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Friday March 29, 2024

Time to transform CPEC opportunity into a landmark

November 29, 2017
No doubt the continuity of democratic regime, sagacious political leadership and mutual consensus among the institutional stakeholders of the state concerned have enabled Pakistan to avail an opportunity for future socio- economic development in form of China-Pakistan Economic Corridor (CPEC). At the same time, there is dire need to transform this opportunity into a landmark by achieving a comprehensive, all-inclusive and sustainable socio-economic development to write a new success story and change the history ever.
The US $46 billion investment of china in shape of foreign direct investment (FDI), soft and commercial loans; and grant will bring a significant change in the infrastructure, energy and transport sector within all the provinces but a lot of needs to be done to make this investment sustainable and profitable in the coming future by building the capacity of the industrial sector through technological up-gradation, innovation, research and development; and reducing cost of doing business. After the British, Germany and United Sates’ industrial revolution, entirely based on innovation, some of the backward countries majorly including Japan, South Korea, Taiwan, Brazil, India, Mexico and Turkey have managed to realize the dream of industrial development by producing valued added goods on the basis of “borrowed technology” and “learning by doing” with the help of strong institutional intervention especially the “State”.
In the present age of cutthroat competition only the development of industrial sector can invoke the sustainable and inclusive socio-economic development by enhancing the total factor productivity and stimulating growth of services sector simultaneously. Beside the provision of basic infrastructural needs in terms of roads, energy and transport the federal and provincial governments concerned should concentrate to promote comparatively advantageous industrial activity in close coordination of the private sector concerned rather only focusing on public spending for the provision of public goods and facing serious problem of budget deficit due to prevalence of sluggish economic activity and low revenue generation.
To establish a comparatively advantageous industrial sector the federal and provincial governments concerned may steer and opt the role of “Big Brother” following the example of South Korea which started with $87 GDP per capita in 1961 and attained around $23000 in the year 2015 by focusing outward-looking industrialization. In absence of an augmented state policy framework, the other instruments of industrial development including investment, technology, skilled labor force and experienced management may not guaranty industrial development. Therefore, the role of the state in form of strengthened industrial policy may be witnessed among all most recently economically developed countries including China.
Keeping in view the interest of Chinese Investors regarding relocation of their low-end industry to Pakistan, the potential sectors including pharmaceutical, Mines and Mineral; auto and steel industry may be focused for development through Pak-China Industrial Cooperation under CPEC. Whereas, the foreign investors may be attracted to the existing sub-sector industrial clusters in which Pakistan has definite comparative advantage over other countries due to cheap skilled labor and abundant raw material. These industrial clusters majorly include surgical instruments, leather equipment, and sports. Further the Chinese support may be sought for technology exchange to transform the other low performing sectors including textile, furniture and food processing into better performing sectors.
To develop the interest of foreign investors more specifically Chinese investors in the potential sectors, a comprehensive package of investment and tax incentives; and a holistic commerce strategy are the key feature of any industrial policy. Therefore, before making any commitment with Chinese Government, the offers of others developing countries majorly including Nigeria, Burundi, Kenya, Rwanda, Uganda and Tanzania already engaged with China under industrial cooperation and FDI may be examined deeply by the government departments concerned. After the 18th amendment, the Industries, Commerce and Investment departments of the provinces concerned have a major role to orchestrate an integrated policy framework with the objective to stimulate domestic and foreign investment through rational incentives and establish outward growth orientated industrial clusters by considering regional dynamics. In view of future prospect under CPEC, there is an urgent need to revamp the institutional structure of Industry, Investment and Commerce related government departments and equip them with high-level professionals and technocrats of the field concerned. Only the technocrats and professionals; equipped with alternative and adaptive approach; can set priorities and accomplish targets through inside solutions, multiple cycles of monitoring; and tool of trial and error.
(The writer is serving as Assistant Chief in Planning & Development Department, Government of the Punjab, and has recently done masters in International Trade and Economic Cooperation from South Korea)