Theoretical Background of the Research

Introduction

According to the experts and researchers in land economics, distance is viewed as a social friction that should be dealt with properly. Friction is a figure of speech or a metaphor given to show the cost of transportation and communication. As stated by Isard (1956, p. 24), the theory of economy should consider time and space as the top priority. He further stated that location theory is based on the important fact that there are some consistencies in the differences of costs and prices over space. The regularities occur because the cost of transportation is some function of distance. Due to the importance of distance factor in the locational analysis, it is important to consider transport inputs where the two major factors are distance and weight, and the rates of transportation as prices of the inputs.
However, Williams (1971) described the characteristic of location specific and focuses on the accessibility as an important factor in the advancement of cities. He further discussed that decisions related to the urban location, especially the evolution of cities, are the result of the fact that most people try to be accessible to other places.
As stated by Blair (1995, p. 354), the way of the usage of land determines the residual to land. The land usage, which helps in providing high residual, is the best usage of land. Accessibility is a major determinant of best use in an urban environment. With the increase of accessibility of land to urban goods, its worth also escalates. Blair (1995) further stated that the decision related to the location includes a trade-off between the accessibility and attractiveness of the surrounding of the location and the cost or investment made in the location.
According to the general principle, if the location is accessible to the positive aspects of the surrounding, it becomes more worth to invest or purchase. However, various types of land usage demand accessibility to various elements. Different business look for the accessibility to the efficient workers/labors and other business (Jordaan, et al., 2004). Different organizations look for the accessibility to the markets and households seek the accessibility to different facilities and convenience. Consequently, the planners and developers of lands have realized the importance of the fact that the maximum accessibility of a location determines greater profits and revenues. Convenience and time are considered as the major aspects of accessibility. New transportation infrastructure has made sure to provide access to a different location as much as the role of urban infrastructure as of simple physical distance.
Dai, et al. (2013) stated that location consists of two different factors which are place and space. The former refers to the predictable location-related factors, on the other hand, later focuses on the geographical remoteness and network aspects. Therefore, the concept of place in traditional location need to be improved by the problem of space so that the activities performed worldwide can be understood in a better way. According to Beugelsdijk, et al. (2013, p. 414), space should propose aspects among places integrating with the domestic differences (for instance, investment patterns of organizations related to the regional sector within a country) and combine them with between-country differences (for instance, comparative analysis of the investment patterns of organizations related to industry cluster between countries).
Location theory postulates that the firms need to analyze the macro environment when they plan to enter to a specific market so that they can examine the potentials and threats in lights of the internal resources that show the pros and cons of the specific firm (Mario, 2016). The market research will be more complex if more the company is involved in global business and has a maximum number of rivals in an industry. Globalization in the present world and complexity is more about giving the company’s exposure and response to the ever-changing business environment than it is about getting into foreign markets (Jones, 2001, p. 193).
Traditional models of location examine the location by reducing the cost of access to various resources (Isard, 1956; Friedrich, 1929). The past studies of locations showed the importance of accessibility to the transportation infrastructure and central business district (CBD), which shows a positive relationship between the location decision and the accessibility of transportation services. Henderson (2001) stated that the building efficient transportation infrastructure could improve local access, which leads to the major reduction in transportation costs. This will be very important and valuable to attract companies. Similarly, Krugman (1991) came up with the core-edge mode and stated that the cost of transportation followed the law of the “iceberg transportation cost hypothesis” so that with the reduction of transportation cost, companies attempted to agglomerate in a similar area, forming into a regional manufacturing unit.
These assumptions are not supported by the neoclassical location theory where the accessibility of an efficient transportation system has different influences on industrial location on the basis of various spatial scales. This shows the connection of the location and accessibility of an efficient transportation system is not easy and does not have a single influence of one on another (Huang & Wei, 2014).
The present study aims to integrate location theory in this study. As discussed above, investment decision in a specific location includes a trade-off between the accessibility and attractiveness of the surrounding of the location and the cost or investment made in the location (Blair, 1995). The investment of CPEC by China to Pakistan is based on the similar fact that being the neighboring country of Pakistan, China found Pakistan attractive and accessible to invest in relation to the cost of investment. From a location theory point of view, the major interest of the study is to establish automated toll plazas in the routes of CPEC to decrease the operational cost, labor, maintenance cost, time-saving, fuel saving, improvement in cash handling and traffic. In other words, to provide an efficient transportation infrastructure to increase the productivity of CPEC and to create a win-win situation for both countries.


1.2 CPEC: SWOT Analysis:

The economy of China is considered as the second largest economy of the world which is standing at $15.4 trillion. The rise of China’s power is not only affecting global affairs but it is also having an impact on its territorial relations inside Southeast Asia. The balance of power in Southeast Asia has just moved and many states are getting restless over the rising power of China and how they will utilize this power particularly as to propel their economy (Javaid, 2016). The beginning of China’s growing global standing is the reason on Martin Jacques motivated to write a book on When China Rules the World. The mixture of the political and economic structure of China shows that the Francis Fukuyama, an American political scientist, was mistaken on his book The End of History and the Last Man in 1992 which emphasized on the fact that the countries around the globe would follow Western liberal democracy (Napoli, 2014).
Different states are influenced with the resources and power of China and this is the main reason why China is considered as a superpower although there are also other dimensions of power which is hard to include and the evaluation method through the power can be easily accessed that the country itself used (Ghulam, 2015). For the fact, President Xi Jinping came up with a greater project of CPEC. This plan cooperates around 4 billion people with a total of 33% of global monetary resources. The project of CPEC began with an investment of $46 billion and is estimated to cross 100 billion dollars by 2030 (CPECinfo, 2018). It supports the Asian infrastructure funding bank along with the large organization and global governmental firms.
Since CPEC is a mega project, it has several internal factors (strengths and weakness) and external factors (opportunities and threats). They are discussed in detail below:
1.2.1 Strengths:
The development of CPEC will bring a number of changes including the improvement in the situation of Gwadar and Baluchistan. Similarly, the province of Xinjiang which is considered as the under-developed province will also change its present condition in a better way. Currently, a major part of Xinjiang is not progressive and with the passage of time, a major progress is expected which will be an ideal situation for China and it will help the country to increase its trade activities (Qi, et al., 2014). Moreover, China is currently covering a long route for the trade activities. It is considered as the single route from where China is undertaking its trade. As indicated in Figure 2 and 3, the existing route is covering by straits of Malacca and entering into European markets. After the completion of the project, the distance will be reduced by 12000 km which will save the cost and time for the country.
All the investment and trade limitation will be lifted slowly and relations with other nations for the business. The completion of project will bring new employment opportunity and economic growth (Butt & Butt, 2015). CPEC will also bring economic stability in Pakistan which will help in the improvement of the industry. This will also help in the improvement of standard of living of common people. The project will not be beneficial for China and Pakistan but also help the South Asian region for trade opportunities.

Figure 2 – Reduction in Sea Route Distance
Source: (CIMSEK, 2016)

Figure 3 – Low Cost and Quick Time Route
Source: (PCQ, 2017)

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