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Integrated Economic Development

September 1, 2023 at 4:09 pm | Economic Affairs

Dr. Hassan Daud Butt

Economic integration has the most transformative influence and consequently, the greatest economic impact on the region’s underdeveloped areas. Transforming economies through regional integration involves fostering deeper economic cooperation and collaboration among neighboring countries within a specific region. It aims to enhance economic growth, competitiveness, and development by leveraging the collective strengths of the participating nations.

Regional integration can take various forms, including free trade agreements, customs unions, common markets, and economic unions. Without actively participating in regional and international cooperation frameworks, no nation can sustain economic growth. Regional cooperation has an impact on growth in a number of different ways.

It enables a country to take advantage of its comparative advantages, which improves resource allocation effectiveness, makes it easier to acquire foreign technology and knowledge, increases productivity, and attracts more investment, which fosters competition and boosts competitiveness. Regional integration can eliminate or reduce trade barriers such as tariffs, quotas, and non-tariff barriers among member countries.

Despite this, Asia is the world’s fastest-growing region, driven by the dynamism of the Chinese economy with more rapid acceleration possible through an integrated economy. As the world comes out of the effects of COVID-19 and embarks on the path to becoming interconnected and interdependent, the social and geographic distances between parts of a region still remain large partially because of bitter politics exacerbated by climate change.

Thus when economic integration initiatives like BRI and SCO transform the region and spread new infrastructures, institutions, and approaches that lower the divide, overcoming challenges including addressing disparities among regions becomes imperative. For this to happen, effective governance, strong institutions, and continuous dialogue among member states are crucial to realizing the full potential of regional economic integration. With roughly a trillion dollars committed to infrastructure projects, including transportation (roads, rail, maritime, ports, and airports), the BRI has the potential to enhance the lives of billions of people and give them fresh chances to achieve the Sustainable Development Goals (SDGs).

With a population of 244 Million, strategica location at the crossroads of South Asia, Central Asia, and the Middle East, Pakistan has the opportunity to play a significant role in regional trade and economic integration. However, there are both challenges and opportunities that it faces in establishing and participating in regional supply chains. As per international best practices, no country can have sustainable economic growth without integrating into the Global economy.

Pakistan has been part of several regional initiatives and organizations aimed at promoting economic cooperation, trade, and other forms of collaboration among neighboring countries. From SAARC, ECO, OIC, and most recently CAREC, SCO, BRI and CEPC, Pakistan is now harnessing its ability to connect China to the Arabian Sea, as well as connect Central Asia and South Asia.

By integrating its economy, Pakistan is leveraging its location to participate in regional value chains where different stages of production take place across borders.

The connection between China and the rest of the world will enable Pakistan to benefit from the projected economic and energy corridors. In order to profit from profit from collocating with Chinese businesses in these CPEC economic zones, it is essential for Pakistan to invest in human capital, management skills, and quality. CPEC is now providing Pakistan with an estimated timeline for arranging the capacity, planning, and coordination required to internalize the benefits of its geography.

Pakistan may expect to gain from increased regional collaboration with Iran and Afghanistan through CPEC as China has already expressed interest in expanding CPEC to Afghanistan, a move that might strengthen economic links between Afghanistan and Pakistan. This may be a stimulus to the local economy through a network of economic cooperation that stretches from South East Asia to the developing markets connected to Europe via sea and land links and as a result of their proximity to CARs, both Pak-China and CARs have access to a sizable market for the export of their goods and services as well as the eastern ports of China and southern port Gwadar helping Pakistan develop its Blue economy and coastal development.

CPEC has been instrumental in addressing energy generation and diversity challenges through indigenous sources utilization like more hydel, renewable and Thar coal projects, infrastructural rural-urban synergy through over 500 KMs highways, and optical fiber connectivity. The project further produced a strategic framework for leveraging a new generation of industrial parks and Special economic zones for inclusive and sustainable development useful for attracting investment, fostering technological learning and innovation, and creating jobs connectivity and multimodal transport infrastructure are crucial for promoting international trade and economic growth.

More specifically, increased trade growth, foreign direct investment (FDI) attraction, industrialization and the creation of more efficient production networks, regional integration, and the eradication of poverty can all be accelerated by enhanced transport connectivity and infrastructure. The SEZs have not been developed at the required pace, however, have set up a development mechanism in Public-Private partnerships that can be emulated in other zones and parks also, especially in technology parks with foreign partnerships.

The Most alarming delay is in the ML-1 which was declared as a strategic project from both sides helping the connectivity advantage. The railway, projects connect the southern less developed as well as the industrial base in Karachi to the border of Afghanistan and KKH and increase in speed from 65-105 km/h to 120-160 km/h through rehabilitation and construction of major bridges, provision of modern signaling & telecom systems and conversion of level crossings into underpasses/flyovers, unlocking the potential of railways and can promote increased within and intraregional trade which will require major capacity building of the existing HR as well as adapt to changing transport patterns.

However, despite the will to draw economic outcomes, the results could have been better, partially due to Political differences, but mainly due to Institutional weaknesses, infrastructure and connectivity Gaps, regulatory and legal harmonization, security challenges, cultural and linguistic diversity, and global power dynamics. Addressing these challenges requires effective leadership, inclusive dialogue, and a shared vision.

It may also involve capacity-building efforts, investment in infrastructure, and policy coordination to overcome the barriers to successful regional integration and unlock its potential benefits. Pakistan has all the ingredients for a sustainable Integration that can strengthen a smart economic growth strategy, yet other factors that loosen binding constraints to growth need to be in place including sound macroeconomic management, a business and investment-friendly climate, competent institutions, thoughtful investment in human capabilities and infrastructure facilities, and effective trade and industrial policies.

Additionally, this also requires strong monitoring of coordination and removal of duplication in functions among various agencies. Pakistan will need to intensify regional cooperation and integration efforts in the current challenging global economic climate through Public and private sector investment in rail, logistics, SEZs and road connectivity projects and the execution of related soft policies to promote trade.

Comprehensive reforms are needed to resolve all major headwinds and pragmatic measures should focus on strengthening institutional frameworks, especially in relation to mandates and coordination, building technical and managerial capacity, and establishing facilitation agencies bodies. This can lead to greater business certainty and attract more investment, which Pakistan so urgently needs for its economic growth.

The writer is a
Projects Management Specialist and is a faculty member and research fellow at various academic institutions. He has served as a diplomat in China and has been a former CEO of KPBOIT & Project Director of the CPEC at MoPDR.

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