Icep Css - Pms (A Brief Research On Cpec)

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The economic
benefits of the
modern silk road:
The China–Pakistan
Economic Corridor (CPEC)
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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.
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© The Association of Chartered Certified Accountants

August 2017
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

The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC) 3

Foreword
The Pakistan-China Institute (PCI) has Pakistan-China Institute, as a think tank, is I am confident that this is one of many
emerged as the primary organisation committed to continue its role as being more research reports to follow that we
devoted to promoting people-to-people the focal platform in Pakistan for taking shall undertake to continue to play a
understanding and friendship between the Belt & Road initiative and CPEC leading role in research, advocacy, and
Pakistan and China. The institute has forward, along with playing its role in diplomacy for the Belt and Road Initiative
emerged as a key player for fostering supporting cultural engagement across as well as the China-Pakistan Economic
multilateral dialogue, promoting cultural the region. Corridor. We believe that the Belt and
and economic connectivity, along with Road Initiative is the biggest multifaceted
acting as a unique bridge between I am pleased to see an informative and development agenda of recent history,
Pakistan and China to develop a closer, insightful research report as a joint and CPEC being its flagship project is a
strategic partnership. PCI’s theme of product of PCI and ACCA. Such research key case study for the Belt and Road
‘Cultures, Corridors & Connectivity’ will be instructive for policy makers, countries to observe and emulate, making
(CCC) is closely aligned with the academics, students and businessmen research on this project significantly
intricate link of Belt & Road with alike, and will help put into perspective important.
cultural engagement, which was the market dynamics and perceptions
also emphasized upon by President that have evolved thus far, as well as the
Xi Jinping during the Belt & Road challenges that the project may face and
Forum, in May 2017. therefore, may help in highlighting the
issues which need to be addressed for Mustafa Hyder Sayed
smooth continuity of this significant Executive Director
project. Pakistan-China Institute
4 The Benefits of the Modern Economic Silk Road; The China–Pakistan Economic Corridor (CPEC)

Right from day 1 when the Chinese that 22 countries in which we operate Pakistan have gained great insights into
premier Xi Jinpeng visited Pakistan in were directly on the Chinese Belt and the Pakistan economy and workings of
April 2015 the accounting fraternity like Road project which meant for ACCA that business enterprises and they live the
other stakeholders in the Pakistan BRI would surely be a factor for our own values enshrined in Kennedy’s speech
business community became absorbed strategic planning and certainly merited “ask not what your country can do for you
with the economic, social and political greater attention and understanding. but rather what you can do for your
consequences of the USD50bn China ACCA more than any other professional country!” There is a feeling in Pakistan
Pakistan Economic Corridor that was body thinks ahead and plays an important that this is their time; Pakistan too can be
being inked by a variety of Chinese role in keeping its members, the an Asian tiger economy, Pakistan can start
organisations with public and private professional community and business walking the walk of the economists
sector parties in Pakistan. The spectrum people informed of what is appearing on Mahboob Ul Haq’s economic blue print
of CPEC investments included IT, roads the business horizon. Pakistan is an for Pakistan that was later adopted by
and bridges, ports and shipping, railways, important country with a population of South Korea and Malaysia as part of an
enterprise zones and energy plants. For 220 million, geo-strategically positioned economic model. I am delighted that we
Pakistan this was seen as an injection of to provide enormous trade and have launched this report “The Economic
long term growth and stability hormone. commercial opportunities to Central Asia Benefits of the Modern Silk Road –
Articles started appearing in newspapers; and Central and Western China from its CPEC” in Pakistan to start a dialogue
TV was streaming expert views of CPEC newly built deep water port Gwadar. amongst the finance professional and
into homes 24/7 and of interest to ACCA, Pakistan is also a country that has a strong show leadership in thinking and planning
professional groups formed on social accounting profession, a long history of for Pakistan’s future.
media to microscopically examine every outstanding banking and finance and one
aspect of CPEC. It was this mass elevation of the most resilient economies which has
of CPEC to the top of the professional enormous potential. ACCA has long
Helen Brand OBE
conversation charts that prompted ACCA recognized the role accountants can play Chief executive
to invest in research at a national and in economic growth and stability. ACCA ACCA
global level. Internally ACCA calculated members over the last two decades in

Executive Summary
CPEC an t a t nt There will be more electricity integrated k ll n nan

l Pak tan nal t al w t
d
i
s
imp
c
o
he
The
s
i
s
eeded
for
fi
ce
into [the] national grid and the electricity
ang
peop
e
of
is
professio
s
o
de
i
h
supply will be more stable. People will
The China Pakistan Economic Corridor
ch
e
enjoy more convenient transportation In order to deal with the imminent
(CPEC) is an unprecedented undertaking
and a better livelihood. Alongside the changes, finance professionals need to
for Pakistan. The Chinese Ambassador to
major projects, we are setting up social equip themselves with the key skills of
Pakistan, His Excellency Mr Sun Weidong,
welfare institutions, especially in effective communication, better use of
has summarised CPEC and its benefit in
Gwadar, in the form of [a] primary business analytics, knowledge of the
the following manner.
school, vocational training centre, and [a] relevant taxation structure and strong
hospital with [the] Chinese government’s leadership.
‘[The] China-Pakistan Economic Corridor
grant. We will also provide KPK province
is a major and pilot project of the Belt
with medical, educational and training Around 86% of survey respondents
and Road Initiative, to which the leaders
projects in line with the need of local agreed that they should attend short
of our two countries have attached
people, to translate the benefits of courses on business, Chinese language
great importance and rendered active
CPEC immediately among them. For and culture.
promotion. It has also won the across-
average persons, the outcomes of the
board support from our two peoples as it
CPEC are tangible, accessible and Following the increase in Chinese
aims to provide new opportunities to the
enjoyable to hundreds of thousands [of] investments in Pakistan, professionals in
citizens as well as bring new impetus and
families across the country’ (CPEC 2017a). accountancy can explore providing a
vision to China–Pakistan friendship.
one-stop-shop solution to investors,
‘CPEC is a long-term and systematic C ang n nt from registration of a company to
h
e
is
immi
e
project to promote economic In an online survey of around 500 finance accountancy and tax advisory services.
cooperation through collaboration on and business professionals, conducted for
Gwadar port, energy, transportation this report, 79% of them expressed the
infrastructure and industrial cooperation. view that businesses will adapt to the
changes engendered by CPEC and such
‘CPEC will bring solid benefits to our adaptations will be made in the business
two peoples. With the completion of plans of organisations in Pakistan within
energy and infrastructure projects, one to five years.
conditions in Pakistan will improve.

v nan t u tu Env n ntal a t building and increasing the literacy rate,
Go
er
ce
s
r
c
res
iro
me
imp
c
enabling Pakistan’s people to benefit
Over 54% of respondents agreed that the Only 26% of respondents agreed that
from the CPEC developments. Lack of
board of directors will be the appropriate their organisations are taking steps to
awareness about CPEC was also cited as
forum for discussing and deciding upon address the environmental issues that will
one of the country’s key weaknesses:
the opportunities that CPEC will bring, arise from the impact of business growth
more workshops, seminars and
while 32% agreed that organisations’ risk due to CPEC, while around 50% remained
publications are required to educate
management committees should be neutral on the key question about the
people to equip themselves for the future
engaged in evaluating such steps that their entities will initiate to
changes. Possible failure to maintain law
opportunities. protect the environment from these
and order is one of the key threats cited,
changes.
along with the mismanagement of
R k anag nt resources and governance-related issues,
is
m
eme
S O analy while the opportunities commonly cited
Around 54% of respondents either
W
T
sis
agreed or strongly agreed that there is The key strengths cited by the business include the generation of employment
a need for risk-management and finance professionals include opportunities, increased trade and
mechanisms in organisations for availability of human resource in the improvements in infrastructure.
reviewing and assessing the challenges country, the potential for tourism, the
and risks that will arise from CPEC-related quality of infrastructure in the form of
business changes. Not everyone had roads, etc. Despite the availability of
firm opinions on this, with 34.2% human resource, however, one common
remaining neutral. weakness cited was a lack of skills, so
there is a need for adequate capacity

Introduction
ut t t finance professionals in the changing with Pakistan China Investment

Abo
his
repor
situation and also contains the results of Company’s executive and a survey
This detailed research report,
SWOT analysis conducted at Pakistan’s questionnaire was also circulated.
commissioned by ACCA Pakistan in
four provincial capitals and the Federal Executives from five Chinese companies
collaboration with Pakistan-China
Capital. The findings in the report are operating in Pakistan responded to this.
Institute, aims to comment upon the
intended to allow stakeholders to engage
transformation taking place in Pakistan
in a meaningful dialogue and to be used ut t u v y
due to the forthcoming China–Pakistan Abo
he
s
r
e
as a tool for formulating long-term plans
Economic Corridor (CPEC), part of the ACCA Pakistan initiated an online survey
and setting up models for progress.
modern economic Silk Road. The report to obtain the views of finance and
had three purposes: business professionals across the country.
This report also includes results of an
i. to review the overall expected online survey of finance professionals The survey was based on fifteen
questions in five areas.

economic impact of CPEC on the jointly commissioned by ACCA and the
economy of the country Pakistan-China Institute, and conducted
between the end of March and June The aim of the survey was to compile and
ii. to analyse the perception of CPEC analyse views from business leaders and
2017. Around 500 finance and business

among finance professionals and their finance professionals on the China
professionals across Pakistan participated
views about plans to prepare for the Pakistan Economic Corridor, which is part
in the survey and answered questions in
future, and of the Belt and Road Initiative (B&R)
the areas of business and financial
iii. to elaborate upon the skills needed by planning, human resource strategy, (ACCA 2017). The respondents were
ACCA affiliates, ACCA members and

finance professionals to benefit from governance models and environmental,
CPEC in the years ahead. social and governance matters (ESG). members from other accounting and
professional bodies working in various
Further, to obtain the views of Chinese service, manufacturing or consulting
M t l gy companies, an interview was conducted organisations across Pakistan.
e
hodo
o
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 Analysis
executives Group discussion
Media reports
• an online survey of finance focusing on SWOT
review

professionals analysis
• interviews with relevant stakeholders

• a review of media reports.

