- With the ML-1 project, the whole country will prosper
The Executive Committee of the National Economic Council (ECNEC) has approved the project for dualisation and upgradation of the 1872-km railway track from Peshawar to Karachi, also known as ML-1, at a rationalized cost of $6.8 billion, allowing the government to go ahead with negotiations with Beijing for loans covering 90 percent of the cost.
With approval from ECNEC, the ML-1 finally is ready to take off. It is the only strategic project of Phase-II of the China-Pakistan Economic Corridor being implemented as part of the initial $46 billion deal. The project was initially conceived to be completed at a cost of $9.2 billion. The Central Development Working Party had cleared the ML-1 project in June this year and recommended it to ECNEC for approval.
The credit for almost 25.7 % reduction in cost rightly goes to the efforts of Railways Minister Sheikh Rashid Ahmed who, after taking charge of the Railway ministry in 2018, had stated that he was the biggest supporter of the CPEC and the ML-1, but he felt that the cost of the project needed to be curtailed. Accordingly, the Ministry of Planning and Development excluded the ancillary cost like project management fee of one percent of total construction cost, insurance cost of half percent of total cost, the 0.6 percent cost of detailed design and construction drawings, security measures cost of 0.75 percent and contingencies equivalent to four percent, or $367 million. Similarly, $477.5 million worth of price escalation has also been excluded from the project scope, as the contract will be awarded in the engineering, procurement and construction mode. Rolling stocks worth $398 million have also been excluded from the project scope, which helped bringing the cost down to $6.8 billion.
Engineering, procurement, and construction will go to Chinese contractors, for which a request for exemption from international competitive bidding will be sent to the Economic Coordination Committee of the Cabinet. Despite the contracts essentially being a no-bidding undertaking, Pakistan expects fair prices, because the estimates have all been vetted by third parties.
Unfortunately Pakistan has failed to achieve rapid industrialization due to the wrong approaches and policies of the successive governments, divorced from the emerging economic compulsions. However by becoming part of the CPEC, Pakistan is poised not only to make up for the lost opportunities but also to become an economic powerhouse within the next two decades. Apart from radically changing the dynamics of regional connectivity and trade, the ML-1 is going to act as a catalyst in the process of transition from an agricultural economy to an industrial economy
There was apparently some haggling involved because of the separate negotiations with the IMF, which had its own concerns about debt sustainability. Pakistan has addressed these concerns by drawing up an elaborate phased construction plan. In the first of three phases, Pakistan will commit to around $2.4 billion worth of construction work to stay compliant with an IMF commitment that created a spending limit of $2.5 billion during the same period. The second phase will start a year after phase one and will cost $2.7 billion as the IMF spending ceiling will not apply. The final phase will begin two years after “package one” and will cost $1.7 billion. The Chinese loan will be in programmatic mode and only the amount required for the particular phase would be contracted so that unnecessary commitment charges are avoided. It is pertinent to mention that China has shown great flexibility in the re-negotiation of the project as always.
Phase 1 will be completed between January 2021 to December 2024, covering the construction of 527 km of track between Peshawar, Rawalpindi and Lahore. Phase 2 will be completed from January 2022 to December 2026 for upgrading the 521-km track from Lahore to Hyderabad. Phase 3 will upgrade the 740-km Rawalpindi-Peshawar and Hyderabad-Multan tracks.
The Peshawar-Karachi track serves as the main passenger and freight line of the country. It carries 75 percent of the country’s cargo and passenger traffic. After the completion of the project passenger trains will run at a speed of 160 km per hour while freight trains will ply at a speed of 120 km per hour, significantly reducing traveling time for the passengers and the movement of goods, respectively. The project will prove to be a great propeller of economic activity, development and employment generation. It is indeed a game-changing undertaking.
The CPEC is a mix of infrastructure projects, energy-producing units and industrial zones along the corridor routes. The development of infrastructure under the CPEC, like ML-1, will lay a firm foundation for industrialization. The CPEC has been acknowledged as a perfect recipe for lifting the economic profile of the countries which are part of the initiative world-wide, in the Belt and Road Initiative. Even the UN has recognized its economic potential and a collateral outcome of promoting peace through economic independence.
It is universally recognized and established fact that no nation can leapfrog into the elite club of developed nations unless it invests in all elements of the infrastructure components, as there are no short cuts to economic progress. All modern growth models invariably rely on development of infrastructure and the resultant industrialization as imperative ingredients and catalysts for a sustained economic growth of a country.
The phenomenal economic prosperity and industrial development in the East Asian countries such as China, South Korea, Singapore and Malaysia, during the last three decades is a ranting testimony to this modern reality. Attainment of high-level growth is unimaginable without infrastructure development leading to industrialization and a gradual lessening of dependence on the agriculture sector. People are often heard wondering why some of the countries are more developed than others and why the countries in Asia which attained their independence at just about the same time as us have gone far ahead in terms of economic prosperity. The simple and straight answer is that their secret lies in the development of physical infrastructure, including roads and railway lines.
Unfortunately Pakistan has failed to achieve rapid industrialization due to the wrong approaches and policies of the successive governments, divorced from the emerging economic compulsions. However by becoming part of the CPEC, Pakistan is poised not only to make up for the lost opportunities but also to become an economic powerhouse within the next two decades. Apart from radically changing the dynamics of regional connectivity and trade, the ML-1 is going to act as a catalyst in the process of transition from an agricultural economy to an industrial economy.