Impact of CPEC on Foreign Direct Investment and Trade in Pakistan

This research proposal investigates the impact of the China-Pakistan Economic Corridor (CPEC) on Foreign Direct Investment (FDI) and trade in Pakistan. The study aims to understand the CPEC's influence by analyzing its effects on FDI and trade, as well as identifying associated challenges and threats. The research includes a comprehensive literature review, examining the CPEC's background, its influence on FDI and trade, and potential challenges. The methodology outlines the research design, strategy, data collection methods, and data analysis techniques. The study also addresses ethical considerations and provides references in APA 6 style. The findings are expected to provide insights into the economic implications of the CPEC for Pakistan, offering valuable information for economists and policymakers.

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Contents
Introduction......................................................................................................................................2
Background of research...............................................................................................................2
Research aim and objectives........................................................................................................3
Research questions.......................................................................................................................3
Significance of the study.............................................................................................................4
Literature review..............................................................................................................................4
China-Pakistan economic corridor..............................................................................................4
Impact of China-Pakistan economic corridor on foreign direct investment (FDI)......................5
Impact of China-Pakistan economic corridor on the trade of Pakistan.......................................6
Challenges and threats for Pakistan.............................................................................................8
Research Methodology....................................................................................................................9
Research design.........................................................................................................................10
Research Strategy......................................................................................................................10
Data Collection..........................................................................................................................10
Data Analysis.............................................................................................................................11
Ethical Consideration.................................................................................................................11
References......................................................................................................................................12

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Introduction
Background of research
The aim of research is to analyse Impact of China Pakistan Economic Corridor (CPEC) on
Foreign Direct Investment (FDI) and Trade of Pakistan. China-Pakistan Economic Corridor is
considered as strategic economic project that contributes in improving the economic connectivity
with Pakistan (Esteban, 2016). CPEC leads to the impact on the FDI as well as overall trade that
is linked with the economic activities on the overall consumption of the energy as well as it is
saving the potential for Pakistan by 2030. The development of the CPEC was possible with the
Belt and Road Initiative which is an important plan. In study, it is predicted that the CPEC
contribute in reducing the cost of transportation of china by offering a much smaller way for
China's occupation to the Persian Gulf. Along with this, the CPEC contribute in offering the
resolution to deficits in energy within Pakistan (Ramay, 2016). Furthermore, CPEC has
estimated scenarios of the progression in terms of economy and also there are few threats related
to the security, economic as well as political in Pakistan. The research shows influence of CPEC
on FDI and trade in Pakistan with the help of different aspects of the researcher.
The research is conducted to discuss the heavy investment in the energy, transportation, Gwadar
port as well as the special industrial regions, solid and robust economic action that will lead to
the rise in the economy of Pakistan. This could result in the development of the industry which
contributes in the growth of economic, intensive use of the energy and also the rise in the trade
as well as the high level of FDI till the year 2030 (Esteban, 2016). Foreign direct investment, as
well as trade openness, leads to high energy saving in the nation of UAE. FDI leads to the rise in

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the trade which allows the people to easily access the energy and contribute in reducing the
energy intensity.
Research aim and objectives
The study aims to analyse influence of the CPEC on the Foreign Direct Investment (FDI) and
Trade of Pakistan. The below given are the objectives of the research that helps in attaining the
research aim.
 To comprehend the considerate about China Pakistan Economic Corridor (CPEC).
 To evaluate impact of China Pakistan Economic Corridor (CPEC) on the Foreign Direct
Investment (FDI) and trade of Pakistan.
 To assess the challenges and threats for Pakistan due to China Pakistan Economic
Corridor (CPEC).
Research questions
Q1. What do you comprehend by the China Pakistan Economic Corridor (CPEC)?
Q2. How China Pakistan Economic Corridor (CPEC) create an impact on Foreign Direct
Investment (FDI) and Trade of Pakistan?
Q3. What are the challenges and threats for Pakistan due to China Pakistan Economic Corridor
(CPEC)?
Justification
The research questions are formed on the basis of the research objectives that are formed to meet
the aim of research. These questions are formed in a way that it will help the researcher to

