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RReeggiioonnaall CCoonnnneeccttiivviittyy && CCoorrrriiddoorrss DEVELOPMENT ADVOCATE PAKISTAN Development Advocate Pakistan provides a platform for the exchange of ideas on key DEVELOPMENT ADVOCATE development issues and challenges in Pakistan. Focusing on a specific development theme in each edition, this quarterly publication fosters public discourse and presents varying perspectives from PAKISTAN civil society, academia, government and development partners. The publication makes an explicit effort to include the voices of women and youth in the ongoing discourse. A combination of Disclaimer analysis and public opinion articles promote and The views expressed here by external contributors or the members of the inform debate on development ideas while editorial board do not necessarily reflect the official views of the presenting up-to-date information. organizations they work for and that of UNDP’s.

Editorial Team Editorial Board Maheen Hassan Umer Akhlaq Malik Mr. Ignacio Artaza Meeran Jamal Resident Representative, UNDP Pakistan

Mr. Hamid Raza Afridi Design Policy Advisor Hasnat Ahmed Embassy of Switzerland

Mr. Amir Goraya Printed by: Assistant Resident Representative/Chief Agha Jee Printers, Islamabad Crisis Prevention and Recovery Unit, UNDP Pakistan

Mr. Kaiser Ishaque United Nations Development Programme Pakistan Assistant Resident Representative/Chief 4th Floor, Serena Business Complex, Democratic Governance Unit, UNDP Pakistan Khayaban-e-Suharwardy, Sector G-5/1, P. O. Box 1051, Mr. Amanullah Khan Islamabad, Pakistan Assistant Resident Representative/Chief Environment and Climate Change Unit, UNDP Pakistan For contributions and feedback, please write to us at: [email protected] Ms. Ayesha Babar Chief Communications Unit, UNDP Pakistan ISBN: 978-969-8736-29-9 December 2019 CONTENTS

Analysis Interviews

02 Regional Connectivity and Corridors 24 Yao Jing Chinese Ambassador to Pakistan

26 Xiaohong Yang Country Director Asian Development Bank (ADB), Pakistan Opinion 28 Arif Ahmed Khan Chief Executive Economic Corridors: Trade Development Authority of Pakistan 10 Impact upon Poverty, Development and Regional Integration Sher Ali Arbab Guntur Sugiyarto 30 Member of the National Assembly of Pakistan Chairman Parliamentary Committee on CPEC CPEC and Socio-Economic 13 Development Atr-un-Nisa

16 Local Integration via Corridors Usman Khan and Zahra Hameed Youth Voices

Trade and Commerce Development 19 32 Salman Arif Dr. Nadia Farooq Alia Nur Buksh Haris Afzal Malik Financing and Management of Kinza Tauqeer 22 China-Pakistan Economic Corridor 33 Faisal Farooq Dr. Liaqat Ali Shah Hina Ali

/undppakistan

w us www.twitter.com/undp_pakistan Saleem Mandviwalla

ollo www wwwPr.pkovincial.undp nominee.org for NFC - Sindh F

Editorial

Connectivity through Corridors

Improving physical access and communication between different To contain the spread of this deadly virus, governments around the parts of the world has gained importance as the corner stone of world have adopted immediate restrictive measures including global and regional integration and economic growth in recent closed-border policy, restriction on mobility (air/road etc.) and social years. However, its foundations were laid decades ago in 1776, when distancing. All of these restrict different means of connectivity. Adam Smith, the famous economist, penned down his thoughts in Resultantly, global trade, an outcome of this connectivity, is simple words: expected to drop from USD 18.89 trillion to USD 16.4 trillion (in the best-case scenario), and to USD 12.84 trillion (in the worst-case “Good roads, canals, and navigable rivers, by diminishing the scenario), in 2020. expense of carriage, put the remote parts of the country more nearly upon a level with those of the neighborhood of the town. They are Retuning back to normal will take time. Or there could be a new upon that, the greatest of all improvements.” normal that will require rethinking our economic models with an emphasis on producing and consuming locally. COVID-19 provides The quote highlights the benets of connectivity; efficient and cost- an opportunity to rethink our unsustainable world. In this context, effective mobility and trade, which leads to improved access to there must be a push towards more sustainable production and opportunities such as labour and food markets etc., and facilities consumption, re-strategizing trade and adapting to the “build back such as health, energy, and education, amongst others. Conse- better” approach. quently, it helps in reducing inequality within and between countries. Sustainable and planned connectivity-global or regional, The important role the digital realm will now play in ensuring is thus, one of the major factors in growth and sustainability in regional connectivity is undeniable. For instance, while telemedicine developed states. was a pre-pandemic practice, it has certainly gained a lot more momentum and technology has enabled it to go beyond being just Enhanced regional connectivity and corridors can have a signicant simple consultations. Same is the case with distance learning: positive impact on Pakistan's economy, by linking different markets, schools and universities have now gone online in full force to ensure goods, ideas, technology, energy, and people. These will boost trade, education is not disrupted. The world, as we know it, has transformed tourism and attract investments, in turn generating more employ- from physical corridors to digital connectivity. ment opportunities and national income. Considering the geostrategic location of Pakistan, this connectivity can enable The benets of digital connectivity can be reaped tremendously. For Pakistan in becoming a signicant trade and transit hub, translating example, increase in digital regional connectivity will enable SMEs into more sustainable and inclusive growth. and rms from developing countries to increase their share in global trade; due to their competitive edge of pre-existing lower produc- The construction of Karakoram Highway (KKH), completed in 1974, tion costs and prices. According to WTO predictions, this reduction was a major milestone in Pakistan's quest to improve regional can especially benet SMEs and rms from developing countries, connectivity. More recent efforts include the China Pakistan increasing their share in global trade from 46 percent to 57 percent. Economic Corridor (CPEC) and Turkmenistan-Afghanistan-Pakistan- India (TAPI) gas pipeline project. Both these projects have insur- The pandemic provides an opportunity for Pakistan to rethink and mountable potential to be the bedrock for future regional develop- adapt short-term strategies that involve improving the digital ment, open new trade routes giving access to landlocked Asian ecosystem, producing and buying locally, and making businesses countries and create new livelihood opportunities for the local transition to the digital realm efficiently. In the long-term, the population. Additionally, these interventions, if implemented existing potential of regional corridors such as CPEC and TAPI, is appropriately, will directly impact upon the achievement of the unquestionable. The building up of these regional corridors is not SDGs, including, decent work and economic growth (SDG 8), only going to help Pakistan economically, but also help generate affordable and clean energy for all (SDG 7), sustainable cities and livelihood opportunities for the local population, as well as aid in communities (SDG 11), no poverty (SDG 1), zero hunger (SDG 2), and achieving a number of sustainable development goals. industry, innovation and infrastructure (SDG 9), to name a few.

In the wake of the recent out-break of novel COVID-19 in late 2019, both regional and global connectivity have been adversely affected.

01 Analysis Regional Connectivity and Corridors

Note: The main analysis has been conducted by Dr. Vaqar Ahmed -Sustainable Development Policy Institute (SDPI).

Introduction This analysis explores existing efforts by trade and transport corridors with the aim Pakistan to build such corridors, the to diversify routes. These could then link Corridors can help developing economies challenges it faces and how the state aims travel and logistics networks and in turn achieve economic growth and welfare to address them. Additionally, it also sheds reduce both transit time and customs related objectives. Most developing light on how improved infrastructure and procedures faced by agriculture and economies perceive the infrastructure economic corridors in Pakistan could industrial output. Ultimately such efforts uplift as a measure which can lend quick job support achievement of the sustainable have proven to reduce the transaction costs creation gains along with decline in poverty development goals (SDGs). faced by exporters and importers. Such levels. The gains in terms of job creation are reductions in the cost of doing trade sustained over longer periods of time if proportionally favour smaller trading economic corridors result in growth which Regional Connectivity, nations as opposed to mature economies. has outward-orientation and bring about Growth and Welfare increase in exports of goods and services, Studies have suggested that the effect of particularly for sectors which employ youth The drive towards regional connectivity regional economic corridors on developing and idle work force. gained momentum once counties and countries could be through two channels: regions embarked on plans backed by trade and foreign direct investment (FDI) The evidence from literature however strong funding arrangements to build (Table 1). For example, studies suggest that varies when it comes to impact of economic bridges between markets and value the trade-effect of BRI transport projects corridors on environment and social chains. The Belt and Road Initiative (BRI), will improve Gross Domestic Product (GDP) justice-the two key pillars of the sustainable Europe Asia Connectivity Strategy, and of low income countries by almost four development framework (apart from Central Asia Regional Economic Coopera- percent.⁴ Estimates suggest that the FDI inclusive growth). tion (CAREC) are recent examples. Such effect of BRI transport projects will improve initiatives start with realizing integrated GDP of low income countries by almost 0.35

Table 1: Economic Corridors: Challenges and Opportunities

Opportunities Challenges

Improving cross-border infrastructure and their management Ensuring that investment is efficient; not directing investment to politically motivated or just 'look good' projects with 'demonstration impact'

Reducing trade costs, improving trade rules, boosting trade Coordinating large scale infrastructure investments ows and Global Value Chain participation

Improving investment climate and boosting cross-border Ensuring transparency of data and information. Transparency in investment public procurement remains a key challenge

Improving growth, employment and poverty reduction Managing social, environmental, and governance risks

Developing lagging and isolated regions Sustaining public debt; nding innovative nancing to complete projects on time

Source: Modied by author from Freund (2018).⁵

1. Dr. Vaqar Ahmed is an Economist and former civil servant. He is author of 'Pakistan's Agenda for Economic Reforms' published by the Oxford University Press. Dr. Ahmed is currently associated with Sustainable Development Policy Institute (SDPI). Views expressed by the author are his own and do not necessarily reect SDPI's official stance. 2. Ahmed, V., Suleri, A. Q., & Javed, A. (2015). Strengthening South Asia Value Chain: Prospects and Challenges. South Asia Economic Journal, 16(2_suppl), 55S-74S. https://doi.org/10.1177/1391561415594900. 3. Ahmed, V., Suleri, A. Q., & Javed, A. (2015). Strengthening South Asia Value Chain: Prospects and Challenges. South Asia Economic Journal, 16(2_suppl), 55S-74S. https://doi.org/10.1177/1391561415594900. 4. De Soyres, F., A. Mulabdic, S. Murray, N. Rocha, and M. Ruta. 2018. “How Much Will the Belt and Road Initiative Reduce Trade Costs?” Policy Research Working Paper WPS 8614, World Bank, Washington, DC. 5. Freund, C. (2018) The Economics of the Belt and Road Initiative. Presentation by World Bank Group. Presentation at the 20th Sustainable Development Conference in Islamabad, December 2018. 02 percent.⁶ result in harmonization of procedures and favourable scientic evidence suggesting standards required to trade between improved outcomes of the energy corridors Regional connectivity can be enhanced c o u n t r i e s a n d r e g i o n s , e ffi c i e n t for the poor and vulnerable. through multiple types of corridors. These coordination between border authorities, include transport, trade, economic, energy, electronic data exchange to check informal Digital Corridors digital and others. A few are discussed and illegal trade, reforms to improve below: logistics at border points, and reduction in Digital connectivity across borders number of export and import documents. provides high speed and reliable data Transport Corridors Ultimately it helps bring down trade costs if services along with protection of users of regions as a whole move towards paperless web services. However, digital divides The development of transport corridors is trade.⁹ This not only increases predictability across regions, countries and often times now being seen in terms of the shared value and timeliness in trade of goods but allows within countries continue to persist. This these could provide. Such value could increasing share of imports and exports. prevents the growth of digital economy. As come in the form of inclusive mobility, Ultimately it becomes easier for countries a result, e-commerce growth remains resource efficiency, transport infrastruc- to integrate into global value chains. subdued in several developing states. It is, ture, safety and security.⁷ The usual way of Efficient trade corridors also demand that however, important to see how digital looking in to spending on improvements in countries address non-tariff barriers which corridors could eventually help the pursuit the transport sector were centred around could hinder regional and global trade of e-government, e-learning, and e-work the provision of affordable public commute ows.⁰ initiatives. This could also bring down the or extending freight transpor t to cost of knowledge and technology underserved areas. Countries are now The World Trade Organization's (WTO) acquisition. striving for innovative transportation Trade Facilitation Agreement has allowed solutions which could be cost-effective in countries to better envisage development E-banking initiatives across countries, for terms of both movement of people and of trade corridors. WTO also encourages not example, to settle trade-related payments goods.⁸ to have a myopic view of trade corridors but could lessen the reliance on traditional to also support trade of services e.g. nancial institutions. In September 2019, Sustainability is a key consideration of such information technology related services. The UN Secretary-General's Task Force on solutions. Smart transport technologies are Digital Financing of the SDGs offered in high demand which could help in Energy Corridors actionable recommendations towards reduction of congestion seen in the case of harnessing the digital revolution to freight movements via road, sea, rivers, As energy needs of developing countries advance the SDGs. The report identied canals, and railways. The sustainability remain high, it will be critical to see how clear possibilities for ntech which could angle is incomplete without considering regions can bring fuels and electricity from shift “the centre of gravity of the nancial the optimization of the performance of energy surplus to decit regions. In doing system towards the citizen”. trucks, buses and other vehicle eets. so, most countries wish to remain responsi- ble and focus more on developing of green Pakistan's Quest for Likewise, enhancing the resilience of energy corridors which are climate friendly. transport infrastructure needs to be seen The SDG-7 and Sustainable Energy for All Regional Connectivity through the various risks posed by climate (SEforALL) initiative emphasizes on change, natural or man-made disasters and ensuring use of cleaner fuels to reduce Pakistan's most recent efforts towards cyber-attacks. The cyber security risks could greenhouse gas emissions while also regional connectivity and building an compromise the efficiency of connected supporting health, air quality, and economic corridor have culminated into vehicles and put the safety of people and economic growth-related goals. This the completion of CPEC's early harvest handling of cargo in danger. Ultimately, the emphasis is part of corridor building such as programme. However, the quest to success of these transport corridors in the Clean Energy Corridors programme in regionally integrate with neighbours and supporting developing economies achieve Africa to meet the electricity requirements have more efficient trade goes back to the higher levels of competitiveness and through renewable energy and cross- days when Karakoram Highway (KKH) was exports, will depend upon complimentary border trade of renewable power. completed in 1974. In the late 1990s, a reforms which are aimed at improving the National Trade Corridor initiative was procedures and process of transit, In Central and South Asia, governments launched. However, it could not meet much immigration, customs, and handling at have committed to ending energy poverty success due to budgetary constraints and ports and airports. through transboundary initiatives such as gaps in federal-provincial and inter- the CASA-1000 electricity transmission line, provincial coordination. Later during the Trade Corridors and Turkmenistan-Afghanistan-Pakistan- visit of the Chinese Premier to Pakistan in India (TAPI) gas pipeline, among other May 2013, the concept of the China Such corridors have facilitation of exports initiatives underway. While political, Pakistan Economic Corridor (CPEC) was and imports at the core of their business procedural and funding constrains could agreed upon by both countries. Subse- model. Regional trade corridors could pose delays it is encouraging to see quently, a Memorandum of Understanding

6. Chen, M., and C. Lin. 2018. “Foreign Investment across the Belt and Road: Patterns, Determinants and Effects.” Policy Research Working Paper 8607, World Bank, Washington, DC. 7. See for example, “SDG Industry Matrix for Transportation”. Study by UN Global Compact and KPMG. Available at https://home.kpmg/content/dam/kpmg/xx/pdf/2017/05/sdg- transportation.pdf. 8. De, P. and Iyengar, K. Developing economic corridors in South Asia. Mandaluyong City, Philippines: Asian Development Bank, 2014. 9. Prabir De (2018) Trade Facilitation Measures for Landlocked Countries. Presentation at UN ESCAP Bangkok. Available at https://www.unescap.org/sites/default/les/S12_Prabir%20De%20ESCAP%20TF%202018%2B.pdf. 10. Ahmed, V., Suleri, A. Q., & Javed, A. (2015). Strengthening South Asia Value Chain: Prospects and Challenges. South Asia Economic Journal, 16(2_suppl), 55S-74S. https://doi.org/10.1177/1391561415594900 and Toru, S. K., and V. Ahmed (2020) Addressing global systemic concerns while implementing SDGs at country level. Southern Voice. Accessed via web: https://www.slideshare.net/vahmed/sdgs-global-systemic-concerns-230813618, accessed on April 2, 2020. 11. Ahmed, V. (2014) A case for energy diplomacy. The News. July 20, 2014. Accessed via web: https://www.thenews.com.pk/tns/detail/556707-case-energy-diplomacy, accessed on: February 27, 2020. 12. “Task Force Analyzes Role of Fintech in Accelerating SDGs”. SDG Knowledge Hub. Available at https://sdg.iisd.org/news/task-force-analyzes-role-of-ntech-in-accelerating-sdgs. 03 Table 2: Initiatives under CPEC

Sectors Current Status and Progress

Energy Out of 17 planned projects as priority, 8 are completed and 9 are under construction. The completed projects have added 4,918 MW to Pakistani national grid.

