Saturday, December 23, 2017

Can CPEC Make Pakistani Manufacturing More Competitive?

In addition to a basic sense of security, the cost of production and availability of required skills are essential for making manufacturing competitive. Cost has several components: labor cost and abundant, cheap energy and infrastructure. Skill comes from education and training infrastructure. Will CPEC (China-Pakistan Economic Corridor) help Pakistan achieve competitiveness on these fronts?

Pak-China Industrial Corridor Source: Wall Street Journal

Abundant, Cheap Energy:

Costs rise dramatically if expensive plant and equipment are not fully utilized due to lack of gas and electricity. It is hard for a manufacturer to be competitive if its factories lie idle for many hours a day due to load-shedding as has been the case in Pakistan for many years. 

Transport Infrastructure:

Manufacturers rely heavily on efficient supply chains. They need required parts delivered on time to continue to operate. Others who depend on their output need to have their orders filled on a just-in-time (JIT) basis. All of this not possible without reliable transport infrastructure over roads, rails, air and sea.  

Skilled Labor:

Energy and infrastructure are necessary but not sufficient to be competitive. Availably of skilled labor is just as important. If the education and training infrastructure does not supply the required skills, then it's not possible for an economy to be competitive.  

China Pakistan Economic Corridor: 

Can China Pakistan Economic Corridor deliver energy, transport infrastructure and skilled labor to improve Pakistani economy's competitiveness? It appears that the first two will be in good shape after CPEC projects are completed. However, significant questions remain with regard to the education and vocational training infrastructure to build the required skilled labor pool. 


Abundant, cheap energy, transport infrastructure and availability of skilled labor are essential for improving Pakistan's manufacturing competitiveness.  It appears that the first two will be in good shape after CPEC projects are completed. However, significant questions remain with regard to the education and training infrastructure to build the required skilled labor pool

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nayyer ali said...

Press reports suggest that the power situation has already improved and loadshedding has become minimal across the country, though I'm not sure how accurate that is. Pakistan has 25 gigawatts installed capacity, CPEC is going to build about another 15 gigawatts and then there are power projects outside CPEC that should also be moving ahead. The Diamer Bhasha dam is a giant project, able to generate 4.5 GW by itself, but Pakistan now wants to build it alone as China wanted ownership of the dam if they built it, and the ADB and World Bank will not fund the 14 billion dollar cost because it is in Kashmir and India opposes it. Using domestic coal to generate power is smart, but the country also has great solar and wind resources that are not being adequately exploited up to now.
One of the factors holding back export growth is an overvalued exchange rate, the government has held the rupee rate at about 100 per dollar for several years, and not allowed it to devalue in line with inflation. This has given the country an overvalued currency which harms exports. The PMLN probably will hold off on meaningful devaluation until after the 2018 election, but I expect the rupee to slip to 125 to 130 to the dollar.
If all projects currently planned get built, do you know what the power capacity will be in 2030?

Riaz Haq said...

NA: "If all projects currently planned get built, do you know what the power capacity will be in 2030?"

Forecasters like PwC predict Pakistan's PPP GDP to nearly double to nearly $2 trillion in current PPP dollars by 2030.

Even if we assume greater efficiency, it will require at least 50% more energy than what Pakistan consumes today.

The projected installed capacity I have seen in the media is about 40-45,000 MW by 2030.

In addition, I expect solar to pick up strongly with declining solar panel costs and new feed-in tariffs being introduced.

Riaz Haq said...

Strategic Insights by #India's Sunil Sharan : #Pakistan, a rising power … via @TOIOpinion

Yet, one nation is a rising power, ready to take its rightful place in the comity of nations, while the other is deemed a global pariah, a jelly state if not a failed state. Huh? How did this happen?

The reality is different. The world pays lip service to India for its large middle class and its ability to buy arms on a large scale. India seems to consider this courting as its emergence on the world stage.

Scratch the surface, and you will find something else. The US is denying Indians H1-B visas. The US has delinked the Haqqanis, who they want, from Hafiz Saeed, who they couldn’t care less about, so that they can give dollops of aid to the Pakistanis.

Today the Yanks hector the Pakistanis, but that is empty bluster. The Pakistanis have trumped them; the Yanks’ wails appear like crocodile tears. The Yanks forgot when they invaded Afghanistan and enlisted the Pakistanis’ help by threatening to bomb them into the stone age that the Pakistanis had been there once before.