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conduct the entire research and this helps in the conducting the literature review which is
essential as it helps in understanding the view point of different researchers.
Significance of the study
In the present opinion of the literature, it is vital to improve knowledge related to influence of the
China Pakistan Economic Corridor (CPEC) on the Foreign Direct Investment (FDI) and Trade of
Pakistan. The study majorly aims to understand the benefit of CPEC for China and Pakistan.
Pakistan can develop growth in terms of the infrastructure, trade, economy and many others
(Irshad, 2015). The research will help in providing the view to the different economist about the
impact which can be positive as well as negative. The information is gathered from the sources
that remain realistic which include CPEC website as Gwadar Port operating Authority website.
The investigations help in opening new ways for the researcher to conduct the research. In
addition to this, the developing countries will be able to look towards the benefits and can
contribute in bringing such initiatives for their own country (Ramay, 2016). It is essential to
determine the positive as well as the adverse influence of CPEC on FDI and Trade of Pakistan.
Literature review
China-Pakistan economic corridor
According to Hali, Shukui, & Iqbal, (2014), “One Belt and One Road” (OBOR) is an essential
development plan of the china broadcasted in the October 2013 for assistance as well as
connectivity among the different countries. The framework of the CPEC was signed at the
amount of US $46 billion among Pakistan and China (Ramay, 2016). This deal connects Gwadar
port with north-western area of China that includes the Silk Road Economic Belt. CPEC

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contribute in enhancing growth, diversify opportunities for the investment which is possible with
FDI and trade, promote industrial, attaining the political stability and modernize energy area.
Also, the literature shows that this strategic project aim is to enhance the people-to-people
interaction to exchange culture, transfer information for development of urban-rural areas as well
as forming of the industrial zones (Irshad, 2015).
In the literature the researcher contribution is to provide the details about the China-Pakistan
economic corridor which include different views and opinions of the researchers. This paragraph
contributed in understanding the concepts of the CPEC.
Impact of China-Pakistan economic corridor on foreign direct investment
(FDI)
According to the views of Esteban, (2016), CPEC is a procedure of FDI inflow into Pakistan. It
has been found that power and transport infrastructure investment as the commercial FDI that is
linked to the CPEC. The investment by CPEC at the Gwadar as the trade FDI inflow for the near
future shows the opportunities as well as improvement in the FDI which contribute in
improvement in the economy of Pakistan. In the research, this has been witnessed that future
progress rate of the FDI sequence below the advance situation is considered as summary of the
development in the baseline situation as well as the per year progress rate of the FDI inflows
which is linked to the CPEC. The foundation behind estimate is that average development in the
net FDI inflow throughout the period of 1977-2013 that will sustain shortly. Therefore, adding to
it the CPEC related the FDI inflows. Shortly, there will rise in FDI with 39.86%, 20.50 and
39.84% in the aggregate, industrial as well as the commercial series (Abid & Ashfaq, 2015).

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According to the views of Rahman & Shurong, (2017), China is not second-largest occupation
companion nonetheless they are considered as the huge investors in the field of
telecommunication, infrastructure, ports and many others. In addition to this, to promote the
mutual trade which is possible with the Chinese administration and isolated subdivisions that
have assured US$ 20 billion asset in the area of energy and also $30 billion in the extra key
subdivisions as the FDI. In the literature, it has been determined that there are negative as well as
the encouraging spillover effects of FDI on the intake of the energy (Wolf, 2016). The results of
the research show that there are the diverse as the factors of the net inflows of the FDI that are
adverse majorly for the collective as well as the manufacturing segments while it is positive for
the commercial sector.
The researcher contribution within the literature is to understand the impact of CPEC on FDI
which is essential to understand. The FDI directly contributes for bringing the improvement in
the economy of the Pakistan. CPEC impact including positive and negative impact can be
understood with the help of researchers.
Impact of China-Pakistan economic corridor on the trade of Pakistan
According to views of Wolf (2016), the improvement in the infrastructure is possible with the
investment under the CPEC which leads to the rise in the internal as well as the external trade.
The completion of the Gwadar port allows Pakistan to work as the trade hub for their entire
region. The port contributes effectively in connecting the city whose major population is Muslim
controlled present in the eastern china-Kashgar in Pakistan. It has been witnessed that
construction of the port is considered as a strategic decision that contributes in the progress of the
country. The port is expected to be a center of the energy as well as a trade corridor to and from
China and also central Asian states. The port of Gwadar is suited on western termination of the

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Baluchistan coast on opposite end of the Gulf of Oman that is one of the vital routes for the oil-
tankers that is connection point for Japan and the western nations that are present out of the Gulf
(Kirkulak, Qiu & Yin, 2011). Considering the point of view of people in Pakistan, the expansion
of the Gwadar free port is one of the main policies that bring the transform the financial
development of Pakistan.
Agreeing to above views, Shoukat, Ahmad & Abdullah, (2017) says that construction of the
Gwadar port is multi-dimensional strategies which consist of the international link in terms of the
investment as well as trade. It is determined that the outflow of the belongings majorly from
western China as well as dominant Asia is accomplishment the permits of Gwadar with the help
of overland trade way. This allows Pakistan to receive millions of dollars within a year when it
comes to the port as well as the cargo handling charges. Also, there are some of the freight
charges that include export goods and import cargoes charges. In addition, this has been found
that CPEC’s foreign direct investment inflows are expected to increase to meet the vision 2025
purposes at rising distributes to $150 billion and exports to the GDP ratio to 16-19%. In the
research, the vision for the year 2030 purpose at rising trade to the ratio of GDP from 30%-60%
in the year 2030. The major contribution behind the growth is possible after FDI inflows which
is possible because of CPEC in Pakistan.
The fact is that CPEC is transforming Pakistan and making it a business hub and allow a permit
for the trade with the countries like Indonesia, Bangladesh as well as Burma (Rehman, Hakim,
Khan & Khan, 2018). The association between Pakistan-china shares special steadiness for the
shared assistances and teamwork that has weathered differences in arena.

