Game changer in year 2019

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Reema Shaukat

CHINA-Pakistan Economic Corridor is excelling with pace and as the year 2019 is soon going to end, this CPEC project outshines while shunning all kind of negative propaganda created against it. CPEC is a project of regional connectivity and is an extension of China’s vision of grander linkages in the form of One Belt, One Road-OBOR initiative. An enormous initiative of connecting Asia with other regions, China-Pakistan Economic Corridor is a multibillion dollar venture as part of China’s “One Belt, One Road” concept. By way of Gwadar as its pivot in Pakistan, CPEC holds remarkable assurance of economic surpluses not only for Pakistan and China but other regions also. These include Central Asian Republics, Far East, Middle East, Africa and Europe. Located on Pakistan’s Makran coast and near to international gateway of Strait of Hormuz, envisioning a well-designed dock at Gwadar with all coupled services comprising industrial and processing sectors could easily become a foundation for inter and intra-regional economic gain.

It will surely provide foreign depositors encouraging preambles and hoist the region’s unfledged zones. The CPEC is a collection of projects currently under construction at a cost of $46 billion which is intended to rapidly expand and upgrade Pakistani infrastructure, as well as deepen and broaden economic links between Pakistan and the People’s Republic of China. The Corridor is considered to be an extension of China’s ambitious proposed 21st century Silk Road initiative, and is considered central to Pak-China relations. The China-Pakistan Economic Corridor as a pilot project of the “Belt and Road” Initiative, was officially launched in 2013. President Xi Jinping, during his visit to Pakistan in April 2015, noted that the CPEC construction should play a leading role in the practical cooperation between the two countries, and determined the “1+4” layout of cooperation focusing on the CPEC construction supported by the Gwadar port, energy, transportation, infrastructure and industrial cooperation. Practices in the past five years have proved that the CPEC construction is not targeting specific regions or groups, but is aiming at the whole country of Pakistan and benefits all the people of Pakistan.

As the project involves huge amount of investment by China, naturally the rivalries and diplomatic matters question a lot. Considering the Sino-US trade war element, the West had and still has apprehensions how China is encompassing world economy. Likewise the location of Pakistan and Gwadar is a way that it provides cheapest route for world trade thus making it a future economic hub which is not acceptable to rivals. One way or another, this 46 billion dollar mega project has remained in limelight since its inception. Apart from pressure from foreign countries, not to forget that some elements inside Pakistan tried to make it controversial by quoting that China is investing in such a big amount that is equal to selling Pakistan to foreign hands but with time these things are proven wrong. Earlier there were speculations or controversies on this project fund distribution by politicians and local populace or this venture grabbed international attention and remained target of their conspiracies. But this CPEC moved on with success and still continues to flourish without any odds. In the past when general election was about to happen in 2108 or previously when Pakistan went through political hiccups and with ouster of previous governments which worked much on this corridor, a certain group of masses questioned on Pakistan-China joint endeavour.

Many assumptions were that this project will lose its pace with the change of government in near future or will lose its momentum for development. For those who are pessimistic about this project must know that this project is not bound to political ups and downs rather it’s a testimony of over 70 years long Pak-China all weather friendship. And today time has proven that after completing first phase of CPEC project, in year 2019 it has started work on Phase-II which shows seriousness on both sides about the early completion of this project. China as a friendly and time-tested neighbour has always mentioned that it hopes that all parties and sections in Pakistan can prioritize state and national interests, properly deal with their domestic affairs, maintain unity, stability and keep focusing on the economic and social development. China believes that the China-Pakistan strategic cooperative partnership will not be affected by the change of the situation inside Pakistan and China stands ready to work with Pakistan to continue jointly building the One Belt and One Road.

CPEC is an endeavour of economic opportunities and development and will largely benefit Pakistan. CPEC’s importance to China’s geopolitical and economic goals is reflected by the inclusion of the project as part of China’s 13th five year development plan. Statistics suggest that if the projects are completed in due course with desired investment then the value of those projects would be equal to all foreign direct investment in Pakistan since 1970, and would be equivalent to 17% of Pakistan’s 2015 gross domestic product. Pakistan estimates the corridor project will create some 700,000 direct jobs till year 2030 and add up to 2.5 percentage points to the country’s growth rate. Pakistan is one of the top ten emerging economies of South Asia being the 42nd largest in terms of nominal Gross Domestic Product (GDP) and 6th most populous country in the world (Pakistan Economic Survey, 2016-17). According to World Bank Report (2017) Pakistan records highest growth in nine years mainly because of growing consumer market and investor confidence in early half of this year. Reports claim that Pakistan has sixth world population giving it a nominal GDP per capita of $ 1,357 in 2019 which ranks 154 in world and giving it a PPP, GDP per capita of 5,839 in 2019 which ranks 132nd in world for year 2019.

