The economic
benefits of the
modern silk road:
The China–Pakistan
Economic Corridor (CPEC)
© The Association of Chartered Certified Accountants
August 2017
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About Pakistan-China Institute (PCI)
Pakistan-China Institute, launched in October 2009, under the Chairmanship
of Senator Mushahid Hussain Sayed has emerged as the primary
organization devoted to promoting people-to-people relations between
Pakistan and China. PCI is a key player in fostering multilateral dialogue,
promoting cultural and economic connectivity, along with acting as a unique
bridge between Pakistan and China to develop a closer, strategic partnership.
Pakistan-China Institute aims to take up a leading role in generating discussions and analysis on
multiple aspects of the diplomatic relations between China and Pakistan, as well as the entire
region. An integral part of PCI’s mission is to serve as a resource to all those who seek a better
understanding of the changing dynamics of regional relations, particularly in relation to Pakistan
and China.
More information is here:
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 3
Contents
Foreword 4
Executive summary 6
Introduction 8
1. What is the Belt and Road initiative (B&R)? 9
2. The China–Pakistan Economic Corridor (CPEC) 10
3. The impact of CPEC on Pakistan’s economy 13
4. CPEC and different sectors of the economy 15
5. Mode of doing business in Pakistan for Chinese companies 18
6. Are Pakistani businesses prepared for the imminent change? 19
7. Capital markets 22
8. Ease of doing business and investment facilitation 25
9. Human development: areas of growth for finance professionals preparing
for the future 27
10. SWOT analysis and expert forums in the four provinces and the capital 30
11. The way forward 37
References 38
4 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
Foreword
The Pakistan-China Institute (PCI) has
emerged as the primary organisation
devoted to promoting people-to-people
understanding and friendship between
Pakistan and China. The institute has
emerged as a key player for fostering
multilateral dialogue, promoting cultural
and economic connectivity, along with
acting as a unique bridge between
Pakistan and China to develop a closer,
strategic partnership. PCI’s theme of
‘Cultures, Corridors & Connectivity’
(CCC) is closely aligned with the
intricate link of Belt & Road with
cultural engagement, which was
also emphasized upon by President
Xi Jinping during the Belt & Road
Forum, in May 2017.
Pakistan-China Institute, as a think tank, is
committed to continue its role as being
the focal platform in Pakistan for taking
the Belt & Road initiative and CPEC
forward, along with playing its role in
supporting cultural engagement across
the region.
I am pleased to see an informative and
insightful research report as a joint
product of PCI and ACCA. Such research
will be instructive for policy makers,
academics, students and businessmen
alike, and will help put into perspective
the market dynamics and perceptions
that have evolved thus far, as well as the
challenges that the project may face and
therefore, may help in highlighting the
issues which need to be addressed for
smooth continuity of this significant
project.
I am confident that this is one of many
more research reports to follow that we
shall undertake to continue to play a
leading role in research, advocacy, and
diplomacy for the Belt and Road Initiative
as well as the China-Pakistan Economic
Corridor. We believe that the Belt and
Road Initiative is the biggest multifaceted
development agenda of recent history,
and CPEC being its flagship project is a
key case study for the Belt and Road
countries to observe and emulate, making
research on this project significantly
important.
Mustafa Hyder Sayed
Executive Director
Pakistan-China Institute
Right from day 1 when the Chinese
premier Xi Jinpeng visited Pakistan in
April 2015 the accounting fraternity like
other stakeholders in the Pakistan
business community became absorbed
with the economic, social and political
consequences of the USD50bn China
Pakistan Economic Corridor that was
being inked by a variety of Chinese
organisations with public and private
sector parties in Pakistan. The spectrum
of CPEC investments included IT, roads
and bridges, ports and shipping, railways,
enterprise zones and energy plants. For
Pakistan this was seen as an injection of
long term growth and stability hormone.
Articles started appearing in newspapers;
TV was streaming expert views of CPEC
into homes 24/7 and of interest to ACCA,
professional groups formed on social
media to microscopically examine every
aspect of CPEC. It was this mass elevation
of CPEC to the top of the professional
conversation charts that prompted ACCA
to invest in research at a national and
global level. Internally ACCA calculated
that 22 countries in which we operate
were directly on the Chinese Belt and
Road project which meant for ACCA that
BRI would surely be a factor for our own
strategic planning and certainly merited
greater attention and understanding.
ACCA more than any other professional
body thinks ahead and plays an important
role in keeping its members, the
professional community and business
people informed of what is appearing on
the business horizon. Pakistan is an
important country with a population of
220 million, geo-strategically positioned
to provide enormous trade and
commercial opportunities to Central Asia
and Central and Western China from its
newly built deep water port Gwadar.
Pakistan is also a country that has a strong
accounting profession, a long history of
outstanding banking and finance and one
of the most resilient economies which has
enormous potential. ACCA has long
recognized the role accountants can play
in economic growth and stability. ACCA
members over the last two decades in
Pakistan have gained great insights into
the Pakistan economy and workings of
business enterprises and they live the
values enshrined in Kennedy’s speech
“ask not what your country can do for you
but rather what you can do for your
country!” There is a feeling in Pakistan
that this is their time; Pakistan too can be
an Asian tiger economy, Pakistan can start
walking the walk of the economists
Mahboob Ul Haq’s economic blue print
for Pakistan that was later adopted by
South Korea and Malaysia as part of an
economic model. I am delighted that we
have launched this report “The Economic
Benefits of the Modern Silk Road –
CPEC” in Pakistan to start a dialogue
amongst the finance professional and
show leadership in thinking and planning
for Pakistan’s future.
Helen Brand OBE
Chief executive
ACCA
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 5
6 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
CPEC anD ItS IMPaCt On tHE
PEOPlE OF PakIStan
The China Pakistan Economic Corridor
(CPEC) is an unprecedented undertaking
for Pakistan. The Chinese Ambassador to
Pakistan, His Excellency Mr Sun Weidong,
has summarised CPEC and its benefit in
the following manner.
‘[The] China-Pakistan Economic Corridor
is a major and pilot project of the Belt
and Road Initiative, to which the leaders
of our two countries have attached
great importance and rendered active
promotion. It has also won the across-
board support from our two peoples as it
aims to provide new opportunities to the
citizens as well as bring new impetus and
vision to China–Pakistan friendship.
‘CPEC is a long-term and systematic
project to promote economic
cooperation through collaboration on
Gwadar port, energy, transportation
infrastructure and industrial cooperation.
‘CPEC will bring solid benefits to our
two peoples. With the completion of
energy and infrastructure projects,
conditions in Pakistan will improve.
There will be more electricity integrated
into [the] national grid and the electricity
supply will be more stable. People will
enjoy more convenient transportation
and a better livelihood. Alongside the
major projects, we are setting up social
welfare institutions, especially in
Gwadar, in the form of [a] primary
school, vocational training centre, and [a]
hospital with [the] Chinese government’s
grant. We will also provide KPK province
with medical, educational and training
projects in line with the need of local
people, to translate the benefits of
CPEC immediately among them. For
average persons, the outcomes of the
CPEC are tangible, accessible and
enjoyable to hundreds of thousands [of]
families across the country’ (CPEC 2017a).
CHangE IS IMMInEnt
In an online survey of around 500 finance
and business professionals, conducted for
this report, 79% of them expressed the
view that businesses will adapt to the
changes engendered by CPEC and such
adaptations will be made in the business
plans of organisations in Pakistan within
one to five years.
tHE SkIllS nEEDED FOR FInanCE
PROFESSIOnalS tO DEal wItH
CHangE
In order to deal with the imminent
changes, finance professionals need to
equip themselves with the key skills of
effective communication, better use of
business analytics, knowledge of the
relevant taxation structure and strong
leadership.
Around 86% of survey respondents
agreed that they should attend short
courses on business, Chinese language
and culture.
Following the increase in Chinese
investments in Pakistan, professionals in
accountancy can explore providing a
one-stop-shop solution to investors,
from registration of a company to
accountancy and tax advisory services.
Executive Summary
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 7
gOvERnanCE StRuCtuRES
Over 54% of respondents agreed that the
board of directors will be the appropriate
forum for discussing and deciding upon
the opportunities that CPEC will bring,
while 32% agreed that organisations’ risk
management committees should be
engaged in evaluating such
opportunities.
RISk ManagEMEnt
Around 54% of respondents either
agreed or strongly agreed that there is
a need for risk-management
mechanisms in organisations for
reviewing and assessing the challenges
and risks that will arise from CPEC-related
business changes. Not everyone had
firm opinions on this, with %
remaining neutral.
EnvIROnMEntal IMPaCt
Only 26% of respondents agreed that
their organisations are taking steps to
address the environmental issues that will
arise from the impact of business growth
due to CPEC, while around 50% remained
neutral on the key question about the
steps that their entities will initiate to
protect the environment from these
changes.
SwOt analySIS
The key strengths cited by the business
and finance professionals include
availability of human resource in the
country, the potential for tourism, the
quality of infrastructure in the form of
roads, etc. Despite the availability of
human resource, however, one common
weakness cited was a lack of skills, so
there is a need for adequate capacity
building and increasing the literacy rate,
enabling Pakistan’s people to benefit
from the CPEC developments. Lack of
awareness about CPEC was also cited as
one of the country’s key weaknesses:
more workshops, seminars and
publications are required to educate
people to equip themselves for the future
changes. Possible failure to maintain law
and order is one of the key threats cited,
along with the mismanagement of
resources and governance-related issues,
while the opportunities commonly cited
include the generation of employment
opportunities, increased trade and
improvements in infrastructure.
8 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
Introduction
MEtHODOlOgy
This report is based on four key pillars:
• group discussions focusing on
SWOT analysis, held in four
provincial capitals and the federal
capital, with finance and business
executives
• an online survey of finance
professionals
• interviews with relevant stakeholders
• a review of media reports.
The results of these investigations were
analysed for the report.
