Second phase of CPEC: Chinese shelve investment plans due to political uncertainty

ISLAMABAD: Chinese investors have reportedly put billions of dollar investment on ice, planned for second phase of China-Pakistan Economic Corridor (CPEC), due to political uncertainty in Pakistan, well informed sources told Business Recorder.

CPEC Authority, sources said, had identified 19 Chinese companies, which have shown keen interest in different sectors for investment billions of dollars.

According to sources, top executives of Chinese companies also met Prime Minister Imran Khan during his visit to China in February 2022, wherein they expressed their interest to invest in different sectors under second phase of CPEC.

The key sectors, which have been identified for Chinese investments under CPEC-II, are textile, pharmaceutical industry, automotive industry, information technology, footwear industry, furniture industry, and agriculture sector.

In textile sector, Pakistan has supply base for almost all man-made and natural yarns and fabrics, including cotton, rayon and others. This abundance of raw material is a big advantage for Pakistan due to its beneficial impact on cost and operational lead time. Many international brands currently operate in Pakistan and work with the local textiles mills such as H&M, Levis, Target, Nike, Adidas, Puma etc.

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Textile sector of Pakistan presents the most attractive opportunities for Chinese investors in the value-added segment particularly ‘apparel and made-ups’ where there is considerable growth potential. The investors will be able to take advantage of the best possible fiscal incentives in the SEZs, skilled and inexpensive labor, easy availability of raw materials, competitive energy tariffs, low freight costs and preferential access to European markets.

In pharmaceutical, there is an opportunity to replace the imports from India, Korea, Japan, EU and even Chinese counterparts. New avenues for export of Plant, Machinery and Equipment to Pakistan would be realized, as local industry will also step-in on backward integration, transportation and logistics strategic advantage for exports to MENA, Central Asia, South Asia, EU and Africa.

In auto sector, duty-free import of plant and machinery for setting up the assembly and/or manufacturing facility on a one-time basis, concessional rate of custom duty @ 10 percent on non- localised parts and @ 25 percent on localised parts for a period of five years for the manufacturing of cars and LCVs.

Pakistani authorities have informed the Chinese investors of 19 multi-industry SEZs open for business, with respect to availability of infrastructure (electricity, gas, water & road accessibility etc.) for investors who wish to set up units in the next two years.

The sources said 5,300 acres of land is available in these SEZs. Additional 1000 acres of land is planned to be added: (i) Bin Qasim Industrial Park (BQIP); (ii) Korangi Creek Industrial Park (KCIP); (iii) Hattar Special Economic Zone (HSEZ); (iv) M3 Industrial City (M3IC); (v) Oil Village SEZ;( vi) Rachna Industrial Park (RIP); (vii) Rahimyar Khan Industrial Estate (RIE); (viii) Rashakai Special Economic Zone (RSEZ) (CPEC); (ix) Vehari Industrial Estate (VIE); (x) Bhalwal Industrial Estate (BIE); (xi) Bostan Special Economic Zone (BSEZ) (CPEC); (xii) Hub Special Economic Zone (HUBSEZ); (xiii) NausheroFeroz Industrial Park (NFIP); (xiv) Allama Iqbal Industrial City (AIIC) (CPEC); (xv) National Science and Technology Park (NSTP); (xvi) JW-SEZ China-Pakistan SEZ; (xvii) Quaid-e-Azam Business Park (QABP); (xviii) Dhabeji Special Economic Zone (CPEC); and (xix) Gwadar Free Zone.

The sources said out of total nine CPEC SEZs, four are at advanced stage of readiness in addition to Gwadar Free Zone.

“All 19 Chinese companies were ready to invest billions of dollars in the identified sectors but they have shelved their plans due to current political insecurity in the country, which is not in favour of the country,” said one of the key officials of CPEC, who has left office after the dissolution of the cabinet.

The Chinese companies, which have already invested in Pakistan’s energy sector are unhappy with the treatment, they are receiving with special reference to payments against sold electricity. Chinese leadership had shared their concerns with the Prime Minister and other authorities, but payments have not yet been made to them as per commitment.

Copyright Business Recorder, 2022