Pak-China industrial cooperation framework and beyond
PAKISTAN’S economy needs a push in the form of FDI to bounce back.Clouded in geo-strategic storms and political instability, however, attracting FDI towards Pakistan is a tough row to hoe.
Nevertheless, China’s massive economic explosion outwards is a tide of time, if surfed intelligently, it can galvanize the industrial transformation in Pakistan.
The challenge is to collaborate sustainably and comprehensively — by liberating the conception and execution of the whole process from desperate fallouts — within and without.
Furthermore, the operational mechanics of the partnership need expansion with a precise analysis of variables identifying stakeholders from both countries with their needs, potentials, and terms of engagement under a liberal investment regime.
As CPEC entered its second phase which primarily revolves around Special Economic Zones (SEZs) development, industrialization, FDI generation and stronger B2B ties between both sides, with special emphasis on industrial relocation from China, the need for a comprehensive Framework Agreement became imperative for an objective-oriented roadmap.
Similar agreements have also been signed for Early Harvest CPEC Projects on Energy & Infrastructure.
In 2016, the Board of Investment (BOI) was designated as the lead agency of the Joint Working Group (JWG) on Industrial Cooperation under CPEC from the Pakistani side and the National Development & Reform Commission (NDRC) from the Chinese side.
NRDC represents the main state organ of China responsible to formulate strategies; playing a leading role in implementing and coordinating China’s “go global” strategy through BRI.
In 2018, BOI initiated the process of drafting a Framework Agreement on Industrial Cooperation, which was hoped to be signed in the 8th JCC meeting held in the same year at Beijing.
However, due to paucity of time, negotiations could not be concluded between the parties and only an MoU was signed which formed the basis for future engagements under the ambit of Industrial Cooperation.
In 2019, BOI established the Project Management Unit CPEC Industrial Cooperation Development Project (PMU-CPEC-ICDP) with PSDP funding.
Due to lack of sufficient regular BOI staff, it became imperative that a dedicated PMU may be established to spearhead BOI’s Industrial Cooperation initiatives.
Resuming the BOI’s efforts from 2018, the PMU-CPEC-ICDP, under the supervision of Project Director, Asim Ayub, who is a dedicated Civil Servant from Pakistan Administrative Service with the sapient guidance of the BOI leadership, took up the matter with NDRC to kickstart the negotiations on the Framework Agreement.
In this regard, a draft was prepared after in-house deliberations and circulated amongst the Federal and Provincial stakeholders for their valuable input.
Similarly, a series of consultative forums were also organized by PMU whereby all concerned quarters were invited from the public and private sectors.
The idea was to devise an all-inclusive framework that should be a focused document yet encompassing all the envisaged ideas to create industrial competitiveness in Pakistan.
Approval of the Federal Cabinet to sign the framework was sought a day prior to PM’s departure to China on 3 February 2022 and the Framework finally saw the light of the day, which was signed on 4 February 2022.
The agreement envisages the prioritized development and operations of the nine CPEC Special Economic Zones, Establishing the Industrial Cooperation Fund for win-win projects and relocation of Chinese and third-country industries.
It envisions the design of a business-to-business matchmaking mechanism for Pakistani and Chinese enterprises to relocate manufacturing establishments and to achieve an effective operational capacity for these Special Economic Zones.
The agreed framework also anticipates an extended and multi-layered collaboration in Skill Development, FDI attraction for Pakistan, Industrial Diagnosis and Technical Assistance, Technology Transfer, joint global marketing of the multi-sectoral corporate prospects linked with SEZs, industry concentration in priority sectors: Iron & Steel, Mines & Minerals, Textile, Petrochemicals, and last but not the least, the promotion of cultural and institutional liaison between the two countries.
The document encapsulates a vast opportunity horizon both horizontally and vertically.The impactful execution of this framework demands four steps to be taken without any delay.
Firstly, Pakistan constitutes a devolved federal structure.The execution arms of different policies in industry regulations, mines and minerals, revenue and land acquisition, environment and general administration rest with provincial departments.
The efficient coordination mechanism between BOI and provincial departments needs a Legislative Framework to decrease the operational frictions at functional levels.
Secondly, systematic outreach to small and large enterprises is needful to develop a sound opportunity base before fabricating the prescribed multi-sectoral investment models.
Constituting a Strategic Incubation Cell with a representation of federal and provincial agencies and business experts; tasked to assist, guide, regulate and monitor local enterprises in developing business plans, feasibility studies, technical reports, surveys, market analysis, recovery, risk, and profit assessment tools, can bridge the glaring capacity gap between Chinese and Pakistani enterprises.
The proposed cell would aim to centralize the opportunity pool with enhanced credibility and to bring the capacity of host enterprises at par with their foreign counterparts.
Thirdly, it is imperative to devise an objective strategy to implement the second phase of CPEC with a sustainable bandwidth.
The third step required is to design out-of-box marketing initiatives to pitch cooperation in the readily available areas aiming to have a larger trickle-down impact on human development by reducing unemployment and poverty.
Tapping indigenous potential in agriculture, mining and tourism, skill and technology transfer in priority areas, identification and provision of cheap raw material to attract speedy manufacturing relocations, and targeted academic and cultural linkages are important steps to ensure an inclusive and progressive implementation of this framework.
Fourthly, a strategy is vital to ensure that internal political instability and law-in-order should least interject the trajectory of cooperation.
China’s business model is highly pragmatic with no tolerance for uncertain profits and recoveries.
Afghanistan’s situation, rampant political polarization and rising extremism are frictions to be overcome by considering all available options to protect logistics and foreign citizens involved in these projects.
—The writer is an academic, columnist and researcher.