This report explores the key capabilities
and skills needed by businesses and
aBOut tHIS REPORt
This detailed research report,
commissioned by ACCA Pakistan in
collaboration with Pakistan-China
Institute, aims to comment upon the
transformation taking place in Pakistan
due to the forthcoming China–Pakistan
Economic Corridor (CPEC), part of the
modern economic Silk Road. The report
had three purposes:
i. to review the overall expected
economic impact of CPEC on the
economy of the country
ii. to analyse the perception of CPEC
among finance professionals and their
views about plans to prepare for the
future, and
iii. to elaborate upon the skills needed by
finance professionals to benefit from
CPEC in the years ahead.
finance professionals in the changing
situation and also contains the results of
SWOT analysis conducted at Pakistan’s
four provincial capitals and the Federal
Capital. The findings in the report are
intended to allow stakeholders to engage
in a meaningful dialogue and to be used
as a tool for formulating long-term plans
and setting up models for progress.
This report also includes results of an
online survey of finance professionals
jointly commissioned by ACCA and the
Pakistan-China Institute, and conducted
between the end of March and June
2017. Around 500 finance and business
professionals across Pakistan participated
in the survey and answered questions in
the areas of business and financial
planning, human resource strategy,
governance models and environmental,
social and governance matters (ESG).
Further, to obtain the views of Chinese
companies, an interview was conducted
with Pakistan China Investment
Company’s executive and a survey
questionnaire was also circulated.
Executives from five Chinese companies
operating in Pakistan responded to this.
aBOut tHE SuRvEy
ACCA Pakistan initiated an online survey
to obtain the views of finance and
business professionals across the country.
The survey was based on fifteen
questions in five areas.
The aim of the survey was to compile and
analyse views from business leaders and
finance professionals on the China
Pakistan Economic Corridor, which is part
of the Belt and Road Initiative (B&R)
(ACCA 2017). The respondents were
ACCA affiliates, ACCA members and
members from other accounting and
professional bodies working in various
service, manufacturing or consulting
organisations across Pakistan.
Online survey
Analysis
Group discussion
focusing on SWOT
analysis
Interviews
Media reports
review
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 9
tHE BElt anD ROaD InItIatIvE
Having attained the position of the
world’s second largest economy, China
seems likely to reach the top spot in
record time. It is doing this by spending
its way to prosperity as part of a grand
strategy that seeks to attain both
geopolitical and economic competitive
advantage. Beijing has launched the Silk
Road Economic Belt and the 21st Century
Maritime Silk Road projects, collectively
called the Belt & Road Initiative (B&R) or
One Belt, One Road. Envisioned by
President Xi Jinping, the B&R is a massive
international development project that
envisages, at the least, a number of roads,
railway lines, ports, industrial zones, and
energy development projects that will
connect major economic centres in China,
via various routes, with Europe, and fuel
industrial development along them
(Figure ).
Figure : The Belt and Road Initiative: Six Economic Corridors Spanning Asia, Europe and Africa
B&R’s envisioned impact on each
participating country is primarily based
on the linkages that each project will
develop with the economy around it, and
workers employed, either directly by the
project’s implementing enterprises, or
indirectly by industrial value chains. A fair
picture of B&R’s impact potential is
indicated by its projected extent,
involving 65 countries, which constitute
over 60% of the world’s population, and
contribute to 40% of global GDP (Hofman
2015).
tHE nuMBER OF PROjECtS anD
aMOunt OF InvEStMEnt In B&R
How extensive is B&R? ‘Massive’ would
be the simple answer. But numbers allow
better understanding and the available
information, considering the wide
outreach of B&R and individual needs of
each participating country, indicates that
the B&R initiative will include a total of
900 projects, amounting to an estimated
cost of USD890bn.
FInanCIng tHE B&R
To finance these projects, multiple
institutions from China have pledged
financial support, including the China
Development Bank, Asian Infrastructure
Investment Bank (AIIB) and China EXIM
Bank. A state-owned Silk Road Fund has
also been set up to foster increased
investment along the Belt and Road
countries.
During the Belt and Road Summit for
International Cooperation, which took
place in May 2017, financial commitments
made by these institutions were increased
to accommodate the expanding number
of projects. The Silk Road Fund, which
was previously set up with USD40bn, saw
an additional funding
support. Similarly, was set
aside in a special lending scheme by
China Development Bank and China
EXIM Bank.
The B&R is geographically structured along six corridors and a
maritime route. The six land corridors are:
1. from western China to western Russia
2. from northern China to eastern Russia via Mongolia
3. from western China to Turkey via central and west Asia
4. from southern China to Singapore via Indochina
5. from southern China to India via Bangladesh and Myanmar.
6. from south-western China to and through Pakistan.
1
2
5
4
3
6
1. What is the Belt and
Road initiative (B&R)?
Figure : CPEC investment breakdown, USD46bn
Energy
Roads
Rail
Transport
4%
8%
75%
13%
10 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
One of the terms that a reader can find
almost daily in Pakistan’s English-
language newspapers is CPEC.
Among the six corridors, the China–
Pakistan Economic Corridor (CPEC) has
achieved the fastest and most effective
progress, with its 19 Early Harvest Projects
aimed at upgrading Pakistan’s transport
infrastructure and bridging the country’s
longstanding energy deficit (Pakistan
Observer 2017a). Investment policies and
financing services between the two
countries have evolved to support
projects being implemented under CPEC,
and have nurtured the enhancement of
industrial linkages and professional
practices to cater for increasing
investments.
CPEC, as part of ‘The Belt and Road’, is of
major interest in professional networks
around the world in general, and in
Pakistan in particular. While people
generally agree that B&R will benefit
Pakistan, there are fears that the country
may not be able to repay the loans
obtained to finance the project, that
China may dominate the project and that
consequently, Chinese objectives will
override Pakistan’s. Hence, the B&R
generates both hopes and fears.
2. The China–Pakistan
Economic Corridor (CPEC)
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 11
The B&R will enhance geographical
linkages by providing improved road, rail
and air transportation systems, facilitating
people-to-people contact.
This should stimulate academic, cultural
and regional knowledge and cultural
exchanges, increase the volumes of
trade and business, and facilitate
energy generation and transfer. These
changes will, ideally, optimise the
business environment and enhance
mutual cooperation. The B&R’s
promoters argue that this ‘win-win’
model will result in a well-connected,
integrated region of shared destiny,
harmony and development.
The CPEC is aimed at creating economic
regionalisation in a globalised world. Its
promoters see it as providing hope of
future regional improvement with peace,
development and economic growth
(CPEC 2017b).
Figure : CPEC’s planned rail networks
Railways Network of CPEC
2. The China-Pakistan Economic Corridor (CPEC)
Faisalabad
Legend
New Railway Line from Quetta
(Bostan) to Kotla Jam on ML-2 via
Zhob & . Khan (560km)
Reconstruction/Upgradation of
Quetta-Taftan existing railway,
633km long
Jacobadad 1,600km long
Karachi-Peshawar
PDL (High Speed
Railway Line)
Reconstruction of existing line
ML2 short and long term: water
hazard treatment, overhaul of
track, signal upgrading and
speeding up, extension of arrival/
departure track and electrification
Gwadar to Jacobabad and
Quetta (Mastung) via Besima
New Railway Line, 1328km long,
US $ billion investment
Construction of new line from
Peshawar to Torkham
Havelian-Kashi New Railway
1,059km long
Reconstruction of
ML1 Existing Railway including
locomotive purchase, overhaul of
track, signal upgrading,
electrification, construction of
double line, communication
upgrading and speeding up the
extending of arrival/departure lines
and construction of Karachi-Kotri
Double Freight Line.
Alternative Scheme of
Gwadar Port Passage
Lahore
Islamabad
Rawalpindi
Quetta
Hyderābād
Multan
Karachi
Shahdadkot
SukkurPan
jgur
Sur
ab
Taftan
Hos
hab
Gwadar
Nag
Zhob
Lodhran
Hongqilapu
Thal
Havelian
Kashi
Babin
Mirpur Khas
Barmer
Bes
ima
Mas
tun
g
Zahedar
Turb
at
Larkana
Baatinda
Tank
Khanewal
Landikotal/
Torkhum
Tuergate
Peshaw
ar
Havelian Dry Port
Havelian Dry Port:
US $40 million investment
Political economist Asad Abbasi1 has
looked at the benefits that China expects
for itself. ‘For Pakistan, CPEC might
represent “prosperity”, “unity”, etc., but
for China it is just one small part of Yi Dai
Yi Lu. This is usually translated into
English as “One Belt One Road” (OBOR)
but according to Tim Summers, senior
consulting fellow at Chatham House, the
English translation fails to convey the
dynamic meaning that the phrase
encapsulates. Yi Dai Yi Lu conjures up two
different epochs of Chinese history: Silk
Road of Tang Dynasty (618–906 AD) and
modern silk maritime trade routes from
coastal China. The aim of the project is to
connect China with 65 countries in Asia
and Europe. China estimates that OBOR
will add $ trillion to its trade over the
next decade’ (Abbasi 2016).
To summarise, the four key pillars of
CPEC include investments in the areas
shown in Figure .
Favoured by geography, Pakistan is
positioned as a bridge between the
Eurasian landmass that is home to the Silk
Road Economic Belt, and the Arabian
Sea, which is an essential link in the 21st
Century Maritime Silk Route.
tHE lInCHPIn OF CPEC – gwaDaR
PORt: wHERE tHE lanD anD
MaRItIME ROutES MEEt
The CPEC is a combination of
investments, one aim of which is to bridge
Pakistan’s energy deficit and so rejuvenate
its ailing industrial base, and loans. The
latter will pay for an overhaul of the
country’s road and railway infrastructure /
railway network to provide seamless
connectivity within the country, and
through it. The aim of this development is
to create the first North–South link
between the ‘Belt’ and the ‘Road’,
converging on the Gwadar Port, the
linchpin of CPEC.
InvEStMEnt In CPEC: uSD46Bn
anD gROwIng
CPEC is B&R’s flagship project, and its
implementation is considered to be
ahead of that of other corridors being
developed under the initiative. Having
been chosen as the first corridor, CPEC
was initiated with an extensive list of
projects amounting in value to USD46bn
(and growing). These projects
have been structured into short-,
medium-, and long-term plans,
extending for a period of 15 years
from the year of signing, ie from 2015
until 2030.
