FEBRUARY 27, 2019
CPEC has been hailed as a game changer for Pakistan’s development as it brings a massive dose of Chinese FDI and assistance in the overall context of the Belt & Road Initiative (BRI). The developments and the governmental policies around CPEC therefore, get huge traction in the public opinion. The CPEC narrative hinges on the governmental assertions that it would, directly and indirectly, result in higher output, technology transfer and job creation. There is no doubt that the energy added to the national grid by CPEC in a record short time has given a significant boost to the country’s output.
The anticipated technology transfer and the creation of a large number of jobs are dependent on the positive outcome of the industrial cooperation between the two countries under CPEC. The technology transfer hypothetically is being given high importance by policymakers. Regarding jobs, the government presented it as a trade-off vis a vis the incentives being given to the Chinese and the eventual profits that the Chinese companies would generate from CPEC. Job creation, therefore, has become a rather acrimonious debate between the government and CPEC skeptics. This debate is important, as it would not only help us better evaluate the tradeoffs involved in CPEC, the government would also be able to put in place more focused vocational and technical training programmes to better benefit from CPEC opportunities.
The raison d’être of establishing the Economic Corridor is to construct integrated networks of infrastructure within a geographical area designed to stimulate economic development. The centerpiece of this Economic Corridor are the Industrial Parks and Special Economic Zones it entails, which would attract investment and generate economic activities within a contiguous region on the foundation of an efficient transportation system. The economic corridors provide two important inputs for competitiveness: lower distribution costs and high-quality real estate. The corridor approach for industrial development primarily takes advantage of the existence of proven, inherent and underutilised economic development potential within the region. Successful Economic Corridors utilise local human resources and become conduits for technology transfer.
The pessimism regarding job creation under CPEC is based on some fears and some assumptions. The fear is that the Chinese would bring in their own labour. Assumptions are that the new capital intensive industry does not create a lot of jobs, the arrival of new Chinese investments will be painfully slow and the megaprojects, more often than not, will be sub-optimal.
The sad reality seems to be that CPEC planning and policies have not been pursued vigorously during the past five and a half years. As such, CPEC will not suffice as the main economic policy of the country in the coming years
Islamabad has been trying to dispel such doubts and claims that CPEC has already produced 75,000 jobs and the (Special Economic Zones) SEZ and Railway projects under CPEC are going to produce 800,000 and 12,000 jobs respectively. However, the use of rather crude and unscientific methods for projecting this number has created even more doubts. This also does not help relevant policymakers prepare the job market for upcoming opportunities.
Jobs under CPEC could be divided into three categories: jobs already created with the energy and infrastructure projects in Gwadar and elsewhere; jobs to be created in the SEZs and jobs expected to be created in the megaproject of Pakistan Railways.
The survey of relevant literature and background interviews suggest that the government of Pakistan did not work out the number and nature of jobs going to the local market under CPEC projects nor did it put in place a review mechanism to monitor job creation as the projects progressed. Foreign Direct Investment Reviews have gained a lot of importance lately as awareness about the limitations of FDI regarding job creation and technology transfer grows. The EU has passed legislation to put in place a Screening Framework for FDI in September 2017. The jobs created till date by CPEC in Pakistan are very small in number; mostly in the manual labour category. One can imagine that in order to speedily complete the projects, it would have been more practical to allow more Chinese labour. However, it would be useful to do a more ex-post analysis of the number and quality of jobs, which could have been potentially created if the government had put a proper investment review mechanism in place.
Government estimates say that 800,000 jobs would be created under CPEC through SEZs. Under CPEC, nine SEZs are being made, on the following locations: Moqdampas in GB, Mohmand, Mirpur in Azad Kashmir, Pakistan Steel Mills in Karachi, ICT Model Industrial Zone in Islamabad, Bostan in Balochistan, Dhabeji in Karachi, Rashakai Special Economic Zone in KP and Allama Iqbal Industrial City in Faisalabad.
In most cases, the land for these projects has not even been acquired yet. Neither have these zones been formally demarcated. Most do not even have boundary walls. During the eighth JCC held in Beijing in December 2018, it was been decided to first focus on the three SEZs in Dhabeiji, Faisalabad and Rashakai. To add up all the indicative Square Kilometers in the nine SEZs and to imagine, rather arbitrarily, that each acre would create x-number of jobs is very crude to say the least. Most of the zones are not going to see any manufacturing activities for the next few years. Some of these zones are also situated in very difficult to reach places. SEZs take a very long time to build. Therefore, international references, quoted in government documents could not be understood without proper context. The Suez SEZ of TEDA China started in 1995 and is not even half populated yet. In India, out of the approximately 430 registered SEZs, only 218 are operational in some capacity and of these operational zones, less than half are actually fully working. So, that not all zones will be functional any time soon is a fact, and from those that do, few will inevitably be fully inhabited. We, in Pakistan, should focus more on the three Zones prioritised by the last JCC and look at the kind of industry expected to come there before we make outlandish predictions about the “millions of jobs” being created by CPEC.
Pakistan and China are preparing to launch a mega project titled the ML I Project to completely upgrade the Karachi-Peshawar railway line. The project agreement is yet to be signed. However, it is expected to be a project worth more than $8 billion. As long as the technical details of the project are not fully known, it is hard to assess the number of manhours required, time in days, and labourer skill level required which would be spent on building the railway. But the claim that each kilometer would create eight jobs does not appear tenable. Economic corridors are too complex to be properly classified as growth centres; they are more suitably described as growth enhancers and catalysts for growth factors in the economy in general. Incorrect measurements are the road to a dangerously misleading policy analysis. The sad reality seems to be that CPEC planning and policies have not been pursued vigorously during the past five and a half years. As such, CPEC will not suffice as the main economic policy of the country in the coming years. Therefore, the question of job creation under CPEC needs to be revisited in realistic terms and in a scientific manner to better educate the public and policymakers.
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Published in Daily Times, February 27th 2019.