Book Review: CPEC & Pakistani Economy – An Appraisal



By Mehran Iqbal.

The booklet titled “CPEC & Pakistani Economy: An Appraisal” is published by the Center of Excellence for CPEC (CoE-CPEC). The CoE is a joint initiative of Pakistan Institute of Development and Economics (PIDE) and Ministry of Planning, Development and Reform, Islamabad. It is an independent think tank working on providing policy guideline for the implementation of CPEC portfolio. This booklet can be divided into three portions, first portion written by editors i.e. Dr. Shahid Rashid, (the executive director) and Yasir Arafat, (the Research Coordinator) of CoE. The second portion consists of the articles by Dr. Ishrat Hussain prior published in DAWN News, who has served as a dean and director of Institute of Business Administration and he was former Governor of the State Bank of Pakistan. The third portion comprises of tables presenting CPEC’s major project details, followed by Appendix.

Salient Features:

In first portion, editor revisits CPEC and explained four stages of CPEC. He further added how CPEC is creating opportunities for Pakistan to use and how these opportunities may turn into a hazard if not handled appropriately. The project is indeed causing realignment of foreign alliances in South Asia. The energy project of CPEC is the foremost singular contribution i.e. the addition of 10,000MW in the span of four years. The energy outage in Pakistan caused decrease by 2% in GDP. The second area which would benefit Pakistan is the highways and railways linkages i.e. the Mass Transit system linkages within the big cities. The instalment of economic zones and economic activities projects along the highways.

The second portion of the booklet consists of five articles written by Dr. Ishrat Husain on CPEC. In which he gives a detail account of policy reforms and recommendations for the fruitful results of the CPEC. He starts with the China’s perspective that he gathered from the conferences he attended and writings of Chinese scholars. According to the writer, the Chinese have concerns over the misrepresentation of facts and analysis by external hostile entities and also some Pakistani’s to create resentment in general masses against China, it could harm bilateral relations of both countries. China is investing under Independent Power Projects (IPPs) policy in the energy sector. Pakistan should be facilitating instead of criticizing the effort. The extraction of natural resources will benefit Pakistan as substitute of imported fuel. Chinese and Pakistani companies both will gain benefit from the economic zones. Chinese have some concern over CPEC i.e.  Security of the Chinese nationals, red tape issues, grievances of Chinese companies, issue of qualified and experienced Pakistani entities within Pakistan to run the projects. Further he emphasized how we can get benefit from this opportunity, which is currently unfeasible due to corruption and dishonesty and it delays the project’s completion timeline. Such issues can overcome by reforms such as visionary leadership. Eventually, CPEC will lead us to relief from external pressure of international aiding agencies that cause a dent in institutional governance.

He also indicates that in industrial zones both Chinese and Pakistan should participate. As Chinese companies are investing under IPPs policy in energy sector thus Pakistan’s government have no dept obligation. Only one fourth of the total cost is spending locally on material and services. Pakistan government is taking loans of $15bn for infrastructure projects with the interest rate off 2pc which cause the additional burden of $3 bn annually. That will decrease over the time and will be payable by increased GDP after the surfeit of energy shortage and the substitution of fuel which also saves more than $1bn annually. Some of the Pakistan’s cynicism and pessimism towards CPEC i.e. it is only for Punjab and it invites external neo-colonist which is causing insecurity among Baloch of being minority within the Balochistan in near future. CPEC benefits in direct, indirect and induce measures i.e. energy, good & services and infrastructure respectively. Similarly, it economically charges in four ways i.e. direct cost in energy sector, indirect cost in large scale investment projects, unavoidable cost for the import items in the absence of domestic supplies and avoidable increment cost that can becontrolled by planning, coordination and active management. However, CPEC will also facilitate in abate the misapprehension and doubts.

The third section of the booklet consists of seven tables that detail the summary of CPEC projects (energy and infrastructure). Followed by appendix i.e. IMF Country Report NO. 17/213 published in July 2017, entitle “The Macroeconomics of Pakistan’s Quest for Energy and The CPEC (IMF).