Over the two years 2015 to 2017, however,
the project portfolios remained flexible to
accommodate more projects, and the
funding needed increased further.
Beijing and Islamabad have been
successful in detailing the precise terms
for the financing arrangements, including
designating the institutions involved, and
determining the length of build-operate-
transfer (BOT) contracts, the quanta of
taxation and excise tariffs, projected
return on investments, the schedule of
repayments, and sovereign guarantees
offering assurance of returns, for both
loan and investment-based projects. The
exhaustive steps involved in strategising
and negotiating each of these aspects of
B&R financing may serve as a model for
other countries to follow for their own
B&R cooperation with China.
Figure : Key pillars of CPEC investment
Energy
Projects
Gwadar
Port
Industrial
cooperation
Infrastructure
development
1 Asad Abbasi has a Masters degree in Political Economy of Late Development from LSE. Currently, he is researching conceptual frameworks of development.
2. The China-Pakistan Economic Corridor (CPEC)
12 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
Legend
Lahore
Haripur
Islamabad
Faisalabad
Rawalpindi
Quetta
Hyderābād
Multan
Karachi
Shahdadkot
Sukkur
Panjgur
Surab
Basima
Rango
Hoshab
Gwadar
Khuzdar
Nag
Qila
Saifullah
Zhob
.
Khan
Khanewal
Khan
Bahawalpur
Darya
Gujranwala
Dera Allahyar
.
Khan
Burhan
Abbotabad
Peshawar
Thakot
Sazin
Havelian
Mansehra
Raikot
Gilgit
Khunjerab
Shinkiari
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 13
Pakistan’s economy will be boosted if its
energy crisis is resolved by CPEC.
Pakistan’s economy has tremendous
strategic development potential, as it is
located at the crossroads of south Asia,
central Asia, China and the Middle East
and thus can serve as the fulcrum for a
regional market with a vast population,
large and diverse resources, and
untapped potential for trade. The major
obstacles faced by Pakistan’s economy
include persistent industrial losses due to
the country’s energy crisis, low foreign
direct investment (FDI), lack of
infrastructure development, losses due to
the war on terror, and a combination of
low exports and high imports. The
average shortfall in the energy sector is
7,000 megawatts (Kiani 2017), which, in
the form of load-shedding and power
outages, cost the Pakistan economy
PKR1,439bn (7% of GDP) in 2015 (Pakistan
Observer 2017b). Major industries have
seen a downward slump in business
because of energy shortages. Under
CPEC, a grand total of 21 energy projects
have been planned. Altogether, these
projects would eventually produce 16,400
megawatts of power, roughly the same as
Pakistan’s current capacity. Also, 11 of
these projects, prioritised as the Early
Harvest Projects, are expected to provide
over 11,000 megawatts of electricity by
March 2018 (CPEC 2017c) – more than
sufficient to make up for Pakistan’s energy
shortfall of 7,000 megawatts.
One of CPEC’s primary objectives is to
address Pakistan’s pressing infrastructural
requirements. With nearly USD11bn
earmarked for its development, the road
and railway network will greatly benefit
Pakistan’s economy.
Figure : Roads planned for the CPEC
Source: CPEC 2017d
3. The impact of CPEC
on Pakistan’s economy
Highways Network of CPEC
ROaD InFRaStRuCtuRE tO IMPROvE
The road infrastructure (Figure ) will
see development along various routes
within CPEC, while not necessarily being
financed as part of it. These include
Gwadar–Hoshab, Khuzdar–Basima,
Karachi–Lahore Motorway (Sukkur–Multan
section), the Karakorum Highway, and
others. These development projects will
enhance the connectivity between all four
provinces and allow for ease of access of
goods. Pakistan Railways is set to attract
up to USD5bn investment for upgrading
and deploying new railway infrastructure
across Pakistan. To enhance connectivity
and improve transportation facilities, rail
track from Karachi to Peshawar will be
upgraded (CPEC 2017e). Other projects
for the railway infrastructure include
railway track from Kotri to Attock city.
SPECIal ECOnOMIC ZOnES
In its medium- and long-term projects,
CPEC aims to use the enhanced
infrastructure and energy generation
capacity to amplify Pakistan’s industrial
productivity. As one of the four
components of CPEC, industrial
cooperation projects are being
implemented to broaden the industrial
base in Pakistan through local and foreign
investments.
At the Federal level, as many as nine
Special Economic Zones (SEZs) have been
identified across the country, which, after
detailed feasibility studies, will be set up
with state-of-the art facilities in which
investors may capitalise (SEZ 2017). .
‘The Government needs to provide [a]
level playing field to Pakistani and
Chinese investors when it comes to SEZ’,
said Ehsan A. Malik, chief executive of the
Pakistan Business Council, in an interview
for this study. ‘There is a need to have a
detailed financial forecast about the
impact on exports due to new companies
which will be established in SEZs’, he
added. ‘Businesses related to
transportation, logistics and supply chain
shall definitely have growth. For Pakistani
businesses, there is a need to move up …
[the] supply chain and provide value-
added products to the world’,
While commenting on CPEC’s
environmental impact, Malik suggested
that the government could consider
initiating green bonds for the companies
that will be established under CPEC,
particularly in SEZs, so that the amount
generated can be used for protection of
the environment. Furthermore, Malik
emphasised the need for more
plantations, as the mega projects will also
result in deforestation.
InDuStRIal COOPERatIOn
PROjECtS
At a macro-level, the industrial
cooperation projects under CPEC will
potentially allow for import substitution
and export-led production, which will not
only lower Pakistan’s current account
outflows by reducing imports, but also
increase inflows as a result of exports.
This makes the industrial cooperation
component of CPEC an important tool for
improving Pakistan’s trade deficit and,
more importantly, generating revenue for
repayment of CPEC loans and other
debts.
At a micro-level, SEZs under CPEC will
play host to massive industrial units being
set up across various industrial clusters of
the economy, which will reshape the
labour market dynamics in multiple ways.
Firstly, they will create jobs for skilled and
semi-skilled workers, who will primarily be
hired from within Pakistan owing to
wage-price competitiveness. Secondly,
the government and enterprises will
invest in the vocational training and
professional development of labour to
meet the rising demand, leading to a
large-scale skills transformation of
Pakistan’s labour force.
‘We need to learn, we need to increase
our capacities’, Hassan Daud, project
director CPEC at the Ministry of Planning,
explained in an interview for this study.
‘Imagine what will be the impact on
business when the trains will move from
65km per hour speed to 130km per hour
speed in [the] next five years. This means
that the speed of business will change. It
is up to people to get benefit from this
opportunity’.
14 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
‘We need to learn, we need
to increase our capacities’
3. The impact of CPEC on Pakistan’s economy
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 15
tHE BESt way tO PREDICt tHE
FutuRE IS tO CREatE It
Working on this report, meeting people
from different backgrounds, reviewing
dozens of documents, conducting
workshops in five cities and reviewing the
results of the online survey, has left a
strong impression that to predict the
outcome of any unprecedented project,
being implemented at vast scale, one
would need a crystal ball. Any projections
made as part of this report are based on
factors and opinions that could evolve
overtime, and are hence are subject to
change.
It is said that the best way to predict the
future is to create it. Pakistan is in the
process of creating a future with hope for
its people.
unPRECEDEntED EvEnt
CPEC is an unprecedented scheme for
Pakistan, particularly in the context of
China–Pakistan relationships. Never in
its history has the country witnessed such
investment from a single foreign country.
It is estimated that the cash inflow under
CPEC will more than equal all the foreign
direct investment (FDI) that has come into
Pakistan since 1970, an amount that is
forecast to equal nearly 17% of the GDP.
jOB CREatIOn
The International Labour Organization
(ILO) has estimated that CPEC will
support the creation of around 400,000
jobs (APP 2017), while the Applied
Economics Research Centre (AERC) has
estimated that it could create over
700,000 direct jobs between 2015 and
2030 (APP 2016).
According to Professor Samina Khalid,
director of the AERC, CPEC could well
create over 700,000 direct jobs between
its start in 2015 and projected
completion in 2030. This would increase
annual economic growth by 2% to %.
Hence Khalid believes that CPEC
projects are likely to create more than
700,000 jobs in various sectors of
Pakistan by 2030 (APP 2016).
The Planning Commission’s estimates
show that the final figure may be much
higher, as these indicate that CPEC
would create around 800,000 jobs over
15 years (APP 2017).
Fawad Yousafzai, a journalist with
Pakistan’s newspaper, The Nation,
reported in June 2017 that CPEC had
by then created 30,000 jobs for
Pakistani workers, including engineers
who would expand their skills in the
these roles. A further 8,000 jobs were
being done by Chinese nationals. Of
the 30,000 Pakistanis 16,000 were
working in the energy sector (Yousafzai
2017). Work on transport infrastructure
had created around 13,000 jobs by June
2017 (PCN 2017a).
Figure : Areas in which CPEC job creation 2015–17
Energy
Transport
Gwadar
CPEC Job creation till mid 2017; Around 30,000 people.
8%
51%
41%
Source: Chart based on general press information
4. CPEC and different sectors
of the economy
4. CPEC and different sectors of the economy
16 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
‘CPEC will have an impact on almost all
key sectors of the economy’, said Top Line
Securities’ chief economist, Saad
Hashemy, in an interview for this study.
He added: ‘There will be a visible growth
in banking, cement, automobile,
insurance, refinery, power generation,
oil and gas marketing and cable and
electrical goods.’
800,000 CaRS nEEDED In nExt 15
yEaRS anD StEEl COnSuMPtIOn
During the interview, while discussing
CPEC’s impact on the motoring sector,
Hashemy said; ‘Current roads are around
265,000km and registered motor vehicles
are 15m, which includes two-wheeler,
three-wheeler and four-wheeler motor
vehicles and also buses, trucks and others.
We expect that CPEC and related projects
can add 12,000–15,000km of roads after
accounting for additional lanes, as per
current project details. Assuming current
road density of registered motor vehicles,
CPEC’s impact on automobile sector road
projects will result in additional demand
for 800,000 autos over next 15 years’.