Online survey Interviews
The results of these investigations were
analysed for the report.
This report explores the key capabilities

and skills needed by businesses and

1. What is the Belt and

Road initiative (B&R)?
B lt an R a In t at v B&R’s envisioned impact on each F nan ng t B&R
i
ci
he
The
e
d
o
d
i
i
i
e
participating country is primarily based
Having attained the position of the To finance these projects, multiple
on the linkages that each project will
world’s second largest economy, China institutions from China have pledged
develop with the economy around it, and
seems likely to reach the top spot in financial support, including the China
workers employed, either directly by the
record time. It is doing this by spending Development Bank, Asian Infrastructure
project’s implementing enterprises, or
its way to prosperity as part of a grand Investment Bank (AIIB) and China EXIM
indirectly by industrial value chains. A fair
strategy that seeks to attain both Bank. A state-owned Silk Road Fund has
picture of B&R’s impact potential is
geopolitical and economic competitive also been set up to foster increased
indicated by its projected extent,
advantage. Beijing has launched the Silk investment along the Belt and Road
involving 65 countries, which constitute
Road Economic Belt and the 21st Century countries.
over 60% of the world’s population, and
Maritime Silk Road projects, collectively
contribute to 40% of global GDP (Hofman
called the Belt & Road Initiative (B&R) or During the Belt and Road Summit for
2015).
One Belt, One Road. Envisioned by International Cooperation, which took
President Xi Jinping, the B&R is a massive place in May 2017, financial commitments
international development project that nu j t an made by these institutions were increased
a unt nv t nt n B&R
The
mber
of
pro
ec
s
d
envisages, at the least, a number of roads, to accommodate the expanding number
mo
of
i
es
me
i
railway lines, ports, industrial zones, and How extensive is B&R? ‘Massive’ would of projects. The Silk Road Fund, which
energy development projects that will be the simple answer. But numbers allow was previously set up with USD40bn, saw
connect major economic centres in China, better understanding and the available an additional USD14.5bn funding
via various routes, with Europe, and fuel information, considering the wide support. Similarly, USD43.5bn was set
industrial development along them outreach of B&R and individual needs of aside in a special lending scheme by
(Figure 1.1). each participating country, indicates that China Development Bank and China
the B&R initiative will include a total of EXIM Bank.
900 projects, amounting to an estimated
cost of USD890bn.
Figure 1.1: The Belt and Road Initiative: Six Economic Corridors Spanning Asia, Europe and Africa
The B&R is geographically structured along six corridors and a

2 maritime route. The six land corridors are:
1 1. from western China to western Russia

3 2. from northern China to eastern Russia via Mongolia

3. from western China to Turkey via central and west Asia

6
5 4. from southern China to Singapore via Indochina

5. from southern China to India via Bangladesh and Myanmar.
4

6. from south-western China to and through Pakistan.


2. The China–Pakistan
Economic Corridor (CPEC)
One of the terms that a reader can find Observer 2017a). Investment policies and CPEC, as part of ‘The Belt and Road’, is of
almost daily in Pakistan’s English- financing services between the two major interest in professional networks
language newspapers is CPEC. countries have evolved to support around the world in general, and in
projects being implemented under CPEC, Pakistan in particular. While people
Among the six corridors, the China– and have nurtured the enhancement of generally agree that B&R will benefit
Pakistan Economic Corridor (CPEC) has industrial linkages and professional Pakistan, there are fears that the country
achieved the fastest and most effective practices to cater for increasing may not be able to repay the loans
progress, with its 19 Early Harvest Projects investments. obtained to finance the project, that
aimed at upgrading Pakistan’s transport China may dominate the project and that
infrastructure and bridging the country’s consequently, Chinese objectives will
longstanding energy deficit (Pakistan override Pakistan’s. Hence, the B&R
generates both hopes and fears.
Figure 2.1: CPEC investment breakdown, USD46bn
4% Energy

8% Roads

Rail

Transport
13%

75%

2. The China-Pakistan Economic Corridor (CPEC)
The B&R will enhance geographical energy generation and transfer. These The CPEC is aimed at creating economic
linkages by providing improved road, rail changes will, ideally, optimise the regionalisation in a globalised world. Its
and air transportation systems, facilitating business environment and enhance promoters see it as providing hope of
people-to-people contact. mutual cooperation. The B&R’s future regional improvement with peace,
promoters argue that this ‘win-win’ development and economic growth
This should stimulate academic, cultural model will result in a well-connected, (CPEC 2017b).
and regional knowledge and cultural integrated region of shared destiny,
exchanges, increase the volumes of harmony and development.
trade and business, and facilitate
Figure 2.2: CPEC’s planned rail networks
Railways Network of CPEC

Tuergate
Kashi
Havelian-Kashi New Railway

1,059km long
Hongqilapu
Construction of new line from

Havelian Dry Port:
Reconstruction of existing line Peshawar to Torkham
US $40 million investment
ML2 short and long term: water
hazard treatment, overhaul of
track, signal upgrading and Landikotal/ Havelian
speeding up, extension of arrival/ Torkhum Havelian Dry Port
war
departure track and electrification Pesha Islamabad
Thal Rawalpindi
New Railway Line from Quetta
Reconstruction of
(Bostan) to Kotla Jam on ML-2 via
ML1 Existing Railway including
Zhob & D.I. Khan (560km) Tank locomotive purchase, overhaul of
track, signal upgrading,
electrification, construction of
Zhob Faisalabad double line, communication
Lahore upgrading and speeding up the
extending of arrival/departure lines
Reconstruction/Upgradation of
and construction of Karachi-Kotri
Quetta-Taftan existing railway, Multan
Double Freight Line.
633km long g Quetta
s tun Khanewal Baatinda
Ma
Zahedar Lodhran
rab
Taftan Su Jacobadad 1,600km long
Gwadar to Jacobabad and
Karachi-Peshawar
Quetta (Mastung) via Besima a
sim PDL (High Speed
New Railway Line, 1328km long, u r Be
njg Railway Line)
US $4.5 billion investment Pa g
Na Larkana Sukkur
Shahdadkot Legend
rbat
Tu
ab
sh
Ho Mirpur Khas
Hyderābād Barmer
Gwadar
Babin
Karachi
Alternative Scheme of
Gwadar Port Passage

2. The China-Pakistan Economic Corridor (CPEC)
Political economist Asad Abbasi1 has Favoured by geography, Pakistan is Inv t nt n CPEC: SD46 n
an g w ng
es
me
i
U
b
looked at the benefits that China expects positioned as a bridge between the
d
ro
i
for itself. ‘For Pakistan, CPEC might Eurasian landmass that is home to the Silk
CPEC is B&R’s flagship project, and its
represent “prosperity”, “unity”, etc., but Road Economic Belt, and the Arabian
implementation is considered to be
for China it is just one small part of Yi Dai Sea, which is an essential link in the 21st
ahead of that of other corridors being
Yi Lu. This is usually translated into Century Maritime Silk Route.
developed under the initiative. Having
English as “One Belt One Road” (OBOR)
been chosen as the first corridor, CPEC
but according to Tim Summers, senior ln n CPEC – wa a was initiated with an extensive list of
P t: t lan an
The
i
chpi
of
G
d
r
consulting fellow at Chatham House, the
projects amounting in value to USD46bn
a t ut t
or
Where
he
d
d
English translation fails to convey the
(and growing). These projects
m
ri
ime
ro
es
mee
dynamic meaning that the phrase
The CPEC is a combination of have been structured into short-,
encapsulates. Yi Dai Yi Lu conjures up two
investments, one aim of which is to bridge medium-, and long-term plans,
different epochs of Chinese history: Silk
Pakistan’s energy deficit and so rejuvenate extending for a period of 15 years
Road of Tang Dynasty (618–906 AD) and
its ailing industrial base, and loans. The from the year of signing, ie from 2015
modern silk maritime trade routes from
latter will pay for an overhaul of the until 2030.
coastal China. The aim of the project is to
country’s road and railway infrastructure /
connect China with 65 countries in Asia
railway network to provide seamless Over the two years 2015 to 2017, however,
and Europe. China estimates that OBOR
connectivity within the country, and the project portfolios remained flexible to
will add $2.5 trillion to its trade over the
through it. The aim of this development is accommodate more projects, and the
next decade’ (Abbasi 2016).
to create the first North–South link funding needed increased further.
between the ‘Belt’ and the ‘Road’,
To summarise, the four key pillars of
converging on the Gwadar Port, the Beijing and Islamabad have been
CPEC include investments in the areas
linchpin of CPEC. successful in detailing the precise terms
shown in Figure 2.3.
for the financing arrangements, including
designating the institutions involved, and
Figure 2.3: Key pillars of CPEC investment determining the length of build-operate-
transfer (BOT) contracts, the quanta of
taxation and excise tariffs, projected
Gwadar Infrastructure return on investments, the schedule of
Port development 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
Industrial B&R financing may serve as a model for
Energy
cooperation other countries to follow for their own
Projects
B&R cooperation with China.
1 Asad Abbasi has a Masters degree in Political Economy of Late Development from LSE. Currently, he is researching conceptual frameworks of development. http://blogs.lse.ac.uk/southasia/2016/02/05/lessons-from-africa-how-can-pakistan-make-the-most-of-chinese-investment/

3. The impact of CPEC

on Pakistan’s economy
Pakistan’s economy will be boosted if its infrastructure development, losses due to Pakistan’s current capacity. Also, 11 of
energy crisis is resolved by CPEC. the war on terror, and a combination of these projects, prioritised as the Early
low exports and high imports. The Harvest Projects, are expected to provide
Pakistan’s economy has tremendous average shortfall in the energy sector is over 11,000 megawatts of electricity by
strategic development potential, as it is 7,000 megawatts (Kiani 2017), which, in March 2018 (CPEC 2017c) – more than
located at the crossroads of south Asia, the form of load-shedding and power sufficient to make up for Pakistan’s energy
central Asia, China and the Middle East outages, cost the Pakistan economy shortfall of 7,000 megawatts.
and thus can serve as the fulcrum for a PKR1,439bn (7% of GDP) in 2015 (Pakistan
regional market with a vast population, Observer 2017b). Major industries have One of CPEC’s primary objectives is to
large and diverse resources, and seen a downward slump in business address Pakistan’s pressing infrastructural
untapped potential for trade. The major because of energy shortages. Under requirements. With nearly USD11bn
obstacles faced by Pakistan’s economy CPEC, a grand total of 21 energy projects earmarked for its development, the road
include persistent industrial losses due to have been planned. Altogether, these and railway network will greatly benefit
the country’s energy crisis, low foreign projects would eventually produce 16,400 Pakistan’s economy.
direct investment (FDI), lack of megawatts of power, roughly the same as
Figure 3.1: Roads planned for the CPEC
Highways Network of CPEC
Khunjerab
Gilgit
Raikot
Sazin
Thakot
Shinkiari
Mansehra
Abbotabad
Havelian
Peshawar Haripur
Islamabad
Burhan
Rawalpindi
Gujranwala
D.I. Lahore
Khan Faisalabad
Darya
Khan
Zhob
Qila
Saifullah
Multan Khanewal
D.G.
Legend
Khan
Quetta
Bahawalpur
Surab
Dera Allahyar
Khuzdar Sukkur
Basima
Shahdadkot
Nag Rango
Panjgur
Hoshab
Hyderābād
Gwadar
Karachi
Source: CPEC 2017d

