Without CPEC, Pakistan’s Economic Challenges Would Be Even Greater
ISLAMABAD:
The Power Policy of 1994 was hailed as a groundbreaking solution to Pakistan’s energy crisis, with Western countries and institutions lauding it as a model pro-private sector initiative. Supported by the World Bank and USAID, the policy was bolstered by the Private Sector Energy Development Fund, which provided special financing for Independent Power Producers (IPPs). However, this policy ultimately failed to resolve Pakistan’s electricity problems, and instead, blame for the current energy issues has been shifted toward the China-Pakistan Economic Corridor (CPEC) energy projects through persistent and unfounded criticisms.
The Asian Institute of Eco-civilisation Research and Development has conducted a comprehensive analysis of the impact of CPEC energy projects, revealing several key insights. Contrary to the narrative of CPEC projects as problematic, these initiatives have played a crucial role in alleviating Pakistan’s energy crisis and fostering economic growth.
Circular Debt and the Real Culprit
The total circular debt in Pakistan currently stands at Rs2.66 trillion, with Rs400 billion owed specifically to Chinese companies. Even if this Rs400 billion is deducted, Pakistan still faces a staggering Rs2.26 trillion in debt. This raises the question: is CPEC to blame, or is the true issue rooted in the Power Policy of 1994, which was heavily supported by international financial institutions like the World Bank and USAID?
Electricity Shortage and CPEC’s Positive Impact
Before the advent of CPEC energy projects, Pakistan was grappling with severe electricity shortages that significantly impacted the economy. Industrial sectors were dwindling, businesses were suffering, and the job market was shrinking. This crisis resulted in an annual economic loss estimated between $4-5 billion.
The introduction of CPEC energy projects has substantially mitigated the electricity load shedding problem. The availability of electricity has improved markedly, with per capita electricity consumption rising from 431 kWh in 2014 to 644 kWh in 2022. Additionally, the percentage of people without access to electricity has decreased from 25% to 24.5% despite a growing population.
The Hypothetical Scenario Without CPEC
Without the CPEC energy projects, Pakistan would have faced a much more severe load shedding crisis. The absence of over 5,000 megawatts of additional electricity in the national grid, coupled with growing demand due to population increase and higher per capita consumption, would have led to an estimated annual loss of $15-20 billion. This scenario would likely have resulted in further deindustrialization, increased unemployment, mental health issues, and business closures.
Economic Implications and Job Creation
In the context of Pakistan’s current financial and economic struggles, including stringent conditions imposed by the International Monetary Fund (IMF), the absence of CPEC projects would have exacerbated the situation. The energy projects have not only provided much-needed electricity but have also created significant employment opportunities and contributed to the skill development of Pakistani engineers and staff.
For instance, the Sahiwal power plant created 8,436 jobs during its construction, with a workforce of 63% Pakistanis and 37% Chinese. The operational phase of the plant employs 1,683 individuals, maintaining a 61:39 ratio of Pakistani to Chinese employees. Similarly, the Port Qasim project created 4,000 jobs during construction and continues to employ 1,270 workers, with a majority being Pakistani. The HUBCO power plant and several other CPEC projects have also contributed to job creation and skill development.
Additional Projects and Future Prospects
In addition to power plants, CPEC has invested in various projects like the Engro Thar Coal Power & Mine, Hydro China Dawood Wind Farm, and the Quaid-e-Azam Solar Park, among others. These projects, along with ongoing developments like the Karot Hydropower and Suki-Kinari Hydropower projects, are vital for Pakistan’s energy infrastructure.
Key Takeaways
- CPEC’s Role: CPEC energy projects have been instrumental in managing load shedding, creating jobs, and enhancing the skills of Pakistani workers.
- Real Culprit: The Power Policy of 1994, supported by USAID and the World Bank, is primarily responsible for the circular debt crisis, not CPEC projects.
- Opportunity Cost: Without CPEC energy projects, Pakistan would have faced a much graver energy crisis and economic situation, with potentially harsher IMF conditions.
In conclusion, CPEC energy projects have provided critical support to Pakistan’s energy sector and economy, debunking the misconceptions that they are to blame for the country’s financial woes. Addressing the root causes of Pakistan’s economic challenges requires acknowledging the positive impact of these projects and focusing on comprehensive reforms.