Opportunity cost of No-CPEC

Pakistan and China are celebrating ten years of successful execution of CPEC. There is no second opinion among Pakistanis that CPEC has benefited our country. CPEC helped Pakistan overcome challenges like electricity shortage, rehabilitation and construction of new transportation infrastructure, alternative seaports, etc.

However, the opponents are not accepting the reality and question the importance of CPEC. They try to tag CPEC with problems of Pakistan like a debt trap by ignoring the opportunity cost of No-CPEC. A quick analysis by the Asian Institute of Eco-Civilisation Research and Development indicates the cost of No-CPEC would be very high.

Let’s start with the energy sector. Deep dive into the facts portrays a scary picture of this sector without the CPEC projects. The analysis indicates Pakistan was facing an acute shortage of electricity before the launch of CPEC, impacting the country badly. The industry was shifting from Pakistan and business opportunities shrinking.

There were limited opportunities to create jobs for the booming young population. It incurred heavy costs on the Pakistani economy, and according to government statistics, the country was losing $4-5 billion annually.

CPEC energy projects helped Pakistan manage, if not, overcome the challenge of electricity loadshedding. The country was also able to improve per capita consumption of electricity. A data shows per capita consumption increased from 431kw/h in 2014 to 644kw/h in 2022.

Imagine, if CPEC energy projects were not operational, what would be the cost of electricity loadshedding? A rough estimate shows the annual loss would be around $15-20 billion. How? There are two major factors which support the argument. First, in 2014, total population of Pakistan was 188 million which increased during the last eight years. According to the new population census, total population of Pakistan is 241 million. Second, per capita consumption of electricity increased during the same period. Both scenarios indicate the demand would have increased. That mean Pakistan will have to suffer from worst loadshedding in 2023. It would lead to de-industrialisation, unemployment, mental health issues (due to sleepless nights) and closer of business. In a nutshell, the cost would have been increased to $15-20 billion.

Let’s try to study the impact of this cost by keeping in mind the present economic crisis. Right now, Pakistan is struggling to find means to avert the debt crisis and reignite growth. IMF compelled Pakistan to accept all conditions to get a loan of $3 billion. Now, if there were no CPEC energy projects, what would had been the economic situation of Pakistan and the behaviour of IMF?

Second, CPEC helped tackle the issue of poverty in Pakistan. It helped create 192,000 jobs during the first phase. It means it helped 192,000 families. More than 100 SMEs benefited from the CPEC projects, which helped create indirect jobs. The provision of electricity to industry also helped create many more indirect jobs.

Third, in 2014, Pakistan needed $1.2 billion to rehabilitate transport infrastructure. Pakistan, being a front-line ally, provided a transit facility to Nato which badly impacted infrastructure. The country was searching for investment to rehabilitate the infrastructure, but our allies did not show any interest. At that time, China came forward and helped Pakistan not only to rehabilitate infrastructure but also build new infrastructure (851km).

Fourth, it is a fact Pakistan is blessed with a youth bulge. Capitalising on the youth, however, required to equip them with the proper skills. Unfortunately, Pakistan does not have the resources to provide skills to its youth. CPEC is helping Pakistan provide skill opportunities. China’s government has provided millions of US dollars for this. Besides, Chinese companies are contributing to training youth. According to available data, Huaneng Shandong Ruyi Group, which built the Sahiwal coal power plant, invested in skill development of 245 engineers and 377 staff members. Port Qasim also contributed to building the capacity of 600 engineers and 2,000 general staff members.

Fifth, in 2014-15, Pakistan was under the worst attack of terrorism. The country was paying the price of being a front-line ally. It suffered more than $100 billion in economic loss and lost almost 50,000 human lives to terrorism in 2014-15. When Pakistan was fighting a multidimensional war, our allies abandoned us. They blamed Pakistan and ran campaigns against our country. They declared Pakistan an unsafe destination for investment.

Pakistan was running from pole to pole to find any investment opportunity. Unfortunately, no one was interested in investing in Pakistan. At that critical time, China came to assist Pakistan. Beijing joined hands with Islamabad to launch CPEC.

The launch of CPEC not only helped Pakistan overcome the challenges of electricity shortage, transport infrastructure, but also paved the way for investment from other sources.

Now, many countries like Central Asian States and ASEAN are showing interest to join CPEC.

From the above discussion, it can be inferred the opportunity cost of No-CPEC would be very high. The economic and social situation would be in a bad shape, and the West and IMF would be pushing Pakistan to obey them. Thus, it is a general consensus among Pakistanis that CPEC helped country avoid such a situation.