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Answering the CPEC challenges


It is necessary to enlarge the stakes of the domestic industry and to protect their interests under CPEC

Quratul Ain Hafeez

OCTOBER 23, 2018

China-Pakistan Economic Corridor (CPEC) will help sustain the economic growth of China and will highlight the strategic importance of Pakistan. It will offer Pakistan a chance to broaden the horizon of its economy and enlarge its foreign reserves. However, whilst venturing towards industrialization and Foreign Direct Investment (FDI), CPEC in Pakistanfaces certain challenges that have so far impeded the industries in realizing their full growth potential. Principal obstructions to investment in this regard are various security and political factors as well as the non-availability of infrastructure and power crises.

The answer to these challenges is that the FDI is necessary for raising capital. Eventually, once the high capital value is achieved it will help in developing infrastructure and for initiating large industries. Thus, through Foreign Direct Investment (FDI) the dearth of capital will be decreased to a great extent. In order to set up competitive industries in this globalized world, one of the main priorities is the accessibility of productive and high tech transportation for manoeuvring of raw materials and finished goods. This is an understood observation that economic expansion strengthens infrastructure advancement and vis-à-vis.

The second most important aspect is, how is CPEC beneficial for Pakistani labourers and how industrial advancement will be creating Jobs through CPEC for Pakistani people? The youth surge is often named as an asset and the State should focus on it, because this strength has turned into a burden owing to unemployment. In this regard, CPEC could offer appropriate interference in the course of employment creation. The first phase of energy projects of CPEC, will be effective in reducing the electricity shortfall. The inexpensive and unremitting power availability is indispensable for stimulating Pakistan’s manufacturing sector. This will increase economic activity, create jobs and catch the attention of foreign investors to invest in the trade zones of Pakistan. Eventually all projects which are a part of CPEC, whether they are electricity production projects or infrastructural advancement projects, need man power – engineers; civil mechanical, electrical. Along with disciplines of engineering technicians: masons, welders, carpenters, surveyors, steel fixer, machine operators, etc are also required. Moreover not only the labour and technical workforce, there is also a need for professional economists, finance, accounting, management HR and interpreters of Chinese language, who will monitor and manage these projects. These projects will generate around two million jobs implicitly or explicitly till 2030.

The first phase of energy projects of CPEC, will be effective in reducing the electricity shortfall. The inexpensive and unremitting power availability is indispensable for stimulating Pakistan’s manufacturing sector


Moreover, how will CPEC be profitable for Pakistani investors and local industrialists, if Chinese investors exempted from paying taxes whereas the local industries are not? In that case, CPEC Special Economic Zones (SEZs) will be a fruitful strategy for promoting trade, employment and economic growth. Consequently to upgrade the industries, through SEZs, one of the intended objectives of the CPEC is to best serve the private sector of Pakistan and to strengthen local industries through Free Trade Agreements (FTA). The proclaimed incentives which CPEC promises to offer the local enterprises include the promotion of Pakistan’s industries from accumulating imported parts and components to localized production of parts by utilizing the available resources, offering employment opportunities to the people and encourage bilateral connectivity between various Chinese and Pakistani enterprises. It will also expand trade volume and logistics, business-to-business (B2B) links, two-pronged trade arrangement, regional connectivity and encourage even handed trade maturity. Subsequently, in order to facilitate the local business sector, Board of Investment (BoI) established ‘CPEC-SEZ Cell’ in February 2017, in order to address the concerns of the stakeholders on matters related to CPEC and the Special Economic Zones. The prime function of this support cell is to attract, facilitate and promote both local and foreign investment in the country as per Special Economic Zones (Amendment) Act, 2016 of Pakistan.

Furthermore, in line with changing global economic structure CPEC will bring trade openness. For that Pakistan has prioritized the establishment of SEZs. So far 41 sites have been identified for SEZs and the Board of Investment (BoI) has mapped out nine exclusive Industrial Zones to be built under the umbrella of CPEC. It is also pertinent to mention that the CPEC project is not merely a route that connects Gwadar port with Kashgar, but an opportunity for both China and Pakistan to enjoy trade with Europe, Middle East, South and Central Asia as well. Thus the establishment of SEZs  promises to bring  Trade Openness through a massive socio-economic development  in the country, specifically in the areas of energy, trade, agricultural, infrastructural development, connectivity, industries, poverty alleviation, tourism, cooperation between financial institutions and markets, and also financial cooperation between Free Trade Zones (FTZs).

Last but not the least, the difficulty of capital and capacity insufficiency can be alleviated through joint ventures between the Chinese and Pakistani business community under CPEC. It is necessary to enlarge the stakes of the domestic industry and to protect their interests under CPEC. Pakistani entrepreneur should be given incentives similar to Chinese investors to encourage investment in the CPEC projects.

The writer has an MPhil in international relations from Quaid-I Azam University Islamabad. She is currently working as a Research Associate at Strategic Vision Institute Islamabad. She can be reached at Quraathashmi@gmail.com

Published in Daily Times, October 23rd2018.


https://dailytimes.com.pk/313439/answering-the-cpec-challenges/

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