A stimulus for economic growth in Pakistan

CPEC is considered economically vital to Pakistan in helping it drive economic growth.China and Pakistan intend that the massive investment plan will transform Pakistan into a regional economic hub and further boost the deepening ties between the two countries.The Pakistani media and government called the investments a “game and fate changer” for the region,while Financial Times notes that Pakistan’s electricity shortages are a major hindrance to foreign investment, and that Chinese investments in Pakistani infrastructure and power projects will lead to a “virtuous cycle” that will make the country more attractive for foreign investment in a variety of sectors.
Pakistan currently faces energy shortfalls of over 4,500MW on a regular basis with routine power cuts of up to 12 hours per day, which has shed an estimated 2-2.5% off its annual GDP. Poor availability of electricity is considered by the World Bank to be a main constraint to both economic growth and investment in Pakistan. Pakistan’s large textile industry has also been negatively effected by several-hour long power cuts, with almost 20% of textile factories in the city of Faisalabad shutting down on account of power shortages. The CPEC’s “Early Harvest” projects are expected to resolve shortages in power generation by 2018 by increasing Pakistan’s power generation capacity by over 10,000 megawatts. As a result of improved infrastructure and energy supplies, the Pakistani government expects that economic growth rates will reach 7% by 2018.
According to Chinese Foreign Ministry Spokesperson Hua Chunying, the corridor will “serve as a driver for connectivity between South Asia and East Asia.” Mushahid Hussain, chairman of the Pakistan-China Institute, told China Daily that the economic corridor “will play a crucial role in regional integration of the ‘Greater South Asia’, which includes China, Iran, Afghanistan, and stretches all the way to Myanmar.” When fully built, the corridor is expected to generate significant revenue from transit fees levied on Chinese goods – to the tune of several billion dollars per annum. According to The Guardian, “The Chinese are not just offering to build much-needed infrastructure but also make Pakistan a key partner in its grand economic and strategic ambitions.”
Moody’s Investors Service has described the project as a “credit positive” for Pakistan. In 2015, 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 Asian Development Bank stated “CPEC will connect economic agents along a defined geography. It will provide connection between economic nodes or hubs, centered on urban landscapes, in which large amount of economic resources and actors are concentrated. They link the supply and demand sides of markets.”

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s