That time they trumped the Russians, with significant money and arms from the Americans and the Saudis. But the Americans never took to battle in Afghanistan the first time round. Sure they had read that Afghanistan was a graveyard for empires, from the British to the Soviet, but they believed, foolishly, that they themselves would win out.

They struck a Faustian bargain with the Pakistanis, without ever realizing that they were dealing with the devil. In the nineties, the Pakistanis used Afghanistan to hijack Indian planes and launch jihad in Kashmir. Afghanistan had become both strategic depth as well as a launching pad for them. How were they expected to give up this twin treat?

Once the Yanks entered Kabul, the Taliban vanished. Into thin air? Oh no, many of them disappeared into Pakistan. The Yanks forgot about Afghanistan, until first the Iraqis, and then the Taliban, started knocking their teeth out. One by one their Nato brethren fled Afghanistan, until the Yanks realized that they had to flee as well.

Go to Kabul today, and you will find disdain for Pakistan everywhere. But the Pakistanis don’t care. The real people who matter in Afghanistan are the Taliban, and you don’t find many of them in Kabul. The writ of the government of Afghanistan extends over only Kabul, much as the later-day Mughals were derided as the mayors of Delhi.

The Taliban control over sixty percent of the country. The Talibs don’t like the Pakistanis, referring to them often as blacklegs. But the Talibs need Pakistan to capture Kabul, much as the Pakistanis need the Taliban to capture Afghanistan.

The Pakistanis are disdainful of the threats emanating from the Yanks. The Yanks need Pakistani territory to transport supplies to their legionaries in Afghanistan. The Pakistanis blocked their land routes once, and all hell broke loose then. It’s almost impossible to transport goods from the west of Afghanistan.


Today Pakistan stands on the cusp of victory in Afghanistan. It spurns the Americans for the Chinese, and lo and behold, the Russians, the very people it had helped kick out of Afghanistan. Politics, or rather realpolitik, sure does make for strange bedfellows.

Pakistan is able to stymie India at every international forum, be it the UN or the nuclear suppliers group. There have even been strong rumours about the Obama administration offering the Pakistanis their own nuclear deal. Trump yells and curses at the Pakistanis, but is the first one to give it gobs of military aid.

Pakistan sure doesn’t seem like a loser. It appears to have come out of Afghanistan smelling of roses. It can blackmail America to its heart’s content, and what is more, happily get away with it. Does it seem like a failed state? A terrorist state? A terrorized state? At least not now. For now it seems that Pakistan’s star, that star in their beloved crescent, is rising. And rising.

Riaz Haq said...

China has stopped being a low labor country many years ago, he noted, adding that Apple entered China because of the advancement of people's skills.

Tim Cook, CEO of Apple at the 2017 Fortune Global Forum /CGTN Photo

Talking about Apple's operations in China, Cook said the company holds 15 percent of the country's smartphone market, but noted that the focus is to produce the best products.

He also noted that there are two million app developers in China who are contributing to the app store, and "these are inspiring entrepreneurs."

Cook also attempted to set the record straight about the misconception that Apple products are "designed in California, and manufactured in China."

"The truth is the process engineering and process developments that are associated with our products require innovation itself, not only on the products the way it is made."

Cook also elaborated on the concept of humanity within the realm of technology, which he touched upon a couple of days ago at the fourth World Internet Conference.

He said Apple stands at the intersection of technology and liberal arts, with users at the center. He maintained that a great user experience should be the focus, and noted that in a world where tech can do anything, developers should put humanity at the center of their creations.

Anonymous said...

Forecasters like PwC predict Pakistan's PPP GDP to nearly double to nearly $2 trillion in current PPP dollars by 2030.

Yes, but that is in NOMINAL PPP dollars and not in CONSTANT PPP dollars. To see what this means in real terms, we should normalize---

2017 (Today):
Pakistan 1.05 Trillion$
India 9.4 Trillion$

Pakistan 2.0 Trillion$
India: 29 Trillion$

So In 2030, India's economy would be 14-15 times larger instead of the 9-10 times larger it is today.

Riaz Haq said...

Anon: "2030: Pakistan 2.0 Trillion$ India: 29 Trillion$
So In 2030, India's economy would be 14-15 times larger instead of the 9-10 times larger it is today."


