INTRODUCTION OF CPEC:

The CPEC is an economic 'corridor' or zone between China and Pakistan started by in 2015 and eventually, on

completion, connecting a number of countries in South and Central Asia for trade and industrial purposes
China–Pakistan Economic Corridor CPEC) is a collection of infrastructure projects that are currently under
construction throughout PAKISTAN. Originally valued at $46 billion, the value of CPEC projects is worth
$62 billion as of 2017. CPEC is intended to rapidly modernize Pakistani infrastructure and strengthen its
economy by the construction of modern transportation networks, numerous energy projects, and special
economic zones. On 13 November 2016, CPEC became partly operational when Chinese cargo was
transported overland to Gwadar Port for onward maritime shipment to Africa and West Asia, while some
major power projects were commissioned by late 2017.
1. A vast network of highways and railways are to be built under the aegis of CPEC that will span the
length and breadth of Pakistan. Inefficiencies stemming from Pakistan's mostly dilapidated
transportation network are estimated by the government to cause a loss of 3.55% of the country's
annual GDP.
2. Over $33 billion worth of energy infrastructure are to be constructed by private consortia to help
alleviate Pakistan's chronic energy shortages
3. Should the initial $46 billion worth of projects be implemented, the value of those projects would be
roughly equivalent to all foreign direct investment in Pakistan since 1970, and would be equal to 17%
of Pakistan's 2015 gross domestic product.
4. According to official statistics, 20% of CPEC is debt-based finance, while 80% of CPEC is investment
with the project contributing to 40,000 jobs for local Pakistanis and 80,000 jobs for Chinese.

ONE BELT ONE ROAD:

The Belt and Road Initiative (BRI) is a global development strategy adopted by the Chinese
Government involving infrastructure development and investments in 152 countries and international
organizations in Asia, Europe, Africa, the Middle East, and the Americas
The leader of the People's Republic of China, Xi Jinxing, originally announced the strategy during official visits
to Indonesia and Kazakhstan in 2013. "Belt" refers to the overland routes for road and rail transportation,
called "the Silk Road Economic Belt"; whereas "road" refers to the sea routes, or the 21st Century Maritime
Silk Road.
It was known as the One Belt One Road (OBOR), the Silk Road Economic Belt and the 21st-century Maritime
Silk Road until 2016 when the Chinese government considered the emphasis on the word "one" was prone to
misinterpretation.[5] However, the old name is still used inside China.[6]
The Chinese government calls the initiative "a bid to enhance regional connectivity and embrace a brighter
future" Some observers see it as a push for Chinese dominance in global affairs with a China-centered trading
network. The project has a targeted completion date of 2049, which coincides with the 100th anniversary of
the People's Republic of China.

PURPOSE OF CPEC:
Agriculture:
CPEC includes provisions for cooperation in management of water resources, livestock, and
other fields of agriculture. Under the plan, agricultural information project, storage and
distribution of agricultural equipment and construction project, agricultural mechanization,
demonstration and machinery leasing project and fertilizer production project for producing
800,000 tons of fertilizer and 100,000 tons of bio-organic fertilizer will be implemented.
Science and technology:
As part of CPEC, the two countries signed an Economic and Technical Cooperation
Agreement, as well as pledged to "China-Pakistan Joint Cotton Bio-Tech Laboratory" ] The two
countries also pledged to establish the "China-Pakistan Joint Marine Research Center"
with State Oceanic Administration and Pakistan's Ministry of Science and Technology. Also as
part of the CPEC agreement, Pakistan and China have agreed to co-operate in the field of space
research

Other fields:
The two nations also pledged co-operation in field ranging from anti-narcotic efforts, to co-
operation in an effort to reduce climate change.[223] the two nations also agreed to increase co-
operating between the banking sectors of the two countries, as well as to establish closer ties
between China Central Television and the Pakistan Television Corporation.
Confucius Institute at University of Punjab is planned to be soon launched in 2019.  Moreover,
Rashaad Special Economic Zone is planned as well.