Agriculture Includes better management of water resources, livestock and sheries development.

Road sector Karakorum Highway Phase-II (Havelian to Thakot) (118 km) - In progress Peshawar-Karachi Motorway (Multan-Sukkur Section) (392 km) - Completed Khuzdar-Basima road (110 km) - In progress Dera Ismail Khan (Yarik) – Zhob connection (210 km) - In progress Thakot – Raikot connection (136 km) - In progress

Trade In Gwadar, new quay cranes have been set up along with additional storage yard, a seawater desalination plant, sewage disposal systems and cargo handling equipment.

Science and A "China-Pakistan Joint Cotton Bio-Tech Laboratory" will be established, along with "China-Pakistan Joint Technology Marine Research Centre", "Pakistan-China Science, Technology, Commerce and Logistic Park". The "Pakistan- China Fibre Optic Project" has already been completed. Pilot project of Digital Terrestrial Multimedia Broadcast (DTMB) has been completed.

Railway Construction of railway track from Karachi to Shahdara completed Work on ML-1 railway line is soon expected to begin Havelian dry port to be established to meet the demand of containerized freight traffic

Skills development China Fund for Peace and Development has built schools called "Chinese Pakistan Friendship schools". These are a consortium of top Pakistani and Chinese business schools estbalished with the Higher Education Commission (HEC) taking lead.

Source: Author's compilation

(MoU) between both countries was signed. Improved digital connectivity has been an capacity to increase taxes given that CPEC's Long Term Plan and Action Plan was important goal of Pakistan's corridor progressive tax bases such as land, urban agreed upon and signed on 5th July 2013 building efforts. In this regard, construction property, agriculture, and services now fall during Prime Minister Nawaz Sharif's visit to of bre optic cable was completed between under their domain, is also limited. Pakistan China. Following these developments, China and Pakistan. This is expected to pave has committed under the International several projects were initiated (table-2). w ay fo r l o n g - d i s t a n c e a n d h i g h - Monetary Fund's (IMF) Extended Fund performance data networking. A higher Facility, to support capacity of federal and The popular discourse in Pakistan has bandwidth with cyber security arrange- provincial tax administration and improve focused largely around the road-based ments allows greater efficiency and audit capacities, whilst alongside strength- routes to be constructed or rehabilitated security in web-based communications. ening efforts to better document the under CPEC, also known as the western and Such improvements are also expected to economy. eastern routes. However, the initial phase of boost Pakistan's e-commerce potential. ⁴ CPEC initiatives largely focused on the Raising government revenues through tax energy sector. Apart from this, there was There are challenges which Pakistan will or non-tax sources is usually not easy when decent development of the port sector in need to overcome to embark swiftly a country is witnessing low economic which ports in Karachi and Gwadar received towards the next set of projects planned growth. With real GDP growth is projected attention. Today, Gwadar not only serves under the CPEC. These challenges could be to remain under three percent for the scal commercial traffic for Pakistan's own use, grouped into: a) macroeconomic, b) legal year 2019-20, it has become difficult to even but also as a transit trade bound for and regulatory, c) rule of law, and d) achieve the revenue target agreed by the Afghanistan. Tajikistan has also requested coordination issues. government with IMF at the start of the access to Gwadar for its food supplies. fund programme. It is, therefore, important Macroeconomic Challenges now to look towards private nancing. A key result of CPEC's early harvest interventions was improved energy Pakistan's ability to nance economic The local private sector has indicated supplies to Pakistan's residential and corridors through indigenous resources is strong intent to invest in transport, oil and industrial users. Constraints remain in constrained due to low levels of domestic gas exploration, and information technol- transmission and distribution of power resource mobilization. The capacity to raise ogy-all sectors are critical to raising an which will be a key focus for the future taxes at federal and provincial levels economic corridor. However, many have phase of CPEC. The overall supply chain in remains low due to policy and administra- also informed regarding the need to the energy sector will also require improve- tive gaps which are now being addressed expedite 'ease of doing business' reforms. ments to meet the needs of nine special under the 'Pakistan Raises Revenue' Furthermore, initiatives which could economic zones. program. The provincial government's strengthen public-private partnerships

13. CPEC Secretariat. 2017. Long Term Plan For China-Pakistan Economic Corridor (2017-2030). http://cpec.gov.pk/brain/public/uploads/documents/CPEC-LTP.pdf. 14. Ahmed Qadir and V. Ahmed (2019) E-commerce Regulations in Pakistan. Trade Insight, Vol. 15, No. 1-2, 2019. 04 could go a long way in signalling the resolve Legal and Regulatory Issues consuming process and can take upto 8 to of the government. 12 months for materialization of applica- Several legal and regulatory issues prevent tions for utility connections. When it comes to innovative nancing, the Pakistan to host large scale investments. role of development partners will remain This has prompted the government to There remains a need to also conduct for critical. However, most donors would like to initiate Pakistan Regulatory Modernisation key economic sectors, a regulatory impact see strengthening of macroeconomic Initiative (PRMI). This is also aimed at analysis (RIA). For example, currently fundamentals and improved scal addressing opacity in the federal and businesses complain regarding absence of discipline. While the government has provincial tax regime. Accessing tax one-window solution when it comes to recently passed the Public Finance law, benets allowed to Special Economic compliance with environmental, labour, however, its implementation will be Zones (SEZs) (table 3) could also take municipal, and sector-specic regulatory important to demonstrate that Pakistan's several months due to delays in approvals bodies.⁵ Furthermore, if you wish to budgetary spending is fair and transparent. by regulatory bodies. Additionally, even in operate in more than one province of the mature industrial estates it is a time- Pak istan, different sec tor-specic

Table 3: Status and Sectors Proposed for Special Economic Zones (SEZs)

SEZs Location/Area Status Focused Sectors

Rashakai Economic Located on 1000 acres of land, Feasibility studies of SEZs are shared Key sectors include Zone of which 702 acres are to be with Chinese side. The MoU and garments and textiles used for industrial Engagement Agreement was signed in manufacturing, steel, development. January 2018. Presently, the two parties electronic appliances and are in the end stages of nalizing and other manufactured signing the Agreement. consumer goods.

Economic Zone at Located in Dhabeji in Sindh Feasibility studies of SEZs are shared Key sectors include storage, Dhabeji province at a distance of with Chinese side. Interest to apply for warehousing, technical and around 35 km from Karachi land has been received from private vocational training and Airport covering 1530 acres of sector representatives. medical facilities. land.

Bostan Industrial Located in Balochistan Feasibility studies of SEZs are shared Key sectors include fruit Zone Province on 1000 acres of land. with Chinese side and 200 acres have processing, agricultural been developed. manufacturing, and pharmaceutical.

Allama Iqbal Industrial Covers approximately 3000 Purchase of land by private sector Key sectors include textiles, City, Faisalabad acres of land in Faisalabad, representatives underway. Prime pharmaceuticals, steel, light Punjab. Minister performed ground-breaking on engineering and chemicals 03-01-2019. industries.

Islamabad Capital Covering approximately 500 Land acquisition process underway. Key sectors include IT Territory (ICT) Model acres of land. Feasibility studies of SEZs is shared with equipment, ICT enabled Zone, Islamabad Chinese side. services, steel, food processing and chemical industries.

Industrial Park in Situated at Port Qasim Feasibility studies of SEZs are shared Key sectors include steel, Karachi (Karachi) on 1500 acres of land. with Chinese side. garments, automobile, auto parts, and manufacturing industries.

Special Economic Covering 1078 acres in Azad Feasibility studies of SEZs are shared Will feature mixed industries. Zone at Mirpur Jammu and Kashmir. with Chinese side.

Mohmand Marble City Situated in the erstwhile The project awaits land allocation. Industries will be similar to Federally Administered Tribal those being proposed for Areas. Rashakai.

Moqpondass SEZ Covers 250 acres of land. Feasibility studies of SEZs are shared Key sectors include marble, Gilgit-Baltistan with Chinese side. granite, leather, food processing, steel and iron ore processing industries.

Source: Author's compilation

15. For example, if operating in the food sector of Punjab, compliance with Punjab Food Authority regulations is necessary. These could be different from Sindh province or national level regulations. 05 regulations and product standards can Now that the threat of militancy and Government's initiative to set up the Public- make it difficult for new businesses to insurgency is on the decline, potential Private Partnership (PPP) Authority by expand. investors wish to see improved working virtue of PPP Act, 2017 is a step in the right climate in key industrial and business hubs direction. However, many have argued that Coordination Gaps and urban areas. For example, to provide for this Authority to function and deliver, it condence to Chinese state-owned is important that it should not be under the The issue of overlapping roles and enterprises who continue to work in administrative control of the Ministry of responsibilities of various institutions Pakistan and implement CPEC projects, Finance (MoF). A clear mandate to regulate continue to pose a challenge for timely Pakistan raised a dedicated security unit. Public-private partnership (PPP) transac- completion of public sector projects. While this may not be possible for other tions and to assist federal institutions in Likewise, difficulties related to land non-CPEC projects given the already rising developing large infrastructure projects acquisition, licenses and permits required costs of law and order, however a general requires autonomy on the lines as allowed by businesses, royalties of provincial sense of improved rule of law will go a long to the State Bank of Pakistan. governments, double taxation on some way in exhibiting a positive image of economic activities by both federal and Pakistan as a business and transit hub. For private sector to participate in provincial governments lead to reduced Several embassies in Islamabad have yet to economic corridor building, the govern- interest in SEZs. This was also true for other offer a favourable travel advisory for their ment will need to demonstrate ease of CPEC-related projects which require a nationals. doing business. In this regard, it is impor- coordinated effort from federal, provincial, tant that all provinces agree on a national and local administrations. Policy Actions for Developing level regulatory impact assessment, based Corridors on which regulations which hinder The Prime Minister, therefore, constituted business and trade, may be considered for National Development Council and CPEC This section offers some policy recommen- automation, rationalization, or elimination. Authority. However, in general, public dation in the light of recent researches.⁶ The compliance with all forms of business infrastructure uplift requires institutions These recommendations may not only help regulations needs to be online, including such as the Council of Common Interests in the pursuit of an economic corridor but payment of any fee. This will eventually (CCI) and National Economic Council (NEC) can also position the trade, transport, reduce the human interface and incidence to function in a manner which encourages energy and other forms of productive of rent seeking. trade and other forms of economic activity activities to support national level efforts to which may or may not fall in the purview of achieve the SDGs. The trade and transport corridors carry the CPEC Authority. immense potential for boosting Pakistan's An effort to reimagine the way Pakistan future export competitiveness. In this Likewise, it is important to demonstrate to wishes to host and manage various regard, initiatives under CPEC and CAREC non-China investors that their assets and corridors has to start with a clear thinking will complement the Free Trade Agreement prots are also secure, and attention will be on the specic roles of state and markets. (FTA) with neighbouring and regional given in case of any business dispute. While For raising basic infrastructure, public economies. Pakistan should also aim to CPEC Authority could act as a one-window sector institutions alone cannot play the negotiate a new FTA on services with China. for the Chinese projects, Pakistan's Board of role of funding, execution, and monitoring This should then open doors for vast Investment (BOI) will need to assume that a of initiatives. The state institutions, number of IT, engineering, medical, and similar level of entitlement is in place for therefore, should focus on creating education sector service providers to non-China investors. enabling policies and regulations and then integrate with the Chinese markets. allow the private sector to come forward to Pakistan was recently ranked fourth in the Rule of Law execute and manage such initiatives. Of global gig economy on the back of large course, the state can still intervene in educated English speaking and technology Foreign investors aiming to enter into a sectors and regions where markets fail. savvy youth.⁷ certain economy for medium to longer term look at governance and rule of law This aspect is closely linked to revisiting the The transboundary ow of resources indicators carefully. While security of assets Government of Pakistan's Rules of Business including energy, will require strengthened and prots remains a key concern, an 1973 and see which economic activities can cross border security arrangements. In this equally important consideration is related be better performed by the private sector, regard, it will be important to not only to respect for property rights and enforce- non-prot entities, social enterprises, and augment the capacities of inland security ment of business contracts. Countries who perhaps in some cases, community-based institutions, but also build partnerships have managed to maintain an investor organisations. A complimentary effort will with counterparts in neighbouring and friendly milieu over the longer run usually then have to focus on reform of the public regional countries so that a shared vision work continuously towards improving administration. The civil service at the for a peaceful Central and South Asia several different dimensions of the rule of federal, provincial, and local level, while accentuates gains from the corridor law. These include civil justice, criminal capable of improving public service building efforts. It is important to highlight justice, informal justice, fundamental delivery, faces numerous operational the narrative that national and sub-regional rights, order and security, regulatory challenges. These continue to adversely efforts to build such corridors should not be enforcement, check on powers of the affect the ability of the civil service to seen as competing with each other and governments, and 'open government' deliver on execution of projects. We have rather help foster cooperation.⁸ systems to demonstrate transparency in seen in recent public expenditure reviews budgeting and procurements. that most development projects are While many have seen cross-border energy marred with time delays and cost overruns. trade with scepticism in South Asia, it is