‘Steel usage will be huge’, Hashemy
remarked. ‘Steel usage will be extensive
in CPEC projects and can run into millions
of tons over [the] life of CPEC. Steel will
be used in civil works, rail tracks, pipelines
(LNG), etc.’ The steel sector has witnessed
significant production growth in 2015–16.
Nonetheless, Chinese imports have
caused some damage to local production
as the substitution product from China is
cheaper.
FInanCIal InDuStRy
While talking about the financial sector,
Hashemy was positive that the banking
and insurance sector is going to grow. He
remarked; ‘At present, [the] deposit base
of local banks is around USD90bn and
loans outstanding are around USD46bn.
CPEC spread over 15-year can result in [a]
direct additional 2–3% per year loan
growth of the banking system. [The]
indirect impact can be over and above
this due to increased economic activity.
Further, approximately USD30bn of
projects will be insured locally and
internationally. All local insurance
companies [are] likely to benefit and [this]
can result in additional insurance premium
of Rs2bn annually, which is 4% of [the]
total gross premium of [the] insurance
industry’. (See also Hashemy 2016.)
SuStaInaBlE DEvElOPMEnt gOalS
‘For SDGs dealing with infrastructure,
urban development, energy,
transportation, mass transit systems, etc
the country needs to strengthen its
capacity to access international green
finance. The cost of the capital for green
growth has created a new global
ecosystem of financial instruments and
polices. In fact, this has become an
essential first step to stimulate
sustainable economic growth for green
jobs…Instead of simply being an
‘economic’ corridor, CPEC can become
an environmental corridor…Pakistan and
China share many SDG [sustainable
development goal] challenges, ranging
from increasing inequality to making
cities sustainable, from combating
climate change to managing water or
protecting oceans and forests. It’s a
historic opportunity for Pakistan to weave
its SDG targets in the accelerated pace of
CPEC. Equally important, CPEC can serve
as a model in acceleration for some SDG
indicators’ (Sheikh 2016).
Sartaj Aziz, a past adviser to the prime
minister on foreign affairs, also believes
that the sustainable development of the
country can be achieved via trade
promotion and not through financial
assistance (Ali 2016).
4. CPEC and different sectors of the economy
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 17
InFRaStRuCtuRE anD
tRanSPORtatIOn
Owing to the increased connectivity of
production sites and markets, public and
goods transportation businesses are
expected to grow, thanks to the road
infrastructure constructed under CPEC,
which will connect rural areas with urban
areas across the country.
This also means that increased mobility
will allow health and educational sector
professionals to reach the places where
demand exists but where professionals
are few because of current inaccessibility.
At the same time, once market access is
available to producers, eliminating the
need for intermediaries, their profit
margins are expected to increase.
tOuRISM, HOSPItalIty anD
MOvEMEnt aCROSS tHE COuntRy
One of the sectors that have already
started witnessing growth due to better
road infrastructure is domestic tourism. In
2015/16 there was a 25% growth in
tourism to Gilgit Baltistan, on the distant
north side of Pakistan, bordering China,
as one million people visited during the
summer of 2016, a number not witnessed
before (Express Tribune 2016). In line with
this, the hospitality industry has
experienced a boom, as average hotel
occupancy increased to 80% in 2016 from
around 35% in 2015 (although one of the
key reasons is an improved security
situation in the country) (JCR-VIS 2016).
In addition to domestic tourism, there are
also opportunities for encouraging
tourists from China. ‘People can consider
promoting tourism related to [the]
Gandhara civilisation and Buddhism
heritage, where people from China will
particularly be interested’, explained
Professor Haroon ur Rasheed from School
of Business and Economics, University of
Management and Technology, Lahore, in
an interview for this report.
tRaDE anD COMMERCE
‘Trade will increase’ said Professor
Rasheed. He believes that where quality is
high, such as in production of sports
goods, leather, handmade products and
food (meat and fruit), there is huge trade
potential with China. He also believes
that with increases in trade and business
growth, Pakistan’s middle class will have
increased incomes and more purchasing
power.
‘We need to negotiate free trade
agreement better’, argued Nazish Afraz,
adjunct faculty, Department of Economics
at the Lahore University of Management
Sciences, in an interview for this report.
‘At present, [the] trade deficit with China
is around 40%. We need to lower this
gap. [A] regional value chain is needed to
be created along with stability in our
policies to increase trade’, she added.
Image Source: PCN 2016
HOw wIll CPEC HElP CORPORatE
SECtOR EntItIES In FutuRE?
Muzzammil Aslam, chief executive officer
of Invest and Finance Securities Limited,
a brokerage firm based in Karachi, was
interviewed for this report. He
commented; ‘The companies will have an
opportunity to get investors once they list
on the Pakistan Stock Exchange [PSX].
For green field companies which will be
established under CPEC, it will be an
opportunity for initial investors to exit
and provide a chance to other investors,
who can purchase shares from PSX, once
the green field project starts giving
benefits’.
While commenting on the sectors that
will be affected by CPEC, Aslam argued
that growth will occur in many sectors,
including power (energy), gas and
electricity distribution, cement, steel,
construction and allied industries, the
motor vehicle sector, the financial
services sector, and apparel.
‘There will be increase in competition for
the companies in Pakistan once the CPEC
projects are executed’, he explained.
‘However, companies operating in
Pakistan need to embrace the fact that
for future, competitiveness shall be the
key. CPEC shall push [the] corporate
sector to think [about] innovation and
work hard to be competitive’.
Attracting foreign investment will also be
important. The president of Rawalpindi
Chamber of Commerce, Raja Iqbal
considers that ‘many sectors, such as real
estate, agriculture, construction, building
materials, energy and infrastructure
development, offer lucrative investment
opportunities to foreign investors’ (Dawn
2017).
5. Mode of doing
business in Pakistan
for Chinese companies
There are three options for the Chinese
companies wishing to work in Pakistan:
• to work independently of any
Pakistani counterpart
• to subcontract their work to Pakistani
companies or
• to enter into joint ventures.
One of the examples of the joint venture
approach is The Hub project, which is a
joint venture between the State Power
Investment Corporation, China Power
International Holding, and the Hub Power
Company of Pakistan.
‘The Chinese government is investing
USD46bn under CPEC projects in Pakistan
and it was decided that the Chinese firms
would be engaged to execute the
development projects. But if the Chinese
firms need assistance, then they can
complete the projects through joint
ventures or sub-contracting’, says Minister
for Planning Ahsan Iqbal (Aftab 2016).
wHy jOInt vEntuRE?
A joint venture between Pakistani and
Chinese companies has certain
advantages. A company based in Pakistan
has local experience while the Chinese
company will bring technical know how
and skills that can be customised to meet
local needs. This results in a ‘win-win’
situation, provided a working relationship
is agreed under the terms of their
contract and both the sides are clear on
the desired business outcome.
MERgERS anD aCquISItIOnS (M&a)
M&A activity has also increased.
• Dutch firm Royal Friesland Campina
acquired Engro Foods for USD446m
• Arcilek, a Turkish company, bought
Dawlance Pakistan for USD250m
• there are reports that a Chinese
energy conglomerate is seeking a
majority stake in Karachi’s largest
utility for (Rizvi and Niaz
2017).
18 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 19
Around 500 finance professionals across
Pakistan responded to a detailed online
survey undertaken for the purposes of
this report.
The key purpose of the survey was to
obtain views from finance and business
professionals about the business strategy
being adopted by different businesses,
their governance and risk-management
models, and the skills needed by finance
professionals and the measures being
adopted by their companies to deal with
the expected changes to the business
environment.
59% of respondents strongly agreed or
agreed that their organisation has such
plans while almost one-quarter
disagreed and another 16% either
remained neutral or made no response
(Figure ).
gOODS FROM CHIna wIll RESult In
InCREaSED COMPEtItIOn
When asked about imports from China,
% of respondents agreed that there
will be an increased inflow of goods from
China, which will have a direct
competitive effect on goods
manufactured in Pakistan. Given the
opportunity, % respondent agreed
that they would move to one of the
Special Economic Zones (SEZs; see
Chapter 3 above), to increase their ability
to compete with Chinese imports.
BuSInESSES wIll aDaPt tO CHangE
With CPEC there will be economic
growth. An increasing inflow of goods
from China is expected as the road
infrastructure improves and following
the development of Gwadar port. The
new infrastructure will, however, also
facilitate exports of goods and services
to China.
When asked about this, 42% of finance
professionals said that the business
strategy of their firms would cater to the
change and relevant adjustments to their
plans would be made in the next one to
three years, while 37% responded that
their organisations would make such
changes to their business strategy in the
next three to five years. Hence, 79% of
respondents were of the view that the
change arising due to CPEC would be
incorporated into their business strategy
within five years and the way their
businesses work would adapt to the
expected growth and change.
6. Are Pakistani businesses
prepared for the imminent
change?
%
%
%
%
%
Figure : Will governance structures change in response to CPEC?
Strongly Agree
Agree
Disagree
Neutral
Strongly disagree
Do you agree that owing to changes related to CPEC, there will be a need to
change the governance structure in your organisation?
Figure : Organisational plans to meet growing demand arising from CPEC
Strongly Agree
Agree
Disagree
Neutral
No response
Does your organisation have plans to scale up capacity to meet any growing
demand due to CPEC?
%
%
%
%
%
%
%
%
%
%
1%
Figure : Risk-management mechanisms and CPEC
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
No response
Is there a need to develop a risk management mechanism in your organisation with
reference to the anticipated growth in the business which may arise due to CPEC?
6. Are Pakastani businesses prepared for the imminent change?
20 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
gOvERnanCE anD RISk
ManagEMEnt
How might the governance structure of
businesses adjust to deal with CPEC-
related changes? When asked: ‘Do you
agree that, owing to changes related to
CPEC, there will be a need to change the
governance structure in your
organisation?’ % of respondents
remained neutral while % either
disagreed or strongly disagreed with the
statement (Figure ).
