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Relocation of Chinese industries

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A latest report indicates Pakistan has not been able to translate its dream of becoming a destination of choice by Chinese entrepreneurs that are relocating their industries elsewhere in the world.

The report published by Pakistan Business Council (PBC) laments Pakistan has so far failed to woo Chinese industries as many have gone to Cambodia, Laos and even Ethiopia, though their cost of labour is higher than the cost in Pakistan and their markets are far smaller in terms of population.

Chinese demonstrated enthusiasm for implementation of projects under the umbrella of China-Pakistan Economic Corridor (CPEC) including establishment of special industrial zones and those relating to Gwadar, which is seen as future hub of regional trade but we could not maintain the momentum due to lack of vision on the part of decision-makers during the last four years.

Security of Chinese nationals and projects has also been a serious issue in the backdrop of foreign-sponsored attacks against such targets which also became a factor in slow implementation of some projects.

Pakistan has a clear edge to attract Chinese investors in view of successful launching of the CPEC which is the flagship project of Belt and Road Initiative (BRI) but it appears our policy and decision-makers did not do the required homework to exploit this potential.

The study says Chinese manufacturers appear to have moved part of their capacity offshore to avoid the “Made in China” label, most notably to the countries in Southeast Asia such as Vietnam, Thailand, Indonesia and Malaysia.

The trend of relocating offshore among Chinese manufacturers presents a significant opportunity to Pakistan, especially in textile and apparel manufacturing.

However, a range of other industries – from auto parts and light engineering to mobile phone assembly/ manufacturing – can also be the potential targets for relocation if the right environment is created.

The report has highlighted a number of broad issues hindering investment decisions in Pakistan including the political risk impeding long-term investment, an unfriendly tax and regulatory regime for businesses, low labour productivity, weak intellectual property rights, uncompetitive energy prices, high logistic costs and limited comparative advantage in accessing external markets through bilateral or regional trade agreements.

The present government is rightly known as business and investment friendly because of its track record and we hope brainstorming sessions would be held with all stakeholders to crystallize issues and how to address them squarely at the earliest.

Otherwise, we would be left out in the race for attracting the right kind of Chinese investment.

It is time we move beyond rhetoric and take practical steps for industrialization, job/wealth creation and removal of bottlenecks in the way of investment.

 

 

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