16. Ahmed, V. (2018) “Pakistan's Agenda for Economic Reforms”. Oxford University Press, Karachi and Abdul Qadir and V. Ahmed (2018) Building the Economy of Tomorrow: A project synthesis report. Friedrich Ebert Stiftung. 17. Available at https://www.msn.com/en-xl/asia/pakistan/pakistan-ranks-4th-in-global-gig-economy/ar-AAGhrLo 18. See Ahmed, V., and Y. Arshad (2018) Corridors for Competition or Cooperation? Perspectives from Southern Asia. Criterion Quarterly, Vol 13 No. 3 and Manzoor, R., Maken, A., Syed, S. and Ahmed, V. (2019), "Trading with India: some current impediments for Pakistan", Journal of International Trade Law and Policy, Vol. 18 No. 1, pp. 39-55. https://doi.org/10.1108/JITLP-04-2018-0017. 06 essential to note that most of the econo- carries an average annual interest rate of Aligning Economic Corridor mies in the region have projections which approximately three percent to be paid indicate a large future demand for power over a decade and a half. Recent reports with Pursuit of SDGs and gas to sustain economic growth and suggest that Pakistan may not be able to maintain employment levels. It is, therefore, enter into any further loan based arrange- It is important to recognize a two-way important that countries rise above ments with China until the time balance of relationship between efforts to build an political differences and create a regional payments difficulties are resolved and both economic corridor and achievement of energy market. This will smoothen the current account and scal balance are in SDGs. For example, having an educated and seasonal disruptions in power and gas seen manageable limits. This understanding is skilled workforce (SDG-4) is a prerequisite across the region.⁹ part of the agreement with IMF and most to host and manage economic corridors. analysts see this as a decent step that will National funding dedicated to, for example The social and environmental safeguards in ensure scal consolidation. projects under CPEC, have a linkage with building economic corridors need to be SDGs. more appreciated at policy and regulatory Lasting gains of an economic corridor are levels. At times, in the race to win participa- achieved once countries offer dividends of As Pakistan moves towards the 'decade of tion in regional corridors, considerations arrangements such as CPEC to neighbours. action' for SDGs, it is important to highlight related to gender, social inclusion, In this regard, it is important that political that decent progress has been achieved in environment, and disaster risk reduction tensions should not impact business-to- aligning policies, plans, and resource are not given a priority. In this regard, business relations. Afghanistan and Iran allocation to the 2030 Agenda. In this Pakistan also has a global and regional have appreciated China-Pakistan coopera- regard, active Parliamentary Task Forces at commitment towards abiding by environ- tion in BRI, both have expressed the desire federal and provincial levels are supported mental, human rights, and labour conven- to join various initiatives of CPEC. Develop- by Advisory Councils, Technical Commit- tions. Such considerations should be ment partners have also advocated that tees, and District SDG Committees. Several carefully monitored during various stages India and Pakistan have a large potential of parliamentarians in the SDGs taskforce also of project execution. Efforts under CAREC bilateral trade and investment. Initiatives serve on CPEC's Parliamentary Committee and CPEC could alleviate most concerns of such as CAREC and CPEC can help both which helps in bridging any information the local business communities and labour countries to realize this potential once gaps. groups if employment opportunities for political tensions subside. maximum number of local populations are The targets envisioned in national and ensured.⁰ The CPEC Long Term Plan offers Global powers also need to play a role in provincial SDGs frameworks have also cooperation in the areas of clean technolo- reducing tensions in the region which found their way into provincial growth gies, renewable energy, water resource constrain progress towards building strategies and sectoral strategies (e.g. management, green construction, and economic corridors and achieving SDGs. provincial industrial policies). This is in turn energy conservation. However, the The role of China, Russia and US in bringing helping in aligning nancial ows to SDGs progress on these themes is slower than India and Pakistan closer and normalizing and also enabling the federal and provincial anticipated. Such interventions which help political and people to people relations, will governments to avoid any duplicity of sustainable development will also give a go a long way in strengthening gains from programmes in SDGs and CPEC portfolios. more human face to economic growth. investments in trade, energy, and logis- The tracking of nancial ows to SDGs has tics. A sincere effort by all member been initiated in collaboration with the Recently, in some countries including Sri countries is also required to commit office of Controller General of Accounts. In Lanka and Pakistan, there have been themselves to the promises in regional the coming days, there are proposals in concerns that economic corridors, if forums including Shanghai Cooperation place for innovative nancing of SDGs. supported through foreign assistance, Organization (SCO), Economic Cooperation These include nancing the 10 billion tree could lead to ballooning of debt and force Organization (ECO) and South Asian tsunami initiative through debt swap and developing economies to run high debt Association for Regional Cooperation promotion of green investments through servicing levels. This in turn could impact (SAARC). ⁴ Green Sukuk. As CPEC Authority and macroeconomic fundamentals and exert Federal SDG Support Units are housed in adverse pressures on exchange rate and ination. In the case of Pakistan, most “CPEC is missing from debates on SDGs framework in Pakistan. CPEC can contribute to projects under CPEC are on a revenue- multiple SDG targets, including but not limited to, local, national and regional connectiv- sharing arrangement which does not give ity, Foreign Direct Investment (FDI) inows, innovation and skills development, decent rise to debt obligations unless projects work, increased employment opportunities, infrastructure development, energy supply default. This, however, does not mean that and economic growth. In the second phase of CPEC, investments must be aligned there is no loan component under CPEC. towards clearly identied SDGs targets including vibrant manufacturing sector (SDG-9), quality jobs, improved work environment (SDG-8), productivity and international According to some estimates this loan competitiveness”.⁵ component comes to 11 percent and

19. Ahmed, V. (2014) A case for energy diplomacy. The News. July 20, 2014. Accessed via web: https://www.thenews.com.pk/tns/detail/556707-case-energy-diplomacy, accessed on: February 27, 2020. 20. Ahmed, V. (2018) “Pakistan's Agenda for Economic Reforms”. Oxford University Press, Karachi. 21. Aslam, H., V. Ahmed, S. Ahmed (2019) Analysis of China Pakistan Economic Corridor. Trade Insight Vol. 15, No. 3, 2019. 22. A related commentary on Pakistan's nancial choices may be seen in Suleri, A. Q. and V. Ahmed (2018) Contours of a programme with IMF: Choosing between approaching or not approaching IMF. Policy Review by Sustainable Development Policy Institute. 23. A more explanatory version of this argument may be seen in Ahmed, V., and Y. Arshad (2018) Corridors for Competition or Cooperation? Perspectives from Southern Asia. Criterion Quarterly, Vol 13 No. 3. 24. See also, Ahmed, V., Suleri, A. Q., & Javed, A. (2015). Strengthening South Asia Value Chain: Prospects and Challenges. South Asia Economic Journal, 16(2_suppl), 55S-74S. https://doi.org/10.1177/1391561415594900. 25. Amin, S. J. (2020) Integrating Sustainable Development Goals into Economic Policy Making: SDGs-in-All and All-in-SDGs approach. Working paper (forthcoming). Sustainable Development Policy Series. 07 Table 4: Complimentary Reform Actions

Reform Areas Actions Required

Integration and corridor Ÿ Reduce trade policy barriers development Ÿ Promote trade facilitation reforms Ÿ Ensure soundness of project selection and planning Ÿ Achieve inter-operability of transport infrastructure

Ensuring private sector's Ÿ Strengthen legal protection of investment interest and participation Ÿ Design public investment to avoid crowding out the private sector Ÿ Support the reform of the regulatory environment and planning of special economic zones (SEZs)

Interventions to ensure Ÿ Put in place social security and labour policies that mitigate adjustment costs faced by the poor as a inclusiveness result of competition from outside Ÿ Improve attractiveness of territories that are not a direct beneciary of corridors Ÿ Investing in urban development and transport where population inux is expected

Manage scal risks Ÿ Publicly disclose the terms and conditions if assistance arriving from outside Ÿ Use debt sustainability analysis to guide borrowing volumes and terms Ÿ Have a debt restructuring framework in place Ÿ Proper reporting of government operations, adequate monitoring and management of scal risks and budgets Ÿ Refrain from taking on loans collateralized through unrelated asset or revenue streams Ÿ Improve regulatory frameworks for public-private partnership and procurement processes

Manage governance risks Ÿ Ensure that projects are awarded through open national competition Ÿ Make use of trade agreements, including the WTO Government Procurement Agreement Ÿ Increase transparency by enhancing disclosure of data at all stages of the contracting process Ÿ Make use of both supply-side interventions (integrity pacts) and demand-side mechanisms (community monitoring) to tackle corruption

Manage environmental Ÿ Conduct strategic social and environment assessment at the corridor level, in addition to standard and social risks assessments at the project level Ÿ Move toward internationally accepted good practices to address social risks due to land acquisition and resettlement; risks to indigenous peoples; risks from work camps with a large inux of outsiders; and risks to community health and safety around construction sites.

Source: Adapted and abridged from World Bank (2019) the same ministry, therefore, it is expected to the relevant authority so that policy projects contributed to additional that there will be alignment in the responses may be designed. This task will capacities, particularly in the power and monitoring and reporting on national level also bring under one roof, the socio, industrial sector. On the back of improved development targets. economic, and environmental impact of energy supplies, Pakistan's economic CPEC, CAREC and related connectivity growth rate crossed ve percent during Pakistan Bureau of Statistics has aligned projects. scal year 2015-16 after almost a decade of some of its survey tools to SDGs and more depressed output. The increased growth efforts are required in the coming months It is important to highlight that infrastruc- seen in the large-scale manufacturing to increase the number of reported ture development on its own may not result sector attracted investment from abroad. variables beyond the current 26 SDG in trade or FDI gains. There are several Some CPEC interventions also focused on indicators. There remain missing capacities complementary reforms needed at the the agriculture sector. These included when it comes to monitoring, evaluation, national level ( see table 4). ⁶ provision of technology and skills to help and learning from current progress on enhance crop yields. China offered duty SDGs. For example, there is a need to free access for farmers in the Gilgit-Baltistan augment capacities in the planning Conclusion region. This has opened new opportunities departments, enabling them to update and for farmers in cereals, dairy, meat, tobacco, use SDG Pulse online dashboard, compute Pakistan's recent efforts to implement fruits, honey and related sectors. ⁷ human development, welfare, and poverty projects under CPEC have met with decent related indices on a regular basis and report success. The already completed energy Efforts related to physical connectivity can

26. World Bank. 2019. Belt and Road Economics: Opportunities and Risks of Transport Corridors. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO. 27. State Bank of Pakistan (2018). Retrieved from http://www.sbp.org.pk/reports/annual/arFY18/Special-Section-1.pdf 08 offer enhanced dividends if complimented ment and sharing of trade and transport environmental safeguards for those who with initiatives to negotiate market access data. However, not all segments of the would bear the adjustment costs of any for Pakistani exports and expedite trade population gain equally in the process of adverse economic outcomes or increased facilitation reforms including, liberal visa implementing large infrastructure projects. competition from abroad. policies, improved border area manage- It is, therefore, important to build social and

09 Opinion Economic Corridors: Impact upon Poverty, Development and Regional Integration

country to integrate with other countries in continues to exhibit an episodic pattern of the region, which is currently among the growth characterized by ‘boom and bust’ least connected in the world. All these will due to lack of fundamental growth help the country to achieve the Sustainable dynamics needed for sustainable and Development Goals (SDGs) in many fronts inclusive economic development. The main including to strengthen the country’s roots of the cycles are very signicant resilience toward climate change and other saving, investment gap and limited shocks. productive capacity. Consequently, as the domestic demand grows above the Background and Rationale economy’s capacity, it builds up scal and external imbalances leading to twin decits i. Key Challenges of the of scal and current accounts, which will Pakistan Economy ultimately cause the economy to overheat. Pakistan has not been able to fully realize its Guntur Sugiyarto economic potential as the economy is iii. Key Problems growing below its full capacity and still far Key problems that have been hindering Principal Economist from its growth aspiration of at least 7 p r o g r e s s a r e e n e r g y c r i s i s a n d Asian Development Bank percent per year. The growth is needed to infrastructural bottlenecks, low and absorb the increasing number of labour cumbersome taxation systems, low saving force in the economy of three percent per and investment, declining exports and Introduction year, to create two million additional jobs worsening competitiveness. All are in annually. The higher growth rate is also addition to the overall security and Pakistan needs to develop economic needed to increase the overall per capita macroeconomic stability issues that keep corridors to link its economy with the income and productivity to reach the high- lingering from time to time. The energy regional and global economic corridors income level. In the 1960s, per capita crisis and infrastructural problems alone that would be brought by the Belt Road growth in Pakistan used to be among the have been costing more than 5 percent of Initiative (BRI) of the People’s Republic of top in Asia, higher than People’s Republic of GDP annually, the taxation rate is not even a China (PRC), the Central Asia Regional China, India, Indonesia, and Malaysia, but it half of its potential, saving and investment Economic Cooperation (CAREC) program is now among the bottom as they have all rates only around 10 percent of GDP or sponsored by the Asian Development Bank bypassed Pakistan. about one third of Asia’s average, and the (ADB) and others. By doing so, Pakistan’s continued declining export value and share economy will be better connected to the ii. Current Situation in the global market is of serious concern.⁴ global production networks and value Pakistan’s growth rate was 5.1 percent The country actually has its growth chains, giving more chance to signicantly during 2001–2007, but it weakened to 3.8 potential through its increasing working expand its product market, increase export, percent during 2008–2015, lower than its age population that explains 64 percent of total output and overall productivity. regional peers. The situation has subse- the potential growth in Pakistan while quently improved as the economy has many other countries have experienced a The economic corridor development (ECD) become a ‘pick star’, being re-admitted to declining rate, but this demographic is also to close the existing provincial and the emerging market index and gearing up dividend will fade away once the popula- district development gaps, reduce poverty towards continued growth. Pakistan tion starts aging. Moreover, the structural and increase regional integration. It can be successfully completed the three-year IMF change in PRC from an export led to a expected to bring development across the program in September 2016, making it the consumption-driven economy has board, including to far ung areas that have rst ever completed IMF program in changed the country’s import structure been relatively neglected in previous and Pakistan, after 21 times of IMF programs into more consumer products, and the rise current development strategies. ECD will since 1958. Pakistan’s growth had been in wages has moved some activities to help in connecting the less-developed steadily inching up over the past few years, lower-cost economies. All these could districts with the developed ones, before common structural problems again benet Pakistan, in addition to its rapidly addressing the structural poverty that has a derailed the progress that forced the growing large and mid-size cities with an strong link with the district development government to return to the IMF program in increasing number of middle class, and its disparity. Moreover, ECD can help the 2019. In a nutshell, Pakistan’s economy dynamic population with a relatively

1. The views expressed here are personal. 2. This growth rate was achieved in the scal years 1963-67 and 2004-07. 3. World Economic Forum (2015), “Global Competitiveness Report 2015–2016.”. Geneva. 4. Pakistan’s economy is driven by a resilient services sector, representing more than 50 percent of GDP. Pakistan also draws its strength from the resilience of its informal economy, including subsistence farming. From the outside, remittances have been a signicant source of foreign exchange and income, amounting to about 6 percent of GDP. 10 signicant number of skilled labour force. Figure 1: ECD Framework based on global best practice and local knowledge iv. Solutions L CONNEC Given the key challenges in the Pakistan OBA TIVIT economy and the current developments of GL ON Y NAL C NECTI economic corridors under CPEC and in the GIO VIT RE Y neighboring countries in Central and West Asian region, i.e. through the CAREC K ey D program, the most plausible solution for r iv e Pakistan is therefore to develop economic rs corridors to connect with CPEC and CAREC Economics corridors. By doing so, the Pakistani economy is expected to link with global production networks and value chains, Infrastructure moving the country into a higher growth Development trajectory by having a bigger and better- connected market. Pakistan should EDE Necessary maximize its strategic position, including Conditions from being the neighbour of the fastest Sustainability & Institution & growing economies in the world. The Inclusiveness Industrial Urban Regulation challenge is now to stimulate economic Development Development development along these newly built corridors by developing their complemen- tary economic facilities, such as special economic zones and industrial parks, and implementing appropriate polic y responses, to transform them into true economic corridors. Hence, the economic Diaspora & External Factors corridor development.

