How to get maximum benefit from CPEC | Pakistan Today

How to get maximum benefit from CPEC

  • China’s great vision

China Pakistan Economic Corridor (CPEC) is the first and foremost implementation of China’s great vision about revival of ancient Silk Route, known as One Belt One Road (OBOR) or Belt and Road Initiative (BRI). This corridor will connect China to Indian Ocean through Pakistan’s Gwadar Port situated in its province Baluchistan and consists of two major routes known as western and eastern route. Upon completion of BRI first phase, i.e. CPEC, along with strengthening China’s outreach to Central Asian Republics, Middle East and Africa without fearing its geo political situation at South China Sea, it will also save time and cost related to transportation which is considered a major cost for doing business in the age of digitalising globalisation. Other parts of the world fear Silk Route as a New World Order challenging the sole super power USA and its allies. Therefore, regional conflicts and conspiracies are on its rise focusing Pakistan specially for being an integral part of BRI through Corridor Project (CPEC).

CPEC is a 15-year plan, to be completed in three phases, with initial cost estimated to $46 billion, which is believed to increase with addition of new sub projects mostly related to infrastructure. Each phase of this project is a 5-year plan with a dead line of completion till 2030.The first phase to construct connecting roads via western route is almost completed followed by the development of Gwadar Port. It is worth mentioning here that the projects related to CPEC are mostly based on focus on infrastructure i.e; developing roads, railway tracks, airports, oil gas gas pipeline. In addition to this, special attention is being paid to producing adequate amount of electricity and special economic zones where China will be able to build gactories in collaboration with the local industries. However, in future it is predicted that Pakistan will become a business hub not only for China but also the countries connecting to OBOR. On the other hand rising trade deficit is reflecting Pakistan’s inability towards increasing its shares of exports with the rest of the world that is extremely alarming while entering into Silk Route World Order, starting from Pakistan. Yet a stable, effective and long term economic strategy can bring Pakistan back in to business by using this CPEC project and benefit from it to the fullest.

China Pakistan Economic Corridor (CPEC) could be a game changer project if previous government would have negotiated it on the discussion table well before its final execution. The great plan is still unclear to general public and therefore speculations are at its peak. The newly established government should immediately focus on CPEC projects and publish its impacts over Pakistan Economy whether it may be positive or negative. One of the major negative impacts is trade imbalance. This trade imbalance can be protected by revamping Free Trade Agreement (FTA) with China. So far bilateral talks over FTA extension or FTA-2 among Pakistan and China not succeeded, however recently after new government has taken over, China has offered and showed its willingness to improve trade imbalance between the countries which will check on Pakistan side of trade deficit which is a good sign and a welcoming gesture from brotherly China towards Naya Pakistan.

Through next FTA Pakistan should negotiate with China to import its agriculture products which can result in earning up to $12billion as China imports Food amounting to $ 120 billion out which a 10pc can be our share. Moreover, Iran also imports food amounting to $65 billion where food products can be exported to this US threatened country by bartering it with oil as payment, if allowed. In this regard government needs to facilitate and educate farmers for high yield cultivation techniques including drop irrigation for better utilisation of already available limited water resources. Improved seeds, adulterated pesticides and fertilisers bear much importance and shouldn’t be neglected. Further to improve yields next step is storage and transportation of these perishable nature products and for that particular purpose government should encourage local transporters by providing them soft loans for upgrading (BMR/CAPEX) their vehicles including cold storage and warehouse available on rent alongside the corridor through Gawadar to the nodes connecting China.

Better performing services industry can bring down the figure of trade deficit with China in longer run

Under this CPEC umbrella Chinese Partnership with Local manufacturers will not only boost Gross Domestic Product (GDP) but will also generate employment and business opportunities by empowering Small Medium Enterprises (SME). This partnership is possible by attracting Private Equities Companies and Venture Capital Companies from across the border. China may invest into these companies not only to manage and boost manufacturing process of SMEs in Pakistan but can earn better profits in return. This technique offers investing in capital of small and medium scale companies who have growth potential but need funds/management expertise or synergies to increase business size.

Textile industry plays a vital part in exports of Pakistani which accounts for 57pc in aggregate and employ approximately about 45pc of labour force. This means if said industry may be neglected it will be a further curse to Foreign Exchange Earnings. Pakistan Tehreek Insaf, came into power recently, have a separate chapter for textile in their manifesto and now it’s time to execute their plan. Cotton prices in Pakistan has recently witnessed an increasing trend since China started procuring this major input for its textile industry from Pakistan and India after indulging itself into trade war with USA. This has led to increase in prices of raw material for local textile industry resulting lower profit margins where other factors of production are already very costly. This scenario requires a particular focus on increasing the production of high yield cotton so that prices may fell down for local industry. By applying this check, Pakistan will be able to get two pronged benefit instantly by selling the raw cotton and other textile products to China simultaneously in short run.

Better performing services industry can bring down the figure of trade deficit with China in longer run. Pakistan is producing good information technology experts which are increasing its share of software export and services. The government needs to focus on establishing such universities which may produce more quantity of quality IT experts to cater Chinese demand where India is number one choice already. Tourism exports will witness a rising trend upon increase in CPEC related activities. An influx of Chinese and Russian origins are expected to increase coupled with tourists of other countries related to OBOR. For said reason, the hospitality side should be active enough together with increase in security standards. Banking Industry plays an integral part of inflow and out flow of foreign exchange. In all CPEC projects government should negotiate with China to utilise local banking network for any kind of transaction so that local banks not only will earn profits but will also pay huge taxes to national exchequer.

CPEC has made Pakistan vulnerable to international influence working against Chinese great vision of OBOR. This can be witnessed through latest happenings against Pakistan specially through United States of America that isnot only pressurising Pakistan and cutting its aid but also influencing international financial institutions like IMF, a financial watchdog like FATF and rating agencies against Pakistan.

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