You are on page 1of 7

Study Objective

What Policy matters Pakistan should take to ensure maximum benefit from the CPEC projects??

Introduction
The ChinaPakistan Economic Corridor is a corridor that is an
assortment of energy, infrastructure & logistics, mass transit &
Gwadar Development projects currently under construction
worth around $50 billion. Out of $50 billion around 70% i.e.:
$35 billion is allocated for energy projects which are planned
to be completed by 2020 -2023, while $15 billion for
infrastructure, logistics, Gwadar and related projects
CPEC aims to facilitate trade along an overland route that
connects Kashgar and Gwadar, through the construction of a
network of highways, railways, and pipelines. This corridor will
rapidly expand and upgrade the infrastructure in Pakistan, and
will also deepen and broaden the economic links between
Pakistan and the People's Republic of China. CPEC is the part
of Chinas ambitious dream of One Belt One Road, its
importance is evident from the inclusion as part of China's 13th five-year development plan.
CPEC will not only benefit Pakistan and China but will also positively impact India, Iran,
Afghanistan and Central Asia. With increasing trade activity rail, road and air transportation
system, people to people contact and enhanced co-operation CPEC will result in a well-connected
and integrated region of shared destiny, harmony and development

CPEC vision & Mission


To have an impact on people of Pakistan and China through an economic corridor promoting
bilateral connectivity, construction, investment ,trade ,logistics and bring people together to
achieve regional connectivity through a series of projects which includes but not limited to

CPEC Projects
Energy
Infrastructure
Mass Transit

1
Gwadar Development
Highway Networks of CPEC
Railway Network of CPEC
Fiber Optics projects of CPEC

Proposed Policies
CPEC CORE BJECTIVES

CPEC is the series of megaprojects to lift up the economy of Pakistan. For the purpose of this I
will discuss the strategies and policies our government and industrial needs to embrace to get
maximum advantage form this project. The scope of this report is limited to suggesting the
policies that could maximize the economic benefit to Pakistan. At a broader level the benefits
that Pakistan economy can enjoy are as follows:

- Transformation of Pakistan into a regional economic hub


- Augmentation in value added sector of Pakistan
- Better balance of trade between China and Pakistan
- Boost Pakistans economy by industrial development and addressing energy crisis
- Global accessibility: including Afghanistan, Central Asian States, Middle East

Infrastructure Development Policy


Pakistans government need to develop an infrastructure policy that is in alignment with CPEC to
expedite the industrial infrastructure development
- Government need to revise the regulatory policies and placed support system to facilitate
and attract foreign direct investment
- Government need to cut down bureaucratic delays to ensure speedy execution of the
projects, increased co-operation between federal and provincial governments and
amongst ministries is fundamental to that.
- Amendments in laws and regulation to build speed in provision of utilities and facilities,
institutional arrangements between federal and provincial governments for smooth
execution of CPEC related projects
- Expedition the acquisition of lands and infrastructure for establishing special economic
zones

2
Strategic decision for power sector growth and development

The government must embark an ambitious policy for


restructuring and liberalization of power sector to gain
maximum advantage from CPEC, the ultimate aim should be the
privatization of DISCOs who are posting huge loses and moving
toward a market driven electricity sector. At present DISCOs are
unable to recover the dues especially from the public sector and
governmental departments, due to the political influence and
intervention, which along with Inefficiencies, theft, law and
order turns results in ever increasing Transmission &
Distribution losses.
i. Encourage competition by providing open access to companies in generation,
transmission and distribution
ii. Ensuring the autonomy of the power sector companies with least government and
political intervention
iii. Appointment of professional and independent management and board of governance
and in all public sector entities
iv. More reliance on domestic fuels and renewables and adapting a cost effective fuel mix
v. Rigorous implementation of Economic dispatch order to make sure that efficient and cost
effective generations are used to fulfill demand while inefficient generations should be
curtail
vi. Minimum to least government and political intervention in Power regulator functions and
giving it power and authority independently take decisions
vii. Comprehensive planning for circular debt issue and Implementation of cost recovery
tariffs to avoid accumulation of circular debts
viii. Transparent determination of tariffs through open and transparent bidding
ix. Introduction of modern technology such as smart metering and Aerial bundle cables to
curb power theft issues and managerial practices
x. Giving incentives to companies for achieving higher efficiencies by passing efficiency gains
in their tariffs structures (Efficiency based tariff structure)

Policy for Training & Development


Government should develop a comprehensive policy to hasten training of skilled labor and
organize a technical and professional workforce who can perform the jobs at CPEC projects, this

3
will not only curtail the outflow of foreign exchange but will enable the cost saving as Pakistani
labor is much cheap as compare to China. Government should
i. Devise a policy to transfer the jobs to Pakistani manpower over a staggered period
through on job training, apprenticeship, internships, attachments and study assignments
supervised by Chinese trainers
ii. Coordinated and deliberated effort on part of government to establish vocational training
centers and skill development institutes .A broad study of the job markets and jobs that
would result from CPEC projects and operational activities.
iii. Develop and prepare a pool of workers and professional who are ready to take jobs from
Chinese
iv. Switch form low-skilled labor to high skilled labor, policy makers should lay down the
policy to induct a minimum level of local labor for all projects and joint ventures.
v. Create a model to improve working condition to increase productivity of the labor.
vi. Ensure that all special economic zones should exclusively include dedicated training
center and facilities