Policy recommendations:

Following are polices that have been recommended by Dr. Ishrat Husain throughout the booklet.

  • Reforms regarding jobs i.e. assured tenure for job security, nepotism to the rock-bottom level, focused accountability of the relevant ministers and high rank officials.
  • DISCOs reform: protection against electricity thefts, overcome the discrepancy in the amount of billed and amount recovered, privatize or restructure it to be a commercial organization free from political influence, abridge the purchase price and sale revenue of power paid and received respectively
  • Multiple buyer models for the NTCD instead of present single model will recover the wheeling chargers for the use of transmission infrastructure
  • NEPRA should provide open access to producers
  • Policies regarding land in industrial zones; land is auction to companies on lease; a strong check and balance after the allotment; allotment should be cancelled if anyone fails in operationalized the land as per agreement
  • Free trade agreements should be revised and control the import/export tariff rate so that Pakistan companies got an opportunity to participate in the global supply chain
  • SBP should tighten the external payments (remittance) to conserve its reserves and reforms to control the remittance i.e. outflow is demands by banks while inflow is diverted towards informal channels
  • Commercial banks should finance the companies that are involved in the CPEC while Small businesses in the region should be funded by aid programs i.e. USAID, DFID etc.
  • Youth should be trained to overcome the deficiency of skill and experience manpower in the backward areas from Gwadar to Karakoram Highway that can replace Chinese workers
  • In Balochistan, Southern KP, GB and far areas, priority should be given to the provincial government for the Provincial Development Projects under the CPEC

Research Gaps:

  1. Facilities will not be available to living outside the industrial economic zones. How to facilitate masses living in far areas in long run.
  2. Free trade agreement needed to revise thus research is required what kind of the new policies are required to replace the old one to increase the export and decrease import and how to attract foreign investment.
  3. Writer mention, NGOs actively engaged in quality vocational and technical training in Punjab and Karachi, research is required about these NGOs and how they can facilitate in region where CPEC is executed.
  4. What steps is required to divert the inflow remittance to the formal (i.e. banking) channel.
  5. Pre-feasible study should be done to identify the precise kinds and requirements of the projects and a separate analysis is required to done how to increase in institutional capacity.
  6. Writer stated that DISCOs’ structure is required to either privatize or restructure, thus study is required how to restructure it to maximize its effectiveness.
  7. A complete discourse is required on how CPEC policies should benefit the deprived districts of Balochistan and southern KP by extensive economic activities.
  8. Nevertheless, a significant research is required how to overcome the propaganda against the CPEC from internal and external hostile entities.

Appraisal:

In a nutshell, the strengths of the booklet include: the article of an expert economist; while CPEC is major economic project; it includes some major policy recommendation that could provide assistance in attaining substantial sustainable development. The booklet is published to provide policy regarding CPEC thus I recommend it to the concern authorities i.e. Ministry of Planning, Development and Reforms, Ministry of Trade and Industry, Ministry of Commerce, Finance Ministry and Ministry of Energy and Power Division for the implementation of polices. It is also valuable for the researcher as it high lights some issues that are required to be resolve, thus researcher can find literature gap in it for further research.  The booklet also published to serve the purpose of explaining true narrative of CPEC for society at large but the complex language and sentence structure made it difficult to understand to a lay man.

In the final analysis, the outcome of the CPEC is based on collective response of federal, provincial and local governments, the private sector and media working together in unison and collaboration. Otherwise we’ll find ourselves entrapped in heavy financial burden. The political agents as a nation need to realize that the time span of CPEC is 15-20 years in which every party can contribute its share and later claim the credit.  Some political agents should avoid misguiding masses regarding sovereignty i.e. it is handed over to Chinese, because of being in influence of foreign inimical elements. For the paramount results of CPEC a successful interaction between investment, institution and policy is required. Research and analysis should be fact base instead of perceptions and ideologies.

About Author:

Mehran Ibqal is Researcher at at Institute of Strategic Studies, Research, and Analysis (ISSRA) NDU, also a candidate of M.Phil in Peace and Conflict Studies (PCS) at NDU.

He can be reached at mehran.iqbal22@gmail.com.

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