ECD in Pakistan

ECD is a well-proven growth instrument. It Source: Developing ECD Framework. Pakistan ADB-DFID (forthcoming) has been empirically proven across countries to have the potential to move a To develop a robust ECD, some basic policy • Public-private partnership (PPP) must country into a higher growth trajectory.⁵ It principles must be considered by the be developed to help ECD, for the refers to the spatial organization of government such as: amount needed is huge while the economic activities across the region and government’s capacity is limited. PPP increasing their density to promote • ECD is not just about infrastructure is to address infrastructure bottle- connectivity, spatial transformation, development but covers the develop- necks and stimulate growth to agglomeration, and economic diversica- ments of markets for capital, factors increase economic activity and tion. and goods and services; enhance cost recovery prospects of the investments; ECD includes creating efficient multimodal • It should have very clear measurable transport networks within a dened objectives such as increased employ- • Policies and regulations in investment, geographic area supported by good ment, more economic activity, industry and trade must be conducive infrastructure, logistics, and a policy enhanced exports and growth with for ECD, which should also be seen as a framework to facilitate business and their corresponding time-line for each poverty reduction measure to reduce distribution networks that are linked with that can be used to assess its perfor- provincial and district development production centers, urban clusters, and mance. This is very important as many gaps; and, international gateways. Therefore, it has ECDs require some sort of incentives three main core components of trade and from the government that must be • ECD requires a multi-agency ’s transport, industrial production clusters, justied by the progress; commitment and coordination, and it and urban centers, which serve as major is imperative to steer its process from markets, as well as sources for labour, • The incentive provided by the the top and implement it through technology, knowledge, and innovation. government must be in the form of robust corporate entities with private The three ECD cores should be driven by foregone revenue and not in the fresh sector talent, fully autonomous and economics, institution and regulation, money transfer from the government accountable to the government. e x t e r n a l f a c t o r s a n d a s p e c t s o f to the key players in ECD; Malaysia’s ECD provides a good sustainability and inclusiveness. Finally, example in which the Prime Minister ECD must be put in the context of regional • Government should act more as a chairs the central planning and the and global economic corridors to increase regulator to address market and/or Chief Ministers act as co-chairs, while the overall connectivity. Figure 1 summa- institutional failures. Any government each corridor has its own implement- rizes the ECD framework highlighting the investment must not crowd out ing authority (e.g. the Northern connections of ECD cores and enabling private capital as private investment is Corridor Implementing Authority and factors under the context of regional and the key for a successful ECD; the East Coast Economic Region global connectivity. Development Council). Similarly, in

5. Asian Development Bank (2016), “Scaling New Heights: Vizag–Chennai Industrial Corridor, India’s First Coastal Corridor.” Manila. 11 India, the Delhi–Mumbai Industrial along Eurasia through mega infrastructure Moreover, CPEC is not a standalone project Corridor is developed under a multi- projects by developing six corridors under but it is in line with other ECDs in the tiered structure but with a steering two roads: the New Silk Road Economic Belt regions in South and Central Asia. ECD is authority headed by the Minister of running west towards Europe through also a key development agenda in India and Finance with concerned central Russia and Central Asian, and the 21st in Central Asia, through the CAREC program ministers and chief ministers of Century Maritime Road focuses on reaching of a regional partnership of 11 countries respective states as members. Europe through South Asia and Southwest covering transport, trade facilitation, Asia.⁷ All of this can be a game changer for energy and trade policy. In addition, India is ECD can be seen as a structured framework Pakistan and its surrounding region given currently developing ve economic covering planning and implementation, the scale and magnitude. This investment is corridors at the national level. Other where the planning must be done through more than 20 percent of Pakistan’s GDP, neighbouring proposed corridors include a master plan considering economic bigger than the country’s annual exports of regional corridors of Colombo-Trincomalee growth prospects of the region concerned, only less than 15 percent of GDP. Moreover, Economic Corridor in Sri Lanka and the and linking it with corridor infrastructure to put in perspective further, Pakistan spent Southwest Economic Corridor in Bangla- development, industrial development and less than ve percent of GDP for infrastruc- desh. social sector development, and the ture in the last four decades, while the need implementation should cover both hard is more than eight percent of GDP.⁸ Better Pakistan’s experience with economic and soft infrastructure developments.⁶ still, about 61 percent of the CPEC invest- corridors goes beyond CPEC and CAREC. ment will be allocated to the energy sector The country history and the spatial ECD under CPEC, CAREC and Others to improve its capacity, transmission and development patterns indicate the distribution, that all have been costing the emergence of organically grown economic CPEC is an extension of PRC’s proposed 21st economy 2 to 2.5 percent of the GDP corridors in the country, such as along the Century Silk Road initiative, the biggest annually.⁹ The big remaining 36 percent will centuries-old Grand Trunk Road. Therefore, overseas investment by the country. be for infrastructure, transport and the history and current circumstances Announced in July 2013, the USD 62 billion communication, whose bottlenecks have conspire to provide a golden opportunity project is PRC’s ‘agship project’ of the One been costing the economy four to six for Pakistan. God does not shower Belt One Road (OBOR) which was then percent of the GDP annually. Therefore, one blessings, he showers opportunities. It is up renamed into the Belt Road Initiative (BRI) would expect that the whole CPEC project to us how to convert the opportunities into to promote PRC’s exports and better could potentially bring a signicant blessings. The golden opportunity is really international relations with a total increase in Pakistan’s economy and GDP. A in yourself! investment of about USD 900 billion. It is successful CPEC will undoubtedly spur also to boost integrated economic growth economic growth in Pakistan and beyond.

6. JICA: Corridor Development Approach – Revitalize the Region Inclusively and Bring Strong Sustainable Economic Growth for the People. Available at: https://www.jica.go.jp/english/publications/brochures/c8h0vm0000avs7w2-att/japan_brand_07.pdf 7. The project aims to connect PRC with more than 60 countries, facilitating potential trade with a further 4.4 billion people. The estimated economic implications are enormous, valued at USD 21 trillion that is expected to boost China’s GDP by 25 percent. This should help China to reach its 6.8 percent projected growth rate. The 6 corridors are: China- Mongolia-Russia Economic Corridor (CMREC); New Eurasian Land Bridge (NELB); China-Central and West Asia Economic Corridor (CCWAEC); China-Indo-China Peninsula Economic Corridor (CICPEC); China-Pakistan Economic Corridor (CPEC); and Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC). Other planned corridors are to connect PRC to the Middle East countries to give direct access to the Arabian Sea and the energy-rich Persian Gulf markets, as well as closing a distance by at least 10,000 km. 8. ADB (2017), “Meeting Asia’s infrastructure needs.” Manila. 9. About 2 percent to 2.5 percent of GDP annually: “Pakistan’s Interminable Energy Crisis: Is There Any Way Out?” Wilson Center. 12 Opinion CPEC and Socio-Economic Development

much as three or four times the initial USD Current Status of CPEC 62 billion investment and will create a number of opportunities for the country to The rst stage of CPEC has been success- pursue inclusive and equitable growth via fully completed with a main focus on multiple channels. energy and infrastructural projects. Prior to CPEC, Pakistan was experiencing losses First, within the country, it will connect the worth USD 4-5 billion every year due to far ung but well-endowed production energy shortages, and 3.5 percent of GDP areas to the main markets in Peshawar, due to poor transportation infrastructure. Quetta, Lahore, Karachi and Gwadar Under the rst phase of CPEC, transporta- seaports through a network of road and tion infrastructure has been improved railways. Second, externally it will decrease through integrated road networks and up illegal activity across border trade costs. gradation of railways, which has also Third, it will open up avenues of economic addressed the energy shortage. Atr-un-Nisa cooperation and trade with China. Fourth, it will link the country to BRI’s other corridors As CPEC enters the second phase, the focus Senior Research Fellow and give direct access to the Global is shifted to socio-economic development, Production Networks (GPNs), Global Value industrial cooperation, development of The Shahid Javed Burki Institute of Public Policy, NetSol Chains (GVCs) and markets of Middle East, Special Economic Zones (SEZs), agricultural Central Asia and Europe, especially to cooperation and construction of Gwadar members of the Economic Cooperation port. The joint cooperation committee Introduction: The Potential of CPEC Organization (ECO) and Eurasian Economic (JCC) of CPEC has identied 27 projects in Union (EAEU). six sectors including agriculture, health, The China Pakistan Economic Corridor education, drinking water and supply, (CPEC), is the key component of the six Other associated benets include, reduced poverty alleviation, and vocational and corridors under China’s “Belt and Road costs of transportation and travel time, technical education. Initiative” (BRI), which was launched in diversication of external economic 2013. The BRI plan touches 138 countries linkages, frequent people to people These projects will directly contribute to with a combined Gross Domestic Product contact, cultural assimilation, higher the achievement of the sustainable (GDP) of USD 29 trillion, and some 4.6 billion volume of trade and businesses and a well- development goals (Especially Goal 7: people (61 percent of the world’s popula- connected, integrated region of shared Access to affordable, reliable, sustainable tion). destiny, harmony and development. and modern energy for all; Goal 8: Promot- ing sustained, inclusive and sustainable CPEC mainly comprises infrastructure Pakistan has been experiencing consider- economic growth, full and productive development, energy production, able social and economic stress, especially employment, and decent work for all; and, industrialization and social and economic over recent years. Slow GDP growth rate, Goal 9: Building resilient infrastructure, development. With a length of around 2900 severe balance of payment crises, along promoting inclusive and sustainable km, it will link Gwadar to Kashgar in China’s with large twin scal and current account industrialization and fostering innova- northwestern region of Xinjiang and decits, low exports, dwindling foreign tion). provide connectivity to major cities of exchange reser ves, high ination, Pakistan through a network of highways, unemployment and rising incidence of Cultural Exchange between railways and pipelines. It constitutes the poverty, characterize the country’s China and Pakistan kernel of BRI and will enable Pakistan to economic landscape. CPEC holds the power fully harness the demographic and natural to simulate a much needed socio- The CPEC has the potential for transfer of endowment of the country, by expanding economic uplift of Pakistan (Figure 1) cultures between the two countries. For and optimizing its agro-industrial capacity, through the provision of employment instance, the cross-border ber optic cable addressing regional disparities, augment- opportunities, overcoming the energy project will establish fast and reliable ing people’s livelihoods and incomes, and shortage problem, the construction of new connectivity routed through China. It will achieving domestic stability. industries, the eradication of poverty, and facilitate terrestrial distribution of improving living standards. broadcast television thereby bringing It is estimated that CPEC could generate as Chinese culture into Pakistani homes.

1. China Power: Unpacking the Complexity of China’s Rise. “How will the Belt and Road Initiative advance China’s interests”. Available at https://chinapower.csis.org/china-belt-and- road-initiative/ 2. The Express Tribune; Shakeel Ahmad Ramay (2019), “CPEC’s second phase can put Pakistan's economy back on track.” Available at https://tribune.com.pk/story/2052518/2- cpecs-second-phase-can-put-pakistans-economy-back-track/ 3. Akhter Rania (2019), “Building Regional Connectivity for Pakistan”, Friedrich Ebert Stiftung. 13 Figure 1: Social and Economic Development Process through CPEC

China Pakistan Economic Corridor

Economic Development Social & Cultural Development

GDP Trade Job Increase Cultural Infrastructure Storage of Connectivity Technology Growth Enhancement Creation FDI Exchange Development Energy Transfer

Poverty Special Development Railway Rural Economic System & Alleviation Zones of Hospitals Roads Development

Social and Economic Development

Energy Infrastructure Pakistan was experiencing a severe energy shortage of more than The CPEC aims at an extensive refurbishment of the existing 10,000 MW during 2010, which resulted in the closure of industrial transportation infrastructure in Pakistan and laying out of new units and factories leading to an increase in unemployment and routes for the facilitation of transit trade and enhancement of decline in exports. In the rst phase of CPEC, nine projects were market accessibility. Infrastructure projects include ve road and completed and 5320 MW of electricity has been added to the three rail projects. 1544 km has been constructed and 1456 km is national grid costing USD 7,899 million. Eight projects are under under construction. construction to provide an additional 4,470 MW to cost USD 9,549.927 million. Four projects are planned to provide 2,544 MW at the cost of USD 4,470.2 million.⁴

Box 1: CPEC Salient Projects

Gwadar Special Economic Zones (SEZs) Gwadar Port is the lynchpin for the success of the In order to accelerate industrialization and CPEC program. A huge USD 4.8 billion investment will economic growth, CPEC provides nine SEZs that be made to upgrade the town, making it a modern port city include; Moqpondass SEZ, Gilgit-Baltistan; Mirpur Industrial at par with international standards, and South Asia's busiest Zone, Azad Jammu and Kashmir; ICT Model Industrial Zone, trading hub by 2023. 50,000 professional jobs are expected in the Islamabad; Punjab - China Economic Zone, M-2 District future, that will drive the regional economy in terms of goods, Sheikhupura Punjab; Rashakai Economic Zone on M-1, Khyber- services and development.⁵ During the rst phase, 10 projects in Pakhtunkhwa; Mohmand Marble City, FATA; Bostan Industrial Zone, infrastructure and social development have either been completed Balochistan; Special Economic Zone Dhabeji, Sindh; and, Port or are at an advanced stage of completion, with an estimated cost Qasim Special Economic Zone, Sindh. Three SEZs (Rashakai, of USD 1377.32 million.⁶ Ongoing Gwadar projects include, Dhabeji and Faisalabad) have been designated as high priority. The dredging of the approach channel, an expressway linking Gwadar static benets of SEZs include, foreign exchange earnings, foreign to the Makran Coastal Highway, a new international airport, and a direct investment, employment generation, government revenue desalination plant. These are to be supplemented with major and export growth, while the dynamic benets of SEZs include, investments. skills upgrading, technology transfer, demonstration effect, export diversication, enhancing trade, efficiency of domestic rms, formation of industry clusters, integration into global value chain and, testing eld for wider economic reforms.