3. The impact of CPEC on Pakistan’s economy
‘We need to learn, we need

to increase our capacities’
R a n a t u tu t v with state-of-the art facilities in which only lower Pakistan’s current account
o
d
i
fr
s
r
c
re
o
impro
e
investors may capitalise (SEZ 2017). . outflows by reducing imports, but also
The road infrastructure (Figure 3.1) will
increase inflows as a result of exports.
see development along various routes
‘The Government needs to provide [a] This makes the industrial cooperation
within CPEC, while not necessarily being
level playing field to Pakistani and component of CPEC an important tool for
financed as part of it. These include
Chinese investors when it comes to SEZ’, improving Pakistan’s trade deficit and,
Gwadar–Hoshab, Khuzdar–Basima,
said Ehsan A. Malik, chief executive of the more importantly, generating revenue for
Karachi–Lahore Motorway (Sukkur–Multan
Pakistan Business Council, in an interview repayment of CPEC loans and other
section), the Karakorum Highway, and
for this study. ‘There is a need to have a debts.
others. These development projects will
detailed financial forecast about the
enhance the connectivity between all four
impact on exports due to new companies At a micro-level, SEZs under CPEC will
provinces and allow for ease of access of
which will be established in SEZs’, he play host to massive industrial units being
goods. Pakistan Railways is set to attract
added. ‘Businesses related to set up across various industrial clusters of
up to USD5bn investment for upgrading
transportation, logistics and supply chain the economy, which will reshape the
and deploying new railway infrastructure
shall definitely have growth. For Pakistani labour market dynamics in multiple ways.
across Pakistan. To enhance connectivity
businesses, there is a need to move up … Firstly, they will create jobs for skilled and
and improve transportation facilities, rail
[the] supply chain and provide value- semi-skilled workers, who will primarily be
track from Karachi to Peshawar will be
added products to the world’, hired from within Pakistan owing to
upgraded (CPEC 2017e). Other projects
wage-price competitiveness. Secondly,
for the railway infrastructure include
While commenting on CPEC’s the government and enterprises will
railway track from Kotri to Attock city.
environmental impact, Malik suggested invest in the vocational training and
that the government could consider professional development of labour to
S al E n Z n initiating green bonds for the companies meet the rising demand, leading to a
peci
co
omic
o
es
In its medium- and long-term projects, that will be established under CPEC, large-scale skills transformation of
CPEC aims to use the enhanced particularly in SEZs, so that the amount Pakistan’s labour force.
infrastructure and energy generation generated can be used for protection of
capacity to amplify Pakistan’s industrial the environment. Furthermore, Malik ‘We need to learn, we need to increase
productivity. As one of the four emphasised the need for more our capacities’, Hassan Daud, project
components of CPEC, industrial plantations, as the mega projects will also director CPEC at the Ministry of Planning,
cooperation projects are being result in deforestation. explained in an interview for this study.
implemented to broaden the industrial ‘Imagine what will be the impact on
base in Pakistan through local and foreign In u t al at n business when the trains will move from
j t
d
s
ri
cooper
io
investments. 65km per hour speed to 130km per hour
pro
ec
s
speed in [the] next five years. This means
At a macro-level, the industrial that the speed of business will change. It
At the Federal level, as many as nine
cooperation projects under CPEC will is up to people to get benefit from this
Special Economic Zones (SEZs) have been
potentially allow for import substitution opportunity’.
identified across the country, which, after
and export-led production, which will not
detailed feasibility studies, will be set up

4. CPEC and different sectors

of the economy

t way t tt It is said that the best way to predict the at n
utu t at t
The
bes
o
predic
he
Job
cre
io
future is to create it. Pakistan is in the
The International Labour Organization
f
re
is
o
cre
e
i
process of creating a future with hope for
Working on this report, meeting people (ILO) has estimated that CPEC will
its people.
from different backgrounds, reviewing support the creation of around 400,000
dozens of documents, conducting jobs (APP 2017), while the Applied
workshops in five cities and reviewing the n nt v nt Economics Research Centre (AERC) has
U
precede
ed
e
e
results of the online survey, has left a CPEC is an unprecedented scheme for estimated that it could create over
strong impression that to predict the Pakistan, particularly in the context of 700,000 direct jobs between 2015 and
outcome of any unprecedented project, China–Pakistan relationships. Never in 2030 (APP 2016).
being implemented at vast scale, one its history has the country witnessed such
would need a crystal ball. Any projections investment from a single foreign country. According to Professor Samina Khalid,
made as part of this report are based on It is estimated that the cash inflow under director of the AERC, CPEC could well
factors and opinions that could evolve CPEC will more than equal all the foreign create over 700,000 direct jobs between
overtime, and are hence are subject to direct investment (FDI) that has come into its start in 2015 and projected
change. Pakistan since 1970, an amount that is completion in 2030. This would increase
forecast to equal nearly 17% of the GDP. annual economic growth by 2% to 2.5%.
Hence Khalid believes that CPEC
projects are likely to create more than
700,000 jobs in various sectors of
Figure 4.1: Areas in which CPEC job creation 2015–17 Pakistan by 2030 (APP 2016).
CPEC Job creation till mid 2017; Around 30,000 people.
The Planning Commission’s estimates
show that the final figure may be much
Energy higher, as these indicate that CPEC
8%

Transport would create around 800,000 jobs over

Gwadar 15 years (APP 2017).

Fawad Yousafzai, a journalist with
Pakistan’s newspaper, The Nation,
reported in June 2017 that CPEC had
51% by then created 30,000 jobs for
41% 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
Source: Chart based on general press information
2017 (PCN 2017a).

4. CPEC and different sectors of the economy
‘CPEC will have an impact on almost all of tons over [the] life of CPEC. Steel will Su ta na l v l nt g al
s
i
b
e
de
e
opme
o
s
key sectors of the economy’, said Top Line be used in civil works, rail tracks, pipelines
‘For SDGs dealing with infrastructure,
Securities’ chief economist, Saad (LNG), etc.’ The steel sector has witnessed
urban development, energy,
Hashemy, in an interview for this study. significant production growth in 2015–16.
transportation, mass transit systems, etc
He added: ‘There will be a visible growth Nonetheless, Chinese imports have
the country needs to strengthen its
in banking, cement, automobile, caused some damage to local production
capacity to access international green
insurance, refinery, power generation, as the substitution product from China is
finance. The cost of the capital for green
oil and gas marketing and cable and cheaper.
growth has created a new global
electrical goods.’
ecosystem of financial instruments and
F nan al n u t y polices. In fact, this has become an
i
ci
i
d
s
r
800,000 a n n n xt 15 essential first step to stimulate
y a an t l n u t n While talking about the financial sector,
c
rs
eeded
i
e
Hashemy was positive that the banking sustainable economic growth for green
e
rs
d
s
ee
co
s
mp
io
During the interview, while discussing and insurance sector is going to grow. He jobs…Instead of simply being an
CPEC’s impact on the motoring sector, remarked; ‘At present, [the] deposit base ‘economic’ corridor, CPEC can become
Hashemy said; ‘Current roads are around of local banks is around USD90bn and an environmental corridor…Pakistan and
265,000km and registered motor vehicles loans outstanding are around USD46bn. China share many SDG [sustainable
are 15m, which includes two-wheeler, CPEC spread over 15-year can result in [a] development goal] challenges, ranging
three-wheeler and four-wheeler motor direct additional 2–3% per year loan from increasing inequality to making
vehicles and also buses, trucks and others. growth of the banking system. [The] cities sustainable, from combating
We expect that CPEC and related projects indirect impact can be over and above climate change to managing water or
can add 12,000–15,000km of roads after this due to increased economic activity. protecting oceans and forests. It’s a
accounting for additional lanes, as per Further, approximately USD30bn of historic opportunity for Pakistan to weave
current project details. Assuming current projects will be insured locally and its SDG targets in the accelerated pace of
road density of registered motor vehicles, internationally. All local insurance CPEC. Equally important, CPEC can serve
CPEC’s impact on automobile sector road companies [are] likely to benefit and [this] as a model in acceleration for some SDG
projects will result in additional demand can result in additional insurance premium indicators’ (Sheikh 2016).
for 800,000 autos over next 15 years’. of Rs2bn annually, which is 4% of [the]
‘Steel usage will be huge’, Hashemy total gross premium of [the] insurance Sartaj Aziz, a past adviser to the prime
remarked. ‘Steel usage will be extensive industry’. (See also Hashemy 2016.) minister on foreign affairs, also believes
in CPEC projects and can run into millions 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
In a t u tu an In addition to domestic tourism, there are H w w ll CPEC l at