CONCESSIONARY LOANS

Approximately $11 billion worth of infrastructure projects being developed by the Pakistani

government will be financed at an interest rate of 1.6%, after Pakistan successfully lobbied the
Chinese government to reduce interest rates from an initial 3%. Loans will be dispersed by
the Exim Bank of China, China Development Bank, and the ICBC. For comparison, loans for
previous Pakistani infrastructure projects financed by the World Bank carried an interest rate
between 5% and 8.5%, while interest rates on market loans approach 12%.
Interest-free loans:
The government of China in August 2015 announced that concessionary loans for several
projects in Gwadar totaling $757 million would be converted 0% interest loans. [226] The projects
which are now to finance by the 0% interest loans include: the construction of the $140
million East Bay Expressway project, installation of breakwaters in Gwadar which will cost
$130 million, a $360 million coal power plant in Gwadar, a $27 million project to dredge berths
in Gwadar harbor, and a $100 million 300-bed hospital in Gwadar.[226] Thus, Pakistan only has
to repay the principal on these loans.
Private consortia:
$15.5 billion worth of energy projects are to be constructed by joint Chinese-Pakistani firms,
rather than by the governments of either China or Pakistan. The Exim Bank of China will finance
those investments at 5–6% interest rates, while the government of Pakistan will be
contractually obliged to purchase electricity from those firms at pre-negotiated rate per unit.
 ADB assistance:
While the E-35 expressway is considered to be a crucial part of the route between Gwadar and
China, the E35 will not be financed by CPEC funds. The project will instead be financed by the
Asian Development Bank.[132]
The N70 project is not officially a part of CPEC but will connect the CPEC's Western Alignment to
the Karachi-Lahore Motorway at Multan. The project will be financed as part of a $195 million
package by the Asian Development Bank announced in May 2015 to upgrade the N70 National
Highway and N50 National Highway.

IMPORTANCE OF CPEC:

The importance of CPEC to China is reflected by its inclusion as part of China's 13th five-year
development plan. CPEC projects will provide China with an alternate route for energy supplies,
as well as a new route by which Western China can conduct trade. Pakistan stands to gain due
to upgrade of infrastructure and introduction of a reliable energy supply
To face hardships selling its own domestic products at competitive prices.

 Environmental Affects

Pakistan has also assured the International Union for Conservation of Nature (IUNC)

That Pakistan and their Chinese Partner will work on (CPEC) with undertaking “environmentally
and economically sustainable”

In March, the Pakistan Environment Protection Agency (Pak-EPA) had rejected the Environment
Impact Assessment Report of the project as “incomplete and insufficient”. A private firm, hired
by the National Highway Authority, had assessed the environmental damage the construction
of the $46 billion CPEC may cause.

Environmentalists argue that cutting of trees, and impact on the shrinking mass of glaciers in
northern Pakistan, in constructing vast road networks for a trade highway to connect the
Gwadar port of Pakistan with western China, will have significant environmental costs.

 Exponential Cost

While dealing with external players, such lethargy and poor project handling can have
exponential costs.

Another thing is that Focal persons are now being appointed in all the ministries and agencies
concerned with the CPEC to expeditiously process any hitches and glitches.

 Negotiating issues
 Moreover Pakistan has recently been struggling to convince Chinese authorities to accept
around a 10pc cost overrun for the $1.5bn Lahore Orange Line Metro Train even though the
project has yet to take off. The Chinese Exim Bank was insisting on a loan agreement of $1.48bn
to be signed with the Punjab government as originally discussed, but Pakistani authorities want
this to be increased by another $147m to meet contingencies that arise during the project’s
implementation.

 Tax Exemption issues on Insurance Premium:

Another issue in this project is that On top of these, the Chinese have sought tax exemptions on
insurance and financing on almost all CPEC projects.

At present there is no tax exemption on insurance premium paid to nonresident companies,

while all CPEC projects are covered by the Chinese firm Sinecure. And Chinese want that tax to
should be exempted up on insurance premium of Sinecure Company. And now tax authorities
made some arrangements with local focal for speedy process of CPEC and also facilitate to
Chinese contractors

 Tax Exemption issues on Dividend

Another issue is that The CPEC-related companies are also seeking tax exemptions on the
dividend income of their shareholders even though this facility is not available under the
existing law for coal mining and coal-based power projects.

 Exemption of sales tax issue:

Chinese companies related to this project they also want exemption from sale tax on vehicles
imported for use on project sites. According to our law these vehicles are exempted from
custom duty but not exempted for sales tax under existing law.

CONCLUSION:

The CPEC is a landmark project in the annals of history of Pakistan. It is the largest investment
Pakistan has attracted since independence and largest by China in any foreign country. CPEC is
considered economically vital to Pakistan in helping it drive economic growth. The Pakistani
media and government have called CPEC investments a "game and fate changer" for the while
both China and Pakistan intend that the massive investment plan will transform Pakistan into a
regional economic hub and further boost the deepening ties between the two countries.
Approximately 1 year after the announcement of CPEC, Zhang Taizhong, chairman of China
Overseas Port Holding Company told The Washington Post that his company planned to spend
an additional $4.5 billion on roads, power, hotels and other infrastructure for Gwadar industrial
zone, which would be one of the largest ever sums of foreign direct investment into Pakistan.