Panacea to Economic Renaissance
SIFC can contribute significantly to inclusive economic growth and sustainable development through CPEC. This involves ensuring that the benefits of CPEC are evenly distributed, addressing regional disparities, and fostering inclusive growth.
By Qamar Bashir
Like many other Pakistanis, I have also been pondering why the CPEC, touted as a game changer and harbinger of development and prosperity, has almost completed its first phase and launched its second phase, but inversely, the country is in deep financial and economic difficulties, the country is faced with the worst form of inflation, investment is almost negligible, and GDP growth is even worse. Hopes for growth and development in the coming years are minimal.
This situation can be interpreted in two ways. One is that Pakistan could have been in an even worse financial and economic situation than we are currently facing, as our current dire financial and economic outlook has to do with our own lack of purpose, absence of clear direction, and lack of competence and efficiency. The second interpretation is that the CPEC project was not well conceived. It lacked effectiveness and therefore was not helpful in improving the financial and economic standing of the country.
This is a known and documented fact: despite its potential, CPEC has encountered several significant hurdles in Pakistan that have hindered its swift, efficient, and result-oriented implementation, subsequently impacting its anticipated contribution to GDP growth.
Political instability and governance issues have led to policy inconsistencies, adversely affecting the continuity of CPEC projects. Bureaucratic inefficiencies and red tape have resulted in delays and escalated costs, while security concerns in certain regions pose additional risks to project timelines. Financial constraints due to high debt levels and balance of payments crises have limited the government’s ability to finance these projects, increasing reliance on external borrowing.
Furthermore, the lack of a skilled workforce has impeded progress in specialized areas. Environmental and social challenges, including land acquisition and displacement concerns, have added layers of complexity.
Additionally, differing priorities across provinces have led to challenges in coordination and resource allocation, affecting uniform development. Global and regional geopolitical dynamics, especially involving key players like China, the US, and India, have also influenced investment flows and strategic prioritization.
While the initial phase of CPEC focused on establishing essential energy and infrastructure foundations, the broader economic impacts are expected to materialize more significantly in Phase II, provided these multifaceted challenges are effectively addressed.
Let us now build an argument around the second premise that CPEC was and is an effective project and helped in contributing to GDP growth while keeping the governance factor constant. In such a scenario, where Pakistan exhibits responsible governance, efficient government functioning, a fair judiciary, a motivated parliament, and a favorable business and investment climate, this could significantly impact its GDP growth.
With a total investment of over $62 billion in CPEC-I, a number of high-value projects were initiated in all critical areas, including the development of coal, hydro, wind, and solar power plants such as the Sahiwal Coal Power Plant, the Port Qasim Coal-Fired Power Plant, the Suki Kinari Hydropower Station, and several wind farms in Sindh province.
These projects collectively added thousands of megawatts to Pakistan’s national grid. Substantial investment was made in transport infrastructure to improve connectivity and facilitate trade, including the Karachi-Lahore Motorway (M-9), the upgrade of the Karakoram Highway (KKH) Phase II (Havelian-Thakot section), the Multan-Sukkur Motorway (M-5), and the Orange Line Metro Train in Lahore.
This phase developed Gwadar Port and related infrastructure, including the Gwadar International Airport, the Eastbay Expressway, and the development of a free zone to enhance trade activities.
It laid fiber optic cable from Rawalpindi to Khunjerab, which enhanced telecommunications in the northern areas of Pakistan. Metro lines, green lines, and a 2000 km fast train to improve urban and inter-city mobility, making cities more business-friendly and enhancing trade efficiencies, making Pakistan into a regional trade hub, and further boosting logistics, manufacturing, and service sectors.
The completion of Phase II is expected to foster industrialization and socio-economic development. This includes the growth of Special Economic Zones (SEZs) to attract foreign direct investment and boost exports. Focusing on mining, industry, green and low-carbon development, health, space cooperation, the digital economy, and development cooperation. The transition towards clean and renewable energy sources is anticipated to reduce Pakistan’s dependence on imported fossil fuels, thereby helping to decrease the depletion of foreign exchange reserves.