t an tat n t nt t n utu ?
fr
s
r
c
re
d
o
i
he
p
corpor
e
also opportunities for encouraging
r
spor
io
sec
or
e
i
ies
i
f
re
tourists from China. ‘People can consider
Owing to the increased connectivity of Muzzammil Aslam, chief executive officer
promoting tourism related to [the]
production sites and markets, public and of Invest and Finance Securities Limited,
Gandhara civilisation and Buddhism
goods transportation businesses are a brokerage firm based in Karachi, was
heritage, where people from China will
expected to grow, thanks to the road interviewed for this report. He
particularly be interested’, explained
infrastructure constructed under CPEC, commented; ‘The companies will have an
Professor Haroon ur Rasheed from School
which will connect rural areas with urban opportunity to get investors once they list
of Business and Economics, University of
areas across the country. on the Pakistan Stock Exchange [PSX].
Management and Technology, Lahore, in
For green field companies which will be
an interview for this report.
This also means that increased mobility established under CPEC, it will be an
will allow health and educational sector opportunity for initial investors to exit
professionals to reach the places where Tr
a an and provide a chance to other investors,
de
d
commerce
demand exists but where professionals ‘Trade will increase’ said Professor who can purchase shares from PSX, once
are few because of current inaccessibility. Rasheed. He believes that where quality is the green field project starts giving
At the same time, once market access is high, such as in production of sports benefits’.
available to producers, eliminating the goods, leather, handmade products and
need for intermediaries, their profit food (meat and fruit), there is huge trade While commenting on the sectors that
margins are expected to increase. potential with China. He also believes will be affected by CPEC, Aslam argued
that with increases in trade and business that growth will occur in many sectors,
u , tal ty an growth, Pakistan’s middle class will have including power (energy), gas and
v nt a t unt y
To
rism
hospi
i
d
increased incomes and more purchasing electricity distribution, cement, steel,
mo
eme
cross
he
co
r
power. construction and allied industries, the
One of the sectors that have already motor vehicle sector, the financial
started witnessing growth due to better services sector, and apparel.
road infrastructure is domestic tourism. In ‘We need to negotiate free trade
2015/16 there was a 25% growth in agreement better’, argued Nazish Afraz,
adjunct faculty, Department of Economics ‘There will be increase in competition for
tourism to Gilgit Baltistan, on the distant the companies in Pakistan once the CPEC
north side of Pakistan, bordering China, at the Lahore University of Management
Sciences, in an interview for this report. projects are executed’, he explained.
as one million people visited during the ‘However, companies operating in
summer of 2016, a number not witnessed ‘At present, [the] trade deficit with China
is around 40%. We need to lower this Pakistan need to embrace the fact that
before (Express Tribune 2016). In line with for future, competitiveness shall be the
this, the hospitality industry has gap. [A] regional value chain is needed to
be created along with stability in our key. CPEC shall push [the] corporate
experienced a boom, as average hotel sector to think [about] innovation and
occupancy increased to 80% in 2016 from policies to increase trade’, she added.
work hard to be competitive’.
around 35% in 2015 (although one of the
key reasons is an improved security
Attracting foreign investment will also be
situation in the country) (JCR-VIS 2016).
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).
Image Source: PCN 2016

5. Mode of doing

business in Pakistan
for Chinese companies
There are three options for the Chinese would be engaged to execute the M er
g an a qu t n (M& )
ers
d
c
isi
io
s
A
companies wishing to work in Pakistan: development projects. But if the Chinese
M&A activity has also increased.
firms need assistance, then they can
• to work independently of any
complete the projects through joint • Dutch firm Royal Friesland Campina
Pakistani counterpart
ventures or sub-contracting’, says Minister acquired Engro Foods for USD446m
• to subcontract their work to Pakistani for Planning Ahsan Iqbal (Aftab 2016).
• Arcilek, a Turkish company, bought
companies or
Dawlance Pakistan for USD250m
• to enter into joint ventures. yj nt v ntu ?
Wh
oi
e
re
• there are reports that a Chinese
A joint venture between Pakistani and energy conglomerate is seeking a
One of the examples of the joint venture Chinese companies has certain majority stake in Karachi’s largest
approach is The Hub project, which is a advantages. A company based in Pakistan utility for USD1.8bn (Rizvi and Niaz
joint venture between the State Power has local experience while the Chinese 2017).
Investment Corporation, China Power company will bring technical know how
International Holding, and the Hub Power and skills that can be customised to meet
Company of Pakistan. local needs. This results in a ‘win-win’
situation, provided a working relationship
‘The Chinese government is investing is agreed under the terms of their
USD46bn under CPEC projects in Pakistan contract and both the sides are clear on
and it was decided that the Chinese firms the desired business outcome.

6. Are Pakistani businesses

prepared for the imminent

change?
Around 500 finance professionals across C na w ll ult n When asked about this, 42% of finance
n a tt n
Goods
from
hi
i
res
i
Pakistan responded to a detailed online professionals said that the business
i
cre
sed
compe
i
io
survey undertaken for the purposes of strategy of their firms would cater to the
When asked about imports from China,
this report. change and relevant adjustments to their
73.8% of respondents agreed that there
plans would be made in the next one to
The key purpose of the survey was to will be an increased inflow of goods from
three years, while 37% responded that
obtain views from finance and business China, which will have a direct
their organisations would make such
professionals about the business strategy competitive effect on goods
changes to their business strategy in the
being adopted by different businesses, manufactured in Pakistan. Given the
next three to five years. Hence, 79% of
their governance and risk-management opportunity, 42.6% respondent agreed
respondents were of the view that the
models, and the skills needed by finance that they would move to one of the
change arising due to CPEC would be
professionals and the measures being Special Economic Zones (SEZs; see
incorporated into their business strategy
adopted by their companies to deal with Chapter 3 above), to increase their ability
within five years and the way their
the expected changes to the business to compete with Chinese imports.
businesses work would adapt to the
environment. expected growth and change.
Bu n w ll a a t t ang
si
esses
i
d
p
o
ch
e
59% of respondents strongly agreed or With CPEC there will be economic
agreed that their organisation has such growth. An increasing inflow of goods
plans while almost one-quarter from China is expected as the road
disagreed and another 16% either infrastructure improves and following
remained neutral or made no response the development of Gwadar port. The
(Figure 6.1). new infrastructure will, however, also
facilitate exports of goods and services
to China.

6. Are Pakastani businesses prepared for the imminent change?
v nan an k Figure 6.1: Organisational plans to meet growing demand arising from CPEC
anag nt
Go
er
ce
d
ris
Does your organisation have plans to scale up capacity to meet any growing
m
eme
How might the governance structure of demand due to CPEC?
businesses adjust to deal with CPEC-
Strongly Agree
related changes? When asked: ‘Do you 6.5%

Agree
agree that, owing to changes related to 18.9%

CPEC, there will be a need to change the 9.8% Disagree

governance structure in your Neutral

organisation?’ 41.7% of respondents No response

remained neutral while 24.9% either
disagreed or strongly disagreed with the
statement (Figure 6.2).
24.6%
Over 54% of the respondents agreed that

the board of directors would be the 40.2%
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.
Figure 6.2: Will governance structures change in response to CPEC?
k- anag nt an
Do you agree that owing to changes related to CPEC, there will be a need to
n
A
ris
m
eme
mech
ism
change the governance structure in your organisation?
is
eeded
There is a need for a risk-management 3.1%
mechanism in all organisations, enabling Strongly Agree
the review and assessment of the 7.5%

Agree
challenges and risks arising from CPEC-

related business changes. When asked ‘Is Disagree

there a need to develop a risk- Neutral
30.3%

management mechanism in your Strongly disagree

organisation with reference to the
anticipated growth in the business which
may arise due to CPEC?’ 54.1% agreed or 41.7%
strongly agreed with the statement while
35.2% remained neutral or failed to
respond; fewer than 11% disagreed
(Figure 6.3).
17.4%
Figure 6.3: Risk-management mechanisms and CPEC
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?
2.3% 1%
Strongly Agree

8.4% Agree
17.5%

Neutral

Disagree

Strongly disagree

No response

34.2%
36.6%

6. Are Pakastani businesses prepared for the imminent change?
at k n ang a firms on production costs will be Env n ntal t t n: H w

qu n u n t gan at n a a ng
Wh
i
d
of
ch
es
re
iro
me
pro
ec
io
o
tough and it is expected that trading
a t utu ? t nv n ntal a t
re
ired
i
b
si
esses
o
or
is
io
s
re
ddressi
with China will increase because of
prep
re
for
he
f
re
heir
e
iro
me
imp
c
While responding to a question about the infrastructure development linking Only 26% of the respondents agreed that
what kind of changes are needed in the two countries, inevitably their organisations are taking steps to
business, respondents highlighted the increasing competitive pressures on address the environmental issues that will
following issues. local products. Risk-management arise from the impact of business growth
mechanisms must be adapted to due to CPEC, while over 50% remained
1. Organisations need to consider and allow timely identification of any neutral on this key question (Figure 6.4).
business risks.

analyse the impact of B&R initiative
globally and its impact on the way
business is conducted in Pakistan
Figure 6.4: Steps for addressing environmental protection
2. Efficient allocation of resources to

compete globally Is your organisation taking any steps to ensure that the environment remains protected
due to expansion in operations related to CPEC
3. Organisations such as in the IT and
1.8%

communications industry will need to 4.40%
consider major investment in human Strongly Agree
7.9%

and organisational development, such Agree
as bringing in experts with skills that

Neutral
are highly technologically advanced, 16.4%

to enable them to compete globally. Disagree
18.7%

Such a step will help these Strongly disagree

organisations to align with the No response

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 50.8%

included in the scope of business risk
assessments. Competing with Chinese

7. Capital markets

The capital markets of Pakistan have been M gan Stanl y u g a t The KSE 100 index2 has moved from
tatu PS
or
e
p
r
des
he
consolidated as the Pakistan Stock below 20,000 points at the end of Quarter
s
s
of
X
Exchange (PSX) (which was formed on 11 1, 2013 to over 45,000 points at the end
In light of the expected increased inflow
January 2016 by the integration of the of Quarter 2, 2017, registering over 125%
of funds and foreign investments, and the
Lahore and Islamabad Stock Exchanges growth in four years.
acquisition of PSX by the Chinese
with the Karachi Stock Exchange and the
consortium described above, Morgan
renaming of the Karachi Stock Exchange Tundra Fonder AB’s chief investment
Stanley Capital International (MSCI) has
as Pakistan Stock Exchange Limited, a officer, Mattias Martinson, says ‘Pakistan
upgraded the status of PSX from ‘frontier
single nationwide capital market). PSX has turned the tide; the CPEC agreement
market’ to ‘emerging market’ status,
had 559 listed companies with market was probably the trigger for many
effective from 30 June 2017 (MSCI 2017).
capitalisation of USD78bn as of 15 investors to actively start looking. We all
Pakistan had had ‘frontier market’ status
September 2016. know China does not take short-term
since 2008.
decisions’ (Mangi 2016).
C n n tu wn a 40%
tak n PS
hi
ese
co
sor
i
m
o
s
Figure 7.1: The development of the Karachi Stock Exchange index
s
e
i
X
The capital markets of Pakistan attracted
international attention in December 2016
when a Chinese consortium bought a
strategic 40% stake in the PSX. The 60,000
consortium comprises Chinese Financial
Futures Exchange Company Limited, 50,000 KSE 100
Shanghai Stock Exchange, Shenzhen 46,565
40,000
Stock Exchange, Pak-China Investment
Company and Habib Bank Limited.
30,000
Stockbrokers from Pakistan were paid
approximately USD85.5m for their role in 20,000
the acquisition of the shares (320m shares
for Rs28 per share) (Siddiqui 2017). 10,000
0
2013 2014 2015 2016 2017
Data Per Quarter
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.