Over 54% of the respondents agreed that
the board of directors would be the
appropriate forum for discussing and
deciding upon the opportunities that
CPEC would bring, while 32% agreed that
the risk management committees should
be engaged in evaluating such
opportunities.
a RISk-ManagEMEnt MECHanISM
IS nEEDED
There is a need for a risk-management
mechanism in all organisations, enabling
the review and assessment of the
challenges and risks arising from CPEC-
related business changes. When asked ‘Is
there a need to develop a risk-
management mechanism in your
organisation with reference to the
anticipated growth in the business which
may arise due to CPEC?’ % agreed or
strongly agreed with the statement while
% remained neutral or failed to
respond; fewer than 11% disagreed
(Figure ).
6. Are Pakastani businesses prepared for the imminent change?
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 21
Figure : Steps for addressing environmental protection
Is your organisation taking any steps to ensure that the environment remains protected
due to expansion in operations related to CPEC
wHat kInD OF CHangES aRE
REquIRED In BuSInESSES tO
PREPaRE FOR tHE FutuRE?
While responding to a question about
what kind of changes are needed in
business, respondents highlighted the
following issues.
1. Organisations need to consider and
analyse the impact of B&R initiative
globally and its impact on the way
business is conducted in Pakistan
2. Efficient allocation of resources to
compete globally
3. Organisations such as in the IT and
communications industry will need to
consider major investment in human
and organisational development, such
as bringing in experts with skills that
are highly technologically advanced,
to enable them to compete globally.
Such a step will help these
organisations to align with the
technological advancement to which
the CPEC projects will give rise and
will facilitate collaboration between
Pakistani and Chinese technology
companies.
4. Geo-political influences should be
included in the scope of business risk
assessments. Competing with Chinese
%
%
%
%
%
%
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
No response
firms on production costs will be
tough and it is expected that trading
with China will increase because of
the infrastructure development linking
the two countries, inevitably
increasing competitive pressures on
local products. Risk-management
mechanisms must be adapted to
allow timely identification of any
business risks.
EnvIROnMEntal PROtECtIOn: HOw
ORganISatIOnS aRE aDDRESSIng
tHEIR EnvIROnMEntal IMPaCt
Only 26% of the respondents agreed that
their organisations are taking steps to
address the environmental issues that will
arise from the impact of business growth
due to CPEC, while over 50% remained
neutral on this key question (Figure ).
7. Capital markets
The capital markets of Pakistan have been
consolidated as the Pakistan Stock
Exchange (PSX) (which was formed on 11
January 2016 by the integration of the
Lahore and Islamabad Stock Exchanges
with the Karachi Stock Exchange and the
renaming of the Karachi Stock Exchange
as Pakistan Stock Exchange Limited, a
single nationwide capital market). PSX
had 559 listed companies with market
capitalisation of USD78bn as of 15
September 2016.
CHInESE COnSORtIuM OwnS a 40%
StakE In PSx
The capital markets of Pakistan attracted
international attention in December 2016
when a Chinese consortium bought a
strategic 40% stake in the PSX. The
consortium comprises Chinese Financial
Futures Exchange Company Limited,
Shanghai Stock Exchange, Shenzhen
Stock Exchange, Pak-China Investment
Company and Habib Bank Limited.
Stockbrokers from Pakistan were paid
approximately for their role in
the acquisition of the shares (320m shares
for Rs28 per share) (Siddiqui 2017).
MORgan StanlEy uPgRaDES tHE
StatuS OF PSx
In light of the expected increased inflow
of funds and foreign investments, and the
acquisition of PSX by the Chinese
consortium described above, Morgan
Stanley Capital International (MSCI) has
upgraded the status of PSX from ‘frontier
market’ to ‘emerging market’ status,
effective from 30 June 2017 (MSCI 2017).
Pakistan had had ‘frontier market’ status
since 2008.
The KSE 100 index2 has moved from
below 20,000 points at the end of Quarter
1, 2013 to over 45,000 points at the end
of Quarter 2, 2017, registering over 125%
growth in four years.
Tundra Fonder AB’s chief investment
officer, Mattias Martinson, says ‘Pakistan
has turned the tide; the CPEC agreement
was probably the trigger for many
investors to actively start looking. We all
know China does not take short-term
decisions’ (Mangi 2016).
Figure : The development of the Karachi Stock Exchange index
Source: Graph based on data from the KSE website
2
Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark for prices on the Pakistan Stock Exchange (PSX) over a period. In determining representative companies for computing the index, those with the highest market capitalisation are selected.
22 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
60,000
50,000
40,000
30,000
20,000
10,000
0
KSE 100
46,565
2013
Data Per Quarter
2016 2015 2014 2017
7. Capital markets
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 23
1,000
900
800
700
600
500
400
300
200
100
00
Lucky Cement Ltd
Kohat Cement Ltd
Bestway Cement Ltd
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
HinPark Motors Ltd HINO
Indus Motor Company Ltd INDU
Millat Tractors Ltd MTL
This is borne out by market activity.
Shares in companies in the sectors likely
to register growth related to CPEC have
shown remarkable movement. Certain
shares in the motor vehicle sector have
grown to between times and 11 times
their Q1, 2013 value in the period from
end of Quarter 1, 2013, when the CPEC
memorandum of understanding was
signed, to Quarter 2, 2017 (Figure ).
Besides other factors, one of the key
reasons for this increase is attributable to
rising demands due to the development
of the country’s infrastructure. (PSX 2017)
Analysis of data on the PSX website
shows that shares in certain cement
companies have risen by between
times and 4 times in the period from the
end of Quarter 1, 2013 and the end of
Quarter 2, 2017 owing to rising demand,
besides other factors (Figure ), (PSX
2017).
The cement sector has witnessed 17%
production growth in 2015/16, compared
with % in 2014/15.
Figure : Increase in value of shares in three motor vehicle assemblers
since June 2013
Source: Based on data from Pakistan Stock Exchange website (PSX 2017)
Figure : Increase in the value of cement company shares since 2013 (PSX 2017)
Source: Based on data from Pakistan Stock Exchange (PSX 2017)
‘Pakistan has turned the tide; the CPEC
agreement was probably the trigger for
many investors to actively start looking.’
DecJun DecJun DecJun DecJun Jun
2013 201620152014 2017
DecJun DecJun DecJun DecJun Jun
2013 201620152014 2017
1,000
900
800
700
600
500
400
300
200
100
0
Jubilee Life Insurance Ltd
IGI Insurance Ltd
EFU Life Assurance Ltd
tHE InSuRanCE SECtOR
Data from the Pakistan Stock Exchange
shows that average share prices of three
key insurance companies in Pakistan
witnessed growth of between times
and 9 times during a period of four years.
(Figure ), (PSX 2017).
Figure : Share price increases in the insurance sector
Source: Based on data from Pakistan Stock Exchange (PSX 2017)
7. Capital markets
24 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
DecJun DecJun DecJun DecJun Jun
2013 201620152014 2017
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 25
Data from the Securities and Exchange
Commission of Pakistan reveals that
registration of Chinese companies in
Pakistan is showing steady growth.
Information obtained from the Securities
and Exchange Commission of Pakistan
(SECP) shows that around 775 companies
registered with SECP have Chinese
directors, out of a total of 80,428
companies registered in the country, as of
30 June 2016. The number of companies
with Chinese directors showed a steady
increase from 30 June 2013 to 30 June
2016, as illustrated by Figure .
‘We are facilitating company registration
and related processes’, said Murtaza
Abbas, joint director of the Investor
Education & International Relations
Department at SECP, in an interview for
this report. ‘There [are] no separate
policies or procedures other than the one
promulgated under the new Companies
Act 2017 for registration and operational
matters of the companies in Pakistan. We
consider CPEC to be regulated under
[the] current framework of regulation for
companies whereby any investor can
initiate [a] single member company, a
private company or a public limited listed
or non-listed company’.
BOaRD OF InvEStMEnt –
FaCIlItatIng CPEC InvEStORS
To obtain licences and permits, a
company needs to consult with the
relevant government department,
depending on the nature of its business.
In addition, Pakistan’s Board of
Investment (BOI) can help to facilitate the
process. The BOI is the central
investment facilitation point responsible
for promoting and facilitating investment,
including in CPEC projects (BOI 2017).
The BOI’s website describes its role as:
‘provid[ing] assistance throughout the
investment cycle. Investor Facilitation
Centres have been established in
Islamabad and all provincial capitals to
facilitate local and foreign investors. BOI
as a focal point provides information and
assistance for speedy materialisation of
investment projects. Apart from
facilitating projects, BOI’s role is also
important in the context of visa
facilitation and opening up of branch
offices and liaison offices of entities.
Permission of BOI is mandatory for
opening of branch or liaison office in
Pakistan. BOI also recommends Work
Visas to expatriates working in foreign
and local companies in Pakistan. BOI’s
role is crucial for materialization and
sustainability of the projects being
started and to be started under CPEC
(BOI 2017).
Figure : The rise in the number of Pakistani companies with Chinese directors
Source: Based on data supplied by the Securities and Exchange Commission of Pakistan
90
800
700
600
500
400
300
200
100
0
2013 201620152014
8. Ease of doing business
and investment facilitation
775
535
445
373
PakIStan’S RankIng FOR EaSE OF
DOIng BuSInESS SHOwS gRaDual
IMPROvEMEnt
Pakistan has shown improvement in its
‘ease of doing business’ ranking from 148
in 2016 to 144 in 2017, based on World
Bank data (World Bank 2017). It takes 260
days for an entity to get construction-
related permits as compared with the
south Asian average of days, while it
takes 215 days to obtain an electricity
connection and involves five procedures
in Karachi (as compared with the south
Asian average of 136 days and
procedures).
wORkIng In tHE PROvInCES
Provincial governments have initiated
processes to facilitate investment in CPEC
projects. For example, the province of
Khyber Pakhtunkhwa has established the
Khyber Pakhtunkhwa Economic Zones
Development and Management
Company (KPEZDMC) as a non-profit
organisation wholly owned by the local
government of Khyber Pakhtunkhwa. As
stated on the company’s official website:
‘The company aims to develop and
manage world class industrial estates in
the Khyber Pakhtunkhwa to help
organising and establishing planned and
rapid industrialisation in Khyber
Pakhtunkhwa. Rehabilitation of the
existing industrial estates is also part of
the objectives of this company’
(KPEZDMC 2015a).