4. The News International (2019), “CPEC projects picking up pace: ministry.” Available at https://www.thenews.com.pk/print/529044-cpec-projects-picking-up-pace-ministry) 5. China-Pak Investment Corporation. Available at https://www.cpicglobal.com/pakistan-overview/cpec/ 6. Ibid 14 Moreover, the increase in the number of wave of foreign investment from other 1. Pakistan needs to develop a clear Chinese workers in Pakistan will bring in countries, boosts agro-industrial export strategy at the national level which more technical and soft skills while also and creates jobs. These investments alone guarantees transparenc y and improving the local skill set. will not yield the required results unless openness to ensure domestic support supporting policy changes are made to to the project e.g. joint ventures, loan While these facets of skill and cultural facilitate export-oriented agriculture, conditionalities and other allied exchanges appear as positives, they can investments in manufacturing to support developments. certainly cause negative impacts in the export of value-added products, demand- country and hence, must be carefully based skills development, investment in 2. Grievance redressal and participatory monitored. Furthermore, skills dissemina- research and innovation, and concrete mechanisms have to be put in place to tion should be made a necessary compo- Public Private Partnership (PPP) linkages. win public trust and allow for space for nent of the CPEC project. grassroot engagement of benecia- The other major challenge is the need to ries. Bilateral and Regional Trade build a strong political consensus to be able through CPEC to orient CPEC’s priority towards inclusive 3. The CPEC’s narrative needs to be growth and sustainable human develop- depoliticized. It must be viewed as a While CPEC projects will directly or ment in Pakistan. With the country’s highly ‘national undertaking’. The responsi- indirectly enhance trade between Pakistan polarized domestic politics along with the bility for project selection and design and China as well as the rest of South Asia, propaganda unleashed against CPEC in the should see equal participation from all transport and infrastructure projects in international arena, several international stake holders rather than solely driven particular can provide strategic leverage for countries have shown apprehensions and by politicians. phenomenally increasing trade through reservations regarding the overall CPEC reducing shipping costs, transit time and model. 4. Reorientation of Pakistan’s exports augment trade competitiveness etc. that are sensitive to the GPNs and On the domestic front, security challenges value chains needs to be a priority. This A major volume of Chinese trade takes on the CPEC routes are of considerable effort should be facilitated via CPEC’s place from Kashgar (western China) to proportion. There is a need to establish and connectivity for an export driven agro- European ports (Hamburg, Le-Havre and subsequently maintain peace and security economy that caters to the needs to Rotterdam) and Middle Eastern ports to gain investors’ condence. markets in Central Asia, Middle East (Jeddah, Kuwait and Oman) to fulll and Western China. Chinese energy requirements. The shipping Several analyses also predict that CPEC may cost alone will drop drastically with CPEC have implications on foreign debt. 5. Peace and security must be ensured development by 36 percent for European Preliminar y projections on CPEC’s and maintained in the region. ports, 50 percent for Jeddah and Kuwait, disbursements and debt liabilities estimate and 68 percent for Oman. that the debt burden from energy and 6. Major policy documents and plans infrastructure projects would be of the also need to focus on social sectors. Moreover, transit time will decrease by 10- order of USD 3.5 billion per year (about For instance, the education and labour 11 days for European ports, 11-13 days for seven percent of current total foreign policy needs to be ‘skills driven’ to Jeddah, 15-18 days for Kuwait and 10 days exchange earnings) over a 15-20 years ensure that it can support the export for Oman. This essentially means that repayment period. However, energy driven agro-economic activity around perishable products which were a projects are likely to save about USD 1 CPEC routes and economic programs. challenge to transport previously, will also billion a year in foreign exchange from increase in exports for both countries. imported fuel costs.⁷ 7. The ownership of individual projects should rest with concerned provincial Finally, it will also aid Pakistan in becoming Finally, the individual and combined and local agencies. They should be a part of global value chains through China. implementation capacities of Pakistan and responsible for project design, A number of Chinese Companies are China, for a huge undertaking of this kind, implementation and nancial showing increasing interest in establishing are going to be a key challenge. Special obligations. Along with this, inde- industries in SEZs under the CPEC, implementation arrangements will have to pendent monitoring and evaluation particularly because of the advantage of be thought through and put in place to mechanisms have to be instituted for location and lower transportation costs in ensure sustainability of the projects. CPEC projects. This effort will generate exporting their produce. trust and ownership amongst the Policy Recommendations beneciaries. Challenges and Way Forward

CPEC offers the potential of transforming To address these issues and challenges, the Pakistan’s economic outlook if it sparks a following recommendations are made:

7. DAWN Newspaper, Ishrat Husain (2017), “Financing Burden of CPEC.” Available at https://www.dawn.com/news/1313992

15 Opinion

Local Integration via Corridors

Socio-Economic Impact of Local Corridors in Pakistan

The local road networks in Pakistan play a signicant role in developing the economy (See Figure 1). Due to the connectivity they provide between provinces and cities, they contribute substantially to the Gross Domestic Product (GDP). The agriculture base is concentrated in Punjab mostly i.e. the production of sugarcane, potatoes, rice, wheat and cotton. These corridors have facilitated in the transportation of this produce from rural areas to urban areas so Usman Khan Zahra Hameed that they can be sold fresh in markets.

Innovation Lead Research Associate The motorways have also contributed Oxford Policy Management Oxford Policy Management signicantly by facilitating intercity travel Faculty of Economics, Lahore University through reducing travel times. The time of Management Sciences taken to commute from Northern Punjab to Southern through the M4 (Multan-Lahore) Pakistan stands at a crucial crossroads Ÿ National Highway and M5 (Multan-Sukkur) motorway line is where its population has been growing Ÿ Indus Highway signicantly less as opposed to previously, rapidly for the past several years and its Ÿ Karakoram Highway when these networks did not exist. economic performance has seen consistent Ÿ Railway networks cycles of boom and busts. The economy Ÿ Motorways sees an upturn pattern fueled by consump- tion led growth that forces the country into Figure 1: Map of National Highway Network a stabilization phase every few years owing to erratic macroeconomic indicators.

Over the last 70 years or so, the country has CHINA only grown at four percent per annum. Moreover, the growth has been character- ized by an imbalanced regional pattern, where certain regions have done really well while others have performed poorly and are signicantly more deprived. This AFGHANISTAN unbalanced development has echoed itself into the national development system resulting in an uneven spread of infrastruc- ture and connectivity. INDIA Evidence shows that development and economic activity is strongly linked to the availability of road and transport connec- IRAN tivity. It is in this scenario that economic LEGEND corridors play a signicant role by ensuring KKH Western Alignment the provision of signicant linkages Central Alignment Peshawar-Karachi Motorway between economic intersections or hubs Indus Highway National Highway ARABIAN SEA Under Construction that are usually around urban areas. Local Planned corridors within Pakistan include the following:

1. Hans-Peter, Brunner (2013), "What Is Economic Corridor Development and What Can It Achieve in Asia's Subregions?" Asian Development Bank, Economics Working Paper Series 117. 2. National Highways Authority, "National Highways Authority – Committed To Excellence". Available at http://nha.gov.pk/en/ 16 While the Grand Trunk Road is the oldest national corridor linking to the M2 Figure 2: Night Light Data motorway, the motorways have provided a clean and fast route for buses, trains and cars etc. Impact of these corridors can be seen in the night light data-the economic activity clearly follows the road network linkages (Figure 2).

Similarly, the development of such corridors in Northern Pakistan has led to a rise in tourism and integration between various cultures. Fruits, herbs and minerals present up north have become more accessible to the population in Southern Pakistan through improved road networks. The Indus Highway is still the shortest route from Karachi to Peshawar and passes through the rural areas, thereby, providing integration and mobility.

Despite the fact that these road networks provide economic prosperity to their respective regions, the way these decisions are taken impact the society signicantly and can result in deprivation of certain segments, resulting in income segmenta- tion.

For example, in Pakistan, these corridors are built from development funds invested by the federal and provincial governments. Unfortunately, post the Junejo regime in Excessive road networks also lead to Case Study 1: The Dhaka-Chittagong the 80s, development spending has massive deforestation. In South Asia, Corridor, Bangladesh become a victim to the ‘pork barrel Pakistan is subjected to the highest rate of The Dhaka-Chittagong corridor in approach’-most investment decisions are deforestation and further investment in Bangladesh is a successful model of a highly politicized and thus over the years road systems could aggravate this. There is transport corridor. It contributes almost 50 have inuenced the development of also severe air pollution, which has led to percent to the GDP of the country, certain regions at the cost of others. This excessive smog in recent years, ranking alongside handling around 85 percent of deprivation is now clear in terms of regional Lahore as the second most polluted city international maritime traffic.⁷ This differences in the Human Development worldwide.⁴ highway is one of the most signicant Index (HDI), Multi-Dimensional Poverty corridors when it comes to freight and Index (MPI) and the quality plus quantity of Global Examples of Successful Local passenger transport. 92 percent of economic opportunities. Corridors in Developing Nations Bangladesh’s imports and exports, as well as 81 percent of the domestic ready-made Moreover, lack of appropriate planning also Local development corridors aim to garments, are carried through this road.⁸ impacts ethnic clusters, leading to social encourage domestic trade and economic conict in urban areas. Other negative growth along the corridor.⁵ To evaluate the Case Study 2: The Golden Quadrilateral spillovers as a result of new transport and objectives of economic corridors, certain Highway, India trade routes being developed usurp living factors are taken into consideration. The The Golden Quadrilateral (GQ) highway in spaces for the poor in cities and crop average time and costs incurred for India, linking the four main cosmopolitan harvesting spaces for agro based rural transport should be reduced, along with cities of the country (Delhi, Chennai, families. This prompts a rise in ‘urban their variability. Trade and other facets of Kolkata and Mumbai), contributes sprawl’, with many rural based families then the domestic economy should be extravagantly to its economic activity. The relocating to urban centers in search of enhanced. If these objectives are achieved, upgrade of this highway greatly increased economic opportunities. Pakistan has the only then are the objectives of a corridor activity in the manufacturing sector of the highest rate of urbanization in South Asia. maximized.⁶ Pakistan can benet from economy. The largest growth came from According to the 2017 Population Census, various successful examples and case the districts located within 0-10 km of the 36.4 percent of the population lives in studies of local corridors all around the highway, accounting for 34 percent of the urban areas. world. initial stages.⁹ The highway ensures

3. UNDP Pakistan, Development Advocate Pakistan (2019), “Sustianable Urbanization.” Volume 5, Issue 4. Available at http://www.pk.undp.org/content/pakistan/en/home/library/development_policy/dap-vol5-iss4-sustainable-urbanization.html 4. Sánchez-Triana, Ernesto, Javaid Afzal, Dan Biller, and Sohail Malik (2013), “Greening growth in Pakistan through transport sector reforms: A strategic environmental, poverty, and social assessment.” The World Bank. 5. Arnold, John, G. Olivier, and Jean François Arvis (2005), "Best practices in corridor management." The World Bank. 6. Kunaka, Charles, and Robin Carruthers (2014), “Trade and transport corridor management toolkit.” The World Bank. 7. Quium, A. S. M (2019), "Transport Corridors for Wider Socio–Economic Development." 8. Uddin, Md Zia, and Takeshi Mizunoya (2019), "An economic analysis of the proposed Dhaka–Chittagong Expressway in Bangladesh with the viewpoint of GHG emission reduction." Asia-Pacic Journal of Regional Science, 1-3. 9. Supra 7 17 provision of rapid transport systems investments discovered a tradeoff between the CPEC is an ideal example of this. This between big cities and ports and smoother reducing poverty and achieving growth. refers to the upgradation and rehabilitation production and people movement within The greatest returns in terms of economic of the existing railway networks in Pakistan- the region. It provides access to India's growth through these investments were this is important to fuel industrial activity in major agricultural, commercial and cultural seen in eastern and central China, however the KP province. centers. It allows industrialization and the impact of poverty reduction was creation of jobs via signicant exposure to signicantly witnessed in western China.⁴ In order to ensure more comprehensive diverse markets in smaller towns.⁰ The National Express Network in China development, it is imperative to interpret greatly boosted real incomes in districts the diffusion of impacts across clusters of Case Study 3: National Highway, India nearby by almost four percent, real wages residents, as well as across geographical Referring to India yet again, the effects of decreased in many districts in the rural and regions. Considering all the exemplary the National Highway (NH2) were also urban sectors.⁵ corridors mentioned above, it can be assessed. Keeping a survey as the baseline, gauged that the diffusion of impacts can be it was seen that overall literacy saw a six All the case studies depict that while the uneven across geographical regions. percent boost, female literacy in particular importance of local corridors or regional went up by 12 percent, along with the development is immense, however, it In the context of Pakistan, extensive school enrolment rate which increased by requires appropriate planning and research would be needed to evaluate the seven percent (out of which 12 percent of nancing. diffusion of impacts across various divisions the children were females). There was also of the population for each development an increase in the people who now had Lessons for Pakistan result, and in various circumstances. Taking access to hospitals and improved medical the provinces of Punjab and Balochistan facilities (seven percent). An increase in In the case of Pakistan, providing access into consideration, a difference can be seen women’s engagement in the labour force through corridors to remote underdevel- in their demographics. Population in (nine percent) and employment in non- oped areas would offer immense benets. Balochistan is more scattered with a rough agrarian projects (seven percent) was For instance, transport linkages within the terrain, however in Punjab it is more signicantly witnessed. Income per capita province of Balochistan could connect concentrated making it easier to imple- also rose by INR 243. different areas with the thriving economic ment and design projects because of the arteries of the province, and the country. land structure. Case Study 4: NH-5 Highway Corridor, Likewise, other ignored areas that could Vietnam offer immense potential if fully reaped, Conclusion Likewise, output impacts were achieved such as northern areas in erstwhile FATA through the NH-5 highway corridor in and Khyber Pakhtunkhwa (KP), can also Economic corridors provide connectivity Vietnam. It produced signicant positive boost revenue and economic activity for and integration on local and international effects for the region it was constructed in. the country. levels. The existing local corridors in Pakistan have their pros and cons. Corridors As the outcome of a spillover effect of this Investment in local connectivity can be a fo s te r i n te rc i t y a cce s s i b i l i t y a n d corridor, Vietnam’s poverty rate decreased signicant policy tool for the purpose of job interprovince integration, however by 27 percent. Households residing in creation and may also play an important political instability and the environmental poverty signicantly decreased by 35 role in reducing regional inequality. impacts are a major setback for the country percent during 1995 and 2000. It also However, overall income distribution may in terms of developing these networks. encouraged job creation and investment. be impacted in a notably negative manner. Several examples of existing corridors 83,453 jobs in the province of Hung Yen and For example, the NH-5 corridor in Vietnam taken from developing nations such as 134,846 jobs in Hai Duong were created in has not only created jobs in the region, but Bangladesh, India, Vietnam, Thailand, 2006. also reduced poverty signicantly and Ethiopia, Kenya, China and Uganda are boosted earnings. What Pakistan can learn useful for Pakistan in developing its Case Study 5: The Asian Highway from this is that, if transport development infrastructure. CPEC will be a game changer Network Route, Thailand coexists with suitable complementary for the economy, if it is able to induce The Asian Highway network route (AH18) in interventions, then the economy can be cultural and regional integration. the Songkhla province of Thailand has also substantially modied in a positive way. proven to be effective in terms of poverty reduction in the region and the average Taking the high-speed railway system in family income differed based on location. China as an example for reducing geo- graphical economic disparity and encour- Case Study 6: The National Express aging geographical economic conver- Network, China gence, Pakistan can learn a lot. The ML-1 In China, studies conducted on road Railways project being implemented under

10. Asian Development Bank; Department for International Development; Japan International Cooperation Agency; World Bank (2018), “The WEB of Transport Corridors in South Asia.” World Bank, ISBN 978-1-4548-1216-3. 11. Asian Institute of Transport Development (2011), “Socioeconomic Impact of National Highway on Rural Population.” Asian Institute of Transport Development: New Delhi, India. 12. Supra 10 13. Neupane, H.S; Calkins, P (2012), “Poverty, Income Inequality and Livelihood Diversication: A case of Asia Highway in Songkhla Province of Thailand. In Asian Economic Reconstruction and Development under New Challenges;” Huang, W. Leeahtam, P, Eds.; CMSE Press: Chiang Mai, Thailand. 14. Fan, Shenggen, and Connie Chan-Kang (2008), "Regional road development, rural and urban poverty: Evidence from China." Transport Policy 15, no. 5: 305-314. 15. Lall, Somik V., Elizabeth Schroeder, and Emily Schmidt (2014), "Identifying spatial efficiency–equity trade-offs in territorial development policies: Evidence from Uganda." The Journal of Development Studies 50, no. 12: 1717-1733. 18 Opinion

