Skip to main content

CPEC and the state of the economy

February 25, 2020

There are loud noises over the perceived mismanagement of the economy by the present government. In this environment, it is worthwhile to review the relevant literature.Economist Shahid Javed...

ShareNext Story >>>

There are loud noises over the perceived mismanagement of the economy by the present government. In this environment, it is worthwhile to review the relevant literature.

Economist Shahid Javed Burki’s Institute (the Burki Institute of Public Policy) has recently launched its 12th annual report on ‘The State of Economy’. It has some chapters written by Burki himself and others by his co-authors. We are going to refer to certain parts of this report in this article.

The report in the beginning gives credit to the PTI government for being different from “patron-client and dynastic politics” (that is debatable), yet it states that the government’s accountability drive and its financial austerity measures are the two “unwritten policies” that have resulted in a decline of private and public investment in the country. These policies have affected the economy negatively and GDP growth has gone below 3 percent from slightly over 5 percent in FY2018 (before the PTI government took over).

The PML-N government was able to grow the economy on average around 5 percent, yet this growth did not lead to better human development outcomes in terms of social sectors such as health and education. The PML-N government also supervised decline in exports – despite the availability of GSP Plus – and an increasing current account deficit.

In the PTI government, inflation has risen as the consumer price index (CPI) is likely to increase to 7.3 percent from 3.9 percent in FY2018. Similarly, both the public and private fixed investment will go down to 13.8 percent from 15.1 percent in FY2018. Fiscal management is not looking promising either with an expected budget deficit of 8.9 percent of the GDP having increased from 6.6 percent the year earlier.

The only achievement that the government can claim is reduction in current account deficit to 4.8 percent of GDP from FY2018’s 6.3 percent and it has been done by containing imports. In other words, Pakistan “is grappling with soaring inflation, a crippling balance of payments crisis, a depreciating currency and poor export performance”.

However, a real contribution of the report is its continued focus on CPEC. It has also comprehensively discussed various aspects of CPEC and its relevance to the economy. Five out of nine chapters of the report analyze CPEC, written by various co-authors.

One strong point made in the last chapter on CPEC is that the government has reserved information on CPEC and there is a veil of secrecy around CPEC. There is a dire need for an effective communication strategy. If the government wants to build investor confidence and wants Pakistani entrepreneurs to be active collaborators in Special Economic Zones (SEZs) as part of CPEC, then its needs to provide timely information and maintain transparency. This sharing of information needs to be done in a systemized and planned manner.

CPEC is also analyzed from the Chinese point of view. The overall message is that the Chinese government is pursuing a policy to develop its western regions. China is moving people from its over-crowded eastern part to the sparsely populated western part. China’s western provinces (geographically close to Pakistan) do not have adequate potential to meet its food needs. Pakistan can export vegetables, fruits, animal products, and dairy to help them meet their demand.

The report recommends some short, medium, and long-term measures for the government of Pakistan to tap the CPEC potential fully, considering that CPEC is enlisted to go on till 2030. In the short term (2020-2022), Pakistan should focus on exporting horticulture, high value crops and livestock. The focus should be on “production and processing” facilitated by the development of technology and jointly conducted research.

In the medium term (2022-2025), the Pakistan government should develop its agro-industry and focus on industrialization through the avenue of SEZs. It should integrate with the global value chain at the regional level, and speed up income generation through the commercialization of agriculture.

In the long term (2025-2030), Pakistan needs to focus on joint ventures and investments and expand into corporate farming. There is further need to integrate with global value chains and facilitate relocation of the ‘traditional’ manufacturing sector of China to Pakistan.

The Preferential Trade Agreements are useful if both sides have equal access to each other’s markets, and they help to deepen economic integration. In the immediate future, Pakistan can for example concentrate on the cultivation of Chinese rice that has increasing demand.

Similarly, an improved governance structure is needed to develop global value chains. Farmers in Pakistan need to be given an incentive to work on ‘climate smart’ agriculture. There is also the need to take into account the nature of global value chains as some of them require more intensive contracting work that may be complex to handle.

Looking beyond CPEC, the report – like other economic analyses – recommends increasing domestic investment to around 25-30 percent of national income as it is way too low right now. This increase in domestic savings and investment is needed for a higher growth of the economy. Moreover, there is a need to develop new sectors of the economy. There is equal emphasis to increase exports based on production. Another message is to focus on the development of urban areas. Pakistan is believed to under-count and not fully develop its urban areas.

There is a need to focus on high-value crops in agriculture, turn the SME sector to be part of global supply chains, and train the large young population in the modern sectors of information technology, healthcare, finance, higher education, and tourism.

The writer is an Islamabad-basedsocial scientist


Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed. Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area” For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number” Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell yo

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میں Please help the deserving persons... Salary: Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows; Welder: Rs. 1,700 daily Heavy Duty Driver: Rs. 1,700 daily Mason: Rs. 1,500 daily Helper: Rs. 850 daily Electrician: Rs. 1,700 daily Surveyor: Rs. 2,500 daily Security Guard: Rs. 1,600 daily Bulldozer operator: Rs. 2,200 daily Concrete mixer machine operator: Rs. 2,000 daily Roller operator: Rs. 2,000 daily Steel fixer: Rs. 2,200 daily Iron Shuttering fixer: Rs. 1,800 daily Account clerk: Rs. 2,200 daily Carpenter: Rs. 1,700 daily Light duty driver: Rs. 1,700 daily Labour: Rs. 900 daily Para Engine mechanic: Rs. 1,700 daily Pipe fitter: Rs. 1,700 daily Storekeeper: Rs. 1,700 daily Office boy: Rs. 1,200 daily Excavator operator: Rs. 2,200 daily Shovel operator: Rs. 2,200 daily Computer operator: Rs. 2,200 daily Security Supervisor: Rs.

A ‘European Silk Road’

publication_icon Philipp Heimberger ,  Mario Holzner and Artem Kochnev wiiw Research Report No. 430, August 2018  43 pages including 10 Tables and 17 Figures FREE DOWNLOAD The German version can be found  here . In this study we argue for a ‘Big Push’ in infrastructure investments in greater Europe. We propose the building of a European Silk Road, which connects the industrial centres in the west with the populous, but less developed regions in the east of the continent and thereby is meant to generate more growth and employment in the short term as well as in the medium and long term. After its completion, the European Silk Road would extend overland around 11,000 kilometres on a northern route from Lisbon to Uralsk on the Russian-Kazakh border and on a southern route from Milan to Volgograd and Baku. Central parts are the route from Lyon to Moscow in the north and from Milan to Constanţa in the south. The southern route would link Central Europe with the Black Sea area and