Government must take immediate steps to improve investment climate
ISLAMABAD: From the very inception, the China-Pakistan Economic Corridor (CPEC) has been subject to all types of controversies.
Critics started to question its performance even before the project began. It was at the planning stage, but hue and cry was raised about its outcome. Unfortunately, without any understanding of the concept, value, importance and future dimension, the critics feel comfortable to talk in vague terms.
China and Pakistan always describe CPEC as the flagship project of the Belt and Road Initiative (BRI) to achieve the dream of shared prosperity. Both countries have consistently urged other nations, including India, to be part of the project and enjoy its benefits.
Even saner voices in India are asking their government to be part of CPEC, but New Delhi is still shying away apparently due to US influence. On the other hand, there are people who are criticising CPEC and its projects. Their major arguments pertain to environment, terms of loans and investments, influence of China and benefits for the people.
More recently, the talk of revisiting CPEC has been doing rounds in the country. Fortunately, both Pakistan and China have tackled it wisely and have not let it harm relations between the two countries.
People are questioning what Pakistan has got from the first phase of CPEC? The answer is very simple – Pakistan has started to upgrade its infrastructure including roads and railways. Many projects have been completed and many more are close to completion.
Secondly, CPEC has also helped overcome energy scarcity as Pakistan has added about 10,000 megawatts to its generation capacity. Despite this addition, the consumers are still enduring load-shedding, which has raised many eyebrows on the authenticity of 10,000MW addition. The real problem now is the transmission system and line losses.
Pakistan’s transmission system is very old and outdated. The previous government did not invest much in its improvement. Line loss is the other area which is haunting the country for a long time. Estimates suggest that every year Pakistan loses Rs212 billion due to line losses and electricity theft. Bad governance is exacerbating the problem.
Moreover, the government has highlighted the power generation capacity, but has focused less on the increase in demand over the last five years.
Data exhibits that total electricity demand increased from 20,576MW in June 2013 to 25,389MW in June 2018. However, load-shedding still exists, which demands investment in the sector according to the growing demand.
Now, the final question is about benefit-sharing and contribution to the economy. CPEC’s first phase was designed primarily to take care of urgent infrastructure needs, especially of transport and energy.
CPEC has successfully contributed on these fronts. Development of Gwadar Port has also begun in the first phase and its pace is satisfactory. The port has started providing services on a smaller scale.
Although Gwadar city could not get the required attention, still the pace of development is good. Apart from developing the port, the government is also working on a special economic zone, water availability, road construction, etc.
Giving priority to Gwadar, the government has vowed to divert resources for speedy development of the city. First-phase development has created almost 70,000-80,000 direct jobs for highly skilled, semi-skilled and unskilled workers.
In the second phase of CPEC, nine Special Economic Zones (SEZ) are being established across the country. These zones are at the heart of CPEC development as they will be real game changer for Pakistan.
However, to reap the benefits of SEZs, the government will have to play its cards smartly. First step will be to improve investment climate in the country. Right now to start a new business in Pakistan is a big hassle. An investor has to run from federal to provincial levels for the registration of his venture. Then the investor has to deal with local authorities for securing utility services.
The process becomes more difficult for foreign investors and it discourages foreign direct investment (FDI) inflow into the country. The FDI has already decreased manifold. Apart from this, bad governance and corruption are major stumbling blocks in the way of FDI. The government must have to take immediate steps to improve the situation, especially the investment environment. The Board of Investment should play a leading role and devise rules of the game.
Secondly, the government should invest in capacity building of the business community to pave the way for joint ventures. Joint ventures will be the key to the success of SEZs and benefit-sharing.
At present, most of the business community is criticising the FDI and other investments from China. They believe these capital flows will destroy their business. It is not true rather it will create opportunities for businesses, enhance their competitiveness through new technologies and better production and marketing skills.
Moreover, it is predicted that millions of jobs will be created in China due to the change in its production status, living standards and higher salaries. These jobs will be exported to other countries as well through new ventures and industries. Pakistan needs to be smart enough to attract as many jobs as possible.
Joint ventures through SEZs can help Pakistan attract a good number of jobs. It will be in line with the government’s job creation policy.
However, in order to cash in on the opportunity, the government will have to invest in skill development, with particular focus on the youth.
Skill development opportunities should be offered to every worker without any discrimination. At present, most of the skill-related interventions mainly focus on the educated youth whereas the uneducated youth are left behind.
Pakistan has a huge bulge of uneducated youth and it needs to be tackled by providing them decent opportunities of skill development and livelihood.
The government should also devise skill development programmes for the students of seminaries as around 2.4 million young people are studying in madrassas. These students can be a good source of skilled labour for the SEZs.
Another area which requires attention is environment. In this regard, lessons could be learnt from China’s Green Civilization coined by President Xi Jinping. This concept can be aptly applied to CPEC.