Good gov­er­nance, re­forms must to make most of CPEC: ADB

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Pak­istan will have to grow at 14.7 per­cent to ma­te­ri­alise its vi­sion of at­tain­ing the sta­tus of ‘mid­dle in­come econ­omy’ by 2025, but ac­cord­ing to Asian De­vel­op­ment Bank (ADB), it would be im­pos­si­ble to achieve with the pre­vail­ing macro­eco­nomics of the coun­try.

“China-Pak­istan Eco­nomic Cor­ri­dor (CPEC) is a great op­por­tu­nity, how­ever, to ob­tain max­i­mum ben­e­fits Pak­istan will have to make mean­ing­ful changes in its gov­er­nance and in­tro­duce re­forms to strengthen its in­sti­tu­tions,” Gun­tur Sugi­yarto, chief econ­o­mist at ADB, said at one of a se­ries of work­shops on ‘sup­port­ing eco­nomic cor­ri­dor de­vel­op­ment in Pak­istan.’

The ADB of­fi­cial said Pak­istan would be able to en­joy its strate­gic lo­ca­tion if it gets in­te­grated global pro­duc­tion net­work with which it is cur­rently dis­con­nected. “Sim­i­larly Pak­istan is not a part of global value chain (GVC),” he said and added that coun­tries like Korea, Malaysia, and Thailand have moved ahead in global mar­kets by be­ing part of GVC.

Not­ing that lop­sided de­vel­op­ment will not let Pak­istan take full ad­van­tage of the op­por­tu­nity, Gunter ad­vised that the CPEC op­por­tu­nity should be fully ex­ploited. He said there is dis­par­ity in in­fra­struc­ture de­vel­oped between not only prov­inces but also between dis­tricts within the same province. “Business as usual will not work now,” he warned.

He said plan­ners in Pak­istan have failed to take ad­van­tage of its di­as­pora. “They re­mit dol­lars equiv­a­lent to 6 per­cent of coun­try’s GDP every year,” he said adding but they have not been mo­ti­vated to in­vest in Pak­istan.

Gun­tur said there are nu­mer­ous sto­ries that re­veal the dif­fi­cul­ties faced by for­eign-based Pak­ista­nis when they in­vested in their moth­er­land. “They have lost con­fi­dence in the gov­ern­ment; how­ever, they are help­ing Pak­istan’s econ­omy through re­mit­tance but they would go be­yond re­mit­tance and in­vest in Pak­istan if the gov­ern­ment holds their hand and as­sure them of fair deal­ing,” he added. He re­vealed that the to­tal wages earned by ex­pat Pak­ista­nis is equiv­a­lent to 20 per­cent of coun­try’s GDP, which is a huge source of wealth that could be at­tracted into the coun­try.

“Pak­istani val­ues their home­land very much. Their love and con­cern can be gauged by the fact that they come with large amount of money when­ever there is an emer­gency in the coun­try like the floods or earth­quake,” he said. The econ­o­mist said that Pak­istan is adding 3 mil­lion per­sons a year in its work­force. “The de­mo­graphic div­i­dend of this young force is not be­ing ex­ploited,” he said and warned that the de­mo­graphic ad­van­tage of young pop­u­la­tion that Pak­istan cur­rently en­joys would end in 2042.

Dr Ishrat Hus­sain, the for­mer gov­er­nor State Bank of Pak­istan, said Pak­istan en­joyed geo-strate­gic ad­van­tage since it came into be­ing. “It is the only coun­try in the world that con­nects South Asia and Cen­tral Asian States through land with China,” Hus­sain said. He added that in­fra­struc­ture im­prove­ment alone would not de­liver the goods. “In­fra­struc­ture is the hard­ware. It is rea­son­ably de­vel­oped but the soft­ware that needs to run on this hard­ware is very weak,” Hus­sain said.

He added that soft­ware weak­nesses in­clude the fail­ure of the gov­ern­ment and in­com­pe­tence, cor­rup­tion, and in­ef­fi­cien­cies are its hall­marks. “If we take for in­stance the state-owned ser­vices sec­tor then it will be found that ir­ri­ga­tion, gas, elec­tric­ity, rail­ways in­cur a loss cross­ing one tril­lion ru­pees, which is 3.5 per­cent of our GDP,” the for­mer SBP gov­er­nor said at­tribut­ing in­sti­tu­tional weak­nesses to gov­ern­ment fail­ure.

Hus­sain said gov­ern­ment fail­ures are com­pounded by mar­ket fail­ures and mar­kets in Pak­istan are im­per­fect. “The dis­tri­bu­tion of re­sources is skewed to­wards the rich. There is over reg­u­la­tion in some cases and un­der reg­u­la­tion in oth­ers. There is no clar­ity in poli­cies,” he said and as­serted that a clear and pos­i­tive change would have to be made in th­ese spheres to get op­ti­mum ben­e­fits from the CPEC.

Hus­sain said no one should ex­pect in­vest­ment in man­u­fac­tur­ing sec­tor if the gov­ern­ment con­tin­ues to of­fer a guar­an­teed rate of re­turn of 17 per­cent in dol­lar terms to in­vestors in ser­vices sec­tors. “The gov­ern­ment would have to adopt a fair and ra­tio­nal pol­icy to at­tract man­u­fac­tur­ing in­vest­ment that cre­ates jobs,” he con­cluded.

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