A corporate report (KPEZDMC .: 15)
states that: ‘[the] KPEZDMC strategic
team believes in sustainability both
technical and financial. Each industrial
estate will have its own board of
management of resident industrialists,
who will be trained and guided by the
Company in the management skills
required for successful and effective
management of industrial estates through
a team of professionals’.
Hence, steps and measures are being
taken to facilitate interested parties in
establishing companies in the minimum
possible time.
DOIng BuSInESS In PakIStan FOR
CHInESE FIRMS
Chinese firms making investments in
Pakistan are not required to register as a
company. They can be registered as a
branch office or initiate a joint venture
with a local company or they can opt to
become a company under the laws of
Pakistan.
Whatever form of business a Chinese firm
adopts, it is implicit that its directors need
to comply with taxation and other rules
and regulations related to audit and the
filing of applicable returns to the relevant
authority. For these purposes, it will
require the services of firms offering
accountancy, auditing and other financial
services, providing opportunities for
accountants.
8. ease of doing business and investment facilitation
26 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
Finance professionals in Pakistan have a
good educational and professional
background. However, they need to develop
their skills for the new future businesses
which will emerge out of CPEC.
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 27
To promote the availability of skilled
workers in the country, the National
Vocational and Technical Training
Commission (NAVTTC) is providing
training in 38 CPEC-specific trades in 197
institutes across the country (PCN 2017b).
The survey conducted for this report
indicates that Pakistan’s finance
professionals need new skills, new
knowledge and behavioural change.
This was supported by % respondents
of the survey, who agreed, and around
19%, who strongly agreed that executives
in the finance function will need new
skills, new knowledge and different
behaviour to handle the challenges of
CPEC (Figure ).
FInanCE SkIllS FOR tHE FutuRE
What are the skills that finance
professionals need to prepare themselves
for the future?
The two key skills needed are better
communication (advocated by % of
respondents) and better business
analytics (%) to enable them to deal
with the expected changes.
Ability to communicate with all
stakeholders is a most necessary
requirement for finance professionals, so
that the ‘story’ presented by the numbers
is narrated well. With Chinese companies
entering the country, communication
skills will become even more important in
winning business and articulating the
challenges to be tackled. This must be
coupled by the finance professionals’ skill
in analysing future trends and suggesting
to management how these could affect
the business strategy. Hence, for growth
purposes, transformation is needed from
being ‘bean counters’ to becoming
strategic business partners.
The two skills cited by the respondents of
the survey as most important after
communication and business analytics
were taxation knowledge (%) and
leadership ability (52%).
Therefore, in summary, to take advantage
of the expected changes, the finance and
business professional needs to develop
skills in the areas of communication,
business analytics, taxation and
leadership for future finance excellence.
FInanCE PROFESSIOnalS In
PakIStan – SkIll DEvElOPMEnt.
wHat FInanCE PROFESSIOnalS
nEED tO lEaRn?
‘Finance professionals in Pakistan have a
good educational and professional
background. However, they need to
develop their skills for the new future
businesses which will emerge out of
CPEC. Further, the senior finance
professionals need to know about the
business side of the ventures which will
happen in future, eg coal plants,
e-commerce, Fintech’ Andy Liu, assistant
vice president at the Pakistan China
Investment Company, expressed in an
interview for this report.
Figure : Requirements for finance function executives in meeting the challenges
of CPEC
Do you consider that the executives in finance functions will need new skills, new
knowledge and different behaviours with reference to CPEC?
%
%
%
%
%
1%
Strongly Agree
Agree
Disagree
Neuteral
Strongly disagree
No response
9. Human development:
areas of growth for finance
professionals preparing for
the future
‘Financially managing Cross-border trades
is one of the skills which the finance
professional needs to learn in the context
of CPEC’, he added.
One of the key roles of finance
professionals will be business planning, in
which many assumptions have to be
made about the future. Therefore, finance
professionals need to understand
business functions for better business
planning.
Liu further elaborated that the Chinese
companies have their own financial and
accounting policies from their China head
offices, for which compliance is required.
Therefore, the Chinese subsidiary
companies in Pakistan will need to have
professionals who are familiar with the
Chinese statutory requirements. In
addition, for local taxation and reporting
requirements, there will be a need for
finance professionals who understand the
local statutes.
While discussing the challenges faced in
Pakistan, Liu mentioned that one of these
is hiring experienced staff. Executives
working in Pakistan need to learn about
the way Chinese people do business,the
ethical values of Chinese professionals
and their work style. The Chinese believe
in working hard, in teamwork and in ‘on
time’ delivery. Pakistani business and
finance professionals should learn about
such traits to avail themselves of the
opportunities of working with Chinese
professionals in future.
RISk ManagEMEnt
While commenting on risk management,
Liu remarked that this is essential in every
project being financed under CPEC.
There are several risks that have to be
managed, including market risk,
repatriation of funds risk, taxation-related
risks, political and security risks. In
practice, to mitigate the risks, one
separate department can be formed
within the organisation or third-party
risk-management services can be used.
a SHORt COuRSE On BuSInESS, tHE
CHInESE languagE anD CultuRE
wOulD BE HElPFul
While answering the question about
whether there is any need to learn
business Chinese and about Chinese
culture, around 86% of the c. 500
respondents to the survey agreed that
they should attend short courses on
business, Chinese language and culture.
Respondents also agreed with the
statement that there is a marked
difference in the business style of Chinese
and Pakistani people (‘strongly agree’:
% ‘agree’: %).
The need for learning business Chinese
language has been emphasised by many
finance professionals. Around 28 public
and private sector universities are offering
courses in Chinese language across
Pakistan while ACCA and the Pakistan-
China Institute have also jointly offered
business Chinese courses.
Figure : Respondents’ views on taking courses to prepare for CPEC
Do you consider that the finance executives should attend a short course on business,
Chinese language and culture?
Strongly Agree
Agree
Disagree
Neutral
%
%
%
36%
9. Human development: Areas of growth for finance professionals preparing for the future
28 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
While responding to the question ‘What
do you think are the key skills needed by
Pakistani executives to be prepared for
the future requirements related to
CPEC?’, the executives from the Chinese
companies listed the following:
• international vision
• good understanding of Chinese
culture
• knowledge of Mandarin (the official
Chinese language)
• project practices used by Chinese
companies
• communication skills
• familiarity with company and tax laws
of Pakistan; specific knowledge of tax
policies, rebates and concessions
allowed under CPEC in Pakistan
• familiarity with Chinese ways of
conducting business and Chinese
culture, and
• full awareness of the business
policies set up by Pakistan’s
government for CPEC projects and
companies.
The Chinese executives emphasised that
while hiring professionals in Pakistan, they
look for those with an understanding of
Chinese culture and with better
communication skills.
9. Human development: Areas of growth for finance professionals preparing for the future
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 29
Drivers
of Change
Does this relate to
changes that CPEC
will bring about?
Skills needed for finance professionals to prepare for the future in Pakistan
Economy Yes
There will be growth in the economy. The economic environment will change. Economic factors,
including demand and supply, will have to be clearly researched if a business intends to reap
benefits from CPEC. Finance professionals should be in a position to provide forecasts of
demand and supply for better planning and decision making.
Politics and
the law
Yes
It is expected that the rules and regulations related to cross-border trade will become more
important for finance professionals, who will have to advise management about the compliance
required with the relevant statutes.
Society Yes
There will be business dealings with Chinese firms and, hence, knowledge about business
Chinese and cultural differences with the Chinese people will be an added advantage.
Business Yes
The key skills to sharpen will include communication, negotiation, business management and
planning.
Science and
Technology
Yes
CPEC is also about digital connectivity. The Country has embraced 4G technology and there are
discussions about 5G. Finance professionals will have to learn about the new technologies that
will affect the way businesses are conducted.
Environment,
energy and
resources
Yes
There will be certain changes in the environment as it is expected that, with the establishment of
Special Economic Zones and increasing industrial cooperation, manufacturing units will be
established that will affect the environment. This will increase the importance of sustainability
reporting and adherence to environment-related regulations.
Practice of
accounting
Yes
One of the key areas where finance professionals will be in demand is the practice of
accounting, particularly when Chinese investors needing services for registering a company with
SECP or filing their tax returns or ensuring compliance with the applicable taxation regulations.
Finance professionals will need up-to-date knowledge of International Financial Reporting
Standards, taxation, business advisory matters and assurance.
Accountancy
profession
Yes
Pakistan’s accountancy profession is expected to grow owing to large investments from Chinese
firms, joint ventures, mergers and acquisitions. During the expert forums organised for this
report, finance professionals suggested that accountants need exposure to the international
markets, particularly China’s, to learn about their business style and increase knowledge of
Chinese financial systems.
Table : The relationship between drivers of change, CPEC and future skills needs
tHE FutuRE SkIll SEt FOR FInanCE
PROFESSIOnalS
In 2012 ACCA and the Institute of
Management Accountants (IMA)
published a report titled 100 Drivers of
Change for the Global Accountancy
Profession (Fast Future 2012).
Most of the skills identified in the report
can be linked with those that finance
professionals will need owing to the
changing business environment in
Pakistan.
For the purposes of the present report,
there were five expert forums organised
in Karachi, Lahore, Peshawar, Quetta and
Islamabad, covering four provinces and
the capital city.
Each focus group discussion was
attended by finance professionals from
diversified backgrounds. The skills they
identified are more or less similar to those
skills identified in the ACCA/IMA report
(Fast Future 2012). The skills identified in
the expert forums fall in the categories of
‘Practice of accounting’, ‘Accountancy
profession’, ‘Economy’ and ‘Business’.
The professionals involved argued that
international investors will look towards
accountants and consultants for guidance
in setting up businesses, for investment
advice and for carrying out finance and
accountancy services.
The 100 drivers of change were divided
into eight different groups and related to
CPEC and the skills needed for the future
(Table ).
analysis and
expert forums
30 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
Highways Network of CPEC
Legend
Lahore
Haripur
Islamabad
Faisalabad
Rawalpindi
Quetta
Hyderābād
Multan
Karachi
Shahdadkot
Sukkur
Panjgur
Surab
Basima
Rango
Hoshab
Gwadar
Khuzdar
Nag
Qila
Saifullah
Zhob
.