ICEP CSS - PMS, Lahore. 03222077774 7. Capital markets
‘Pakistan has turned the tide; the CPEC

agreement was probably the trigger for
many investors to actively start looking.’
This is borne out by market activity. Figure 7.2: Increase in value of shares in three motor vehicle assemblers
Shares in companies in the sectors likely since June 2013

to register growth related to CPEC have
shown remarkable movement. Certain
shares in the motor vehicle sector have
2,000
grown to between 2.6 times and 11 times HinPark Motors Ltd HINO
1,800
their Q1, 2013 value in the period from Indus Motor Company Ltd INDU
1,600
end of Quarter 1, 2013, when the CPEC Millat Tractors Ltd MTL
1,400
memorandum of understanding was
signed, to Quarter 2, 2017 (Figure 7.2). 1,200
Besides other factors, one of the key 1,000
reasons for this increase is attributable to 800
rising demands due to the development 600
of the country’s infrastructure. (PSX 2017) 400
200
Analysis of data on the PSX website 0
shows that shares in certain cement Jun Dec Jun Dec Jun Dec Jun Dec Jun
companies have risen by between 2.6 2013 2014 2015 2016 2017
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, Source: Based on data from Pakistan Stock Exchange website (PSX 2017)
besides other factors (Figure 7.3), (PSX
2017).
Figure 7.3: Increase in the value of cement company shares since 2013 (PSX 2017)
The cement sector has witnessed 17%
production growth in 2015/16, compared
with 3.6% in 2014/15. 1,000
Lucky Cement Ltd
900
Kohat Cement Ltd
800
Bestway Cement Ltd
700
600
500
400
300
200
100
00
Jun Dec Jun Dec Jun Dec Jun Dec Jun
2013 2014 2015 2016 2017
Source: Based on data from Pakistan Stock Exchange (PSX 2017)

7. Capital markets ICEP CSS - PMS, Lahore. 03222077774
n u an t Figure 7.4: Share price increases in the insurance sector

The
i
s
r
ce
sec
or
Data from the Pakistan Stock Exchange
shows that average share prices of three
key insurance companies in Pakistan 1,000
Jubilee Life Insurance Ltd
witnessed growth of between 2.2 times 900
IGI Insurance Ltd
and 9 times during a period of four years. 800
EFU Life Assurance Ltd
(Figure 7.4), (PSX 2017). 700
600
500
400
300
200
100
0
Jun Dec Jun Dec Jun Dec Jun Dec Jun
2013 2014 2015 2016 2017
Source: Based on data from Pakistan Stock Exchange (PSX 2017)

8. Ease of doing business

and investment facilitation
Data from the Securities and Exchange Figure 8.1: The rise in the number of Pakistani companies with Chinese directors
Commission of Pakistan reveals that
registration of Chinese companies in
Pakistan is showing steady growth. 90
800 775
Information obtained from the Securities 700
and Exchange Commission of Pakistan 600
(SECP) shows that around 775 companies 535
500 445
registered with SECP have Chinese
400 373
directors, out of a total of 80,428
companies registered in the country, as of 300
30 June 2016. The number of companies 200
with Chinese directors showed a steady 100
increase from 30 June 2013 to 30 June
0
2016, as illustrated by Figure 8.1.
2013 2014 2015 2016
‘We are facilitating company registration

and related processes’, said Murtaza Source: Based on data supplied by the Securities and Exchange Commission of Pakistan
Abbas, joint director of the Investor
Education & International Relations B a nv t nt – Islamabad and all provincial capitals to
a l tat ng CPEC nv t
o
rd
of
i
es
me
Department at SECP, in an interview for facilitate local and foreign investors. BOI
f
ci
i
i
i
es
ors
this report. ‘There [are] no separate as a focal point provides information and
To obtain licences and permits, a
policies or procedures other than the one assistance for speedy materialisation of
company needs to consult with the
promulgated under the new Companies investment projects. Apart from
relevant government department,
Act 2017 for registration and operational facilitating projects, BOI’s role is also
depending on the nature of its business.
matters of the companies in Pakistan. We important in the context of visa
In addition, Pakistan’s Board of
consider CPEC to be regulated under facilitation and opening up of branch
Investment (BOI) can help to facilitate the
[the] current framework of regulation for offices and liaison offices of entities.
process. The BOI is the central
companies whereby any investor can Permission of BOI is mandatory for
investment facilitation point responsible
initiate [a] single member company, a opening of branch or liaison office in
for promoting and facilitating investment,
private company or a public limited listed Pakistan. BOI also recommends Work
including in CPEC projects (BOI 2017).
or non-listed company’. Visas to expatriates working in foreign
and local companies in Pakistan. BOI’s
The BOI’s website describes its role as:
role is crucial for materialization and
‘provid[ing] assistance throughout the
sustainability of the projects being
investment cycle. Investor Facilitation
started and to be started under CPEC
Centres have been established in
(BOI 2017).

8. ease of doing business and investment facilitation
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.
Pak tan’ ank ng a stated on the company’s official website: D ng u n n Pak tan
ng u n w g a ual C n
is
s
r
i
for
e
se
of
oi
b
si
ess
i
is
for
‘The company aims to develop and
v nt
doi
b
si
ess
sho
s
r
d
hi
ese
firms
manage world class industrial estates in
Chinese firms making investments in
impro
eme
Pakistan has shown improvement in its the Khyber Pakhtunkhwa to help
Pakistan are not required to register as a
‘ease of doing business’ ranking from 148 organising and establishing planned and
company. They can be registered as a
in 2016 to 144 in 2017, based on World rapid industrialisation in Khyber
branch office or initiate a joint venture
Bank data (World Bank 2017). It takes 260 Pakhtunkhwa. Rehabilitation of the
with a local company or they can opt to
days for an entity to get construction- existing industrial estates is also part of
become a company under the laws of
related permits as compared with the the objectives of this company’
Pakistan.
south Asian average of 196.4 days, while it (KPEZDMC 2015a).
takes 215 days to obtain an electricity Whatever form of business a Chinese firm
connection and involves five procedures A corporate report (KPEZDMC n.d.: 15)
adopts, it is implicit that its directors need
in Karachi (as compared with the south states that: ‘[the] KPEZDMC strategic
to comply with taxation and other rules
Asian average of 136 days and 5.7 team believes in sustainability both
and regulations related to audit and the
procedures). technical and financial. Each industrial
filing of applicable returns to the relevant
estate will have its own board of
authority. For these purposes, it will
management of resident industrialists,
k ng n t vn require the services of firms offering
who will be trained and guided by the
Wor
i
i
he
pro
i
ces
accountancy, auditing and other financial
Provincial governments have initiated Company in the management skills
services, providing opportunities for
processes to facilitate investment in CPEC required for successful and effective
accountants.
projects. For example, the province of management of industrial estates through
Khyber Pakhtunkhwa has established the a team of professionals’.
Khyber Pakhtunkhwa Economic Zones
Development and Management Hence, steps and measures are being
Company (KPEZDMC) as a non-profit taken to facilitate interested parties in
organisation wholly owned by the local establishing companies in the minimum
government of Khyber Pakhtunkhwa. As possible time.

9. Human development:

areas of growth for finance
professionals preparing for

the future
To promote the availability of skilled in analysing future trends and suggesting F nan nal n
workers in the country, the National to management how these could affect Pak tan – Sk ll v l nt.
i
ce
professio
s
i
w at nan nal
is
i
de
e
opme
Vocational and Technical Training the business strategy. Hence, for growth
n t l a n?
h
fi
ce
professio
s
Commission (NAVTTC) is providing purposes, transformation is needed from
eed
o
e
r
training in 38 CPEC-specific trades in 197 being ‘bean counters’ to becoming
‘Finance professionals in Pakistan have a
institutes across the country (PCN 2017b). strategic business partners.
good educational and professional
background. However, they need to
The survey conducted for this report The two skills cited by the respondents of
develop their skills for the new future
indicates that Pakistan’s finance the survey as most important after
businesses which will emerge out of
professionals need new skills, new communication and business analytics
CPEC. Further, the senior finance
knowledge and behavioural change. were taxation knowledge (52.2%) and
professionals need to know about the
leadership ability (52%).
business side of the ventures which will
This was supported by 50.9% respondents
happen in future, eg coal plants,
of the survey, who agreed, and around Therefore, in summary, to take advantage
e-commerce, Fintech’ Andy Liu, assistant
19%, who strongly agreed that executives of the expected changes, the finance and
vice president at the Pakistan China
in the finance function will need new business professional needs to develop
Investment Company, expressed in an
skills, new knowledge and different skills in the areas of communication,
interview for this report.
behaviour to handle the challenges of business analytics, taxation and
CPEC (Figure 8.1). leadership for future finance excellence.
F nan k ll t utu Figure 8.1: Requirements for finance function executives in meeting the challenges
i
ce
s
i
s
for
he
f
re
What are the skills that finance of CPEC

professionals need to prepare themselves
Do you consider that the executives in finance functions will need new skills, new
for the future?
knowledge and different behaviours with reference to CPEC?
The two key skills needed are better 1%

communication (advocated by 68.7% of Strongly Agree
respondents) and better business

9.6% Agree
analytics (66.1%) to enable them to deal 18.9%

with the expected changes. Disagree

Neuteral

Ability to communicate with all 14.9% Strongly disagree

stakeholders is a most necessary No response

requirement for finance professionals, so
that the ‘story’ presented by the numbers 4.7%
is narrated well. With Chinese companies
entering the country, communication
skills will become even more important in
winning business and articulating the 50.9%
challenges to be tackled. This must be
coupled by the finance professionals’ skill