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The researcher contribution within the literature is to understand the impact of CPEC on trade in
Pakistan which is essential to understand. The literature contribution helps in understanding the
trade has been improved with the help of CPEC.
Challenges and threats for Pakistan
According to the view of Abbas, Liu, Wasti, Munir, & Abbas, (2019), despite the predicted
significant advantage of the CPEC, it has been determined that Pakistan is dealing with the wide
range of issues with the emergence CPEC. These threats are known as the internal as well as
external aspects of CPEC. In the research, this has been found that economic as well as the
political challenges say that CPEC is the biggest threat to the neighbouring country which
includes India. In the research, this has been determined that china is vigorously requested India
to develop the member in the Belt and Road summit that took place in Beijing (Abbas, Liu,
Wasti, Munir, & Abbas, 2019). However, Indian government presented that negative response
because of the involvement of Pakistan that has occupied an area of Kashmir. CPEC also lead to
the issue of the Indian security control as the region feels the threat from Pakistan. Contradicting
this GHANI & Sharma, (2017) said that one of the major challenges that have been witnessed is
ethnic as well as religious parties different within Pakistan. In the research, this has been
witnessed that Gilgit-Baltistan also demanded a huge share when it comes to the project of
CPEC by doing the protests. In the recent news, it has been found that the government responded
with the motive to complaints by recurrently announcing that the project of CPEC will evidence
essential for the entire provinces in an equivalent manner. In addition to this, the research shows
internal as well as the outside level include the main risk of safety disputes. Pakistan is
distributing with issues of terrorism and extremism which is reason that political parties are

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contrary to CPEC. Several agencies across the world are against this project and they provide the
support to the terrorist activities and these activities hinder Xinjiang to the port of Gwadar.
According to the views of Mirza, Fatima, & Ullah, (2019), China has provided the opinion on the
issue of tax, electricity price and tariff with Pakistan apart from the CPEC's venture related to
energy with Pakistan. The trade is motivated by the CPEC which leads to the rise in the imported
equipment’s that will be exempted from all the tax. In addition, china government has
highlighted the fact that the decline in tariffs for renewable energy will lead to an adverse effect
on plan of CPEC.
The contribution in literature is essential for determining the challenges and threats to the
country due to CPEC. Different researcher has provided their opinions and views for the same
which leads to the clarity for the CPEC with challenges and threats associated with it.
Research Methodology
The research methodology includes the specific procedures and techniques that identify, select
and analyze the information related to the topic. The total validity and dependability of research
included in the section of research methodology (Mehar, 2017). The section of the research
methodology includes the various processes like the data collection approaches, data analysis
methods and many others. The research methodology is used to collect the data to achieve the
overall objectives of research. All these processes are essential in researching a particular topic.
The research methodology includes several methods that are discussed below-

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Research design
The research design is a vital part of research methodology as it supports to give valid and
reliable information. To get accurate information, the researcher uses one of the methods form
the three different methods that are qualitative, quantitative and mixed research. In this research,
the qualitative design is used to get realistic information linked to topic (Mehar, 2017).
Research Strategy
The research strategy needs to be followed the process of aims and objectives of the topic that is
related to the analysis of FDI and trade of Pakistan due to CPEC. The data has been collected by
the literature review on the particular topic of research. The strategy of research helps to gain
valid and accurate information related to the topic (Hair Jr, Page & Brunsveld, 2019). The
research strategy wants to be proper to analyze the quantitative data. The research strategy
matters a lot in the overall process of the research as the strategy helps in giving valid and
accurate information that is essential for carrying out the research.
Data Collection
Data collection is a procedure of collecting information from the related sources to find the
answers to a particular problem. The data collection approaches are of two types that are primary
data collection methods and secondary data collection methods. Both the methods help in finding
better answers to the related problem (Fowler Jr, 2013). The primary method of data collection
includes the sample or questionnaire on which the survey is taken from several respondents
related to the problem. According to the results of the survey, the data can be analyzed properly.
The other method is secondary data collection which includes the review of the already
published articles, journals or newspapers. This research selects the secondary method of data