Trade and Commerce Development

economy. Regional connectivity through European region. A noticeable increase in corridors can serve as the catalyst for trade was witnessed after the TRACECA enhancing trade and commerce develop- agreement in 1994 (Figure 2). TRACECA has ment, if utilized appropriately. played its vital role in shrinking the distance between nations in supplying products for For instance, the Greater Mekong Sub- trade purposes. The Logistics Performance Region (based in China, Cambodia, Index also depicts improved performance Thailand, Viet Nam, and Myanmar) and of countries following the signing of TRACECA (Consists of European Union and TRACECA (Figure 3). 12 other countries including Central Asian republics and The Caucasus) are the These global examples imply that eco- ultimate examples of economic corridors nomic integration through regional providing regional connectivity, serving as corridors increases trade between regional gateways of trade and commerce for the markets. Other benets of regional Dr. Nadia Farooq whole region. connectivity include; development of regional value chains, infrastructure, Economic Consultant The Greater Mekong Economic Program institutional and social capital and was established in 1992 to improve exchange of knowledge through people, Asian Development Bank economic relationships between those six culture and communication etc. countries that share the Mekong River. The A Global Perspective: major objectives were to promote industry, There are multiple ways through which Regional Connectivity and Trade trade, economic wellbeing, tourism and trade and commerce can be boosted environmental protection etc. within the through regional connectivity. For instance, Every country, given their resources and region. Figure 1 reveals the massive countries usually enter into free-trade area capabilities, has a comparative advantage improvement in trade (Exports) of these six agreements that eliminate or reduce tariffs in producing certain goods and services countries beyond 1992. and quota restrictions between its member over others. Countries utilizing this countries under the arrangements of comparative advantage through trade and TRACECA, is also an inspiring example of a economic corridors. However, each country commerce can substantially boost their signicant transport corridor within the retains previous tariffs and quota

Figure 1: Exports of The Greater Mekong (USD)

3.5E+12

3E+12

2.5E+12

2E+12

1.5E+12

1E+12

5E+11

0

Vietnam China Myanmar Thailand Lao PDR Cambodia Data Source: The World Bank, WDI 2020 19 Figure 2: Exports of TRACECA Countries (USD)

2.5E+11

2E+11

1.5E+11

1E+11

5E+10

0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Azerbaijan Bulgaria Armenia Georgia Iran, Islamic Rep. Kyrgyz Republic Moldova Romania Tajikistan Turkey Turkmenistan Ukraine Uzbekistan

Data Source: The World Bank, WDI 2020

Figure 3: Logistics Performance Index: (1=L ow, 5=High)

18 16 14 12 10 8 6 4 2 0

2007 2010 2012 2014 2016

Data Source: Logistics Performance Index by World Bank restrictions for non-member countries. The Another form of regional integration is common market adds to all these arrange- formation of custom union is another way economic and currency union. This union ments by allowing free movement of to enhance regional integration and necessitates a high degree of political capital and labour. increase trade; under which trade tariffs accord between member states. It aims at amongst member states of custom union full economic integration through steps The Transport and Trade Facilitation Action get abolished, while, a uniform tariff rate for like a common currency, a common Program between The Greater Mekong non-member states is maintained. economic policy, and the elimination of all Sub-Region (GMS) has streamlined custom barriers (tariff and non-tariff). Whereas, a procedures by introducing the one window

1. Moon, Chung-in. (2016). "Economic Regionalism." Encyclopedia Britannica. Available at http://www.britannica.com/topic/economic-regionalism#ref751099 accessed 25/10/2017 20 system between capital cities of its member risks, land acquisitions, human trafficking, enable them to specialize in goods and countries. It has tremendously boosted smuggling etc. While addressing them is services as per their comparative advan- trade between the countries by enhancing pertinent, these vary from region to region tage. These SEZs through the CPEC, can the production sector. as per the social and cultural context. These serve in enhancing trade and commerce for require strong political will from all partners Pakistan. The Central Asia Regional Economic to address such diversied bottlenecks. Cooperation (CAREC) is another example of It is estimated that this corridor will not only regional connectivity, which includes the The above examples prove the positive contribute towards employment genera- development of six multimodal corridors to impacts of regional connectivity by the tion in both countries, but also ultimately improve regional cooperation in central favourable increase in trade and economic benet them through enhanced trade and Asia. The development of these corridors prosperity. These are the great examples for commerce activities. The development of follows the Transport and Trade Facilitation Pakistan to learn and implement for Gawadar port would bring China closer to strategy 2020. Since inception, the cross- enhancing its trade and overcoming the Middle East by an average distance of 6500 border clearance time in the CAREC region ever-increasing trade and current account km; thus, reducing the transportation cost enormously decreased by 6.1 percent in decits. and time massively, from 45 days to 10 days. 2015 and average border costs also On average 45 days are required for decreased from USD 172 to USD 161 in National Perspective: Regional shipping goods from the Middle East and 2014. Empirical ndings suggest that a 10 Connectivity and Trade in Pakistan Africa to reach Chinese ports, this includes percent time reduction on the importer's the local in-land transportation as well. The side has a parallel gain of at least three Recent developments in Pakistan to construction of CPEC, will thus, reduce the percent intraregional trade in the CAREC enhance regional connectivity such as the transportation time to a record low of 10 region. China-Pakistan Economic Corridor (CPEC) days through Gawadar Port. Data analysis can also serve in boosting the economy of other regions especially in South East The border cooperation center between through trade and commerce. Asia, depicts that multiple ports operations Khorgos, China and Kazakhstan is another lead to trade volume expansion. example of regional cooperation and trade. The Belt and Road Initiative (BRI) with its It includes visa free entry of business soul of economic connectivity, is the actual For reaping the benets of this economic partners along with a third partner of any master plan behind the CPEC. This corridor, it is essential to have strict other country for 30 days, for discussion economic corridor intends to open new monitoring of expected passenger traffic to and negotiation of business deals and avenues by building transport infrastruc- ensure implementation of duty- and tax- commodity transactions. It is soothing out ture, energy resources and development of free regimes, and avoid any smug- China's trade relations with other CAREC the Gwadar Port. gling/pilferage of Chinese goods. More- countries and enhancing its future over, for establishing export processing prospects with the European Union (EU). For instance, under the CPEC, special zones/special economic zones, Pakistan economic zones (SEZs) are being setup in requires door-step Customs facilitation to Regional connectivity, however, comes Pakistan, which will provide a favourable ensure swift clearances of goods without with its challenges. These include security environment for industries to ourish and any pilferages.

21 Opinion Financing and Management of China-Pakistan Economic Corridor

three phases with focus on transport Moreover, projects under industrial infrastructure and energy sector projects in cooperation are being carried out under the early harvest/rst phase (2015-2020) in Public Private Partnership mode. For order to remove economic bottlenecks. The instance, China Road and Bridge Corpora- second phase (2020-2025) aims to kickstart tion (CRBC) is the concessionaire for industrialization and modernize agriculture Rashakai Special Economic Zone (SEZ). for socio-economic uplift, whereas the third Dhabeji SEZ in Thatta is in international phase (2025-2030) is designed to consoli- bidding and the Sindh Economic Zone date gains made in the rst two phases. Management Company (SEZMC) is looking for a developer as a private partner for zone CPEC Projects’ Financing Modes development and management. As for the Allama Iqbal SEZ in Faisalabad, FIEDMC is To fund CPEC projects, multiple modes of exclusively developing the economic zone. nancing are available. Projects in the Dr. Liaqat Ali Shah energy sector are being carried out in the CPEC: Memorandum of IPP mode under the Power Policy 2015, Understanding (MoUs), Project Director CPEC except for hydro power projects which are Agreements and their Viability being implemented under the Power Policy Ministry of Planning, Development and Special Initiatives 2002. Moreover, all the energy power To carry out CPEC projects, MoUs and other projects under CPEC are private sector agreements (exchange of notes, protocols investments and are being executed in and framework agreements) were signed Introduction Built, Own, Operate and Transfer (BOOT), between the two countries. Initially, 51 with a lease period of 25-30 years depend- agreements were signed, however, further Economic corridor development involves ing on the project. For infrastructure were added overtime. Of the 51 initially huge infrastructure projects that require projects, the nancing is through either signed agreements, approximately two- considerable resources and investments Government Concessionary loans (GCL), third were project specic agreements and with strategic considerations. The world is preferential buyer credit or simply credit. In other general purpose MoUs and agree- witnessing a remarkable investment gap in addition, some of the infrastructure ments for cooperation in diverse areas infrastructure, especially in energy and projects are being funded through the including energy, infrastructure, communi- transport sectors. As per McKinsey, the Public Sector Development Program cation and nance, as well as between investment gap is 3.3 trillion USD per (PSDP). educational/research institutions for annum or will be as high as 14.9 trillion USD capacity building and exchange of until 2030 when the achievement of As of now, 5.8 billion USD is GCL and knowledge, culture and ideas. sustainable development goals (SDGs) is approximately 1.2 billion USD are grant also measured. Multi-lateral banks are projects. In the GCL mode, notable projects The success of these agreements is evident working hard to close this gap. are the Multan-Sukkar Motorway (392 km), today as majority of the agreements have Thakot-Havelian road project (118km) and achieved their milestones. Of the project The Belt and Road Initiative (BRI) that Orange line Lahore Projects. Eastbay specic MoUs and agreements, two-third pledges to invest over USD 1 trillion along Expressway Project at Gwadar is a govern- have materialized, and the projects are six corridors covering more than 65 ment interest free loan project with an running on ground. Projects of one-quarter countries, is a step to spur unprecedent approximate cost of USD 179 million. New agreements are under implementation. development, and enhance trade and Gwadar International Airport (NGIA) cooperation. The key aspect of the BRI is project (USD 230 million) and Gwadar In short, the progress under CPEC is thus far infrastructure development in both Master Plan Project (USD 4 million), in remarkable. The timely completion of many transport and energy sectors. Within the addition to the 27 projects under the socio- projects in CPEC can be attributed to the USD 1 trillion investment under the banner economic development framework worth commitment made on both sides to of BRI, USD 46 billion was earmarked for the 1 billion USD, are being executed in grant implement the CPEC cooperation China Pakistan Economic Corridor (CPEC). mode. Regarding infrastructure projects on framework in true letter and spirit. The the western alignment including Hakla-DI provision of mechanisms to redene the The CPEC project was officially launched in Khan, DI. Khan-Zhob and onward to Quetta scope of the cooperation under the Joint the year 2015 during the visit of the Chinese and beyond, as well as the M8 motorway Working Group on Planning and Expert President, Mr. Xi Jinping, to Pakistan. connecting Ratodero in Sindh to Gwadar, group further substantiates the commit- Projects under CPEC were divided into are all funded through the PSDP. ment of the two countries made for

1. OECD (2018), “China’s Belt and Road Initiative in the Global Trade, Investment and Finance Landscape.” Available at https://www.oecd.org/nance/Chinas-Belt-and-Road- Initiative-in-the-global-trade-investment-and-nance-landscape.pdf 2. Global Infrastructure Outlook 2017—Infrastructure Investment Needs. 22 pushing the agenda of cooperation in the narcotics and highway police forces etc. economic integration through context of CPEC. increased trade, foreign direct However, the logistics industry in Pakistan investment and human migration. For Corridor Beyond Hard Infrastructure suffers from a number of inefficiencies this integration to take place, an caused by outdated processes and a lack of overarching strategy must be The success of corridors cannot simply be regulatory frameworks. In fact, the sector developed to leverage the ‘hard-soft measured through infrastructure develop- has not even been formally recognized as infrastructure nexus’ to better respond ment, but it can be gauged against the an industry in Pakistan. Lack of strategies to to market demand. intended purpose for which the corridor is develop this sector would negatively affect conceived. Any corridor’s ultimate purpose future corridor efficiency which is expected • The role of the corridor should be is to promote trade, investment and to serve Western China, Central Asian e x t e n d e d b e y o n d i m m e d i a t e economic development in and among the Republic and Afghanistan, to say the least. outcomes such as travel time and cost areas within the sphere of the corridor. This efficiency, as was previously expected requires careful planning, monitoring and iii. Security from transport corridors. They are control over the life of the corridor. While Reliable security creates the pre-conditions meant to generate economic activities CPEC projects are being planned and for viable economic corridor development. by attracting investment on the monitored diligently with institutional Nevertheless, the prevailing hostile f o u n d a t i o n s o f a n e ffi c i e n t mechanisms in place, a separate strategic situation in and around the region poses transportation system. For this to plan must be spelled out to maximize the threat to the security of CPEC development happen, interventions are required all dividends of the corridor by delineating a and operations. Multiple measures have along the corridor to exploit the clear roadmap to attract investors. The been taken to counter the threat. For resource base of the regions it passes strategic plan should include interventions instance, special security division (SSD) through, in order to make them to enhance the efficiency and effectiveness comprising of 9000 Pakistani Army Soldiers attractive for investment. of the corridor. That could involve trade and 6,000 para-military force, have been facilitation, security measures, comple- raised and entrusted to protect Chinese • Developing growth poles as was menting transport corridor with logistic workers, enterprises and project sites all customary in the past goes against the services etc. along the corridor. Moreover, a joint essence of an economic corridor. The working group on security (JWG) has also emergence of global value chains I. Trade Facilitation Measures been established to oversee the security of (GVC) supported by a fast and reliable Measures needed to facilitate trade include the CPEC project. However, challenges lie transportation system in the broader simplication and harmonization of ahead to ensure stable and reliable security framework of an economic corridor, custom clearance procedures, bringing with less inconvenience for the people and has challenged several dimensions of transparency in trade regulations, ratifying investors alike. the growth pole concept. Economic agreements including free trade agree- co r r i d o r p ro m o te s G V C s t h a t ments and mutual recognition agreements iv. Policy ultimately lead to economic prosper- between corridor hosting countries etc. Last but not the least, strategic plan ity. However, the importance of inter ventions should include “soft clusters and growth poles cannot be For CPEC to be effective on this front would complimentary infrastructure”. Govern- rejected outright. Trade-off between require a trade facilitation framework with ment interventions are needed to improve the two concepts and the role of China in addition to the already signed Free the overall investment climate by focusing economic corridor in the process must Trade Agreement (FTA) Phase II. The more on the legal and regulatory frame- be gured out under the CPEC objective is to ensure competitive, efficient, works, policies, and enhance the quality of framework. and seamless movement of goods through institutions that govern the economic improved monitoring mechanisms, and by system. In this scenario, overall benets can • Rush to develop huge infrastructure minimizing the impact of non-tariff be reaped of the corridor and the intended without adequate consideration for barriers, engaging with stakeholders purpose can be achieved. involving local communities in the particularly private sector, and improving development process would not make the institutional quality for implementation In short, simply improving the physical development sustainable. Space and of the framework. Trade with China suffers infrastructure would not suffice in order to time should be provided to develop mainly because of non-tariff barriers, earn maximum benet out of the economic their capacity to make development particularly SPS and TBT, reported to be the corridor until and unless complimentary sustainable. In CPEC, the focus is there major obstacles to trade. services, be it trade facilitation, logistic but needs to be enhanced. services, security situation or policy ii. Logistic Services measures, are not aligned with the overall • Lastly, developing a balanced Provision of logistic services is a critical objectives of the economic corridor. framework to frame policy options for component for any economic corridor to be enhanced institutional quality, successful. The logistics system is superim- Lessons Learnt logistics and transportation system, posed over a transport corridor to make it a economic zones development with logistic corridor. Services include ware- • Economic corridor does not simply dened backward and forward houses, multi-modal integration, facilita- attribute to infrastructure develop- linkages as well as their spillover, is tion centers for transporters and seamless ment but in fact, it refers to a coopera- requisite for CPEC to ourish and coordination among institutions such as tion platform, inuenced largely by prosper. customs, immigration, quarantine, anti- public policies, that focuses on

