The China Pakistan Economic Corridor Myth

Discussion in 'Pakistan' started by Mikesingh, Sep 10, 2015.

  1. Mikesingh

    Mikesingh Senior Member Senior Member

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    Pakistanis have been going to town about the China Pakistan Economic Corridor that would link their port of Gwadar to Kashgar in Xinjiang Province of China. Some Pakistani commentators have even said that soon rivers of gold would flow through Pakistan!! Really?



    Ok. Let’s get a reality check…..



    Out of this $46 billion ‘investment’ by China, $11 billion is being borrowed by Pakistan as a LOAN from China to build the road. Payback time is when it will start to hurt! The rest of the infrastructure is being made by Chinese companies which would be funded by Chinese banks. The cost the Pakistanis would therefore be paying for electricity would be around Rs18 -20 PKR per unit in contrast to an average of Rs 8 per unit what they're paying now!! After all, the Chinese companies aren't going to give their deeper-than-ocean friends any freebies as they would need to pay back their borrowings from banks including interest and make profits too!

    Coal plants that are planned to be set up for energy are old existing ones that will be transferred to Pakistan as the Chinese have stopped coal fired plants due to climate change issues. So Pakistan would be saddled with old stuff producing more pollution than energy!!

    Have they calculated the cost of transportation along this road? An average of $460 per ton or Rs 46,000 PKR per ton from Pakistan to Kashgar! That's almost Rs 5 Lakhs PKR per 10-ton truck - more than the cost of what is being transported!! Would Pakistan’s exports, which are mostly low value goods, to China along this road be viable? Not by a long shot!

    Gwadar will be completely controlled by China operationally as it has been leased out to them for 40 years! Pakistan’s exports from here, if any, will be heavily taxed as the Chinese companies controlling the port will need to pay back loans to their banks as well as make profit.

    More importantly, Pakistan’s provinces have already started fighting for the 'spoils' and putting spokes in the wheel! Like why is Sindh getting six power plants out of 11? The others are already up in arms and have threatened to scuttle the project. Vested interests will be one big speed-breaker to this project.

    Employment generation? Most of the workers will be Chinese. Like the 11,000 stationed permanently in GB for infrastructure development. How many Pakistanis are working with the Chinese there? Just a handful!

    Therefore, it's not all hunky dory as it sounds. And the Chinese, the businessmen that they are, will extract their pound of flesh from the ordinary Pakistani. There are no freebies in this world despite the 'deeper than the oceans' friendship!

    And, finally and most importantly, the Chinese are making this 'economic corridor' for their own strategic and national interests. Their strategic aim is to establish a PLAAN base at Gwadar to try and dominate the Strait of Hormuz from where a large proportion of the world’s oil flows. Not only the Strait of Hormuz but also to try and dominate the Arabian Sea and the Indian Ocean. The CPEC is the only viable option for providing logistics support to their future naval base at Gwadar.

    Pakistan is just a side show in this project. The sooner this is realized by the Pakistanis, the better. All this talk of them achieving super power status due to the CPEC is a lot of bull and hot air.
     
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  3. sob

    sob Moderator Moderator

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    You missed one point. They will be charging transit fees to the Chinese and that will be considerable.

    IIRC for the IPI pipeline, if it ever goes through India would be paying almost US $ 500 Million per year for transit fees. For a country with such poor finances this is indeed a very big figure.
     
  4. sob

    sob Moderator Moderator

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    If you watch this video and listen to the analysis of the gentleman on the extreme left you will understand better what I mentioned above.

     
    Last edited: Sep 10, 2015
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  5. Mikesingh

    Mikesingh Senior Member Senior Member

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    Beijing has the kind of capital it can invest in such places where it is guaranteed higher returns. This is contrary to the issue of Pakistan charging transit fees on Chinese goods instead!

    How then would the Chinese companies pay back their massive borrowings to the Central Bank of China and other lending institutions? The Chinese instead would in all likelihood charge Pakistanis transit fees and other overheads! Like Gwadar has been leased to China for 40 years and Pakistanis would be charged for using it.
     
  6. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    @Mikesingh - how did you arrive at 460$ per ton value?

    I too think that this road would be much more expansive than sea. But the above figures seem too high.
     
  7. Mikesingh

    Mikesingh Senior Member Senior Member

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    Here.....

    Picture2.jpg

    This is over normal terrain on LTL trucks. Much of the CPEC is over mountainous areas that would almost double the cost due to fuel consumption, wear and tear, turnaround etc.
     
  8. warrior monk

    warrior monk Regular Member

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    Economics 101
    Infrastructure build up of an economy is only helpful when there is a supporting industries to use that infrastructure and it has a skilled population to leverage it , Pakistan has none of the two criteria. This CPEC is nothing but China creating transit route to its western part from a warm water port , Pakistan 's gain will be minimal at best in the form of transit fees and more power will reduce load shedding.
     
    Last edited: Sep 10, 2015
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  9. Mikesingh

    Mikesingh Senior Member Senior Member

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    Spot on! And what in the name of God is Pakistan going to export to China along the CPEC? Jute prayer mats? Cotton shirts? These are very low value goods and the cost of transportation will be more than the value of goods!!

    And then, China already has a huge apparel industry, so why should they import from Pakistan? Is there anything else the Pakistanis can export? Nix! (I ain't meaning terror here!! [​IMG] Lol!)
     
  10. salute

    salute Senior Member Senior Member

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    whatever he is saying not possible before nuclear disarmament of paki,
    because pakis armed with nuclear weapons always gonna want to extort india,
    by threatening to shutdown of those corridors or pipelines he talked about,
    and india cannot use force to do anything against,

    and if pakis thinks that india gonna economically dependent on pakis,especially nuclear armed pakis,by taking their words of peace and building all those corridors and pipelines through paki country, lol,

    pakis must be nuclear disarmed before that then they cannot economically threat india, even if india becomes depended upon them for some corridors or pipelines,
    because if they do then india can use force against it,

    paki country is a wrong country to have nuclear weapons anyway.
     
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  11. brational

    brational Regular Member

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    Pipelines through Pak is a risky proposition. Even if India gets land access through Pak, India will pursue Chabahar. Pakistanis are dreaming that India will become dependent on them if they allow access.
     
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