Here are the correct figures from PwC forecast for 2030 and 2050:

2014: India $7,277 billion Pakistan $884 billion (Ratio 8.23)

2030 (in constant 2014 dollars) : India $17,136 billion Pakistan $1,832 billion (Ratio 9.35)

2050 (in constant 2014 dollars): India $42,205 billion Pakistan $4,253 billion (Ratio 9.82)

If history is any guide, Pakistan economy will most likely grow faster than the PwC forecast assumes.

At 6% per year, it can double every 12 years (Rule of 72: 72/6=12 )

Riaz Haq said...

CPEC With Virtues Blessed Pakistan With Bountiful Harvest In 2017 [ANALYSIS]

Discussing the energy sector under CPEC, there were 16 projects prioritized with the total capacity of 10,400MW as well as 8 actively promoted projects. Year 2017 has witnessed the operationalization of 2x660MW Sahiwal Coal-Fired Power Plant, 50MW Dawood Wind Farm and 50MW Sachal Wind Farm. Near to completion are the 900MW Quaid-e-Azam Solar Park in Bahawalpur (90% work has been done) and 100MW Jhimpir Wind Farm. 2x660MW Port Qasim Coal-fired Power Plant, 4x330MW Engro Thar Coal-fired Power Plant and Surfice Mine in Block II of Thar Coal Field, 720MW Karot Hydro-Power Project, and 873MW Suki Kinari Hydropower Project are under construction.
Year 2017 has witnessed the seventy percent completion of the two infrastructure projects; KKH PhaseII(Havelian- Thakot Section),120 km, Karachi-Lahore Motorway (Sukkur-Multan Section),392 km. Rest of the infrastructure projects are working on their pace while the spine of the CPEC Railway Line ML-1’s complete feasibility report has been compiled up for the further progress. An efficient and fast transportation network is vital importance for the economic development.

In the area of industrial cooperation under CPEC, there are six projects under construction and year 2018 will be witnessing their destiny. China has advantages in experience, technology, financing and industrial capacity, while Pakistan enjoys favorable conditions in resources, labor forces and market. By carrying out industrial cooperation, both sides will achieve mutual complementarity and win-win results.

Year 2017 marked a landmark achievement for Pakistan as Federal Minister Ahsan Iqbal said that CPEC Long Term Plan would be public on 18th of December, 2017 which would further add the prospects for more inclusive research of this mega project. Simultaneously, there are bright prospects to jack up the developments in various sectors which include agriculture, information technology. This demonstrates the success of this meeting and the willingness of China to diversify its cooperation under the CPEC project. In this backdrop, the harmony between the provincial and federal governments is required and they should work enthusiastically for the inclusion of more projects under CPEC and to complete the ongoing projects. It can be hoped that the end result would be productive and the project will be able to proceed. The continuity of the meetings of Joint Cooperation Committee since 2013 to Nov 2017 shows the evaluation and progress of work on the ongoing projects under CPEC. 7th JCC has further deepened mutual cooperation between the two countries under the framework of CPEC and would pave a clear way for Pakistan to enter the phase of Industrial Cooperation.

CPEC has helped Pakistan to mitigate the chronic energy crises which have negative impacts on the economic growth of Pakistan. This energy shortage has hampered the industrial production and the businesses were closed down because of the interrupted supply of energy. CPEC project has played a significant role in this regard whereas WAPDA and KESC failed to resolve this problem of energy shortage. CPEC energy projects based on the wind, solar, coal and hydro power would create the generation of 16,400 MW.

Riaz Haq said...

#China completes work on $1.7 billion project to transform #Pakistan’s dysfunctional national grid. The 878km, 660kV DC, #Matiari–#Lahore transmission line will provide the national grid with a new backbone. 1300 #Chinese & 650 #Pakistanis worked on it.

A $1.7bn electricity transmission line on the China–Pakistan Economic Corridor (CPEC), which was begun in December 2018, was inaugurated in a ceremony held in Islamabad and Beijing at the end of last month.
The 660kV Matiari–Lahore high-voltage direct current line will provide Pakistan’s national grid with a new backbone and improve chronic problems with the country’s energy transmission and distribution grids.

The 878km line was financed and built by the State Grid Corporation of China, which will operate it for the next 25 years.

More than 1,300 Chinese and 6,500 Pakistani workers were employed on the scheme.

Hammad Azhar, Pakistan’s energy minister, said the project would bring stability to the country’s power system. Speaking at the online ceremony, he said the project would “enhance transmission capability and bring relief to consumers”.

Electricity generation in Pakistan has increased dramatically in recent years, thanks to the large-scale construction of mainly coal-fired plants funded by China.

