Asia comprises of Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, India, Pakistan, and Sri Lanka. South Asia covers about 4.5million Sq. Km, which is 11.51% of the Asian continent or 3.4% of the world's land surface area. The population of South Asia is about 1.749 billion or about one fourth of the world's population, making it both the most populous and the most densely populated geographical region in the world. Overall, it accounts for about 39.49% of Asia's population, over 24% of the world's population, and is home to a vast array of people.

Although the majority of its people work in the agriculture sector, the share of the labor force in services has increased significantly in the past few years. Overall, the region's flourishing services sector has been the main driver of economic growth (accounting for about half of the growth of GDP), whereas the contribution to GDP growth from the industrial sector has been nominal.

Average annual inflation for the region (as reported by the Asian Development Bank) remained "subdued as economic slack and low global food and commodity prices contain price pressures" such that the rate dropped from 6.2 percent in 2014 to 5 percent in 2015 (Asian Development Bank, "Growth Prospects Soften for Developing Asia). Remittances sent home by South Asian citizens working abroad are important contributors to regional economies, accounting in 2013 for nearly 30 percent of Nepal's GDP, more than 9 percent each for Bangladesh and Sri Lanka, and 6 percent for Pakistan. (World Bank: Personal Remittances, Received (Current US$)," 2015, http://data.worldbank.org). South Asia share 2.5 percent in global trade.

The geopolitical importance of South Asia, shared borders with Central Asia and the oil-rich Gulf, its natural resources, and its human capital make the region's potential for growth enormous. While China is a leading emerging economy, expanding rapidly and a leading trading hub.

After 1978, Chinese focused on market-oriented economic development and by 2000 output had quadrupled. China has increased its global outreach and participation in international organizations. China has implemented reforms in a gradualist fashion, resulting in efficiency gains that have contributed to a more than tenfold increase in GDP since 1978.

Measured on a purchasing power parity (PPP) basis, China stood as the largest economy in the world last year, surpassing the US in 2014 for the first time in modern history. China became the world's largest exporter in 2010 and the largest trading nation in 2013. OBOR is a testimony of visionary leadership of China and attracting the entire world. China's OBOR initiative has six proposed corridors and China Pakistan Economic Corridor is termed as the most important corridor among them.

  • China - Mongolia - Russia Corridor
  • New Eurasian Land Bridge
  • China - Central Asia - West Asia Corridor
  • China - Indochina Peninsula Corridor
  • China- Myanmar - Bangladesh - India Corridor
  • China - Pakistan Economic Corridor (CPEC)

It is expected that within a decade China's annual trade with OBOR countries will exceed $ 2.5 trillion. OBOR will cater for 2/3 of the world population, 1/3 of the world GDP and 1/3 of the world services &goods. China- Pakistan Economic Corridor (CPEC) is the main component of OBOR. The basic concept of CPEC is to join Gwadar (Arabian Sea port in Pakistan) with Kashgar / (Xinjiang province) in Western China.

At present, many regional mega projects are in progress or proposal stages which gain enormous potential and feasibility by the undertaking of China Pakistan Economic Corridor (CPEC), a part of OBOR. In this way the complementary nature of CPEC and various south Asian bilateral or multilateral projects can maximize the geostrategic cum economic benefits to the south Asian people. The various South Asian projects are as under:

Afghanistan - Pakistan - India - Bangladesh - Myanmar (APIBM) Corridor:

It is a proposed corridor to restoring historical Afghanistan-Pakistan-India-Bangladesh-Myanmar (APIBM) route which is considered a road of shared prosperity for South Asia.

Pakistan - India - Nepal Integrated Network:

The route to Nepal shall give Pakistan access to major Chinese cities of Chengdu, Chongqing and Kunming.

Central Asia & South Asia (CASA) - 1000:

Pakistan has a great need of energy for its socio-economic development and to run its industrial sector to its full potential so that it is an ambitious project of regional energy cooperation among Pakistan, Afghanistan, Tajikistan and Kyrgyzstan with a potential to reach from 1000 MW to 4,000MW electricity transmission alleviating power woes for the South Asian countries involved. It connects Tajikistan and Kyrgyzstan in Central Asia to Afghanistan and Pakistan in South Asia through an electricity grid.

Indus River Trade Corridor:

It is envisaged that by developing this river a fast alternative track for goods and passengers' transportation can be developed. The transport expenses can be reduced to half, as one liter of fuel is able to ship one ton of consignment up to 180 km over waterways as compared to only 25 km and 75 km by road and rail respectively.