9. Human development: Areas of growth for finance professionals preparing for the future
‘Financially managing Cross-border trades R k anag nt While responding to the question ‘What
is
m
eme
is one of the skills which the finance do you think are the key skills needed by
While commenting on risk management,
professional needs to learn in the context Pakistani executives to be prepared for
Liu remarked that this is essential in every
of CPEC’, he added. the future requirements related to
project being financed under CPEC.
There are several risks that have to be CPEC?’, the executives from the Chinese
One of the key roles of finance companies listed the following:
managed, including market risk,
professionals will be business planning, in
repatriation of funds risk, taxation-related • international vision
which many assumptions have to be
risks, political and security risks. In
made about the future. Therefore, finance • good understanding of Chinese
practice, to mitigate the risks, one
professionals need to understand culture
separate department can be formed
business functions for better business • knowledge of Mandarin (the official
within the organisation or third-party
planning. Chinese language)
risk-management services can be used.
Liu further elaborated that the Chinese • project practices used by Chinese
companies have their own financial and t u n u n ,t companies
C n languag an ultu
A
shor
co
rse
o
b
si
ess
he
accounting policies from their China head • communication skills
w ul l ul
hi
ese
e
d
c
re
offices, for which compliance is required.
o
d
be
he
pf
• familiarity with company and tax laws
Therefore, the Chinese subsidiary While answering the question about
of Pakistan; specific knowledge of tax
companies in Pakistan will need to have whether there is any need to learn
policies, rebates and concessions
professionals who are familiar with the business Chinese and about Chinese
allowed under CPEC in Pakistan
Chinese statutory requirements. In culture, around 86% of the c. 500
addition, for local taxation and reporting respondents to the survey agreed that • familiarity with Chinese ways of
requirements, there will be a need for they should attend short courses on conducting business and Chinese
finance professionals who understand the business, Chinese language and culture. culture, and
local statutes. • full awareness of the business
Respondents also agreed with the policies set up by Pakistan’s
While discussing the challenges faced in statement that there is a marked government for CPEC projects and
Pakistan, Liu mentioned that one of these difference in the business style of Chinese companies.
is hiring experienced staff. Executives and Pakistani people (‘strongly agree’:
25.7% ‘agree’: 48.7%). The Chinese executives emphasised that
working in Pakistan need to learn about
while hiring professionals in Pakistan, they
the way Chinese people do business,the
look for those with an understanding of
ethical values of Chinese professionals The need for learning business Chinese
Chinese culture and with better
and their work style. The Chinese believe language has been emphasised by many
communication skills.
in working hard, in teamwork and in ‘on finance professionals. Around 28 public
time’ delivery. Pakistani business and and private sector universities are offering
finance professionals should learn about courses in Chinese language across
such traits to avail themselves of the Pakistan while ACCA and the Pakistan-
opportunities of working with Chinese China Institute have also jointly offered
professionals in future. business Chinese courses.
Figure 8.2: 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?
2.8%
Strongly Agree

10.8% Agree

Disagree

Neutral

50.4%
36%

9. Human
ICEP CSS - PMS,development:
Lahore.Areas of growth for finance professionals preparing for the future
03222077774
utu k ll t nan For the purposes of the present report, profession’, ‘Economy’ and ‘Business’.
nal
The
f
re
s
i
se
for
fi
ce
there were five expert forums organised The professionals involved argued that
professio
s
in Karachi, Lahore, Peshawar, Quetta and international investors will look towards
In 2012 ACCA and the Institute of
Islamabad, covering four provinces and accountants and consultants for guidance
Management Accountants (IMA)
the capital city. in setting up businesses, for investment
published a report titled 100 Drivers of
advice and for carrying out finance and
Change for the Global Accountancy
Each focus group discussion was accountancy services.
Profession (Fast Future 2012).
attended by finance professionals from
diversified backgrounds. The skills they The 100 drivers of change were divided
Most of the skills identified in the report
identified are more or less similar to those into eight different groups and related to
can be linked with those that finance
skills identified in the ACCA/IMA report CPEC and the skills needed for the future
professionals will need owing to the
(Fast Future 2012). The skills identified in (Table 9.1).
changing business environment in
the expert forums fall in the categories of
Pakistan.
‘Practice of accounting’, ‘Accountancy
Table 9.1: The relationship between drivers of change, CPEC and future skills needs
Does this relate to

Drivers
changes that CPEC Skills needed for finance professionals to prepare for the future in Pakistan
of Change
will bring about?
There will be growth in the economy. The economic environment will change. Economic factors,
Yes including demand and supply, will have to be clearly researched if a business intends to reap
Economy
benefits from CPEC. Finance professionals should be in a position to provide forecasts of
demand and supply for better planning and decision making.
It is expected that the rules and regulations related to cross-border trade will become more
Politics and Yes important for finance professionals, who will have to advise management about the compliance
the law
required with the relevant statutes.
Yes There will be business dealings with Chinese firms and, hence, knowledge about business
Society
Chinese and cultural differences with the Chinese people will be an added advantage.
Yes The key skills to sharpen will include communication, negotiation, business management and
Business
planning.
CPEC is also about digital connectivity. The Country has embraced 4G technology and there are
Science and Yes discussions about 5G. Finance professionals will have to learn about the new technologies that
Technology
will affect the way businesses are conducted.
There will be certain changes in the environment as it is expected that, with the establishment of
Environment,
Yes Special Economic Zones and increasing industrial cooperation, manufacturing units will be
energy and
established that will affect the environment. This will increase the importance of sustainability
resources
reporting and adherence to environment-related regulations.
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
Practice of Yes SECP or filing their tax returns or ensuring compliance with the applicable taxation regulations.
accounting
Finance professionals will need up-to-date knowledge of International Financial Reporting
Standards, taxation, business advisory matters and assurance.
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
Accountancy Yes report, finance professionals suggested that accountants need exposure to the international
profession
markets, particularly China’s, to learn about their business style and increase knowledge of
Chinese financial systems.

10.SWOT analysis and

expert forums
Khunjerab
Gilgit
Raikot
Sazin
Thakot
Shinkiari
Mansehra
Abbotabad
Havelian
Peshawar Haripur
Islamabad
Burhan
Rawalpindi
Gujranwala
D.I. Lahore
Khan Faisalabad
Darya
Khan
Zhob
Qila
Saifullah
Multan Khanewal
D.G.
Legend
Khan
Quetta
Bahawalpur
Surab
Dera Allahyar
Khuzdar Sukkur
Basima
Shahdadkot
Nag Rango
Panjgur
Hoshab
Hyderābād
Gwadar
Karachi
Highways Network of CPEC

10. SWOT 03222077774
ICEP CSS - PMS, Lahore. analysis and expert forums in the four provinces and the capital
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.
The Khyber-Pakhtunkhwa (KP) housing, oil and gas, tourism, agriculture

government has signed a memorandums and transport are the areas in which
Khunjerab
of understanding (MoU) for 82 projects, investment opportunities exist (KP 2017).
Sazin
Gilgit
Raikot
together worth more than Rs2.4 trillion,
Abbotabad
Thakot
Shinkiari
Mansehra
Havelian
with Chinese companies in the recently- The provincial government plans to
held K-P Economic Cooperation Road organise a Chinese investment forum,
Peshawar Haripur
Islamabad
Burhan
Rawalpindi
D.I. Khan
Gujranwala
Show (KECRS) organised by the provincial inviting a Chinese delegation to discuss
government in April 2017 in China (Ullah
Lahore
Zhob
Darya
Khan
Faisalabad
the MoUs and associated projects further.

Qila
Saifullah
D.G.
Khan
Multan Khanewal
2017). The Chief Minister of KP province
has termed the signing event and
Quetta
Bahawalpur
Surab
Dera Allahyar subsequent investment as an ‘economic
revolution’. In accordance with KP
Khuzdar Sukkur
Basima
Shahdadkot
Nag Rango
Panjgur
Hoshab
Economic Zones Development and
management company website, there are
Hyderābād
Gwadar
Karachi
17 Special Economic Zones being

planned in KP.
In order to discuss the strengths,
y Pak tunk wa ( P) weaknesses, opportunities and
Kh
ber
h
h
K
The sectors in which MoUs have been
Khyber-Pakhtunkhwa (formerly known as signed (and consequently where projects threats (SWOT) of CPEC for the
the North-West Frontier Province, or will be executed) include: the higher province, a focus group discussion
NWFP), runs for over 1,100km along the education sector (19 projects – was conducted on 8 May 2017,
border with Afghanistan, with Peshawar as USD393.7m; the housing sector (seven attended by around 25 participants.
the capital. Peshawar was the centre of projects – USD3,332m); the industrial
the ancient kingdom of Gandhara and is sector (12 projects – USD5,704m); and the While discussing strengths, the
rich in archaeological remains. IT sector (seven MoUs – USD245.2m). participants expressed the view that the
Other sectors include mines and minerals rich culture and heritage of the province
It is bounded by Afghanistan to the west (three MoUs), roads (nine MoUs), urban offers a lot to the tourist who visit KP.
and north, Punjab province to the sanitation (three MoUs), the local Further, the province is rich in minerals,
south-east, and Baluchistan province to government sector (two MoUs) and one gems and jewellery and has a border with
the south-west. On the western boundary MoU each in urban development and Afghanistan, which gives the province a
of Khyber Pakhtunkhwa, along the Afghan transportation. strategic advantage by connecting it with
border, are the federally administered China, thus facilitating exports. They also
tribal areas, a series of semi-autonomous The provincial government considers that considered that human resource is
areas that are ethnically homogeneous IT, hydropower, minerals, education, available, though there is a need for
with the province but not politically energy and power, infrastructure, vocational training.
connected to it.