As a result the country has an installed capacity of around 37GW and peak demand of only 25GW, although this is growing at a rate of about 5% a year. However the grid is able to handle only 22GW of power, resulting in chronic blackouts and load shedding, particularly in the summer when demand is highest.

However, problems occur in winter as well. In January of this year, the entire country suffered a blackout after a fault at a power station in southeast Sindh province caused the grid to lose its 50Hz frequency, which caused power stations throughout the country to close down.

This makes the reinforcement of the grid, arguably, the single most important infrastructure scheme for the country’s socio-economic development.

Zhang Jianhua, head of China’s National Energy Administration, told those present at the ceremony that the Matiari-Lahore line was the first large-scale transmission project of the CPEC, and would provide “solid assurance” for power transmission in the south and power supply in the north.

Speaking about the economic corridor in general, Azhar added: “The CPEC is of utmost importance for Pakistan. It will enable the country to enhance industrial production, upgrade energy and communication infrastructure and improve connectivity within the region.”

Of Pakistan’s 207 million people, roughly 58 million lacked access to grid electricity in 2018, including 46% of the rural population.

Riaz Haq said...

Pakistan light oil pipeline project undertaken by CPP completed

FAISALABAD, Jun. 13 (Gwadar Pro) –Recently, the MFM MoGas Project – (MFM MP) Phase-II (TS-3 & TS-4), constructed by China Petroleum Pipeline Engineering Co., Ltd. (CPP) was officially completed and successfully passed the owner's inspection.

“Since we officially entered the Pakistani market in July 2014 and registered the Pakistan Branch of China Petroleum Pipeline Engineering Co., Ltd. in October 2017, we have completed a total of 9 projects here. Beyond all question, the light oil pipeline project means another challenge for us," said Wang Desheng from the TS-3 & TS-4 EPC Project Department in an exclusive interview with Gwadar Pro.

“Our owner, Pak–Arab Refinery Limited (PARCO), operates a pipeline transportation system of more than 2,000 kilometers, from Karachi in the south to Lahore in the north, which can be described as the main artery that helps Pakistan’s north-south energy transmission. In recent years, demand for motor gasoline has grown rapidly in north and central Pakistan, so the PARCO started planning to use the same pipeline to transport gasoline to alleviate the shortage in the region, thereby stabilizing its market share in north-central Pakistan,” Wang told Gwadar Pro, “therefore, Mahmood Kot-Faisalabad-Machike (MFM) Pipeline Phase II Reconstruction and Expansion Project came into being, which also included our project.”

The TS-3 and TS-4 stations are located in Faisalabad and Sheikhupura, Punjab, respectively. The former includes a single gasoline storage tank (42 meters in diameter, 12.6 meters in height, and a tank capacity of 15,000 cubic meters), a fire water storage tank (15.24 meters in diameter, 13.1 meters in height and a tank capacity of 2200 cubic meters), etc. The latter includes 2 single gasoline storage tanks (42 meters in diameter, 12.6 meters in height and a tank capacity of 15,000 cubic meters), a fire water storage tank (18.2 meters in diameter, 14.63 meters in height and a tank capacity of 3500 cubic meters) and related supporting facilities.

According to Wang, their project has always adhered to the strictest engineering quality standards since the start of construction in November 2017 until the owner issued the completion certificate recently. “During the construction period of several years, our team overcame challenges such as local climate, customs differences, project safety, and successfully overcame the huge difficulties brought by the COVID-19 epidemic, and the project proceeded smoothly. It can be said that the owner's affirmation means our success,” Wang emphasized.

Besides, as for employment, the project also created a series of jobs to local technical talents. The reporter learned that during the peak construction period, the total number of people on site reached nearly 400. The project department recruited a group of skilled and experienced Pakistani engineers, and the person in charge of HSE also provided training on epidemic prevention and various rules and regulations.

In Wang’s view, there are huge opportunities for cooperation between CPP and Pakistani companies in the oil and gas industry, which has a considerable market in Pakistan. At present, the CPP has established good cooperative relations with major oil and gas industry owners such as SSGC, SNGPL, PARCO, ISGS, OGDCL, etc. in Pakistan, and has won a good reputation locally. “In the future, we will always pay attention to local policy trends and seize the opportunity to promote the comprehensive development of large-scale oil and gas projects in the China-Pakistan Economic Corridor. China-Pak friendship Zindabad!”

Riaz Haq said...

