Second phase of CPEC: what is needed

There must be no politics on mega project, point scoring by any party

ISLAMABAD:

The current government comprises the political parties that consider themselves the champion of Pakistan-China relationship.

Pakistan Peoples Party (PPP) takes pride in attributing Pak-China friendship to the founder of the party. Jamiat Ulema-e-Islam-Fazl (JUI-F) claims a major role in providing policy guidelines for economic cooperation in the late 1990s, especially during the visit of JUI-F leadership to China.

Pakistan Muslim League-Nawaz (PML-N) boasts the finalisation and signing of China-Pakistan Economic Corridor (CPEC) project.

Thus, it is expected that the new government will give a fresh push to CPEC, as all parties are on the same page and want to strengthen Pak-China relationship.

PML-N, which claims that it executed the first phase of CPEC with great vigour, has raised the level of expectation.

However, the execution of plans is not according to the claims made by the parties and requirements of the second phase of CPEC.

PML-N is still stuck in the first phase and busy in delivering lengthy lectures on its past performance. It needs to acknowledge that the second phase is entirely different from the first phase.

The first phase was dominated by government-to-government or government-to-business cooperation in the fields of roads, highways and energy infrastructure.

On the contrary, the second phase revolves around the private sector. Industrialisation is the driving force along with cooperation in the fields of science and technology as well as agriculture.

It requires the involvement of numerous ministries and agencies. For example, to register a firm, an investor has to deal with eight agencies and departments (SECP, bank, tax facilitation centre of the Regional Tax Office, FBR, Excise and Taxation Department, Social Security Institution, Employees Old Age Benefits Institution and labour department).

The process becomes more complex during the execution phase, as the firm would need a number of certificates and clearances.

Besides, the incentive system for attracting an industry or investor is not according to the need, which is a pre-requisite to attracting foreign direct investment (FDI).

On top of that, after the 18th Constitution Amendment, the process has become more complicated, as the provincial governments have devised their own policies for investment.

Hence, it was decided that the Special Economic Zones (SEZs) will be established to expedite the industrialisation process and work will be consolidated in one place to speed up cooperation in the fields of agriculture and science and technology.

CPEC Authority was established to achieve the above objectives. Unfortunately, it could not deliver in line with the objectives. So, the problems still exist.

There are hurdles in smooth implementation and the impact is evident in the form of delayed work on the SEZs.

Security is another area, which requires new mechanisms and arrangements according to the need of the second phase.

In recent months, we have witnessed a surge in terrorist attacks. Terrorists are also targeting Chinese nationals, and the security apparatus has to step up its efforts.

In this context, the second phase of CPEC needs a new policy framework to smoothen its implementation.

First of all, the government must devise and adopt innovative policies to present the SEZs as an attractive opportunity. It is required to promote industrialisation, attract FDI and enhance trade.

An analysis of SEZs across the world suggests that the lack of innovation in policies, incentives and consolidation of work are the common reasons of the failure of SEZs.

Most of the countries fail to understand that the SEZs are specialised areas to achieve specific goals. Thus, Pakistan should formulate the policies and instruments to make the SEZs successful.

Apart from that, Pakistan needs to bring all work related to CPEC, from registration to execution, under one roof. For that purpose, the country can strengthen the structure and role of CPEC Authority, which will help to enhance the confidence of investors.

Third, an incentive system should be designed to attract investors. Pakistan should realise that the SEZs or industrialisation process can only be successful by offering customised incentives. These must be lucrative and different from the rest of country.

For that purpose, Pakistan can learn from the experience of Shenzhen Special Economic Zone, China. It would be helpful to understand the required mechanisms for the successful execution of SEZs plan for industrial and trade development.

It will also provide good policy guidelines for the political leadership to learn how to devise the political and governance system to support rapid economic growth, industrialisation and attract FDI.

On the security front, Pakistan needs to bring fundamental changes in the policy and implementation framework. The new framework must focus on the fifth-generation warfare and inclusiveness.

On the other hand, companies should develop their own capacity to counter propaganda and forge close linkages with the communities in project areas. For that purpose, they will have to understand the local dynamics and culture.

Regrettably, the new government is not considering these points and is still busy in beating drums pertaining to the achievements of the first phase. It is a disastrous recipe and the government must abandon it.

Pakistan must understand that there is need of a strong CPEC Authority to steer the second phase. Otherwise, the ministries and agencies will keep on fighting for supremacy and in practical terms no ministry is superior than other.

Pakistan is already witnessing a tug of war among ministries, which is impacting the pace of CPEC. The Ministry of Planning cannot dictate any other ministry or agency.

So, it will be better to look for alternative ways to speed up work and the CPEC Authority would be an excellent choice. However, if the Ministry of Planning still wants to lead CPEC, then it should revise its SOPs and take up the job of CPEC Authority.

Concluding, the government should try to comprehend that Pakistan is not the only member of the Belt and Road Initiative, there are other 146 countries, which have joined or signed agreements to join the BRI.

For China, every member of BRI is equally important and it offers opportunities to everyone. Moreover, there are more than 5,400 SEZs in 147 countries, which are also working to attract FDI.

If Pakistan is not able to consolidate work, the present lucrative incentives and provide fool-proof security, then investors can go anywhere. It is high time to take action and say goodbye to the lengthy speeches.

Lastly, there must be no politics on CPEC and point scoring by any party.

The writer is a political economist

 

Published in The Express Tribune, May 16^th, 2022.

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