10. SWOT analysis and expert forums in the four
ICEP provinces
CSSand the capital
- PMS, Lahore. 03222077774
While citing weaknesses, lack of Opportunities available to private sector manufacturing. Security threats will have
awareness about CPEC was cited as one companies include partnership with to be addressed to ensure that investors
of the key weaknesses, followed by the government to establish a public private are protected. It is essential that, after
need for better coordination among the partnership model, both to stimulate such massive investment, there is an
central (federal) and KP provincial current growth and to take advantage of increase in manufacturing in the country
governments. Furthermore, they future growth prospects. In addition, to avoid trade deficits. Therefore, a threat
indicated that the pace of work on CPEC focus group participants predicted that, to the revival of local industries remains.
project needs to be accelerated and the owing to the advantages of the Special On the other hand, such massive
people need to be trained in the different Economic Zones and increased industrial investment in industry will result in carbon
skills that will be required in the big production, exports will increase. This will emissions, industrial waste and possibly
planned projects. also generate increases in employment. excessive consumption of natural
Participants also considered that external resources. To counter this environmental
The weaknesses can be turned into perceptions of the province will improve threat, these aspects will have to be
opportunities by: because of huge investment in industry managed carefully.
and improvement in the security situation.
• Initiating skill development training
There will also be more opportunities for A SWOT analysis summary of the KP
programs
finance professionals (providing services focus group discussion can be
• Organising CPEC related awareness to the newly established companies) summarised as shown in Table 10.1.
sessions through universities and
chambers of commerce; and While deliberating on threats, participants
considered the expected increase in
• Improving transparency through
competition and influx of new products
adequate disclosures on websites
from China as a key threat for local
Table 10.1: Strength, weakness, opportunities and threats in KPK
Strengths Weaknesses
• Availability of human capital
S W
• Lack of awareness: locals are unaware
• Culture and heritage of KPK will of CPEC Projects
attract tourists • Need for better coordination among

• KPK has huge mineral resources and the federal and provincial governments
geographical advantage, including a • Slow pace of development
border with Afghanistan • Lack of the necessary skills to benefit
• Competence and capabilities for from CPEC
future growth
• Quality products are manufactured
Opportunities Threats
• Strong competition
O T
• Strategic alliances and public private
partnerships • Import of cheap raw materials from

• Business growth due to increase in China will have adverse impact on

exports local markets

• Innovation and technology development • Security and terrorism risks
• Increase in employment and tourism • Increase in imported cheap goods in
• Global image will improve - better the markets

perception abroad • Trade deficit will increase, if reliance

• Security situation will enhance and fiscal remains on imports

policies will improve • Carbon emissions, industrial waste and

• Demand for local goods will increase and excessive consumption of natural

local industries will flourish, specially SMEs resources will damage the environment.

• Opportunities for finance professionals
(providing services to the newly

established companies)


10. SWOT 03222077774
While discussing weaknesses, participants be addressed. Participants argued

mentioned the need for skilled labour, ie that further influxes of goods from
Khunjerab
technically trained staff for employment China may pose a threat to existing
Gilgit
in the large-scale projects. Further, there SMEs, for which they need to
needs to be more public awareness of
Raikot
Sazin
Thakot
prepare and adapt.
CPEC.
Shinkiari
Mansehra
Abbotabad
Havelian
Peshawar Haripur
Islamabad
Burhan
Rawalpindi
The weaknesses can be addressed

Participants considered that job
Gujranwala
by forecasting the demands of

D.I. Khan
Lahore
Faisalabad
Darya
opportunities will increase and living

Khan
Zhob
Qila
Saifullah skilled labour arising due to CPEC
conditions will improve. Further,
Multan Khanewal
D.G.
projects and then initiating targeted

Khan
Quetta
Bahawalpur
businesses will obtain access to Chinese skills development programs.

and central Asian markets and population
Surab
Dera Allahyar
Basima
Khuzdar
Shahdadkot
Sukkur
Further, public trust can be

increases will give rise to the
Nag Rango
enhanced through more public

Panjgur
Gwadar
Hoshab
Hyderābād
development of new cities, new private partnership projects. To
Karachi
recreational centres and parks. On the ensure accountability and increase
whole, participants considered that the transparency, information about
quality of life will improve.
Punja public financial management
b
systems can be made public
Punjab is Pakistan’s most industrialised While discussing threats that may arise
through websites and public
province, with the industrial sector from CPEC, participants cited over-
announcements.
making up 24% of the province’s gross exploitation of natural resources,
domestic product. The province is known pollution and environmental threats and a SWOT analysis summary of the
in Pakistan for its relative prosperity, and need to manage those adequately. Punjab focus group discussion can
has the lowest rate of poverty among all Participants also expressed their concern be summarised as in Table 10.2.
Pakistani provinces. Punjab is also one of about the increase in the national debt
south Asia’s most urbanised regions with and security challenges that will have to
approximately 40% of people living in
urban areas.
Table 10.2: Strength, weakness, opportunities and threats in Punjab
The chief economist of the Planning and
Development Board of the province, Dr
M. Aman Ullah, is of the view that ‘Punjab Strengths Weaknesses
• Historical places to attract tourists
S W
has a huge potential to take the lead • Lack of availability of a skilled workforce/
under CPEC. This is primarily due to • Shares a border with India, which will lack of training
Punjab’s conducive business environment enhance trade through the border • Lack of awareness about CPEC projects

in terms of its suitable geography, its • Strong educational institutions and large • High production costs
number of young professionals • Lack of accountability
sustainable law and order situation, the
• Investments in infrastructure, • Lack of public trust in private public
high Human Development Index of its eg Orange train and metro buses private partnership projects
population and its cultural diversity and

• Agriculture sector is very strong and • Financial constraints of provinces
dynamic leadership’ (Aman Ullah 2017). supplies the country • Weak bargaining power in relation to

CPEC projects

The focus group session was organised
• Threats to heritage and culture
O T
• Job opportunities
in Lahore on 18 May 2017 and was
• A chance to boost to the living • Chinese infrastructure – threat to local
attended by around 30 participants. conditions of locals industry and SMEs

• Access to Chinese and central Asian • Security threat
While discussing the province’s strengths, markets • Lack of separate policies for foreign
participants argued that Punjab, being a • Development of new cities companies

cultural centre of long standing, offers • New developments of recreational • The problem of repaying debts that
tourists a lot to visit. Furthermore, the centres, parks and hotels Pakistan incurs through CPEC

province shares a border with India. The • With Chinese investment, there will be • Over-exploitation of natural resources
province has a large number of an opportunity to improve the • Pollution and other environmental

educational institutions and a large youth security/law and order situation threats, and health issues

population. The availability of quality
infrastructure in shape of the metro bus
system is considered to be a strength
(PMA 2017).

ICEP provinces
CSSand the capital
- PMS, Lahore. 03222077774
The participants cited availability of Participants opined that CPEC presents

human capital as one of the key strengths lots of opportunities, particularly growth
Khunjerab
of the province, particularly in Karachi city. in business for fishing, transportation,
Gilgit
Karachi, being a port city and having cement, steel and the banking sector. It
access to Gwadar (another port city in the
Raikot
should also generate employment.

Sazin
Thakot
Shinkiari
making), is a huge strength for the Companies will have opportunities for
Mansehra
Abbotabad
Havelian
Peshawar Haripur
Islamabad
Burhan
Rawalpindi
Gujranwala
province, giving it opportunities for entering into joint ventures with Chinese
D.I. Khan
Darya
Khan
Faisalabad
Lahore
increasing business via the sea route. The companies and their products/services
province has a vibrant financial sector and
Zhob
Qila
Saifullah
Multan
will have access to international markets.
is home to shipping, fishing and other
D.G. Khanewal
Khan
Quetta
Bahawalpur
Surab
Dera Allahyar
industries. The key threats from CPEC for the
Nag
Basima
Khuzdar
Rango
Shahdadkot
Sukkur
province include an environmental threat

Panjgur
While deliberating upon weaknesses, the due to the increase in industrial activities,
lack of adequate law and order in the
Hoshab
Gwadar
Hyderābād
and threats from the dominance of
province and energy shortages were Chinese companies in the market.
Karachi
cited. The group recognised the need for Participants considered that the debt
Sn more awareness about CPEC-related financing of the projects may pose a
projects, enabling people to take financial threat while CPEC projects may
i
dh
Sindh is the third-largest province of advantage of the opportunities that will result in the cultural dominance of
Pakistan by area, and second only to become available in future. Lack of Chinese people.
Punjab by size of population. Sindh is adequate IT infrastructure in rural areas
bordered by Balochistan province to the and a high illiteracy rate were also cited SWOT analysis summary of the Sindh
west, and Punjab at the north. This as weaknesses of the province that need focused group discussion is summarised
province also shares a border with Indian to be addressed. as in Table 10.3.
states to the east and has a coastline on
the Arabian Sea to the south.
Table 10.3: Strength, weakness, opportunities and threats in Sindh
Sindh’s landscape consists mostly of
alluvial plains flanking the Indus River, Strengths Weaknesses
although the Thar Desert lies in the
• Availability of human capital (skilled and
S W
• Lack of law and order
eastern portion of the province. Sindh’s unskilled) and unused land • Insufficient electricity generation
climate is noted for hot summers and mild

• Easy access to Gwadar and the • Lack of public awareness of the
winters. The provincial capital of Sindh is Arabian Sea CPEC opportunities

Pakistan’s largest city and its financial hub,

• Large number of financial aid providers • Lack of long-term strategies and vision
Karachi. • Availability of low-cost labour and raw • Low literacy rate
material • Poor IT Infrastructure
• Shipping, fishing and motor vehicle • Lack of understanding of Chinese culture
industries already exist and are growing
• Construction of roads and infrastructure
projects is in progress

• Cosmopolitan society

• Pollution and environmental threats
O T
• To develop businesses, particularly for
fishing, transportation, cement, steel • Dominance and undue influence of

and the banking sector the Chinese

• Employment generation • Increase in importation of petroleum
• Joint ventures with Chinese companies and electronic goods

• Increase in access to international markets • Regional rivalry
• Growth in SME / cottage industry • External debt financing and payment
• Opportunities for outsourcing industry • Cultural imperialism
• Lack of meritocracy
• Intra-provincial conflicts
A focus group discussion session
took place at Karachi on 10 May 2017
and was attended by around 22
participants.

