Besides infrastructure, manufacturing industry needs big investment

It will create job opportunities in country, help industry compete globally


Umer Khayyam December 10, 2018
A labourer works inside an electronics factory. PHOTO: REUTERS

ISLAMABAD: The mega Belt and Road Initiative (BRI), launched by China, comprises one axis and two wings. The axis is composed of 15 countries mostly neighbouring China and aids Chinese influence across continents. The two wings are spread over 24 countries across continents.

The BRI is aimed at connecting countries in the region and beyond through trade facilitation and other measures. However, the development of a broad-based transport network is the sine qua non for such connectivity.

Hence, a new array of highways attracted $11 billion out of the $46 billion initially promised by Beijing for China-Pakistan Economic Corridor (CPEC) projects. The transport infrastructure development accounts for 24% of the CPEC investment, covering roads, highways and railways from the Khunjerab Pass to Gwadar Port.

This long transport passage has been designed to also facilitate energy projects through coal transportation, but the transportation network is mainly targeted at markets of the Middle East and Europe. It will ensure a smooth flow of Chinese goods to international markets. In the meantime, Pakistan is trying to persuade other neighbouring countries including Saudi Arabia, Iran and Turkey to join CEPC. Simultaneously, the eastern part of the BRI is being facilitated by Malaysia.

Likewise CPEC and other major investments in Pakistan, China has made huge capital injection into Malaysia. Till 2008, China’s investment accounted for just 0.08% of the total foreign direct investment (FDI) in Malaysia.

However, in 2016, the Chinese investment rose massively and touched the level of 14.4%. Most of the investment from China went to infrastructure development like the East Coast Rail Link and the Kuantan Port. The investment will help provide easy market access across Malaysia.

Non-manufacturing sector

The huge investment in the non-manufacturing sector comes in the wake of developing countries’ heavy reliance on the strong economies. As the developing countries are short of resources, they open their economies for the FDI but with little say in such investment plans.

Although the investing economies target neglected sectors of the recipient economies, still in this process they improve their supply chain to the world market.

These pose a great challenge to goods and services producers of the developing countries both in local and international markets. Malaysia has already experienced difficulties as demand for its goods and services has gone down because imported goods are cheaper and are easily available.

In the same way, Pakistan could face the challenge of competing with goods and services of China.

Apart from this, though infrastructure investment provides employment to locals with handsome remunerations, it is not known what will happen to these jobs when projects are completed. Also, all such investments are non-productive and are based on loans with guarantees from the state.

If the state fails to return the loans, the consequences may be difficult to bear. An example is Sri Lanka’s Hambantota Port, where the state could not return Chinese loans and then the port was handed over to Beijing on a 99-year lease.

However, there is no doubt that CPEC is a game changer. It addresses core problems of Pakistan like energy shortage, dearth of infrastructure and financing as well as underdeveloped areas. It will lead to the promotion of small and medium enterprises and uninterrupted energy supply will help large-scale manufacturing companies to compete at the global level.

Also, the road and railway infrastructure will support the development of backward areas and bridge the rural-urban divide. CPEC will create an environment for regional integration, help build trust among regional emerging economies and provide Pakistan with a platform to improve its image in the international arena.

However, there is a strong need to revise plans in order to invest more, without any impact on infrastructure investment, in the manufacturing sector, which will create more employment opportunities and promote emerging industries. This way, Pakistan’s economy will strengthen and a strong neighbouring country is in the interest of China as well.

The writer is associated with the School of Social Sciences and Humanities, National University of Science and Technology (NUST)

 

 

Published in The Express Tribune, December 10th, 2018.

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