Impact of China Pakistan Economic Corridor Muhammad Aqeel (16546) Förnamn DegreeEfternamn Thesis BBA International Business 2016 DEGREE THESIS Arcada Degree Programme: BBA International Business Identification number: 5400 Author: Muhammad Aqeel Title: Impact of China Pakistan Economic Corridor (CPEC) Supervisor (Arcada): Siv Relander Commissioned by: Abstract: The work of this thesis primarily revolves around the concept of logistics’ shipping cost and transit time. China needs a short, safe and inexpensive trading route to European and Middle Eastern countries. The aim of the study is to verify if CPEC is a viable solution to the need. The study analyzes the impact of China Pakistan Economic Corridor (CPEC) on trade in terms of the shipping costs and transit time. Transport and infrastructure are called strategic levers of trade as they help in reducing the shipping costs and transit time. In the modern era, organizations want to reduce the shipping costs and transit time to maximize profit and ensure timely delivery of product. The focal point of the thesis is to study the importance of CPEC and its impact on import and export in terms of costs and transit time. Besides, this study compares existing route with proposed route. The re- search methodology used in the study follows qualitative and descriptive approach. In this study, dry port Kashgar (western China) has been taken as origin and three ports of each European and Middle Eastern countries are taken as destinations. The destination ports which have been selected in this study are key trading players with the port of origin. The selected European ports (Hamburg, Le Havre and Rotterdam) share huge trading volume with China. The selected Middle Eastern ports (Jeddah, Kuwait and Oman) fulfil Chinese energy requirements. In the first step, the variables (transit time and shipping cost) of 40-foot container are cal- culated when transported using current route. In the second step, the same variables are calculated using proposed route (CPEC). In the third step, both variables are compared for current and proposed route. Although it’s difficult to calculate the exact future road transportation cost (in case of CPEC), so this study considers average value of current road transportation cost. The results show that shipping costs will drop drastically if pro- posed route is used. The shipping costs between Kashgar and destination ports can de- crease by 36% for European ports, 50% for Jeddah and Kuwait and 68% for Oman. Also, the transit time will decrease by 10-11 days for European ports, 11-13 days for Jeddah, 15-18 days for Kuwait and 10 days for Oman. Keywords: CPEC, Qualitative, Shipping cost, Delivery/Transit time Number of pages: 69 Language: English Date of acceptance: 2 CONTENTS 1 Introduction .......................................................................................................... 8 1.1 Overview ........................................................................................................................ 8 1.2 Description and Motivation ............................................................................................ 9 1.3 Research aim ................................................................................................................ 9 1.4 Research Question ...................................................................................................... 10 1.5 Research Design ......................................................................................................... 10 1.5.1 Material ................................................................................................................ 10 1.5.2 Approach ............................................................................................................. 11 1.5.3 Data collection ..................................................................................................... 11 1.5.4 Data analysis ....................................................................................................... 11 1.5.5 Data interpretation ............................................................................................... 11 1.6 Limitation of Study ....................................................................................................... 11 2 Logistics (Theoretical Framework/ Literature Review) ................................... 12 2.1 Supply Chain ............................................................................................................... 13 2.2 Supply chain functions, activities and flow .................................................................. 15 2.3 Importance of shipping cost in SCM ............................................................................ 17 2.4 Importance of delivery/transit time in SCM ................................................................. 19 3 Pakistan .............................................................................................................. 22 3.1 Geography of Pakistan ................................................................................................ 22 3.2 Climate ........................................................................................................................ 24 3.3 Economy of Pakistan ................................................................................................... 26 3.4 Government ................................................................................................................. 28 4 China Pakistan Economic Corridor .................................................................. 28 4.1 What is CPEC? ............................................................................................................ 28 4.2 CPEC Projects ............................................................................................................. 29 4.2.1 CPEC Energy Projects ........................................................................................ 29 4.2.2 CPEC Transport infrastructure sector projects ................................................... 31 4.2.3 CPEC Gwadar port related projects .................................................................... 31 4.2.4 CPEC Others projects ......................................................................................... 32 4.3 Description of CPEC Route ......................................................................................... 32 4.4 Impact of CPEC in general .......................................................................................... 35 5 Methodology ...................................................................................................... 38 5.1 First Part ...................................................................................................................... 38 5.2 Second Part ................................................................................................................. 40 3 5.3 Third Part ..................................................................................................................... 41 6 Trading Volume with selected destination countries ...................................... 41 6.1 China exports volume to Destination countries ........................................................... 41 6.2 China imports volume from Destination countries ....................................................... 43 7 Shipping cost and Transit time calculation ..................................................... 44 7.1 Current route shipping cost and transit time Calculation............................................. 44 7.1.1 Current route Shipping cost ................................................................................. 46 7.1.2 Current route transit time ..................................................................................... 47 7.2 CPEC route shipping cost and transit time Calculation ............................................... 48 7.2.1 CPEC route Shipping cost ................................................................................... 51 7.2.2 CPEC route transit time ....................................................................................... 51 8 Findings.............................................................................................................. 52 8.1 Impact on imports & export in term of shipping cost and delivery time (RQ 1) ........... 53 8.2 Comparison of current route shipping cost and delivery time with CPEC (RQ 2) ....... 54 8.2.1 Comparison of Shipping Cost .............................................................................. 55 8.2.2 Comparison of Transit Time ................................................................................ 56 8.3 Distance Comparison .................................................................................................. 56 8.3.1 Current route distance ......................................................................................... 57 8.3.2 CPEC route distance ........................................................................................... 57 8.3.3 Comparison of distance ....................................................................................... 58 9 Discussion and conclusion ............................................................................... 59 9.1 Recommendation ........................................................................................................ 59 9.2 Conclusion ..................................................................................................................