10. SWOT 03222077774
The province has Gwadar port, which is

one of the key focus areas of CPEC’s
work and projects.
The discussion covered tourism, the Owing to massive investment in CPEC,

mining industry and the availability of participants argued that there will be
Khunjerab land, which, along with mineral resources, employment opportunities that will create
Sazin
Gilgit
Raikot
participants considered to be the economic prosperity. Improved access of
Abbotabad
Thakot
Shinkiari
Mansehra
province’s strengths. Further, the province businesses to markets will contribute to
has Gwadar port, which is one of the key this. To benefit from the opportunities,
Havelian
Peshawar Haripur
Islamabad
Burhan
Rawalpindi
Gujranwala focus areas of CPEC’s work and projects. the people of the province need to
manage available resources with care,
D.I. Khan
Lahore
Faisalabad
Darya
Khan
Zhob
Qila
Saifullah
D.G.
Khan
Multan Khanewal
Participants discussed the province’s lack and governance within the province
of skilled labour and the low literacy rates needs further improvement. Security and
Quetta
Bahawalpur
Surab
Dera Allahyar compared with other provinces. law and order arrangements need to be
Therefore, this area needs particular monitored and controlled to ensure that
Khuzdar Sukkur
Basima
Shahdadkot
Nag Rango
the benefits of CPEC projects are

Panjgur
Hoshab
attention to ensure that local people are
Gwadar
Karachi
Hyderābād
able to find jobs in the CPEC projects. In manifested.

addition, the general public is not aware
of the CPEC projects or of how to SWOT analysis summary of the
Bal tan prepare themselves for the opportunities Balochistan focused group discussion
ochis
that will arise in the future. is summarised as in Table 10.4
Geographically, Balochistan is the largest
province of the country but with the
lowest population of all Pakistan’s Table 10.4: Strength, weakness, opportunities and threats in Balochistan
provinces. Its provincial capital and largest
city is Quetta. It has borders with Punjab Strengths Weaknesses
and the Federally Administered Tribal
• Tourism
S W
• Lack of availability of skilled labour
Areas to the northeast, Sindh to the east
• Mining industry • Low literacy rate
and southeast, the Arabian Sea to the
• Export of agriculture products • Lack of government projects and
south, Iran to the west and Afghanistan to initiatives
• Natural resources – coal, gold
the north and northwest.

and copper • Military interference and feudalism

• Large area for industry set-up and • Scarcity of basic needs such as
Largely underdeveloped, Balochistan’s for energy projects drinking water

provincial economy is dominated by • Gwadar port • People are unaware of the benefits
natural resources, especially its natural gas of CPEC

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. Opportunities Threats
• Mismanagement of resources
O T
• Employment opportunities
• Access to other markets in central Asia • Local unemployment
and China • Inadequate law and order/ security

• People empowerment due to access to • Governance issues
new markets

• Investment in infrastructure is certain
• Connectivity with other parts of the
country through new rail and road

connections
• Foreign direct investment
The focus group discussion was

organised on 19 July 12017 at Quetta
and was attended by 22 participants.

ICEP provinces
CSSand the capital
- PMS, Lahore. 03222077774
CPEC offers opportunities for collaboration

with Chinese companies, particularly for
the transfer of technology to improve
production and efficiency.
The participants considered that the CPEC offers opportunities for

infrastructure of the city is improving and collaboration with Chinese companies,
Khunjerab
CPEC is expected to provide better particularly for the transfer of technology
Gilgit
access to international markets. They to improve production and efficiency.
argued that CPEC will give a boost to With better infrastructure, trade
Raikot
Sazin
Thakot
Shinkiari
many sectors of the economy, including opportunities are expected to increase.

Mansehra
Abbotabad
Havelian
Peshawar Haripur
Islamabad
Burhan
Rawalpindi
Gujranwala
tourism, transportation, hospitality and
D.I. Khan
Darya
Khan
Faisalabad
Lahore
energy. As elsewhere in Pakistan, there will be an
increasing threat to the environment from
Zhob
Qila
Saifullah
expanded industrial activity, which will

Multan
The weaknesses that need to be

D.G. Khanewal
Khan
Quetta
Bahawalpur
Surab
Dera Allahyar
addressed include lack of skilled human need to be addressed. Other threats arise
Nag
Basima
Khuzdar
Rango
Shahdadkot
Sukkur
resource, the law and order situation, lack from governance issues and the
Panjgur
of inter-province collaboration, weaknesses identified above: inadequate

communication issues with Chinese security and lack of inter-provincial
Hoshab
Hyderābād
Gwadar
Karachi
companies and higher production costs collaboration and cooperation.

in Pakistan, where industries lack the
economies of scale found in Chinese SWOT analysis summary of the Islamabad
I la a a industries. focused group discussion is summarised
s
m
b
d
Islamabad is the capital city of Pakistan. In as in Table 10.5
1960, land was transferred from
Rawalpindi in the Punjab province for the Table 10.5: Strength, weakness, opportunities and threats in Islamabad
purpose of establishing Pakistan’s new
capital. Being the federal capital, Strengths Weaknesses
Islamabad is the seat of government and • Broadband telecom and hospitality
S W
• Poor law and order
the location of foreign embassies/ industries are growing in the capital • Lack of skilled labour
missions and international donor • Better and cheaper access to • Lack of transparency and cooperation
agencies. international markets among provinces

• The service, manufacturing, • The language barrier results in gap
transportation, energy and hospitality in communication

industries are ripe for expansion • Dependency on China for financial aid

• Strong Pakistan-China friendship • Production costs in Pakistan are high
• Barrier for new entrants is low owing to shortage of electricity and
imported raw material use
• Security threats and lack of law and
O T
• Strategic alliances, partnerships
• Import, export order

• Innovation and technology development • Migration of local industry to the
• Employment generation for skilled and economic zone
unskilled labour • Political instability and influence

• Improvements in industry know-how • Governance issues / transparency
• Productivity enhancement • Lack of communication between
• Inflow of FDI provincial and federal governments

• Hospitality industry growth • Exhaustion of natural resources
• Opportunities for existing local industries • Pollution (ecosystem damage) and
such as cement, banking and transport limited energy resources

The focused group discussion was • Infrastructure development • Possible damage to relationships with
organised at Islamabad on 18 May 2017 , neighbouring countries
• Export of goods and services

attended by around 25 participants. • Tourism is set to increase

11. The way forward
There will be a new day. Things will • Finance professionals will need to Relevant Government departments

change. To prepare for the anticipated answer two questions - how will we should consider creating more
changes and to grow, one needs to adapt become competitive in the changing awareness, particularly for the writers and
according to the changing circumstances. scenario?; What additional skills are media professionals on the concerns
It is said that change is growth and required to take advantage of the raised related to debt repayment and
growth is change. The B&R and CPEC road and railway infrastructure transparency in CPEC related projects.
both provide visible indications of improvement and availability of This will foster trust between different
massive changes that will take place in industrial zones? segments of society and the
the years to 2030. Government. Policy level dialogue may
• In the case of skills development, also be initiated to address concerns of
What should finance and business there will be a need for skilled human the business community in the country
professionals do to prepare themselves resource in all related industries, and obtaining feedback from the relevant
for the business growth that will take including the manufacturing and stakeholders.
place? services sectors, as outlined in this
report. Thinking ahead and preparing for change
• The key is to understand how change requires an improved skill set to ensure
will affect their lives and the • Visiting China and meeting with that the benefits are realised. Finance
organisations in which they are relevant Chinese companies professionals are in a position to reap
working. interested in investing in Pakistan is these benefits. To obtain them, reading
another option to be explored. more about CPEC is essential,
• On the completion of the so-called concentrating on the area of business
‘early harvest’ projects related to • Knowledgeable people may be growth that is of interest to the individual
power plants, most of the energy needed to develop a detailed future and then analysing the course of action
requirements will be fulfilled. This strategy based on the longer-term that must be adopted.
means that electricity will be implications of CPEC.
available for production. Will this
result in reducing the cost of • To make appropriate decisions at the
production? This is anybody’s guess. organisational and personal level,
finance professionals with need to
learn and think carefully about
cross-border trade, the Chinese way
of doing business, Chinese cultural
and ethical values, and the
advantages that could arise from
CPEC, among other things .

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Contributors
HOR CO RIB OR
AUT
NT
UT
Malik Mirza FCCA Ahmed Lodhi
Associate,
Pakistan-China Institute (PCI)
Managing Director
Finman Group
Malik is a fellow member of

the Association of Chartered
Certified Accountant with
over 18 years of experience in
financial management,
business processes
strengthening, strategy
management, consultancy
and capacity building.

-SI -RO D-CPEC

pi
LK
A
CCA The Adelphi 1/11 John Adam Street London WC2N 6AU United Kingdom / +44 (0)20 7059 5000 / www.accaglobal.com
A


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CPEC an t a t nt There will be more electricity integrated k ll n nan

ut t t finance professionals in the changing with Pakistan China Investment

• interviews with relevant stakeholders

This report explores the key capabilities

1. What is the Belt and

B lt an R a In t at v B&R’s envisioned impact on each F nan ng t B&R

The B&R is geographically structured along six corridors and a

1 1. from western China to western Russia

Figure 2.1: CPEC investment breakdown, USD46bn

Figure 2.2: CPEC’s planned rail networks

Railways Network of CPEC

Havelian-Kashi New Railway

Construction of new line from

3. The impact of CPEC

Figure 3.1: Roads planned for the CPEC

Highways Network of CPEC

Source: CPEC 2017d

‘We need to learn, we need

4. CPEC and different sectors

In a t u tu an In addition to domestic tourism, there are H w w ll CPEC l at

Image Source: PCN 2016

6. Are Pakistani businesses

Over 54% of the respondents agreed that

Figure 6.3: Risk-management mechanisms and CPEC

Is there a need to develop a risk management mechanism in your organisation with

at k n ang a firms on production costs will be Env n ntal t t n: H w

4. Geo-political influences should be 50.8%

Source: Graph based on data from the KSE website

‘Pakistan has turned the tide; the CPEC

Source: Based on data from Pakistan Stock Exchange (PSX 2017)

n u an t Figure 7.4: Share price increases in the insurance sector

Source: Based on data from Pakistan Stock Exchange (PSX 2017)

8. Ease of doing business

‘We are facilitating company registration

Finance professionals in Pakistan have a

The two key skills needed are better 1%

Figure 8.2: Respondents’ views on taking courses to prepare for CPEC

Does this relate to

10.SWOT analysis and

Highways Network of CPEC

The provincial government considers that IT,

The Khyber-Pakhtunkhwa (KP) housing, oil and gas, tourism, agriculture

the MoUs and associated projects further.

17 Special Economic Zones being

Table 10.1: Strength, weakness, opportunities and threats in KPK

While discussing weaknesses, participants be addressed. Participants argued

The weaknesses can be addressed

by forecasting the demands of

opportunities will increase and living

projects and then initiating targeted

businesses will obtain access to Chinese skills development programs.

Further, public trust can be

enhanced through more public

The participants cited availability of Participants opined that CPEC presents

should also generate employment.

province include an environmental threat

The province has Gwadar port, which is

The discussion covered tourism, the Owing to massive investment in CPEC,