Industrial Policy
Governmental policy makers need to categorize industries in the context of CPEC and devise a
plan for their growth accordingly. Government need to develop a coherent, well-functional
industrial policy that can stimulate real growth.
The decision we will make today will have ramifications in the long-term. It is evident form the
history of most developed industrial nations that well-organized policies and growth plans plays
a vital role in their economic growth. One can simply infer that idiosyncratic industrial policies
coupled with free trade agreements and low risk appetite of our industrialist has contributed
towards low industrial growth in Pakistan.
Business community has several concerns over CPEC projects and how it will impacts their
businesses they need to realize that only by setting up joint ventures and partnerships they can
harness the interest of Chinese businessmen and achieve mutual benefits
- Industrialist need to take bold decisions and put up joint ventures with Chinese
- they need to change their psyche of running the business in families and in isolation, they
need to open up and share the dynamics of their business and work with Chinese
businessmen and to set up partnerships and joint ventures

This mutual co-operation will result in sharing of capital, knowledge, skill, technology and
experience and would not only result in the growth of individual businesses but will servers
towards collective prosperity and growth of Pakistans economy
Now that we have discussed the importance of a coherent industrial policy the question arises
who it should be structured. The obvious initial step is setting the fundamentals right.
Government should
4
- Ensure uninterruptable supply of electricity and gas to the industries
- streamlining tax policies and easing up the regulations
- making coordinated efforts to increase the volume of exports by diversifying product mix,
probing new markets, revising free trade agreements and reducing transaction cost
- Put a serious effort to monetize the CPEC opportunity and move up the technology ladder.
- Create firm incentives for establishing state of the art industries and commissioning of
advanced machineries and force industries to achieve competitiveness by reducing cost
and increasing efficiency.

Policy for transfer of technology


Government need to devise a policy that ensures transfer of technology to Pakistani industries.
Currently our industries are mainly based on low-value addition processes and if we continue
this trend then Chinese companies may shift their low value-added industries to Pakistan to
exploit cheap labor and raw materials, and we will end up producing the same goods as we are
producing now but at larger scale .This whole scenario doesnt make any sense as this contributes
nothing toward modernization and technological advancement of our industries we need to shift
from low-value addition to high value-addition industries
Therefore, for all CPEC projects agreements including the establishment of special economic
zones Government should make it mandatory it transfer the technology gradually over the period
of time. By doing so we could get technical advantage from CPEC project activities and this will
not only contribute towards increasing trade volumes but will enable our industries to yield more
profits by shifting their focus towards modernization and high-value-adding processes.

Local vs Chinese ownership


Government should implement a policy to ensure industrial activities must have well-defined
local stakeholders participation. This could be achieved by formulating requirements for
minimum local partnership.

- One concern government need to address is Chinese versus local ownership of the
resources, government can alleviate this concerns by implementing the policy of long-
term lease for CPEC projects as opposed to sale.

Deliberate effort for Growth in export


Government need to put a deliberate effort to translate the benefits of CPEC in terms of growth
in exports, to offset CPEC loan payments Pakistans exports must grow by a rate of 14 percent
annually in dollar terms , this growth is not unprecedented as we have already witnessed that
growth rate in past.

5
- Government need to make sure to translate the economic activity that CPEC would
create into increase in exports to achieve long-term sustainability and growth.

Substitution of Imported fuels with renewables


Government should put focus in gradual substitution of the imported fuels with renewables and
local ones such as hydro, coal, wind and solar this would result in annual saving of around $1bn
which would enable us to achieve stability in balance of payment and reducing the trade deficit.

Development of Service industry


Government should support and promote service industry along the route of CPEC that can
supplement the businesses and trades, such services may include hotels, restaurants, clubs,
saloons, fixing works etc.

Branding of Pakistani Products


Based on the industrial activity CPEC will stimulate government need to persuade industrialist
towards creation of brands that could compete in global arena, government need to
communicate the benefits industrialist could earn both locally and globally.
Our industrialist need to realize that CPEC will not only boost the economic development of
Pakistan but will bring with it a furious industrial competition and they need to well prepared for
it to survive and to gain the maximum advantage out of it. Until now our industrialist main focus
is on low value addition process due to low risk and smooth process, now they need to realize
the importance of shifting focus form low value added processes towards high value added
process, this would only increase their profit exponentially but will also open new markets for
them. Government need to communicate the fact that as industries move towards high value
addition processes the profit percentages increases drastically.

Policies for Special Economic Zones (SEZs)


Around 27 special economic zones are planned to be set up as part of CPEC. Government needs
to set up clear policies to attract foreign investment in manufacturing and export sectors and
encourage joint ventures in the industrial zones. Government should
- Plan manufacturing and export sectors that need to be setup in each economic zone
based on the proximity to raw material, market and availability of human resource
- Distinctly planning for each economic zone based on its geographical location, availability
of resources, based on this decision should be made about which industries should be set
up in an economic zone based on their special requirements and unique feature of the
SEZs

6
Conclusion
The CPEC initiative could, potentially, transform Pakistan and its industry in particular. That
said, now is the time to sit down and formulate a coherent industrial policy or we may find
ourselves trapped in producing the same, low-value-added goods in the future
To get the most out of CPEC, we must perform a detailed planning and set measurable objectives.
To achieve the planed goals we must have the best of the teams with the right blend of people
to effectively manage the resources and stakeholders.
Such planning must drill down to each SEZ and specific teams must be assigned to set, manage
and achieve milestones set for each SEZ.

References
http://cpec.gov.pk/

https://www.dawn.com/news/1313992(Financing burden of CPEC by Dr. Ishrat Hussain)

Pakistan Power Sector Reform Plan (Key of SUSTAINABLE, AFFORDABLE and reliable power sector)

You might also like