CPEC the Way to success and Prosperity for Pakistan

9th Annual Sustainable Shipping, Logistics & Supply Chain Summit & Expo held on 19^th September 201

Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), Former Head of FSCD SBP, Former Head of Research Arif Habib Investments and Member IFSB Task Force for development of Islamic Money Market, Former Member of Access to Justice Fund Supreme Court of Pakistan

The Professionals Network with the collaboration of various stakeholders organized the 9th Annual Sustainable Shipping, Logistics & Supply Chain Summit & Expo at Marriott Hotel, Karachi on September 19, 2019.

Minister for Maritime Affairs Syed Ali Haider Zaidi was the Chief Guest on the occasion. Rear Admiral Jamil Akhtar HI (M), T. BT, Chairman, Karachi Port Trust was the Key-Note Speaker in inaugural Session.

President Karachi Chamber of Commerce & Industry Junaid Esmail Makda also participated at the Concluding ceremony as Chief Guest.

It is a good effort on behalf of Mr. Ateequr Rehman and Mr Mehmood Tareen for organizing this conference to highlight role of shipping, logistics and supply chain in the economy of any country like Pakistan.

Mr Ateequr Rehman briefed about the challenges to the economy of Pakistan.

Minister for Maritime Affairs informed that government is coming with legislation on industry of fisheries to make it hygienic and a profitable business.

Another Key-Note Speaker Mr. Sirajuddin Aziz, CEO: Group Financial Institutions, Habib Bank AG Zurich very well gave facts about the subject

Since CPEC is the most talked about subject in Pakistan so it needs to be analyzed from Pakistan perspective and where it is standing right now. The conference also helped to highlight areas of CEPEC.

The Belt and Road Initiative (BRI) of China comprises of investments beyond $2.5 trillion, in ports, railways and pipelines, which will transform the lives of more than 4.4 billion people across 65 countries. The China-Pakistan Economic Corridor (CPEC) is a key platform for the promotion of the Belt and Road Initiative (BRI), being the flagship project of the BRI. With the emergence of CPEC, the locals of Pakistan are supposed to get benefits tremendously, with more than 60,000 people employed in various projects. However, for CPEC to progress smoothly, a one-window platform needs to be created to override the bureaucratic bottlenecks that impair the progress of the project, and also the security plan needs to be enhanced, for the future benefit of CPEC and Pakistan.

As Pakistan navigates changing power equations in the world, and the crisis in Kashmir with relations with USA and India, the China Pakistan Economic Corridor (CPEC) stands out as the one possible silver lining for Pakistan. However, while CPEC is still one of the largest bilateral investment projects underway anywhere in the world, today its momentum in Pakistan is being regularly questioned. The scale of the promise is so large that it invites anxiety as well as awe in its sweep. With early harvest projects worth 18.9 billion dollars already underway in Pakistan in its first leg, the planning by Islamabad should bring much higher inflows than timeline right now. Yet it simultaneously tests the Pakistan government’s capacity to use the opportunity to its advantage.

China’s ability to pull 800 million people out of poverty in four decades through economic reforms has presented a compelling model for Pakistan to follow. However, given a tough series of IMF-induced measures for stabilization, economic growth in Pakistan seems to have slowed down even more. Even though the centre is adamant that there has been no slowdown on CPEC goals, the sense in the provincial capitals is different.

Among the big signature projects, infrastructure and energy top the wish list. While Thar coal has generated power that now feeds into the national energy grid, officials claim that Islamabad’s full-throttle drive on CPEC has been eased up and work on the projects pushed down the priority list. Yet at the same time, the economic impact of CPEC is seen as potentially so game-changing, that it cannot be ignored. With the precipitous slide of an overvalued rupee, and public finances straining at crippling deficits, the prospect of Chinese-led investment growth is the only rainbow on a horizon clouded by high economic stresses for a fast-growing population. In best-case estimates, in fact, it is believed that Chinese investment can potentially stimulate an eight to 10 percent increase in Pakistan’s GDP by 2030. In worst-case futures, that number may well be unreachable, given Islamabad’s current inability to operationalise promised reform.

Moreover, while some of the Pakistani concerns pivot around transparency, repayment terms and capacities, most of them do not question the intent of the embrace. Provinces within Pakistan that voice complaints either do so because of Islamabad’s growing institutional opacity or simply because they want more of the pie.

As with all such big platforms, the challenges to CPEC are legion. Understanding that the real challenges to realizing the maximum potential from CPEC are internal is a crucial step towards successfully benefitting from it. These are embedded in three Cs’ of capacity, coordination and consensus. Pakistan, undeniably, has to scale up its capacity and coordination while building consensus in identifying policy frameworks for the opportunity this platform offers.

Another major challenge to Pakistan has been the government’s capacity deficit to absorb concessionary loans and grants which has been only worsened by their inability to plan how these will be absorbed in the future. Given the multiplicity of project designs under CPEC, both in the government and the private sector, it is clear that the Planning Commission, in which CPEC is nested, is both under-resourced and under-powered.

The Chinese ambassador to Pakistan, Yao Jing, has repeatedly asserted that Pakistan has the potential to attract huge Chinese investments only if they can develop better trade policies, offer tax incentives and foster an investment-friendly climate. Currently, investors are required to get multiple No Objection Certificates (NOCs) before investments can begin. Hence, while SEZs in other countries such as China, UAE, Thailand and Georgia offer a one-stop-service for all regulatory matters, in Pakistan, the Board of Investment (BOI) serves that purpose which, due to the lack of a tailor-made framework for SEZs, leads to bureaucratic red tape. Reforms should be aimed at empowering the provincial governments to process the application of SEZs to save time and money instead of being dependent on Islamabad.

Another significant hurdle in Pakistan’s ability to generate employability under CPEC initiatives has been the capacity of our human resources. While Pakistan boasts the ninth-largest labor force, lack of investments in technical and vocational training have seriously affected labor skills. As a result, while infrastructure projects under CPEC continue to employ over 90 percent domestic labor, the percentages shrink dramatically in technical projects such as energy and digital connectivity. Presently, several Chinese companies are undertaking specific on-the-job training programs for semi-skilled workers, both in China and in collaboration with universities in Pakistan that are partnering in dedicated short training courses.

CPEC has so far created nearly 68,382 direct jobs, according to the Ministry of Planning, Development and Reform.

Now, as CPEC drives into the next phase, the flow of substantive informational exchanges between various provincial and central departments as well as the private and public sector should not remain ambiguous anymore.

Going forward, here is what the government needs to do urgently in order not to miss this opportunity. Future development may be less arduous if a one-window autonomous CPEC Authority is set up, which may already be on its way as recommended by the Senate Special Committee on CPEC. This would manage the internal challenges of planning, financing and coordinating between institutions, provinces and agencies to build momentum on speedy outcomes. Furthermore, tax regimes would have to be rationalized, infrastructure and energy provisions need to be ensured, transparency of contracts have to be addressed to avoid controversy and sovereign guarantees to provinces where needed made available. Flexible financing for private joint ventures and structural reforms also need to be planned and undertaken if any of the promised gains are to materialize.