23 Interview

say that again

“...Promoting the construction of connectivity can help different countries break the bottleneck of development and remove barriers to connectivity. “

Yao Jing Chinese Ambassador to Pakistan

In your opinion, what impact will regional connectivity and trained more than 40 local women, some of them became truck corridors in Pakistan have on economic development, social and drivers and their income increased significantly. I believe that with cultural integration etc.? the joint efforts of both sides, CPEC will bring more positive changes in Pakistan. With the development of global economic integration, regional connectivity has become an important way to promote economic As one of the six corridors of the Belt and Road Initiative (BRI), CPEC is globalization, free trade, open economy, and cross-border coopera- becoming increasingly attractive to other countries. Gwadar Port tion. Promoting the construction of connectivity can help different has started handling transit cargo to and from Afghanistan. Whereas, countries break the bottleneck of development and remove barriers Iran has shown interest in CPEC cooperation, calling for the common to connectivity. It also serves as the driving force for development for development of Chabahar and Gwadar ports. Central Asian achieving higher levels of openness and building a global connectiv- countries have also expressed their wish to use CPEC as a corridor for ity partnership. Infrastructure connectivity also promotes soft regional connectivity. Few interested countries call for full imple- connectivity through interpersonal interactions. For instance, it mentation of “Quadrilateral Agreement for Traffic in Transit among facilitates people-to-people exchanges which enhances mutual Pakistan, China, Kazakhstan and Kyrgyzstan”. We are also in discus- understanding and cooperation between countries. It thus, plays an sion with the British, German, Japanese and other Ambassadors to important role in promoting regional peace and Pakistan has been Pakistan for exploring possibilities of industrial cooperation under an important pivot of the Silk Road project since ancient times. It has the CPEC framework. We are certain that CPEC will play a greater role played a significant role in connecting the ocean with the Eurasia in promoting regional economic integration. Continent, and linking East and West. Developing the economy and improving people's livelihood are the top priorities of the current How can the different corridors be optimally utilized for Pakistani government, and they are also the call of the Pakistani national achievement of the Sustainable Development Goals? people to build a “Naya Pakistan”. Reaching out for regional connec- How can suitable interventions be identified? Describe with tivity could create more space for Pakistan’s economic development. global examples. Achieving better economic connection with regional partners has become an inherent demand for the development of Pakistan’s The 2030 Agenda for Sustainable Development (Sustainable economy. Development Goals-SDGs) has ushered a new chapter of global cooperation in development and raised higher criteria for global The China-Pakistan Economic Corridor (CPEC) is the main platform governance and coordinated economic, environmental and social for connectivity between China and Pakistan. Since its inception in progress. Nowadays, globalization is deepening, and the interde- 2013, CPEC has played an important role in promoting national pendence of the world economy is increasing. However, it is development. 12 power generation projects have either started interrupted by increasing unilateralism, protectionism and de- construction or have been in commercial operation under CPEC globalization, which has brought several challenges to the achieve- energy cooperation, with a total investment of about 12.4 billion ment of SDGs. USD. Among them, there are nine Commercial Operation Date (COD) projects, with a total installed capacity of 5,320 MW. Power genera- The Belt and Road Initiative (BRI) stands firm for globalization, tion of CPEC projects reached 17.73 billion kWh, 14.5 percent of the mutual benefit and win-win cooperation. It fits the actual needs and total output in the National Transmission and Despatch Company historical trends of development and cooperation of participating (NTDC) system, which could supply over 33 million people on per countries. The BRI makes considerable contribution to international capita power use basis. poverty reduction, global economic integration and economic and trade cooperation among participating countries, that altogether Of the two main transportation projects, Peshawar-Karachi contributes to achieving SDGs. The World Bank’s report entitled “Belt Motorway Project (Sukkur-Multan Section) is complete and and Road Economics: Opportunities and Risks of Transport Karakoram Highway Phase-II (Havelian- Thakot) will be completed Corridors” states that the BRI can accelerate economic development this year. These are high-speed and convenient arteries across and poverty reduction in dozens of developing countries. According Pakistan which facilitate flow of people and goods and reduce the to this report, the implementation of BRI projects can help lift 32 imbalance in Pakistan's domestic development. At the same time, million people from moderate poverty (those earning less than USD CPEC also played an important role in social development. For 3.20 a day). Whereas, trade can grow by 6.2 percent for the world and example, in the Thar Coal Fire Power Plant, the Chinese company has 9.7 percent for participating economies. The global income can grow

24 by 2.9 percent. China, thus, will continue to promote the BRI for cooperation. We not only welcome third parties’ participation in achieving common, coordinated sustainable development, and to CPEC but also are willing to promote the extension of CPEC to jointly promote a community of shared future for mankind. neighbouring countries. We encourage all parties to participate and invest in CPEC to achieve mutual benefit and win-win cooperation to What role can different stakeholders such as the government, building a wider and closer partnership. civil society and development partners play in strengthening the efficacy of these regional corridors and reaping maximum Moving forward, what local policies or interventions need to be benefits? implemented to facilitate socio-economic development through enhanced regional connectivity? CPEC has received massive support from all walks of life in Pakistan. At present, CPEC is at a new stage of enrichment and expansion. China proposes that the BRI should be implemented through a "Five- China is willing to work with different sectors of society to further pronged Approach". In my opinion, this approach meets the actual summarize experiences, make plans for the future, build consen- needs of regional connectivity and has universal applicability. suses, and effectively promote CPEC cooperation towards high- quality development. First is strengthening policy coordination. It is necessary to vigor- ously strengthen policy coordination at the inter-country level and Firstly, at government level, we should strengthen coordination. conduct extensive exchanges on economic development strategies There is a mature cooperation mechanism from top to bottom in and policies. This should include formulating plans and measures to CPEC cooperation. The aim of the two governments is to determine promote regional cooperation by seeking common ground while the medium and long-term direction of cooperation, identify major shelving differences and giving a green light to policy on regional projects through institutionalized mechanisms, enhance consensus economic integration. through policy coordination, maintain policy coherence, solve issues in business cooperation, and create more favourable policy Second is strengthening infrastructure connectivity to gradually space. build a high-level transportation network to facilitate economic development and personnel exchanges in regional countries. For Second, at the business level, we should encourage engagement instance, we are actively working to improve cross-border and cooperation among the business community. The Chinese transportation infrastructure and strengthen construction of key government encourages Chinese companies to strengthen transportation projects. industrial relocation and technology transfer to Pakistan, and in setting up more joint ventures to achieve common development. Third is promoting unimpeded trade. There is a need to explore trade We hope that the Pakistani business community can utilize this and investment facilitation measures, make appropriate arrange- opportunity provided by CPEC and participate proactively with each ments to eliminate trade barriers, reduce trade and investment other and the Chinese business community. costs, improve the speed and quality of regional economic cycles, and create a favourable business environment for mutual benefits Third, as development partners, we need to keep an inclusive and win-win cooperation. approach to development, especially focusing on the less privileged, to ensure they can benefit from CPEC as well. For instance, we have Fourth is creating financial integration. It is essential to explore co- set up a CPEC joint working group on social economic development. construction of an open investment and financing system. This can The joint working group has finalized 17 social projects covering be achieved by enhancing financing support for infrastructure agriculture, poverty alleviation, water supply, sanitation, education, connectivity, trade and investment, capacity building, further and vocational training, which will be launched this year. These elevating facilitation levels of cross-border trade, investment and projects are focused on addressing the most urgent requirements of financial service, and guiding flow of financial resources for real Pakistan’s backward areas and bringing more benefit to the local economy to grow. people. At the same time, media and think tanks should create a positive atmosphere for cooperation around CPEC. We welcome Fifth is to strengthen people to people ties. For this, we must carry suggestions and criticism in good faith but oppose malicious out extensive and in-depth cultural exchanges and cooperation, slander. strengthen friendly exchanges by enhancing mutual understanding and traditional friendship, promoting the realization of value Fourth, development partners like us, should expand partnerships recognition, cultural tolerance and mutual respect in different for reaping maximum benefits from CPEC. CPEC has a good potential countries, which will win popular support and lay a solid social of seeking complementarities from bilateral and multilateral foundation for regional cooperation.

25 Interview

say that again

“...Sustained commitment is necessary since economic corridor development typically requires public and private investments and completing projects will take substantial time and resources.. “

Xiaohong Yang Country Director Asian Development Bank (ADB), Pakistan

In your opinion, what impact will regional connectivity and policy recommendations to be implemented over the next decade corridors have on Pakistan’s economic development, and social based on regional cooperation, energy market reforms, and green and cultural integration? technology. The member governments and multi-lateral develop- ment banks, by working together, will create a new regional Regional connectivity and corridors have a significant impact in governance system to manage transmission systems centrally. Pakistan by linking markets, goods, energy, ideas and people. Better Elevating the grid and pipeline planning from national to regional regional connectivity with neighbouring countries and beyond will level will lead to a larger, more integrated energy market equipped enhance trade and tourism and attract investments that will create to cover seasonal variability and uneven distribution of energy jobs. This will drive regional integration, leveraging Pakistan’s across the region. geostrategic location to become a trade and transit hub, and encourage more sustainable and inclusive growth in Pakistan. ADB’s new country partnership strategy 2020-2024 for Pakistan is currently under preparation. It aims to attach great importance to Pakistan is a member of the Central Asia Regional Economic regional cooperation and integration as a crosscutting theme. Cooperation (CAREC) Program, a partnership of 11 countries and development partners. ADB serves as the Secretariat. CAREC How can the different corridors be optimally utilized for supports regional cooperation and integration through the national achievement of the SDGs? How can suitable interven- establishment of multimodal transportation networks, increased tions be identified? Describe with global examples. energy trade and security, laying the groundwork for economic corridor development, providing a policy dialogue platform to Economic corridors help spur economic growth, which paves the improve economic and financial stability, promoting regional way for advancement of the SDGs including affordable and clean tourism development and enhancing people-to-people and energy (7), sustainable cities and communities (11), and ultimately, business-to-business contact. no poverty (1) and zero hunger (2).

Through CAREC, stronger ties with neighbors to the north will For example, ADB, together with Department for International enable Pakistan to import energy to make up for its shortages in Development (DFID) and Asian Infrastructure Investment Bank electricity supplies. In return, Pakistan will offer its mostly landlocked (AIIB), co-financed the M-4, a greenfield motorway which is an CAREC partners, access to its warm water ports on the Arabian Sea, integral part of CAREC Corridors 5 and 6. Sections of the motorway giving them the prospect of greater trade with the Middle East. opened to the public last year. The completed four-lane access- controlled motorway provides a faster, safer, more cost-effective In 2019, CAREC countries including Pakistan, worked together to alternative to the existing narrow and congested national highways, launch the new Transport Strategy 2030 and Energy Strategy 2030. improving north–south connectivity and quality and efficiency of The Transport Strategy has two core objectives of connectivity and road transport services. sustainability. The sustainability agenda will receive maximum attention given the strong demand to convert transport infrastruc- M-4 is part of the 1,800 km north-south corridor from the port city of ture investments into sustainable economic and social develop- Karachi in the south, to Torkham on the northern border with ment. Particular attention will be given to reducing cross-border Afghanistan. The corridor connects the key centers of economic trade and logistics barriers: in order to support the growth of free activity in the country, directly serving the economy of an area that trade and economic development within the CAREC region. The accounts for 80–85 percent of Pakistan's gross domestic product importance of improved financing and management of road and (GDP). railway assets for more sustainable transport infrastructure investment will be a key focus of CAREC knowledge products and Furthermore, the ports of Gwadar and Karachi are among the institutional capacity development activities. Contemporary road nearest ports for Central Asian countries and these countries are safety principles and practices will be further integrated into keen to take advantage of this proximity to transport their goods to transport infrastructure and operations. This will be achieved and through Pakistan to other countries of the world. through consistent implementation of priority actions under the CAREC Road Safety Strategy 2030. Another example is the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline. When fully operational, the TAPI pipeline will The CAREC Energy Strategy 2030 outlines a set of initiative and transport up to 33 billion cubic meters of natural gas per year from

26 Turkmenistan to Afghanistan, Pakistan, and India over a commercial Moving forward, what local policies or interventions need to be operations period of 30 years. implemented to facilitate socio-economic development through enhanced regional connectivity? TAPI will enable Pakistan, India and Afghanistan to benefit from enhanced and longer-term energy security while enabling Regional cooperation and integration is one of the seven opera- Turkmenistan to diversify its gas export markets. The TAPI pipeline tional priorities of ADB’s Strategy 2030. As mentioned earlier, it is also will have a transformational impact on regional cooperation and one of the key crosscutting themes in ADB’s forthcoming Country boost other initiatives aimed at bringing peace and economic Partnership Strategy (CPS) 2020–2024 for Pakistan (under prepara- stability to the region. tion), which is anchored on fostering economic competitiveness.

In your opinion, what challenges exist in the creation and Going forward, Pakistan first needs to build a consensus internally maintenance of regional corridors in Pakistan, especially with and externally with all key stakeholders to, (i) build on constructive relevance to CPEC? regional relations to support economic competitiveness and growth; (ii) liberalize trade, improve transport, logistics, and cross Pakistan is facing macroeconomic challenges that need to be border management; and, (iii) build resilient institutions. At the same addressed through macroeconomic and structural reforms; time, mitigation measures to avoid negative impacts, also need to be including improving revenue collection; improving energy and placed. water sector management; revitalizing public sector enterprises; improving business environment and private sector investments; The Government of Pakistan has planned the Integrated Transit and improving institutions, social sector and human capital; and Trade Management System (ITTMS) under the ADB financed CAREC leveraging improved security for better regional trade and coopera- Regional Improving Border Services (CAREC-RIBS) project, to update tion benefits. the infrastructure at three key border crossing points, in the context of CAREC corridors for trade, to support a modern supply chain. The The CPEC consists of a mix of investments in energy, transport, and project also includes the development of Information port development, potentially totaling to about USD 62 billion (22 Communication Technology (ICT) based systems and procedures. percent of FY 2018 GDP). CPEC will benefit Pakistan provided that The ITTMS is a good mechanism to reach consensus among all the country can transform the predominantly road corridors into concerned ministries and agencies in Pakistan for moving forward true economic corridors, so that Pakistan’s economy can be part of with project implementation. global production networks and value chains. For example, the additional wear and tear on road infrastructure that ADB is willing to support Pakistan in developing economic corridors may be imposed by trucks operating on international routes, can be within the framework of CAREC and ADB’s country partnership offset by stringent, fair and enforceable policies against over- strategy, as well as to maximize the benefits of projects under CPEC. loading. Some countries also opt to apply charges to heavy-goods vehicles, commensurate with their weight. Revenues from such Pakistan stands to benefit from improved trade with Central Asian charges can be recycled back into road maintenance. countries, as it has been hampered by poor connectivity, trade related barriers, and geopolitical considerations. But as these It is promising to see that the government has been demonstrating barriers are overcome and connectivity improves along with an its strong commitment to enhance regional cooperation and improved security situation, Pakistan should stand ready to take integration. For example, it has recently initiated bilateral trade talks, advantage of positive market movements. expanding e-visa travel arrangements. Pakistan recently proposed introducing a single-entry tourist visa for the CAREC member What role can different stakeholders such as the government, countries. Such initiatives could go a long way in building trust for civil society and development partners play in strengthening creating a region where countries interact with each other and with the efficacy of these regional corridors and reaping maximum the rest of the world. benefits? ADB in partnership with Pakistan’s Securities and Exchange In Pakistan, about USD 1.5 billion has been invested in eight projects Commission (SECP) and other local partners, brought together through CAREC as of September 2019. Pakistan’s road network is capital market regulators of the CAREC countries in Islamabad from connected to CAREC Corridor 5, which opens a vital trading link 29 to 30 August 2019, for the first time. The First Capital Market between landlocked Central Asian nations and the country’s warm Regulator Forum was a vital pioneering step to improve capital water ports of Gwadar and Karachi on the Arabian Sea. market linkages and enhance access to finance to spur private sector development and regional economic integration. It is important that government, civil society, and development partners work together to ensure that regional corridors are ADB, with support from the United Kingdom’s Department for effective. Governments must be willing to enact necessary policy International Development, has been supporting the government and institutional reforms. Development partners’ funding and for the work of economic corridor development. ADB will help expertise are crucial in ensuring that economic corridors develop- develop a knowledge hub to facilitate cross-country knowledge ments are in accordance with the highest international standards. sharing to better inform Pakistan’s development policy priorities. The inputs from civil society and investments by the private sector This knowledge hub initiative will comprise of national and global are essential in supporting the growth of urban clusters, trade and think tanks to undertake research and analysis and promote energy market integration, and linking them with rural areas for knowledge sharing on regional economic connectivity and inclusive development. integration of relevant topics such as special economic zones.

