Saddam Hussein
China Pakistan Economic Corridor (CPEC), surely is an unprecedented economic stimulus package, but the best thing would be to view it as a window of opportunity, not as some sort of nosh from heaven that will come down and solve all our glitches. The worst mistake is to view CPEC as some sort of self-paying enterprise, as if the investments will somehow generate the required level of economic activity to self-fulfill all the repayment obligations that they bring. This would be a grave mistake because it cannot be taken for granted.
Without robust structural reforms CPEC cannot be translated into a success story, as history tells us super-mega projects like railways and largest irrigation system by the British in Sub-Continent, failed eventually, only due to bad governance.
According to the World Bank’s report 2019, Pakistan’s GDP would increase by up to 6.43% till 2030, if one is to take only the investment on transport infrastructure under CPEC into account. However, if one includes the impact of some policy measures like reducing border delays and reduction in tariffs that the World Bank proposes, Pakistan can add as high as 14.06% to its GDP. The impact of a more ambitious set of reforms could magnify the gains from the new infrastructure network, mentions the report. Now, let us analyze the various dimensions CPEC would significantly have on.
On a positive note, this year in 2020, the World Bank issued its latest report on ease of doing business, in which Pakistan stands at 108th rank with a score of 61.0. It is the first time, since the launch of the report back in 2002, that Pakistan has jumped 28 points in one year with 06 reforms.
According to the report, Pakistan made it easier to start a business by giving online access to expanding procedures, so that anyone who is interested in doing business can access required information easily. It has also made acquiring a construction permit easier by streamlining the approval process.
Moreover, construction business/activity is now more secure and safer by making sure that building inspections happens regularly. Getting electricity connection has been made easier by enforcing service delivery time frames and online portals for the new connection applications.
The country has also increased the transparency of electricity tariff changes. When it comes to registration of property, Pakistan has made registration faster and easier to register a deed at the office of Sub Registrar. The country also increased transparency in land administration system. Pakistan has started online payment system for tax collection such as Value Added Tax (VAT) and corporate income tax. Though, all the above-mentioned measures regarding ease of doing business are in black and white, yet their effective implementation on the ground still seems a challenge.
As trading is one of the major components of the economy, Pakistan has also made it easier to trade across the borders as well, by increasing the integration of various agencies in the Web-Based One Customs (WEBOC) electronic system and coordinating joint physical inspections at the port.
Another key area is the infrastructure development under CPEC. Several roads and highways have been constructed and many more are under construction. This shall enhance connectivity across the country, whereas at the same time improving market access in the shape of farm-to-market and industry-to-market roads.
Extensive projects across the country, under CPEC, would also help alleviate poverty within the country. According to Pakistan Vision 2025, the aim is to cut down its poverty level by half. Currently, the poverty rate is almost 39%, according to multidimensional poverty index (MPI); which Pakistan intends to bring down to 19% by 2025, with CPEC playing the key role in poverty alleviation.
However, Pakistani human resource, if not channeled properly, might become a liability rather than being a dividend. Education and skill-based training has been neglected so far. Pakistan needs to set up more schools, colleges and training centers, especially technical and skilled based training institutes, especially in Balochistan, if it intends to reap the benefits of CPEC in true sense.
Apart from that, health sector has also been ignored and no or minuscule future planning in done in the wake of growing urbanization as CPEC moves towards full operationalization. However, the PTI’s government, at many occasions stated that the new government is re-negotiating several plans in order to shift the focus more on socio-economic uplift of the Pakistani society, especially in the domains of poverty alleviation, education and health. Yet, nothing tangible so far on part of the government.
In parallel, one of the primary benefits from CPEC is in terms of employment generation. Officials statistics claim that 30,000 jobs have already been created for Pakistani technicians and laborers under the first phase of CPEC. International Labour Organization (ILO) estimated that CPEC will generate around 400,000 jobs, while Applied Economics Research Center (AERC) estimate states the creation of 700,000 direct jobs between 2015-2030, after completion of all three phases of CPEC. This augurs well for Pakistan.
Lastly, as Dr. Ishrat Husain, a renowned Pakistani banker and economist, describes is that what CPEC offers us would significantly depend on Pakistan’s collective response and capacity. For the venture to become a success story, all the entities – federal, provincial and local governments along with the private sector, the media, civil society and academia ought to work together in unison. If this happens the benefits of CPEC would exceed the costs. In contrast, if we continue with the business as usual, where bickering, blame game, point scoring, narrow parochial and personal considerations, red tape, hesitation and delays in solving problems and removing bottlenecks persist, then we would certainly find ourselves entrapped in heavy financial burden. The choice is entirely ours and not that of our Chinese partners.
The author Saddam Hussein is a Development Economist, while he serves as a Research Fellow at Center for Research and Security Studies (CRSS), and Program Officer for CRSS’ sister organization – Afghan Studies Center, Islamabad. He tweets @saddampide.
