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Taking forward industrial cooperation

By Samaira Nazir Siddiqui

The Secretary, Board of Investment believes that by leveraging the CPEC opportunity, Pakistan will be able to achieve massive growth. Consequently, the board of investment has developed a plan to improve the investment climate with the focus on nine special economic zones.

AFTER being the frontline state in War on Terror for the last 15 years, Pakistan has faced many a challenge in the form of political instability, rising security concerns and stagnant economy. Luckily, things are changing now due to the geostrategic advantage of the country’s global positioning and implementation of various projects under the umbrella of CPEC.

Pakistan is situated at the crossroads of South Asia with an easier access route to the Central Asian Republics (CARs) and China through the western border. Increased Chinese investment in Pakistan has been a confidence booster for the European and other Western countries wishing to invest in Pakistan who were previously uncertain regarding the future stability.

All of us are well aware that during the last 10 years, Pakistan has attracted low FDI (US$23 billion) compared to the size of its economy and peers, primarily because of two major reasons that were security situation and energy deficit.

However, the situation has significantly changed in the last three years. Now, security and energy supplies have improved incredibly.

Tremendous countrywide investments are being made to improve the quality of infrastructure and trade-related connectivity to reduce inefficiencies. With essential ingredients of growth in the shape of security, energy and fast and efficient connectivity available, the software of growth i.e., enabling environment and a responsive government, has worked well for Pakistan in the last few years.

I believe that we can grow at over nine per cent by leveraging the CPEC opportunity. China-Pakistan Economic Corridor is a multi-fold development package that has not only vital transportation road link, but also rail and energy links. Enhanced connectivity between China and Pakistan will alter the geo-economic landscape of East Asia-West Asia neighbourhood.

Once such connectivity becomes effective, Pakistan will act as a vital bridge between China, Middle East, Africa and Europe.

The Chinese model of best economic practices gives Pakistan many options to become a global destination for trade and investment and it can be a best infrastructure-driven economic development model for both Pakistan and China.

Industrial cooperation is an important area of CPEC and the Federal Board of Investment is the lead agency from Pakistan’s side to take forward the industrial cooperation at its highest level to transform our development plans into reality.

China has advantages in experience, technology, financing and industrial capacity, while Pakistan enjoys favourable conditions in resources, labour forces and market. By carrying out industrial cooperation, both sides will mutually complement each other’s resources for a win-win result.

In fact, it is a concept of shared prosperity.

For Pakistan, the development of industry is the main gain from CPEC as a driving force for economic growth and taking the fruits of CPEC to the lesser developed regions of Pakistan.

Conducive business environment is one of the important determinants of attracting investment. The Board of Investment has developed a plan to improve investment climate in Pakistan in consultation with all federal and provincial stakeholders.

Our plan is focussing on streamlining of procedures by setting up One-Stop Shops, making procedures simpler and faster by introducing technology.

In this context, online registration through e-services/VOSS has now been operationalised, Digital scanning for all registered documents as well as digitised maps for Sindh and Punjab are available online, Credit Bureau Act, 2015, and Secured Transaction Act, 2016, have been enacted to improve access to credit for SMEs, FBR launched the integrated end-to-end IT solution for online payment of corporate income tax and GST and new web-based software for Custom Clearance (WeBOC) has been launched in the Port Qasim to improve customs clearances.

The BOI is a close partner in CPEC for beefing up the industrial plan for establishing priority SEZs under the corridor. Nine sites have been selected as prioritised SEZs. Each economic zone will target specific products and services, based on the availability of local raw material, workforce and other such factors.

Industrial development is a long-term phenomenon, which takes time to transform the ideas in to reality. Federal and provincial as well as regional governments are also working hard to establish industrial parks, which can be used as a tool to spur industrialisation in the country.

Out of many, a few salient initiatives taken by Federal Board of Investment and Chinese NDRC for early development of SEZs and to accelerate industrial cooperation under CPEC are as follows:

Chinese Experts Group visited Pakistan thrice in July 2017, October, 2017 and March 2018 besides holding second meeting of Joint Working Group on Industrial Cooperation in November 2018. Apart from these, Chinese experts also visited zones sites in Sindh, Punjab, Balochistan, KP and Gilgit-Baltistan.

