China Pakistan Economic Corridor (CPEC), a $46 billion mega economic project is moving forward to its heights. Since its beginning, CPEC has yet completed so many its inter-connected projects successfully. It has played a major role in attracting investors to Pakistan as there is a conducive environment which would help encourage foreign investment in diverse economic spheres.
CPEC would usher in a new era of progress and prosperity and it would not only benefit the entire Pakistan but also contribute to the regional peace, stability and prosperity. CPEC is a game changer which can bring about gigantic investment and a bunch of business opportunities in Pakistan.
What has been expected from CPEC towards development and economic prosperity, is its mega infrastructure and many other inter connected projects i.e highways, Gwadar port, energy projects, etc. How CPEC would attract foreign investors from different, European and Middle Eastern developed countries in order to bring about huge investments in Pakistan, is a matter of concern that should be dealt with thorough insight and expertise. The United Kingdom, Iran and Kuwait had already shown their interest to be part of CPEC projects as there are so many business firms who want to invest in CPEC.
Potential for Islamic finance schemes
CPEC is also expected to bring the full potential of Islamic finance into action. The CPEC, till 2030, will see €54bn in investments to create, overhaul or expand highways, railways, ports, airports, power plants, solar parks and wind farms, pipelines and optical fibre lines, which partly will be raised through a variety of Islamic finance instruments, notably sukuk. This represents lucrative Islamic finance public-private partnership opportunities in energy and construction and will positively affect Pakistan’s Islamic finance sector. Experts are of the view that it offers an opportunity for the Islamic finance industry to channel liquidity into long-term projects which also have spillover benefits for other industries, including real estate, manufacturing, building materials and contracting.
Further, co-financing for the corridor comes from Chinese state loans, as well as from funding from the Asian Development Bank and the new, China-backed Asian Infrastructure Investment Bank, whereby the two latter stated that they are also considering the utilisation of Islamic finance for infrastructure funding. Latest examples of how such funding looks like are financing agreements between Pakistan and China amounting to approximately $1.95bn for a coal-fired power plant including coal mining operations to be developed in Thar region of Pakistan, with a financing package including US dollar and Pakistani rupee loans in Shariah-compliant tranches. Other large investments are being made by foreign and domestic investors in addition to the Chinese and involve Islamic finance instruments such as ijara, one of the most commonly used sukuk structure which is basically a Shariah-compliant leasing contract.
The CPEC spans over three phases and four major areas, namely the development of Pakistan’s southern port city of Gwadar, the energy projects, road, rail and communication networks and industrial cooperation. Currently, CPEC projects worth about $18bn are in the implementation phase, while another $17bn are in the active pipeline. The short-term, medium-term and long-term projects will be completed by 2020, 2025 and 2030, respectively, and will have significant economic impact on Pakistan and its role in the entire Western Asian region and towards its archrival India.
A new trade axis across the Asian continent to Western Asia
The project is, of course, of huge geostrategic importance for China as it represents a new trade axis across the Asian continent to Western Asia, the Middle East, Africa and eventually Europe as it circumvents China’s main maritime trade route across the South China Sea, the Strait of Malacca and the Indian Ocean and opens a vital route for China particularly for oil transportation.
International trade opportunities
Completion of China-Pakistan Economic Corridor (CPEC) project aims to create economic coordination, boost the international trade opportunities and bring the domestic commerce out of different challenges.
It would connect the economy as the communication infrastructure would improve and create harmony among the domestic commerce and trade. It would also pave the way for Chinese trade which would definitely benefit Pakistan. There is a need to establish an independent authority for the implementation of the CPEC which would promote bilateral investment, technology, market shares and infrastructure development projects, besides creating awareness of it in western countries.
Fastest growing economy
Financial indicators published recently in ‘The Economist magazine’ suggest that Pakistan is the fastest growing Muslim economy of the world. Pakistan’s estimated GDP growth – 5.3% – is also ahead of 4% GDP growth of Israel. This makes Pakistan world’s fifth fastest-growing economy in the world, only behind China and two other countries. The live data, which is updated twice-daily, is published on The Economist website showing interactive economic and financial indicators. In 2014, The Economist had forecasted Pakistan to be world’s sixth fastest-growing country.
Our economy has depth and space for improvement. The incumbent government is working on CPEC. If peace and security in the country is maintained, we can increase our GDP up to 7%.
Pakistan wants to include all regional countries in CPEC and because of that our coming generations can benefit from this project. The growth in Pakistan has also increased. Operation Zarb-e-Azb has also restored confidence of investors. Many global economic institutions have appreciated the performance of Pakistan’s economy. The global attention is shifting towards Pakistan now due to its geo-strategic position in the world.
Foreign investors are now looking towards Pakistan as a lucrative market. These are outcomes and results of democracy and credit goes to the present government. CPEC is a gigantic project and it will change the fate our country. Foreign companies from UK, Turkey, and Arab countries are taking interest in investment in Pakistan. Companies from Central Asian countries are also willing to invest in Pakistan. The country is moving towards betterment. Despite all the controversies and conspiracies against CPEC, we should join hands together to make CPEC successful.