A passage to Pakistan: The China-Pakistan Economic Corridor

For the regular visitor, Pakistan appears to have a vibrant economy. Flights are busy and hotels often see nearly full occupancy. Economic data support this observation with The World Bank predicting the Pakistani GDP growth rate expected to rise to 4.8% in 2017 and will accelerate modestly through to 2019. What is behind this? To a large extent it is driven by Chinese investment.

The China-Pakistan Economic Corridor (CPEC) is creating opportunities for investment through the advancement of key projects by the Chinese and Pakistani governments along a 3,000 kilometre route between the two countries.

A part of the Belt and Road initiative, CPEC is one of six economic corridors along the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

The flagship initiative consists of a range of developmental projects connecting Kashgar in Xinjiang, China to Gwadar in Balochistan, Pakistan, including the development of roads, oil and gas pipelines, power stations, cables and airports. It is expected to be completed by 2030. In addition, CPEC also aims to increase cooperation between the two countries in other areas such as science and technology, agriculture, tourism and culture.

With the objective to strengthen economic ties between China and Pakistan, the respective governments hope that the collaboration will also enhance the region’s cohesiveness, accessibility and prosperity.

The first proposals for CPEC began in 2014 when the President of Pakistan, Mamnoon Hussain, visited China to discuss plans for an economic corridor in Pakistan. Following further discussions between Pakistan Prime Minister Nawaz Sharif and Chinese Premier Li Kequiang in November 2014, the Chinese government announced its intention to finance Chinese companies as part of a US$45.6 billion plan for energy and infrastructure projects. The CPEC Agreement was signed on 20 April 2015, and the two countries agreed to jointly undertake the development of these projects in Pakistan.

Nathan Dodd is a partner in the Singapore office of Mayer Brown JSM. He can be contacted on +65 6327 0235 or by email at nathan.dodd@mayerbrownjsm.com