Khan
Khanewal
Khan
Bahawalpur
Darya
Gujranwala
Dera Allahyar
.
Khan
Burhan
Abbotabad
Peshawar
Thakot
Sazin
Havelian
Mansehra
Raikot
Gilgit
Khunjerab
Shinkiari
10. SWOT analysis and expert forums in the four provinces and the capital
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 31
housing, oil and gas, tourism, agriculture
and transport are the areas in which
investment opportunities exist (KP 2017).
The provincial government plans to
organise a Chinese investment forum,
inviting a Chinese delegation to discuss
the MoUs and associated projects further.
The Khyber-Pakhtunkhwa (KP)
government has signed a memorandums
of understanding (MoU) for 82 projects,
together worth more than trillion,
with Chinese companies in the recently-
held K-P Economic Cooperation Road
Show (KECRS) organised by the provincial
government in April 2017 in China (Ullah
2017). The Chief Minister of KP province
has termed the signing event and
subsequent investment as an ‘economic
revolution’. In accordance with KP
Economic Zones Development and
management company website, there are
17 Special Economic Zones being
planned in KP.
The sectors in which MoUs have been
signed (and consequently where projects
will be executed) include: the higher
education sector (19 projects –
; the housing sector (seven
projects – USD3,332m); the industrial
sector (12 projects – USD5,704m); and the
IT sector (seven MoUs – ).
Other sectors include mines and minerals
(three MoUs), roads (nine MoUs), urban
sanitation (three MoUs), the local
government sector (two MoUs) and one
MoU each in urban development and
transportation.
The provincial government considers that
IT, hydropower, minerals, education,
energy and power, infrastructure,
kHyBER PakHtunkHwa (kP)
Khyber-Pakhtunkhwa (formerly known as
the North-West Frontier Province, or
NWFP), runs for over 1,100km along the
border with Afghanistan, with Peshawar as
the capital. Peshawar was the centre of
the ancient kingdom of Gandhara and is
rich in archaeological remains.
It is bounded by Afghanistan to the west
and north, Punjab province to the
south-east, and Baluchistan province to
the south-west. On the western boundary
of Khyber Pakhtunkhwa, along the Afghan
border, are the federally administered
tribal areas, a series of semi-autonomous
areas that are ethnically homogeneous
with the province but not politically
connected to it.
The provincial government considers that IT,
hydropower, minerals, education, energy and power,
infrastructure, housing, oil and gas, tourism,
agriculture and transport are the areas in which
investment opportunities exist.
In order to discuss the strengths,
weaknesses, opportunities and
threats (SWOT) of CPEC for the
province, a focus group discussion
was conducted on 8 May 2017,
attended by around 25 participants.
While discussing strengths, the
participants expressed the view that the
rich culture and heritage of the province
offers a lot to the tourist who visit KP.
Further, the province is rich in minerals,
gems and jewellery and has a border with
Afghanistan, which gives the province a
strategic advantage by connecting it with
China, thus facilitating exports. They also
considered that human resource is
available, though there is a need for
vocational training.
Lahore
Haripur
Islamabad
Faisalabad
Rawalpindi
Quetta
Hyderābād
Multan
Karachi
Shahdadkot
Sukkur
Panjgur
Surab
Basima
Rango
Hoshab
Gwadar
Khuzdar
Nag
Qila
Saifullah
Zhob
.
Khan
Khanewal
Khan
Bahawalpur
Darya
Gujranwala
Dera Allahyar
. Khan
Burhan
Abbotabad
Peshawar
Thakot
Sazin
Havelian
Mansehra
Raikot
Gilgit
Khunjerab
Shinkiari
10. SWOT analysis and expert forums in the four provinces and the capital
32 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
Table : Strength, weakness, opportunities and threats in KPK
S W
O T
Strengths
• Availability of human capital
• Culture and heritage of KPK will
attract tourists
• KPK has huge mineral resources and
geographical advantage, including a
border with Afghanistan
• Competence and capabilities for
future growth
• Quality products are manufactured
Weaknesses
• Lack of awareness: locals are unaware
of CPEC Projects
• Need for better coordination among
the federal and provincial governments
• Slow pace of development
• Lack of the necessary skills to benefit
from CPEC
Opportunities
• Strategic alliances and public private
partnerships
• Business growth due to increase in
exports
• Innovation and technology development
• Increase in employment and tourism
• Global image will improve - better
perception abroad
• Security situation will enhance and fiscal
policies will improve
• Demand for local goods will increase and
local industries will flourish, specially SMEs
• Opportunities for finance professionals
(providing services to the newly
established companies)
Threats
• Strong competition
• Import of cheap raw materials from
China will have adverse impact on
local markets
• Security and terrorism risks
• Increase in imported cheap goods in
the markets
• Trade deficit will increase, if reliance
remains on imports
• Carbon emissions, industrial waste and
excessive consumption of natural
resources will damage the environment.
While citing weaknesses, lack of
awareness about CPEC was cited as one
of the key weaknesses, followed by the
need for better coordination among the
central (federal) and KP provincial
governments. Furthermore, they
indicated that the pace of work on CPEC
project needs to be accelerated and the
people need to be trained in the different
skills that will be required in the big
planned projects.
The weaknesses can be turned into
opportunities by:
• Initiating skill development training
programs
• Organising CPEC related awareness
sessions through universities and
chambers of commerce; and
• Improving transparency through
adequate disclosures on websites
Opportunities available to private sector
companies include partnership with
government to establish a public private
partnership model, both to stimulate
current growth and to take advantage of
future growth prospects. In addition,
focus group participants predicted that,
owing to the advantages of the Special
Economic Zones and increased industrial
production, exports will increase. This will
also generate increases in employment.
Participants also considered that external
perceptions of the province will improve
because of huge investment in industry
and improvement in the security situation.
There will also be more opportunities for
finance professionals (providing services
to the newly established companies)
While deliberating on threats, participants
considered the expected increase in
competition and influx of new products
from China as a key threat for local
manufacturing. Security threats will have
to be addressed to ensure that investors
are protected. It is essential that, after
such massive investment, there is an
increase in manufacturing in the country
to avoid trade deficits. Therefore, a threat
to the revival of local industries remains.
On the other hand, such massive
investment in industry will result in carbon
emissions, industrial waste and possibly
excessive consumption of natural
resources. To counter this environmental
threat, these aspects will have to be
managed carefully.
A SWOT analysis summary of the KP
focus group discussion can be
summarised as shown in Table .
10. SWOT analysis and expert forums in the four provinces and the capital
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 33
PunjaB
Punjab is Pakistan’s most industrialised
province, with the industrial sector
making up 24% of the province’s gross
domestic product. The province is known
in Pakistan for its relative prosperity, and
has the lowest rate of poverty among all
Pakistani provinces. Punjab is also one of
south Asia’s most urbanised regions with
approximately 40% of people living in
urban areas.
The chief economist of the Planning and
Development Board of the province, Dr
M. Aman Ullah, is of the view that ‘Punjab
has a huge potential to take the lead
under CPEC. This is primarily due to
Punjab’s conducive business environment
in terms of its suitable geography, its
sustainable law and order situation, the
high Human Development Index of its
population and its cultural diversity and
dynamic leadership’ (Aman Ullah 2017).
While discussing the province’s strengths,
participants argued that Punjab, being a
cultural centre of long standing, offers
tourists a lot to visit. Furthermore, the
province shares a border with India. The
province has a large number of
educational institutions and a large youth
population. The availability of quality
infrastructure in shape of the metro bus
system is considered to be a strength
(PMA 2017).
While discussing weaknesses, participants
mentioned the need for skilled labour, ie
technically trained staff for employment
in the large-scale projects. Further, there
needs to be more public awareness of
CPEC.
Participants considered that job
opportunities will increase and living
conditions will improve. Further,
businesses will obtain access to Chinese
and central Asian markets and population
increases will give rise to the
development of new cities, new
recreational centres and parks. On the
whole, participants considered that the
quality of life will improve.
While discussing threats that may arise
from CPEC, participants cited over-
exploitation of natural resources,
pollution and environmental threats and a
need to manage those adequately.
Participants also expressed their concern
about the increase in the national debt
and security challenges that will have to
S W
O T
Strengths
• Historical places to attract tourists
• Shares a border with India, which will
enhance trade through the border
• Strong educational institutions and large
number of young professionals
• Investments in infrastructure,
eg Orange train and metro buses
• Agriculture sector is very strong and
supplies the country
Weaknesses
• Lack of availability of a skilled workforce/
lack of training
• Lack of awareness about CPEC projects
• High production costs
• Lack of accountability
• Lack of public trust in private public
private partnership projects
• Financial constraints of provinces
• Weak bargaining power in relation to
CPEC projects
Opportunities
• Job opportunities
• A chance to boost to the living
conditions of locals
• Access to Chinese and central Asian
markets
• Development of new cities
• New developments of recreational
centres, parks and hotels
• With Chinese investment, there will be
an opportunity to improve the
security/law and order situation
Threats
• Threats to heritage and culture
• Chinese infrastructure – threat to local
industry and SMEs
• Security threat
• Lack of separate policies for foreign
companies
• The problem of repaying debts that
Pakistan incurs through CPEC
• Over-exploitation of natural resources
• Pollution and other environmental
threats, and health issues
Table : Strength, weakness, opportunities and threats in Punjab
be addressed. Participants argued
that further influxes of goods from
China may pose a threat to existing
SMEs, for which they need to
prepare and adapt.
The weaknesses can be addressed
by forecasting the demands of
skilled labour arising due to CPEC
projects and then initiating targeted
skills development programs.
Further, public trust can be
enhanced through more public
private partnership projects. To
ensure accountability and increase
transparency, information about
public financial management
systems can be made public
through websites and public
announcements.
SWOT analysis summary of the
Punjab focus group discussion can
be summarised as in Table .
The focus group session was organised
in Lahore on 18 May 2017 and was
attended by around 30 participants.
