Missing the point

Published December 18, 2016

THE China-Pakistan Economic Corridor (CPEC) has generated competing claims among provinces on where the corridor should lie, as though counting the trucks plying on it is what really matters. This is myopic.

The significance of CPEC is in the fast connectivity it provides to the vast regions of western China and Central Asia to the Arabian Sea. This is an immense economic opportunity for the provinces if they focus instead on improving their respective connectivity to the corridor and align their economic activity to exploit that connectivity.

Over the last several decades, low private and public investments have resulted in our lacklustre economic performance. If we position ourselves well, CPEC’s massive $46 billion investment programme in key infrastructure will redress this and bump up the growth rate for several decades to come.

Although energy projects dominate the CPEC package, its main goal is to revolutionise regional connectivity via Gwadar port and the road/rail network that leads up to the port. The four CPEC pillars are thus: energy projects, Gwadar port, rail/road networks, and the associated industrial and commercial activity.

Provinces must engage sensibly with CPEC.

Furthermore, for CPEC-related public investment to have a lasting impact, it must stimulate private investment in a variety of sectors. The fourth pillar should thus be renamed ‘linkages with domestic economic activity’ — spanning industry, commerce, agriculture, livestock, mining, transport and tourism.

For CPEC to be a real ‘game changer’, the provinces will be pivotal. The centre — responsible for trade, credit and fiscal policy — is important for ensuring that CPEC-related public investment attracts significant flows of private investment. However, the provinces must create the right investment climate to physically host such investments. In doing so, they will become partners with the federal government in managing the economy as envisaged in the 18th Amendment, and not as mere appendages as they are now.

CPEC-related provincial investment strategies would have the following four elements:

One, align ongoing provincial development initiatives with CPEC investments. This includes establishing economic enclaves that are consistent with demographic changes in the provinces. Provinces should invest in excellent roads to connect the enclaves to CPEC road/rail networks. They must facilitate land acquisition, provide key infrastructure (electricity, gas, water, waste treatment) and promote skills development in close proximity to the economic enclaves. The National Finance Commission should design the NFC award to compensate the provinces where the cost of connecting to CPEC highways is high.

Two, reform provincial regulations and upgrade institutions to strengthen economic sectors of comparative advantage. Detailed studies have already been carried out in all four provinces, and in Gilgit-Baltistan, which specify reforms that will maximise CPEC benefits. These need to be implemented. The studies include provincial growth strategies for KP and Punjab; various KP sector studies prepared by the USAID Pakistan Firms Project; and World Bank economic reports for Sindh, Balochistan and GB. Provincial studies on the cost of doing business are also available. The studies identify regularity and institutional hurdles that discourage investment and need to be jettisoned. They also recommend ways of engaging with the

federal government to remove the hurdles under its mandate. Provincial governments must set up task forces to monitor progress on implementing the recommendations.

Three, trengthen local firms to forge joint ventures with foreign firms (including Chinese firms). Forward-looking provincial economies enabled by energy projects and Gwadar port will strengthen the negotiating power of local firms, making them attractive partners in joint ventures. Well-funded, well-staffed, modern and efficient investment authorities must be established to facilitate the joint ventures.

Four, strengthen federal-provincial coordination to develop a nationwide investment programme. Platforms such as the Council of Common Interests and the National Economic Committee need to be strengthened for effective federal-provincial coordination in designing and implementing a countrywide investment strategy associated with CPEC. The Planning Commission, with adequate capacity and in close coordination with the provincial planning and development departments, should be the technical secretariat to CCI and the NEC. CPEC provides an opportunity to revamp these institutions.

To conclude, CPEC can be a ‘game changer’ provided the provinces adopt sensible development strategies and align them with the opportunities provided by CPEC. Squabbling over road location misses the point altogether.

The writer is chairman of CDPR and teaches at Lums.


Published in Dawn December 18th, 2016



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