CPEC — 10 years and ameliorating
2023 sets the 10th year of the China-Pak Economic Corridor(CPEC) project at a time when countries are facing difficulties to recover from the vulnerabilities of climate change, high youth unemployment rate and depleting resources for effectively countering the security challenges and with disinformation flow like the one being projected against the CPEC. The beginning of the year has also seen a surge in deadly terrorist incidents and growing political instability posing daunting challenges to overall development. However, despite challenges and headwinds, trade between China and Pakistan has witnessed an increase with the new areas being explored especially in agri-based products where sesame seed export surged by 50% on a year-on-year basis in 2022, seafood export grew by 40% in 2022 and Pakistan’s rice exports to China crossed the historical figure of one million tons. Overall, Pakistan’s export to China rose by over 35% from 2013 to 2021.
Under China-Pakistan Economic Corridor numerous road networks have been established creating rural-urban synergy and the SEZs on these road links are finding new means to attract investments, especially in the post-COVID-19 scenario. The way globalization led by China has helped pull more than a billion people out of poverty, in Pakistan the CPEC initiative has created over 100,000 opportunities for employment, 6000 MW of electricity and over 510 KMs roads creating rural-urban synergy and regional connectivity. It has helped Pakistan develop its Blue Economy through Gwadar port and its connectivity with the hinterland through the western route and the rest of the world through the upcoming Gwadar airport which is being constructed with a Chinese grant of $230 million and will be completed in March this year. The connectivity through optical fiber and through transmission lines is also helping Pakistan achieve the development targets for having an endogenous mechanism for sustainable economic growth.
The CPEC activities were initially focused on improvement in infrastructure and energy projects to help create favourable conditions for development, next phase critically is being crafted more towards agriculture sector development, socio-economic projects as well as forging an academic partnership for improved R&D collaboration. As a country in transition, confronted by a number of challenges, Pakistan is looking for further strengthening the economic ties between the two countries and looks for Chinese FDI and industrial support for a path of stability. Overall, BRI and CPEC are important initiatives that Pakistan wants to leverage to address all challenges from human development challenges, to sustainability challenges. Industrial development is imperative for future employment opportunities and attracting Chinese investment in CPEC SEZs are a must.
Going forward, the expectations from CPEC are high, however, rising terrorist incidents like the one in Peshawar continue to threaten the development agenda, especially at a time when the economic and political situation is unpredictable. However, despite the surge in recent terrorist activities, China’s focus and plans to encourage regional prosperity through investment and technology remain firm and during the recently concluded 14th NPC sessions, China has set new development and investment targets with an improved mechanism through BRI, GDI and the new initiative of Global Security Initiative. The GDP growth target of 5%, along with other economic development goals set by the Chinese Government promises enough economic activity and stability through the continuity of policies of which BRI is a major component. The fast-changing global environment led by the Chinese of which the recent agreement between Iran and Saudi is a sign of China’s growing importance.
To benefit from all this, Pakistan needs to prepare well as conventional wisdom may not come into play and novel ideas led by technology may help address these challenges to attract investment flow. In the current unstable economic and security situation, Chinese investors will still continue to explore business opportunities in Pakistan, as long as the expected return on investment is sufficient and the risks are mitigated including the possibilities of unexpected and arbitrary changes in policies.
This requires a more prudent approach of high-level engagements with Chinese political and business leadership with projects and investment inducements that are imperative to mitigate the political, economic and social risks to minimize capital flight and build a positive narrative for the new investors. In all situations including financial and security challenges, the basic principles of attracting investment remain the same which is that any investment made must ultimately provide a fundamental economic return for which Pakistan has to prepare the enabling environment well for attracting new investment based on a partnership.
Importantly, Pakistan also has to accelerate targeted reforms designed on economic rationale rather than political agendas to improve the business climate through the ongoing regulatory reform initiative and respond to increased competition for which the mandate and role of the Board of Investment is vital to raise awareness of existing investment opportunities, remove bottlenecks, overcome negative perceptions and reduce information gaps while also focusing on existing investors and their concerns, especially in the energy sector.
We also need to explore the opportunities in the CPEC long-term plan for supporting Pakistan’s economic stability for which understanding the preconditions for investment is imperative including a strong rule of law to address major systemic disparities more effectively, as the absence of any of these critical aspects can hinder investment and are often the failure of overall developmental efforts for which strengthening institutions and enhancing their capacity to provide ease of doing business based on principles of good governance and absolute harmony are perhaps essential and inexorable.
—The writer is a Projects Management specialist and is a faculty member and research fellow at various academic institutions. He has served as a diplomat in China and has been a former CEO of KPBoIT & Project Director of the CPEC project at MoPDR.