Lahore
Haripur
Islamabad
Faisalabad
Rawalpindi
Quetta
Hyderābād
Multan
Karachi
Shahdadkot
Sukkur
Panjgur
Surab
Basima
Rango
Hoshab
Gwadar
Khuzdar
Nag
Qila
Saifullah
Zhob
.
Khan
Khanewal
Khan
Bahawalpur
Darya
Gujranwala
Dera Allahyar
. Khan
Burhan
Abbotabad
Peshawar
Thakot
Sazin
Havelian
Mansehra
Raikot
Gilgit
Khunjerab
Shinkiari
10. SWOT analysis and expert forums in the four provinces and the capital
34 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
SInDH
Sindh is the third-largest province of
Pakistan by area, and second only to
Punjab by size of population. Sindh is
bordered by Balochistan province to the
west, and Punjab at the north. This
province also shares a border with Indian
states to the east and has a coastline on
the Arabian Sea to the south.
Sindh’s landscape consists mostly of
alluvial plains flanking the Indus River,
although the Thar Desert lies in the
eastern portion of the province. Sindh’s
climate is noted for hot summers and mild
winters. The provincial capital of Sindh is
Pakistan’s largest city and its financial hub,
Karachi.
The participants cited availability of
human capital as one of the key strengths
of the province, particularly in Karachi city.
Karachi, being a port city and having
access to Gwadar (another port city in the
making), is a huge strength for the
province, giving it opportunities for
increasing business via the sea route. The
province has a vibrant financial sector and
is home to shipping, fishing and other
industries.
While deliberating upon weaknesses, the
lack of adequate law and order in the
province and energy shortages were
cited. The group recognised the need for
more awareness about CPEC-related
projects, enabling people to take
advantage of the opportunities that will
become available in future. Lack of
adequate IT infrastructure in rural areas
and a high illiteracy rate were also cited
as weaknesses of the province that need
to be addressed.
A focus group discussion session
took place at Karachi on 10 May 2017
and was attended by around 22
participants.
Participants opined that CPEC presents
lots of opportunities, particularly growth
in business for fishing, transportation,
cement, steel and the banking sector. It
should also generate employment.
Companies will have opportunities for
entering into joint ventures with Chinese
companies and their products/services
will have access to international markets.
The key threats from CPEC for the
province include an environmental threat
due to the increase in industrial activities,
and threats from the dominance of
Chinese companies in the market.
Participants considered that the debt
financing of the projects may pose a
financial threat while CPEC projects may
result in the cultural dominance of
Chinese people.
SWOT analysis summary of the Sindh
focused group discussion is summarised
as in Table .
S W
O T
Strengths
• Availability of human capital (skilled and
unskilled) and unused land
• Easy access to Gwadar and the
Arabian Sea
• Large number of financial aid providers
• Availability of low-cost labour and raw
material
• Shipping, fishing and motor vehicle
industries already exist and are growing
• Construction of roads and infrastructure
projects is in progress
• Cosmopolitan society
Weaknesses
• Lack of law and order
• Insufficient electricity generation
• Lack of public awareness of the
CPEC opportunities
• Lack of long-term strategies and vision
• Low literacy rate
• Poor IT Infrastructure
• Lack of understanding of Chinese culture
Opportunities
• To develop businesses, particularly for
fishing, transportation, cement, steel
and the banking sector
• Employment generation
• Joint ventures with Chinese companies
• Increase in access to international markets
• Growth in SME / cottage industry
• Opportunities for outsourcing industry
Threats
• Pollution and environmental threats
• Dominance and undue influence of
the Chinese
• Increase in importation of petroleum
and electronic goods
• Regional rivalry
• External debt financing and payment
• Cultural imperialism
• Lack of meritocracy
• Intra-provincial conflicts
Table : Strength, weakness, opportunities and threats in Sindh
Lahore
Haripur
Islamabad
Faisalabad
Rawalpindi
Quetta
Hyderābād
Multan
Karachi
Shahdadkot
Sukkur
Panjgur
Surab
Basima
Rango
Hoshab
Gwadar
Khuzdar
Nag
Qila
Saifullah
Zhob
.
Khan
Khanewal
Khan
Bahawalpur
Darya
Gujranwala
Dera Allahyar
. Khan
Burhan
Abbotabad
Peshawar
Thakot
Sazin
Havelian
Mansehra
Raikot
Gilgit
Khunjerab
Shinkiari
10. SWOT analysis and expert forums in the four provinces and the capital
The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 35
BalOCHIStan
Geographically, Balochistan is the largest
province of the country but with the
lowest population of all Pakistan’s
provinces. Its provincial capital and largest
city is Quetta. It has borders with Punjab
and the Federally Administered Tribal
Areas to the northeast, Sindh to the east
and southeast, the Arabian Sea to the
south, Iran to the west and Afghanistan to
the north and northwest.
Largely underdeveloped, Balochistan’s
provincial economy is dominated by
natural resources, especially its natural gas
fields, which are estimated to have
sufficient capacity to supply Pakistan’s
demands over the medium to long term.
Aside from Quetta, a further area of major
economic importance is Gwadar Port on
the Arabian sea of Pakistan, forming the
southwestern region of the country.
The discussion covered tourism, the
mining industry and the availability of
land, which, along with mineral resources,
participants considered to be the
province’s strengths. Further, the province
has Gwadar port, which is one of the key
focus areas of CPEC’s work and projects.
Participants discussed the province’s lack
of skilled labour and the low literacy rates
compared with other provinces.
Therefore, this area needs particular
attention to ensure that local people are
able to find jobs in the CPEC projects. In
addition, the general public is not aware
of the CPEC projects or of how to
prepare themselves for the opportunities
that will arise in the future.
Owing to massive investment in CPEC,
participants argued that there will be
employment opportunities that will create
economic prosperity. Improved access of
businesses to markets will contribute to
this. To benefit from the opportunities,
the people of the province need to
manage available resources with care,
and governance within the province
needs further improvement. Security and
law and order arrangements need to be
monitored and controlled to ensure that
the benefits of CPEC projects are
manifested.
SWOT analysis summary of the
Balochistan focused group discussion
is summarised as in Table
The province has Gwadar port, which is
one of the key focus areas of CPEC’s
work and projects.
S W
O T
Strengths
• Tourism
• Mining industry
• Export of agriculture products
• Natural resources – coal, gold
and copper
• Large area for industry set-up and
for energy projects
• Gwadar port
Weaknesses
• Lack of availability of skilled labour
• Low literacy rate
• Lack of government projects and
initiatives
• Military interference and feudalism
• Scarcity of basic needs such as
drinking water
• People are unaware of the benefits
of CPEC
Opportunities
• Employment opportunities
• Access to other markets in central Asia
and China
• People empowerment due to access to
new markets
• Investment in infrastructure is certain
• Connectivity with other parts of the
country through new rail and road
connections
• Foreign direct investment
Threats
• Mismanagement of resources
• Local unemployment
• Inadequate law and order/ security
• Governance issues
The focus group discussion was
organised on 19 July 12017 at Quetta
and was attended by 22 participants.
Table : Strength, weakness, opportunities and threats in Balochistan
Lahore
Haripur
Islamabad
Faisalabad
Rawalpindi
Quetta
Hyderābād
Multan
Karachi
Shahdadkot
Sukkur
Panjgur
Surab
Basima
Rango
Hoshab
Gwadar
Khuzdar
Nag
Qila
Saifullah
Zhob
.
Khan
Khanewal
Khan
Bahawalpur
Darya
Gujranwala
Dera Allahyar
. Khan
Burhan
Abbotabad
Peshawar
Thakot
Sazin
Havelian
Mansehra
Raikot
Gilgit
Khunjerab
Shinkiari
10. SWOT analysis and expert forums in the four provinces and the capital
36 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)
ISlaMaBaD
Islamabad is the capital city of Pakistan. In
1960, land was transferred from
Rawalpindi in the Punjab province for the
purpose of establishing Pakistan’s new
capital. Being the federal capital,
Islamabad is the seat of government and
the location of foreign embassies/
missions and international donor
agencies.
The participants considered that the
infrastructure of the city is improving and
CPEC is expected to provide better
access to international markets. They
argued that CPEC will give a boost to
many sectors of the economy, including
tourism, transportation, hospitality and
energy.
The weaknesses that need to be
addressed include lack of skilled human
resource, the law and order situation, lack
of inter-province collaboration,
communication issues with Chinese
companies and higher production costs
in Pakistan, where industries lack the
economies of scale found in Chinese
industries.
CPEC offers opportunities for
collaboration with Chinese companies,
particularly for the transfer of technology
to improve production and efficiency.
With better infrastructure, trade
opportunities are expected to increase.
As elsewhere in Pakistan, there will be an
increasing threat to the environment from
expanded industrial activity, which will
need to be addressed. Other threats arise
from governance issues and the
weaknesses identified above: inadequate
security and lack of inter-provincial
collaboration and cooperation.
SWOT analysis summary of the Islamabad
focused group discussion is summarised
as in Table
The focused group discussion was
organised at Islamabad on 18 May 2017 ,
attended by around 25 participants.
Table : Strength, weakness, opportunities and threats in Islamabad
S W
O T
Strengths
• Broadband telecom and hospitality
industries are growing in the capital
• Better and cheaper access to
international markets
• The service, manufacturing,
transportation, energy and hospitality
industries are ripe for expansion
• Strong Pakistan-China friendship
• Barrier for new entrants is low
Weaknesses
• Poor law and order
• Lack of skilled labour
• Lack of transparency and cooperation
among provinces
• The language barrier results in gap
in communication
• Dependency on China for financial aid
• Production costs in Pakistan are high
owing to shortage of electricity and
imported raw material use
Opportunities
• Strategic alliances, partnerships
• Import, export
• Innovation and technology development
• Employment generation for skilled and
unskilled labour
• Improvements in industry know-how
• Productivity enhancement
• Inflow of FDI
• Hospitality industry growth
• Opportunities for existing local industries
such as cement, banking and transport
• Infrastructure development
• Export of goods and services
• Tourism is set to increase
Threats
• Security threats and lack of law and
order
• Migration of local industry to the
economic zone
• Political instability and influence
• Governance issues / transparency
• Lack of communication between
provincial and federal governments
• Exhaustion of