Sustained commitment is necessary since economic corridor development typically requires public and private investments and completing projects will take substantial time and resources.

27 Interview

say that again

“...Optimizing benefits from regional corridors warrants each stakeholder such as government, civil society, and development partners plating their due roles. “

Arif Ahmed Khan Chief Executive Trade Development Authority of Pakistan

In your opinion, what impact will regional connectivity and special measures, policy initiatives, and interventions. corridors have on Pakistan’s economic development, and social and cultural integration? For optimal utilization of the corridors, maximizing benefits of association, and achievement of Sustainable Development Goals The ease of physical communication between different regions of (SDGs), a country needs to undertake interventions directed at the world has historically been the most important factor in bringing leveraging its position through enhancement of both intra-regional the world closer to each other. as well as inter-regional connectivity. Accordingly, besides optimiza- tion of the benefit-cost ratio of investments, a key consideration for Transport, energy and telecommunication networks are being prioritization of interventions should be focused on existing gaps or developed at a fast pace across the globe, which is contributing to weakest links in the infrastructure networks in the context of intra- basic infrastructure for regional connectivity. From Pakistan's and inter-regional connectivity. This consideration is based on the perspective, improved connectivity for economic and social premise that impact of the economic corridors will ultimately interactions will not only promote economic development in the depend on the degree of integration of the connected regions and country, but will also bring about greater social and cultural locations. Strengthening of the weakest links, thus, in the infrastruc- integration among people living in different provinces, cities ture networks would have the highest priority. districts, and villages. This can be achieved by bringing them closer to each other through improved communications and access to As an example, in the global scenario China, ASEAN region, and the amenities and opportunities. European Union (EU) already have a high degree of intra-regional connectivity. Accordingly, in their cases, greater attention needs to Investments made in various projects associated with economic be paid to interventions focusing on enhancing inter-regional corridors would contribute to upgradation of transport, energy, connectivity. Whereas for developing countries like Pakistan, focus telecommunications, and industrial infrastructure. This in turn has to be on interventions directed at improving intra-regional would result in better opportunities for education and skills connectivity through strengthening of core networks. Once the core development. Simultaneously, it would promote employment networks are in place, private sector could also join in to play its role generation along with increased interaction, productivity, competi- by providing services in demand based needs of the markets and tion, and market opportunities emanating from lowering of their commercial dynamics. production, transport and logistics costs between the centers connected through the corridors. Completion of power generation In your opinion, what challenges exist in the creation and and transmission infrastructure projects and setting up of special maintenance of regional corridors in Pakistan, especially with economic zones under the CPEC, in particular, are expected to relevance to CPEC? enhance production and promote fast track technology transfer, skills development, and productivity improvements that could have The foremost challenges are speedy completion and a major impact on the national economy, through promoting operationalization of on-going infrastructure projects within exports from Pakistan. allocated budgets, and development of relevant policies, institu- tional frameworks, and support systems for their smooth and How can the different corridors be optimally utilized for sustainable operation on a long-term basis for achievement of laid national achievement of the SDGs? How can suitable interven- out objectives. tions be identified? Describe with global examples. With the first phase of the CPEC nearing completion, the main From an international perspective, six land corridors being devel- challenge now in hand is formulation and implementation of oped under China's “Belt and Road Initiative (BRI)” would connect projects planned in the second phase. The second phase emphasizes more than sixty countries. It has been estimated that the extent of on industrial and agricultural development; enhancement of benefits or impacts accruing to the participating countries and their production and productivity; promotion of trade in goods and economic centers from the economic corridors, would largely services through improved market access and product and market depend on the scope of their connectivity to the corridors. The scope diversification; and attracting Foreign Direct Investment (FDI). of connectivity would in turn depend on their geographical location in relation to the corridors, and individual efforts of respective Additional challenges pertaining to the second stage of the CPEC are countries to leverage their roles in relation to the corridors through much more complex due to their specialized nature, wider scope

28 and the need for their intra- and inter-regional integration. monitoring and evaluation of the interventions planned and Improving ease of doing business and reducing the cost of doing implemented under economic corridors. They can achieve this business are among the foremost challenges at hand. These need to through provision of international frameworks for independent be addressed to achieve development of envisaged value chains, monitoring of international conventions, protocols, standards, investments, efficiencies, productivities, and capacities. Besides compliances, and norms in collaboration with civil society. creation of requisite infrastructure, the challenges at this stage require development of appropriate policies, rules, regulations, Moving forward, what local policies or interventions need to be systems, procedures and frameworks for sustainable operation. implemented to facilitate socio-economic development Thus, involving national and international level facilities allowing through enhanced regional connectivity? participation of private sector for provision of services along with an effective framework for regulation of competition between service An important objective of achieving enhanced regional connectivity providers, is important. Furthermore, provision of cross-border through improved regional integration is promotion of trade and services in the context of international corridors, requires harmo- enhancing exports from Pakistan. With TDAP's core mandate of trade nized systems across borders. This must include effective and development, I would like to throw some light on the multifaceted efficient border controls, open access to infrastructure, measures to interventions being envisaged in this area. allow uninterrupted services such as harmonizing vehicle weight limits in road transport, addressing railway gauge differences, The existing expected production and productivity improvements, setting cross-border payment systems, etc. enhanced market opportunities, improved communications and savings in transport and logistics costs resulting from enhanced What role can different stakeholders such as the government, regional connectivity, will have a significant positive impact on the civil society and development partners play in strengthening development of Pakistan's exports. However, additional interven- the efficacy of these regional corridors and reaping maximum tions could facilitate achievement of socio-economic development benefits? at a faster pace. An important area in this context is improving market access for our exports. A major step in this connection has Optimizing benefits from regional corridors warrants each stake- recently been completed through implementation of the second holder such as government, civil society, and development partners phase of the China-Pakistan Free Trade Agreement (CPFTA). This has plating their due roles. In the first place the government has to act as resulted in immediate duty-free access for Pakistan's exports to the prime mover by coming up with long- and short-term plans, China on 313 tariff lines where Pakistan has good export potential in policies, and overall designs. This must include financing plans for the Chinese market. Similar arrangements with other countries establishment of regional corridors keeping in view national and could further promote Pakistan's exports. Various avenues in this international dynamics, country's development needs and context are being explored. upcoming trends in international trade and global economies. Setting of Special economic zones (SEZs) as part of the CPEC Governments, with their regulatory and facilitative roles coupled initiative is under an advanced stage of implementation. The first SEZ with their operational and budgetary constraints, can design and being established at Faisalabad, has recently been inaugurated by implement such mega initiatives with active participation and the Prime Minister. Whereas, two others being established in Sindh support of civil society and development partners. With the core and KPK are expected to be inaugurated within the current financial infrastructure made available by the government, either on its own, year. Properly planned and equipped SEZs supported by appropri- or in partnership with the private sector and development partners, ate incentives and policies, need to be adopted and pursued at a fast private sector has to come forward to play its role as investor and pace. These can, thereby, play a significant role in promoting provider of services for the citizens based on commercial arrange- industrialization, attracting FDI and enhancing exports. ments. Additionally, the government as well as the civil society have to play their due roles towards regulation and monitoring of private Similarly, interventions are needed for promoting market and sector's service delivery to ensure competition, quality assurance, product diversifications in Pakistan's exports. In this context, new efficiencies, and promotion of market mechanisms. markets are being explored by the TDAP in collaboration with the Ministry of Commerce. Africa and South America have been Development partners or international financial and development identified as important potential markets for Pakistan's exports. agencies play a very important role in such interventions through Accordingly, a Pakistan-Africa Trade Development Conference was provision of technical assistance and consulting services, sharing of recently organized by Pakistan at Nairobi, Kenya on 30-31 January international experiences and best practices, promoting cross- 2020, as a major trade development initiative. Tariff rationalization is border integration through harmonization of regional and global also being pursued to reduce duties on imported raw materials and initiatives and development of synergies among similar or comple- inputs to support development of value chains besides formulation mentary initiatives. Additionally, development partners in collabora- of conducive policies to reduce the cost of doing business and tion with international agencies also play the role of international improve ease of doing business.

29 Interview

say that again

“...We need to have this sense of urgency to explore, invest, and create a facilitating environment in the SEZ for all stakeholders especially business community and foreign investors. “

Sher Ali Arbab Member, National Assembly of Pakistan Chairman, Parliamentary Committee on CPEC

In your opinion, what impact will regional connectivity and ment. For example, the lack of peace and stability in Afghanistan, corridors have on Pakistan’s economic development, and social hinders Pakistan's trade potential with Afghanistan. Restoration of and cultural integration? peace in Afghanistan can do leaps and bounds in reducing security challenges in Pakistan along the Durand line, thus, boosting trade In today's World, the primary reason why countries are showing between the two and enabling them to reap the benefits of regional interest in partnering with Pakistan or for that matter with other connectivity. countries, is because of economic viability, available investment opportunities, and value addition a country brings to the global What role can different stakeholders such as the government, table. Regional connectivity and corridors are, thus, central to civil society and development partners play in strengthening economic development. In addition, regional connectivity can also the efficacy of these regional corridors and reaping maximum strengthen social and cultural integration, given appropriate policy benefits? interventions are taken. All stakeholders need to play a proactive role if maximum benefits How can the different corridors be optimally utilized for are to be taken out of this window of opportunity-CPEC. national achievement of the SDGs? How can suitable interven- Government needs to be proactive. We need to have this sense of tions be identified? Describe with global examples. urgency to explore, invest and create a facilitating environment in the SEZ for all stakeholders, especially the business community and Promoting economic development through regional corridors can foreign investors. help countries achieve the SDGs. Pakistan can benefit by promoting trade and commerce with neighbouring countries, for example Civil society needs to ensure partnership and involvement of the Afghanistan, Iran, and China, and even Central Asia and the Middle local people in the development of CPEC. For example, if the Gwadar East. In doing so, Pakistan can promote local economic develop- port is to be established into a port city, similar to international ment, which would inevitably help in achieving the SDGs. As seen in counterparts like Dubai, then civil society needs to ensure that the other developed countries and regions such as China and Europe, local population is not only fully involved in it, but also benefits from export-led growth has paved the way for development of local it. economy and in achieving the SDGs. In addition, development partners need to step-up to fill in the gaps In your opinion, what challenges exist in the creation and left by the government and civil society, either due to lack of maintenance of regional corridors in Pakistan, especially with resources or limited capacity. This could come both in the form of relevance to CPEC? development assistance, or through enhancing technical capacities in adopting global best practices and policies. Pakistan faces both external and internal challenges in the creation and maintenance of regional corridors, due to its geo-political Even the media has a role to play, in representing the positive image positioning. of Pakistan as well, rather than only focusing on controversial issues which might create unrest amongst different stakeholders. Internally, Pakistan lacks pro-activeness in creating a facilitating space for businesses and trade to flourish. As a result, it lacks Moving forward, what local policies or interventions need to be comparative advantage to trade with its neighbours. Pakistan needs implemented to facilitate socio-economic development to invest substantially in building skills and human capital, if it were through enhanced regional connectivity? to use an export led growth model for development. Although currently Pakistan is focusing on one corridor-CPEC-there Externally speaking, bi-lateral relations with other countries can exists potential to have many more. Potential corridors can include influence and serve as a challenge in the creation and maintenance the Iran-Turkey corridor which could lead into European markets; of regional corridors. For example, Pakistan is increasing its align- Pakistan-Afghanistan-Central Asia and Russia Corridor, and even a ment more with China to build CPEC, however, some other countries Pakistan-India-Nepal-Bangladesh corridor. Appropriate policies might not be in favour of this alignment due to their personal need to be crafted on these lines. political and foreign agendas. Second, lack of peace in the region is another external challenge hindering regional corridor develop- Additionally, the government needs to create a facilitating environ-

30 ment for the private sector to invest and flourish, for boosting an interventions that can enable the country to reap maximum benefits export-led growth in Pakistan. Simultaneously, rather than import- from regional connectivity. Pakistan has recently become one of the ing tangible goods, Pakistan must focus on importing technology to most attractive tourist destinations in the world. Thus, public-private upgrade production and efficacies of businesses. partnerships can build on this added advantage to promote cultural exchange and simultaneously, cater to local population needs via Promoting tourism in Pakistan is yet another set of policies and regional connectivity.

31 Youth Voices

How can regional connectivity be achieved via corridors?

Corridors hold the key to opening a world of opportunities, if utilized smartly. They can not only enhance the economic potential of the country, but also provide employment opportunities and cultural exchanges.

Salman Arif

Digital Marketing

The transfer of knowledge I feel is the most important facet of regional corridors. Why? Because give a man a sh, feed him for a day, but teach a man to sh, and feed him for life. Hence, infusion and transfer of knowledge via these corridors is in my opinion, a very integral aspect of regional corridors.

Alia Nur Buksh

Engineer

With the CPEC gaining momentum, I am looking forward to seeing the benets that have been ‘claimed’. I think this will provide Pakistan a good learning case study for future corridor development.

Haris Afzal Malik

O/A Level Teacher

32 Corridors are essentially the routes which connect countries. It might be easy to construct a road but it is difficult to maintain, to monitor, to sustain that road. One must understand that while these corridors may offer power, they also present an equal amount of challenges. Planning in advance is mandatory to address these bottlenecks.

Kinza Tauqeer

Researcher

Pakistan, bearing a great geographical location, is in one of the best positions to utilize corridors. It can do so via different routes, including sea, land and even air. The question really is about capacity and monitoring.

Faisal Farooq

Media Planning

Peace is something the world lacks, but should work towards. While corridors offer immense potential and benet in several socio-economic facets, I think there should also be some focus on the fact that corridors can help enhance friendships between religions, between cultures and between people. The power of physical interaction holds no parallel.

Hina Ali

Artist

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