ISLAMABAD: Since being officially launched in 2015, the China-Pakistan Economic Corridor (CPEC), the Belt and Road Initiative’s (BRI) flagship project, has begun to bear fruit.
As the CPEC project enters a new stage, Pakistan is facing new opportunities to fast-track the development of its industries which can help it compete globally.
At the early stage of the project, there were many issues such as energy supply shortage, infrastructure deficiency and inefficient implementation of the incentive policies. In addition, Pakistan lacked a clear understanding of the direction of industrial development.
However, Pakistan has started the process to promote economic liberalization and to open up the economy. Joining the BRI and CPEC is part of the country’s effort in doing the same. In these couple of years, the country focused on industrial park construction while trying to enhance industrial relocation from China.
Although Pakistan has largely surpassed India in many aspects, yet its economic growth has not substantially accelerated. There are a few reasons for this.
Pakistan has yet to realize significant achievements in industrial development.
Historically, the mainstay sectors of Pakistan’s economy have been the consumer non-durable goods and the light industry. High-Tech and Modern industries such as iron and steel, metallurgy, heavy machinery, and petrochemical industries have not been in the focus.
In addition, industries such as cement and automobile manufacturing have long been overly protected, some analysts say.
Another reason for relatively slow growth is because Pakistan’s economic development relies heavily on external markets and its dominating export, textile goods, do not contribute substantially to the growth prospects.
Low domestic saving rates and low domestic investment rates have also hindered opportunities. The Pakistani government attaches great importance to attracting and utilizing foreign investment, but failure to address security concerns inside the country scare away potential foreign investors.
Low fiscal revenues and heavy external debt burdens have also been major problems in Pakistan’s economic development, limiting the government’s ability to invest.
Since the COVID-19 outbreak, CPEC has become a key highlight for the country’s economic development. The construction of the mega-project will eventually play a supporting role in economic recovery in the post-pandemic era.
However, Pakistan must seize the opportunity to formulate scientific development plans to equip domestic industries with competitive advantages.
Speaking of China-Pakistan industrial cooperation, agriculture is the sector that could help Pakistan consolidate its industrial chain and quickly earn foreign exchange earnings through exports. At the same time, China should open its market to Pakistani agricultural products and fruits to expand imports of Pakistani agricultural and industrial products.
The textile industry is a traditionally strong industry in Pakistan. When China’s textile industry is shifting outward due to labor price rises, Pakistan should seize the opportunity to upgrade its own industry and accept orders from the super power.
Since 2020, affected by India’s increasingly hostile attitude towards Chinese companies, many Chinese mobile phone brands in India have begun to move their factories to countries like Vietnam, the Philippines, and Indonesia. This is also a great opportunity for Pakistan.