Pakistani side invited Chinese Industrial Parks experts to conduct training workshop on SEZs in Karachi, Lahore and Islamabad and to share their experience of developing SEZs with Pakistani officials.

Feasibility studies for five priority SEZs namely Dhabaji SEZ Sindh, M-3 Industrial Park Faisalabad, Rashakai SEZ KP, Maqpoondas SEZ Gilgit- Baltistan and Federal SEZ at Bin Qasim have been finalised and shared with Chinese side to get maximum industry to populate these zones.

Some Chinese entities have also shown interest to develop few zones as well.

The government, in consultation with all federating units, has also framed an additional incentive package to attract relocation of industry from abroad particularly from China to these priority zones.

The additional package include provision of land on installments, 50pc subsidy on loans taken in Pakistani currency, 50pc inland freight subsidy, One Stop Shop in each zone, allowing bulk purchase of electricity and gas and renting out of sheds to have plug and play facility in these zones.

The relocation of Chinese industry to Pakistan will not only enhance the skill development in Pakistan, but will also be eventually instrumental in technology transfers, channelizing the economies of scale, and adding value to the production chains in various sectors like agriculture, textile and industry. Pakistan’s market oriented economy and the increasing domestic demand will absorb and complement this technology relocation for mutual sustainable growth.

As regards agriculture and other important sectors where Pakistan has the comparative advantage, subworking groups in the priority areas of agriculture & livestock, mining & minerals, iron & steel, petrochemicals, and textiles are being formed to get maximum benefits of CPEC.

Sub-working group on agriculture from Pakistan side has been notified and the group has held its first meeting on March 30, 2018, to finalise the TORs of the group and to chalk out the way forward in consultation with all stakeholders for taking up with the Chinese side.

So far as impact is concerned, these efforts will bring new technology through Joint Ventures (JVs), strengthen vocational and technical training in Pakistan, instrumental to promote Pakistan’s exports to China and modernise infrastructure and break critical bottlenecks in infrastructure which constrain long-term growth and development.

We all are aware that Pakistan is lagging behind in technology and value-added products due to inflow of FDI in a handful of sectors.

CPEC will not only bring quality investment but would also bring peace, harmony and cater to the needs of all federating units in terms of trade and industrial development, including development of agriculture sector as a whole.

Pakistan's Existing and Future Investment Outlook FDI was peaked at $5,409 million in 2007-08 and thereafter started to decline and dipped at the level of $820 million in 2011-12. It again took upward momentum in 2012-13.

During the last five years (2014-18) investment of $9,832.7 million was recorded in the country. Huge chunk of FDI inflows have been recorded from China to the tune of $4,630.2 million which stands at 47.1 per cent.

Oil & gas exploration, financial business, communication, construction, and chemicals are traditionally major sectors attracting foreign direct investment in the country. Besides, other sectors in manufacturing, like electrical machinery, electronics, transport equipment (automobiles), rubber & rubber products, metal products, textile, and leather & leather products, have the potential to attract foreign investment into the country.

In future, the potential of FDI exists in power, LNG, gas, telecom-(3G), infrastructure development, textiles and petro-chemical sectors. The need of the hour is to reevaluate the investment strategies with specific emphasis on attracting FDI in export-oriented segments that will help in improving value-added exports and will pave way for export-led growth.

Pakistan is lagging behind in technology and value-added products. Foreign Direct Investment will play an important role i n enabling technology transfer to the country, access to innovative and larger foreign markets and capital growth, enabling Pakistan to become part of global value chain.

In short, CPEC can play a very vital role in attracting quality investment into Pakistan, which would bring not only value addition but also be a substantial source of enhancing Pakistan’s competitiveness in trade and investment.

The writer is Secretary, Board of Investment.

This article is part of the CPEC 2018 summit supplement. To read more from the supplement, visit the archive.


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