CPEC may help China play role of large economy in region

LAHORE: After materialisation of the China-Pakistan Economic Corridor (CPEC), China could play the role of a large economy in the region as was done by Japan in the Association of Southeast Asian Nations (Asean) and the US in Nafta, experts said.

Regional trade in South Asia is the lowest as compared to other regional blocks.

India is the largest economy of the region and is growing at a faster pace than any other economy of the world.

They said still 300 million people in India live in extreme poverty. This is 1.5 times larger than the total population of Pakistan. Its intra-state disparities are very large.

Its average per capita income is slightly higher than Pakistan and half that of Sri Lanka. There are some products that only India produces in the region, but it also fiercely compete in the global markets for all the products that are exported by Pakistan, Bangladesh or Sri Lanka, they said.

The per capita income of India in certain states is lower than that of Pakistan or Bangladesh. So, if it needs to provide some goods and services it would prefer its poorer states.

All other countries of the South Asian region face the same dilemma. Unemployment is as high in Pakistan, Bangladesh and Afghanistan as in India. None of the countries is prepared to transfer jobs to their neighbours even if they enjoy price advantages in certain fields, the experts said.

China is also a close door neighbour of Pakistan, but due to logistic problems the two countries conducted trade with each other through a route that is more distant than even the distance from Pakistan to United States.

Chinese products entered Pakistan because China has attained the status of global supplier of manufactured goods.

Through economies of scale it competes even with Mexican products in the US market.

Similarly, Pakistan’s exports to China were restricted to those that Pakistan has been successfully exporting to destinations like Europe or the US.

Some of the products that Pakistan produces at competitive rates lose their edge when similar products are produced by North Korea, Cambodia or Vietnam that are nearer to the Chinese port of Shanghai.

China has to relocate many of its industries for re-import components and accessories produced at low cost for making high value products.

Had there been a direct road link with Pakistan, China would have preferred to locate many of those industries here.

All low value and labour intensive industries in China could be conveniently relocated in Pakistan once the logistic problems are resolved, the experts said.

They said that the per capita income in China is $8,000 as compared to $1,350 in Pakistan.

Chinese economy is very large, in fact, the largest in the world.

Despite a population of 147 billion the labour shortages have started manifesting in China where the population is shrinking until recently due to one child policy.

CPEC would be a game changer for the entire region, as China would act through this route in the same way as Japan and United States did to boost regional trade for the benefit of all.

China has largely addressed its poverty problem and the unemployment level is very low. It can afford to outsource most of its unviable industries to the regional economies once the CPEC is operational.

"We may well see Chinese investments not only in Pakistan, but also in India and Afghanistan,” an expert said.

This corridor is the only hope for promotion of regional trade.

There are very slim chances of increasing trade through Safta, as even the largest economy is afraid to open its economy for smaller neighbours.

"In fact, if we study the trade regime and non-tariff barriers erected by India most of them are directed towards the neighbouring economies, as Indian planners cannot afford to transfer any job to its neighbours."

China will have no such hang ups. It has since long been seeking destinations for relocating its unviable industries.

India will also be forced to lower its guard against imports from Pakistan because it would need the CPEC corridor to get shortest access to Chinese markets. Without this corridor it would be forced to adopt a longer route that would not be commercially viable.