CPEC to give bargaining power to Pakistan

LAHORE: The China Pakistan Economic Corridor (CPEC) would transform Pakistan and open up new trade routes for Pakistan, while at the same time denying many countries the option to impose their will on it in return for economic assistance.

Planners deserve the credit for being on target for progress on CPEC infrastructure projects. This feat has been acknowledged by International Organisation “Emerging Markets” that declared Pakistan the best country in the region on infrastructure development.

The security forces on the other hand deserve the praise for ensuring the security of the CPEC projects. They acted prudently and first completed and secured 650 kilometre CPEC road in Balochistan. The adversaries were caught unaware at the speedy completion of CPEC route in Balochistan. The insurgency in the province has now largely been controlled. Building the rest of the route is child’s play as it is in Khyber Pakhtunkhwa and Punjab.

Periodic crisis has affected the country since 1990 and with each passing year its economic growth became more dependent on the assistance of the western countries. The growth accelerated to 5-7 percent when assistance was available and declined to 1.2 to 2.5 percent when the assistance was withdrawn.

The assistance was provided when Pakistan accepted the conditions of the creditors. If political demands of western powers were accepted, the International Monitory Fund (IMF) allowed numerous waivers even if the conditions of its loan facility were not fulfilled. In case of resistance to the wishes of western powers, the assistance was stopped by almost all development agencies.

This time around, the Pakistani government took the initiative of proposing the IMF the rules of engagement for providing it three year extended loan facility of $6.15 billion. Pakistani government fulfilled most of the reform measures it promised to introduce during this period.

The loan was disbursed in quarterly tranches of around $500 million. For the first time, an IMF programme has been successfully executed.

During the past three years, the planners secured the financial and economic stability of the country. Now the foreign exchange reserves are at all time high, interest rates are at historic low and inflation in a highly comfortable zone.

The LNG infrastructure projects have drastically reduced the natural gas shortages.  The low global oil rates are an icing on the cake. This is one measure where the present regime has no role, but low prices are expected to prevail in the medium term. Traditionally, smaller economies benefit immensely when located close to a flourishing economy. The East Asian economies grew on the spill over effect of the Japanese economy.

Latin American economies moved ahead on the strength of the US economy by establishing a strong vending base that supplied parts to the big industries in the United States.

The German and British strengthened the economies of small European Union members. Pakistan is located quiet close to two highest growing economies of the world. Still its regional trade is dismal.

The doors of regional trade remained closed on Pakistan during the past 70 years, as trade with India its largest next door neighbour was not possible due to hostilities between the two countries, while China was a neighbour without direct road connectivity.

Currently, trade between Pakistan and China is conducted through Shanghai from Karachi Port. This is a very long route and transportation cost is high.

The CPEC is going to change all this. India will continue to create hurdles for import of Pakistani goods in its territory. Despite being granted the MFN status by India, Pakistani exports to India have remained dismally low at $400 million.

The Indian exports to Pakistan are worth $2.16 billion. Despite very high transportation cost, bilateral trade with China has crossed $10 billion. Pakistan’s exports to China are $2.5 billion - 6 times higher than to India.

Pakistan can easily triple its exports once low cost CPEC route becomes operative. India, our adversary will lose market for its products if it continued to trade through the high cost transport route. To gain access to the CPEC route, it would have to remove the barrier it erected for Pakistani products in the Indian market.