Muneeb Sikander
1/2 Pak Flood hit rural economy

Work produces things of value and transforms physical world in ways to make life better and survival possible.

But without organised and purposeful productive action, i.e., work, not possible for most people asis at the base of economic order


2/2 Flood hit rural areas

Agrarian to agriculture/livestock based or limited workshop industry. Limited Agri TFP + 15.4 million at poverty risk

1. Need for agri TFP improvement
2., Need to diversify economic base by Proto-industrialization,

Riaz Haq said...

CPEC Results According to Wang Wenbin of China

Bilal I Gilani
CPEC projects are creating 192,000 jobs, generating 6,000MW of power, building 510 km (316 miles) of highways, and expanding the national transmission network by 886 km (550 miles),” Foreign Ministry spokesman Wang Wenbin told reporters in Beijing."

Associated Press of Pakistan: On July 5, Prime Minister Shahbaz Sharif while addressing a ceremony to mark a decade of signing of the China-Pakistan Economic Corridor (CPEC), said that CPEC has been playing a key role in transforming Pakistan’s economic landscape. He also said that the mega project helped Pakistan progress in the region and beyond. What is your response?

Wang Wenbin: The China-Pakistan Economic Corridor (CPEC) is a signature project of China-Pakistan cooperation in the new era, and an important project under the Belt and Road Initiative. This year marks the 10th anniversary of the launch of CPEC. After ten years of development, a “1+4” cooperation layout has been formed, with the CPEC at the center and Gwadar Port, transport infrastructure, energy and industrial cooperation being the four key areas. Projects under CPEC are flourishing all across Pakistan, attracting USD 25.4 billion of direct investment, creating 192,000 jobs, producing 6,000 megawatts of electric power, building 510 kilometers of highways and adding 886 kilometers to the core national transmission network. CPEC has made tangible contribution to the national development of Pakistan and connectivity in the region. China and Pakistan have also explored new areas for cooperation under the framework of CPEC, creating new highlights in cooperation on agriculture, science and technology, telecommunication and people’s wellbeing.

China stands ready to work with Pakistan to build on the past achievements and follow the guidance of the important common understandings between the leaders of the two countries on promoting high-quality development of CPEC to boost the development of China and Pakistan and the region and bring more benefits to the people of all countries.

Riaz Haq said...

The mega undertaking (China-Pakistan Economic Corridor or CPEC) has created nearly 200,000 direct local jobs, built more than 1,400 kilometers (870 miles) of highways and roads, and added 8,000 megawatts of electricity to the national grid, ending years of blackouts caused by power outages in the country of 230 million people.

Chinese Foreign Ministry spokesman Wang Wenbin told reporters in Beijing earlier this month that CPEC projects "are flourishing all across Pakistan," making a "tangible contribution" to the national development of the country and to regional connectivity.

But critics say many projects have suffered delays, including several much-touted industrial zones that were supposed to help Pakistan enhance its exports to earn much-needed foreign exchange.

The country's declining dollar reserves have prevented Islamabad from paying Chinese power producers, leading to strains in many ties.

Pakistan owes more than $1.26 billion (350 billion rupees) to Chinese power plants. The amount keeps growing, and China has been reluctant to defer or restructure the payment and CPEC debts. All the Chinese loans – both government and commercial banks – makeup nearly 30% of Islamabad's external debt.

Some critics blame CPEC investments for contributing to Pakistan's economic troubles. The government fended off the risk of an imminent default by securing a short-term $3 billion International Monetary Fund bailout agreement this month.

Security threats to its citizens and interests in Pakistan have also been a cause of concern for China. Militant attacks have killed several Chinese nationals in recent years, prompting Beijing to press Islamabad to ensure security measures for CPEC projects.

Diplomatic sources told VOA that China has lately directed its diplomats and citizens working on CPEC programs to strictly limit their movements and avoid visiting certain Pakistani cities for security reasons.

"They [Chinese] believe this security issue is becoming an impediment in taking CPEC forward," Senator Mushahid Hussain, the chairman of the defense committee of the upper house of the Pakistani parliament, told VOA in an interview earlier this month.

"Recurring expressions of concern about the safety and security of Chinese citizens and investors in Pakistan by top Chinese leaders indicate that Pakistan's promises of 'foolproof security' for Chinese working in Pakistan have yet to be fulfilled," said Hussain, who represents Prime Minister Shehbaz Sharif's ruling party in the Senate.