Economic corridors can be game changers if they offer trade, investment, jobs, people-to-people engagement and other interdependencies that ensure peace in the region. A key outcome of such corridors is an integrated network of enabling infrastructure that can spur intra-regional investment.
Successful economic corridors, however, require a set of complimentary reforms, including streamlining of: tax and tariffs regime, processes for initiating or expanding a business activity, permits for construction, procedures in getting certain access to utilities (e.g. electricity and gas), and trade facilitation, i.e. increasing the transparency of trade regulations, simplifying, standardizing, and modernizing import, export, and custom’s procedures, and improving the conditions for transit.
While Pakistan is keen and working hard to achieve timely implementation of projects under China Pakistan Economic Corridor (CPEC), it is also important not to ignore the infrastructure gaps which continue to undermine efficiency of already available public assets and future investments like CPEC.
According to the 2016 world competitiveness rankings, Pakistan ranked 129 out of 140 countries in the supply of electricity. The position was not very encouraging in overall infrastructure rank at 98. Planning Commission’s Framework for Economic Growth, published in 2011, had explained that Pakistan may not be an infrastructure deficient country, however it remains slow in reforming governance of existing infrastructure.
The capacity to design, manage and reform infrastructure is missing — a lesson which Pakistan should have learned after the unsuccessful National Trade Corridor project in 2005.
A weak progress on enabling infrastructure and ease of doing business reforms also undermines the outcomes of bilateral trade agreements. There are studies that indicate that already signed trade agreements with China and Sri Lanka may not have resulted in originally anticipated outcomes.
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Alongside the gaps in trade diplomacy, Pakistan’s competitiveness is now threatened due to rising cost of doing business vis-à-vis competitor countries. Pakistan performed weakly in terms of competitiveness rankings, e.g. time required to start a business (94 out of 140 countries), number of procedures to start a business (116), non-tariff barriers to trade (106), and burden of customs procedures (111).
Another important concern is that Pakistan’s infrastructure is not integrated with rest of the region. Any corridor’s success and rate of return hinges upon increased cross-border engagement between business communities.
This is not possible unless Pakistan carves its relevance in regional integration efforts under Central Asia Regional Economic Cooperation (CAREC) programme and avoid the lack of imagination and political will which plagued Economic Cooperation Organisation and South Asian Association for Regional Cooperation.
For corridors to succeed in a regional framework, these require integration with rail, road, port, aviation and energy networks in neighbouring countries. Iran has recently hinted that it will be interested in integrating with CPEC. Pakistan also needs to adopt a similar approach with all neighbours and Central Asian economies. This is perhaps the only way to create deeper regional interdependencies which act as insurance against negative fallout of future political tensions in the region.
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More specifically, Pakistan will need to integrate its transport framework with the six corridors of CAREC, including: East Asia and Europe link through Russia; Caucasus and Mediterranean to East Asia and covers countries like Azerbaijan, Kazakhstan and China; Russia and the Middle East, also covering Afghanistan; Russia with East Asia via Mongolia and China; East Asia with the Middle East and South Asia and passes through China, Tajikistan, Afghanistan and the Kyrgyz Republic; Europe and Russia to the Middle East and South Asia via three routes to the Arabian Sea i.e. Karachi, Gwadar and Bandar Abbas.
It is only when one looks at the entire region and its efforts towards corridor building that one realises how essential it is to position CPEC to compliment other regional networks.
China, Kyrgyz Republic, Kazakhstan and Pakistan have also signed Quadrilateral Traffic in Transit Agreement (QTTA). This aims at enhancing transit and providing easy border crossings for neighbouring countries and aims to cut down the trans-shipment and intermediary stops. A timely implementation of this agreement can significantly benefit Pakistan in terms of reduction in the costs of trade with Central Asia and beyond.
Another opportunity is possible revision of Afghanistan Pakistan Transit Trade Agreement (APTTA) and extending this to include other regional economies. For ultimate success of this agreement, Pakistan has to deliver on its promise of building Peshawar-Kabul motorway and additional transit-trade corridors. Tajikistan has already requested to extend APTTA to Dushanbe, so that it can secure alternate routes for its food supplies via Karachi and Gwadar ports. A timely implementation of these regional commitments can complement CPEC and turn it in to a peace corridor.
One hopes that as political relations with India and Bangladesh ease, Pakistan will make use of South Asia Motor Vehicle Agreement to connect with two road corridors under South Asia Sub-regional Economic Cooperation (SASEC). These are part of the Asian Highway-2 with first corridor connecting Nepal, and Bangladesh via India and the Asian Highway-48 which will connect India, Bhutan and Bangladesh. The full programme aims at ten major road corridors across the region.
With a bit more imagination, Pakistan should demand from India access and linkages to the North South – East West Corridor planned under the National Highway Development Project in India. This includes a highway from Srinagar to Kanyakumari (4000 km) and another highway from Silchar to Porbandar (3300 km). In return Pakistan should be willing to offer India transit for merchandise to select locations.
While it is important to envisage linkages and expected outcomes under regional connectivity with an open mind, free from any political baggage, equally important is to consider that ultimately regional corridors can only become successful if ownership of local communities is ensured and future gains from such infrastructure development are received by the poorest of the poor in the region.
The government should initiate a large-scale outreach effort towards mitigating apprehensions of local communities in Balochistan and Gilgit-Baltistan. It is important that people in both regions should be helped in foreseeing gains from public investment and cooperation with China and other friends of Pakistan.
This cannot be done by the federal government alone. The provincial governments in larger provinces particularly Sindh and Punjab will need to assure the smaller provinces that only this time we will not let you down.
This point needs to be stressed and brainstormed not just in the context of CPEC but across an entire spectrum of public investment in Pakistan. Anecdotal evidence informs that economic planners and private sector of West Pakistan once used to suggest that it is not possible to invest in East Pakistan because it’s dangerous and security of assets and profits is not certain. The outcomes of such thinking are indeed very telling.
CPEC must create a win-win outcome for all, especially the poor and marginalised in the region.