Gross domestic product (GDP) denotes the aggregate value of all services and goods produced within a country in any given year. GDP is an important indicator of a country’s economic power. In 2018, Pakistan’s gross domestic product amounted to around 314.59 billion U.S. dollars. Pakistan has semi-industrialized economy and its major exports include textiles, leather goods, sports goods, chemicals, carpets and medical instruments. The economy primarily consists of three majors sectors which are agriculture, industry and services. Improved security situation of Pakistan and playing pivotal role in war against terrorism, Pakistan’s efforts are acknowledged world-wide. Pakistan has strategic location in South Asia with easy access to Central Asian States and China making it an important hub in world trade and investment.

Huge investment through CPEC in various projects has boosted confidence of European and Western countries that wish to invest in Pakistan. Also evading the FATF black list has given foreign investors to trust Pakistan’s serious efforts in curbing corruption and money laundering. In the past, the environment for investment has been less favourable due to internal and external circumstances. Over the years the trend of FDI remained fluctuating and irregular. Two peaks have been observed in the past where FDI was maximum; one was during 1995-96 and second was in 2007-08 which relatively experienced huge influx of foreign investment inflows especially in the industries of telecommunication, banking and E-commerce. However, the situation has changed from 90s onward where better government policies and initiatives have given rise to investment friendly climate. FDI inflows are increasing showing the improvement in multinationals’ confidence in country economy.

Currently, Pakistan has made many successes by making it easier to start a business, setting up of electronic processing for exports and imports, and strengthening port infrastructure because of which Pakistan has ranked at 147th in World Bank’s Ease of Doing Business Index among 190 countries (Economic Survey of Pakistan, 2017). Generating favourable circumstances of investment in Pakistan via CPEC, Pakistan’s macroeconomic conditions have improved and its economy has maintained a momentum of rapid growth. Over the past five years, Pakistan’s GDP grew by an average of 4.77%, especially in the 2017-2018 fiscal year when Pakistan’s GDP grew by 5.8%, being the highest growth rate in the recent 13 years. Pakistan’s annual foreign direct investment grew from US$650 million to US$2.2 billion, and the per capita annual income rose from US$1,334 to US$1,641. CPEC has solved the problem of limited investment capacity caused by insufficient savings and shortage of foreign exchange in Pakistan and provided a high-quality source of impetus for Pakistan’s economic development. As of January 2019, CPEC included 9 completed early harvest projects and 13 projects under construction, with a total investment of US$19 billion. It drove Pakistan’s economic growth by one to two percentage points every year and created 70,000 jobs in Pakistan. The Chinese government provided US$5.874 billion in concessional loans to Pakistan, with a consolidated interest rate of only 2%, far lower than the average interest rate. The Chinese government also provided US$143 million in interest-free loans for the Gwadar East-Bay Expressway project and free assistance for some livelihood projects in Pakistan.

CPEC is not about industrialization but one of its prime focus is on agriculture too. As Pakistan’s economy is agrarian based hence to ease the lives of farmers, provision of new technologies and equipment and robust training of farmers is also CPEC agenda. Construction of deep sea port at Gwadar is in process but the port is operational with day to day small scale activities. Likewise, construction of nine Special Economic Zones was proposed in this flagship project. Special economic zones (SEZs) are considered as engines of economy for their role to uplift the economy through trade boost-up, widening export base, geographic expansion and other social privileges. Around the world there exist several examples of successful SEZs also located in Asian region. China-Pakistan Economic Corridor proposed nine SEZs in all provinces of Pakistan. Efforts to boost people to people contact, student exchange programmes, educational and social liaison on both sides of Pak China are also vision of CPEC. Apart from focusing on G2G and B2B, efforts for strengthening people to people contact, media and cultural exchanges (including movies, drama, theatre etc.) are part of CPEC too. Both sides intend to promote Chinese and Pakistani culture and heritage as a way of long term partnership and for this Consortium of Top Business Schools from Chinese and Pakistan sides are established. HEC is also leading one of the projects.

Apart from industrial projects, there are certain sectors which are waiting for immediate response by government and officials. Tourism is one such sector which needs immediate attention as during construction of CPEC routes there are many unexplored beautiful areas in Pakistan which if developed with all necessities can generate revenue apart from providing jobs to locals. Likewise with the construction of another port in the country, sea food sector can be explored and exported to countries which rely on sea-food as basic commodity. With this the tin, processed and halal packed food products industry can gain momentum too. Instead of relying on big industries, small and medium enterprises hold equal opportunities in Pakistan and must not be neglected. CPEC is a win-win model and past few years have proved that if something is done with sincerity and good intentions, result definitely come as desired. Hopes must be kept high that in coming few years, this CPEC will surely prove a fate changer to Pakistan.