There has been an increase in academic and cultural cooperation between Pakistan and China, with many Pakistani students studying in China. This interaction is expected to strengthen the bond between the two nations and contribute to Pakistan’s educational growth.
Emphasizes agricultural cooperation, including crop breeding, pest control, and the expansion of crop cultivation, and plans to increase sesame cultivation and exports to China, aiming to bolster the agricultural sector. Green and low-carbon development, health, space cooperation, digital economy, and development cooperation and export of agricultural products to China.
Both CPEC-I and 2.0 will only achieve their full potential if Pakistan removes all hurdles hampering their speed and effectiveness. This was perhaps the realization at the apex of Pakistan’s policy-making institutes, which resulted in the constitution of the Special Investment Facilitation Council (SIFC).
Having been established with high ambitions to transform the country’s economy by attracting significant foreign direct investment (FDI), SIFC, involving key figures from both the government and the armed forces, focuses on sectors like defense production, agriculture, mines and minerals, energy, and IT. Its primary goal is to draw $100 billion in FDI and achieve a nominal GDP of $1 trillion by 2035.
This initiative is seen as a potential game-changer for the economy, particularly by addressing bureaucratic hurdles and providing a streamlined process for investors and business groups.
Moreover, the SIFC’s strategy includes addressing issues like political instability, inconsistent economic policies, and bureaucratic hurdles, which have previously deterred foreign investment in Pakistan. It aims to foster an investment-friendly environment, enhance investor confidence, and improve the ease of doing business. The council’s multifaceted approach also emphasizes the importance of export-oriented investments, policy reforms, investor protection, public-private partnerships, and skilled workforce development.
The SIFC can be instrumental in harnessing the full potential of the China-Pakistan Economic Corridor (CPEC) through several strategic initiatives. Firstly, SIFC’s role in streamlining investment processes is crucial. By simplifying and expediting the investment procedures, SIFC can significantly attract both domestic and foreign investments into CPEC projects. This involves reducing bureaucratic hurdles, offering a one-window operation for all clearances and approvals, and ensuring that the investment process is smooth and investor-friendly.
Moreover, SIFC’s ability to enhance coordination among various government departments, provincial governments, and CPEC stakeholders ensures better alignment of projects with national and regional development goals, leading to more efficient and effective project implementation.
Secondly, SIFC’s potential to drive policy reforms and address security concerns is pivotal for CPEC’s success. By advocating and facilitating necessary policy reforms, SIFC can create an enabling environment for CPEC projects, encompassing areas such as land acquisition, labor laws, tax incentives, and regulations for special economic zones. Additionally, collaborating with security agencies to ensure the safety of CPEC projects is critical, as it instills confidence among investors and contractors.
Furthermore, promoting transparency and accountability in the execution of CPEC projects will build trust among all stakeholders, including local communities and international investors, thus ensuring the smooth execution and completion of projects.
Lastly, SIFC can contribute significantly to inclusive economic growth and sustainable development through CPEC. This involves ensuring that the benefits of CPEC are evenly distributed across different regions of Pakistan, addressing regional disparities, and fostering inclusive growth.
Encouraging private sector participation is also essential, as it can lead to more innovation, efficiency, and public-private partnerships, which are vital for the corridor’s success.
Additionally, aligning CPEC projects with workforce development, skill enhancement, and job creation will ensure the long-term sustainability of these projects.
By leveraging Pakistan’s diplomatic relations to attract international investors and partners, SIFC can broaden the scope and impact of CPEC, turning it into a catalyst for Pakistan’s economic transformation.
In essence, SIFC’s comprehensive approach encompassing streamlined investment processes, policy advocacy, security enhancement, transparency, equitable development, private sector engagement, and international collaboration is key to unlocking the full potential of CPEC. This multifaceted strategy is crucial for transforming CPEC into a driving force for Pakistan’s economic growth and development.
The writer is the former Press Secretary to the President of Pakistan, former Press Minister at Embassy of Pakistan to France, and former MD SRBC.