North-South Transnational Corridor (Kazakhstan - Turkmenistan - Iran railway link):

It provides Arabian Sea access to landlocked Kazakhstan and Turkmenistan through railway link via Iran.

Iran - Pakistan - India Pipeline:

Originally India was included in this project to buy natural gas from Iran but now the work is in progress between Iran and Pakistan

Turkmenistan - Afghanistan - Pakistan and India (TAPI) Pipeline:

The TAPI pipeline is a major interlinking project for energy.

Trans-Iranian canal:

The idea of linking the Persian Gulf and the Caspian Sea by a canal.

All the projects for efficient connectivity in transportation and energy reflect the direction of trade and mobilization of resources in future. However, China Pakistan Economic Corridor has become more crucial because of its geostrategic and economic importance. It has become a part of the largely debatable global issues and politicized by neighboring countries of Pakistan. No doubt the project has its political impact as it can change the patterns of regional development and will improve the strength of Pakistan's relations with China and other participating countries.

Under the new era of globalization economic activities have largely shifted to Asia and it is observed in global economic data that South Asia and China are rapidly moving towards their historical positions.

Trends of Economic Growth

The China - Pakistan Economic Corridor (CPEC) is an ongoing development mega project of $46 billion in investments from China. This includes $15.5 billion in coal, wind, solar, and hydropower projects which will increase Pakistan's national grid capacity by 10,400 MW. It also includes a project to build a $44 million fiber-optic cable. The main objective or aim of this mega project is to connect Gwadar Port in southwestern Pakistan to China's northwestern automounus of Xinjiang through a network of roads, railways and pipelines to transport gas and oil. It is considered as a central for both countries (Pakistan and China) relations. It would run about 3,000 kilometers (KM) from Gwadar (Pakistan) to Kashgar (China).

The OBOR of which CPEC is a main component will benefit for South Asia's economy. China has planned road and rail infrastructure and oil and gas pipelines joining China to Central Asia and Moscow, Rotterdam, and Vienna. China will also establish a maritime route that joins South Asia, Southeast Asia, North Africa, and the northern Mediterranean Sea. This will connect South Asia with some of the most important regions in the world. South Asia can derive the benefits from CPEC as South Asia is an energy deficient region which can use Central Asia's huge gas and oil resources to help address its energy deficits. Gwadar Port will be connected with Central Asia for trade and energy transportation. Once the way is open to Central Asia for bi-lateral trade, the markets of Europe will also be accessible to South Asian. China Pakistan Economic Corridor will connect China to the world and will have a significant impact on the China, Pakistan and regional economies. Its role in bringing prosperity to the region cannot be ignored. Scio-Economic development is critical to convert challenges into opportunities in South Asia.

The South Asia needs to connect with CPEC to derive benefits of the project which is spanned largely yielding investment and economic opportunities for South Asian nations/interest which have potential and interest to gain from CPEC.

COMPARASION OF EXPORT AND IMPORT OF SOUTHASIAN COUNTRIES WITH WORLD

(US $ Million)

Countries

2014

2015

2016

Test

Exports

Imports

Total Trade

Exports

Imports

Total Trade

Exports

Imports

Total Trade

India

317.5

459.4

776.9

264.4

390.7

655.1

260.3

356.7

617.0

Pakistan

24.7

47.5

72.3

22.1

44.0

66.1

20.5

47.0

67.5

Bangladesh

0.0

0.0

0.0

31.7

48.1

79.8

38.8

41.2

80.0

Sri Lanka

11.3

19.2

30.5

10.4

19.0

29.4

10.5

19.5

30.0

Nepal

0.9

7.6

8.5

0.7

6.6

7.3

0.7

6.2

6.9

Afghanistan

0.6

7.7

8.3

0.6

7.7

8.3

0.8

4.7

5.5

Maldives

0.1

2.0

2.1

0.1

1.9

2.0

0.1

2.1

2.3

Bhutan

0.2

0.3

0.5

0.3

0.5

0.8

0.1

0.5

0.6

South Asian Association

 

 

 

 

 

 

 

 

 

for Regional Cooperation

 

 

 

 

 

 

 

 

 

(SAARC) Aggregation

355.4

543.7

899.1

330.3

518.5

848.8

332.0

477.9

809.9

World

18969.8

18989.4

37959.2

16508.5

16656.0

33164.5

15862.4

16062.5

31924.9