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July 24, 2019

The belt and its buckle

Opinion

July 24, 2019

With strong integration of globalization and economic forces, the Belt and Road Initiative (BRI) seeks to forge a common destiny for Asia Pacific and beyond. At this critical juncture when economies are slowing down and regional politics is overtaking regional economics, the

BRI offers a beacon of hope for the participating states.

It is projected that the BRI, when fully realized, will reduce travel times by up to 12 percent, reducing trade costs amongst its partner countries. The Belt and Road Initiative mainly focuses on connectivity of policies for unimpeded trade which will resultantly increasing trade up to three to eight percent. As predicted by economic pundits, the next decade will witness new supply chains and new regional trade lines despite the hovering clouds of the US-China trade war.

Along with relocation of Chinese industries, there will be diversification in investment coming from the West with industries shifting to new destinations like Laos, Indonesia Cambodia, Vietnam and other South East Asian countries. Pakistan too can become a preferred destination for foreign industry relocation – provided that it does well on the targets set by the prime minister on the ease of doing business, and crafts the right match of incentives.

While many rightly term the China-Pakistan Economic Corridor (CPEC) as the game-changer project for Pakistan and the icon project of the Belt and Road Initiative, I see it as the ‘Buckle of the Belt’. It is widely understood that the BRI is incomplete without CPEC, which has manifested its real strength as a comprehensive transportation corridor thereby stimulating economic, trade, and industry cooperation for socioeconomic development.

Pakistan, therefore, must seize favourable opportunities in the second phase of CPEC through opening-up of the BRI and mutual gains in collaboration with Chinese hi-tech industrial and capital advantage. In doing so, Pakistan needs to expand and rebuild existing industrial infrastructure, modernize railroad infrastructure through the Mainline (ML-1) project and develop the Gwadar Port as a smart and safe port city with correct hybrid governance structure in place to achieve tangible outcomes. As discussed during the recent World Economic Forum (WEF), the US-China trade war may be a beginning of the opening up of China in the field of advance sciences and technologies which in itself may be an opportunity for Pakistan if carefully factored in the cooperation mechanism under CPEC.

While the bottleneck of energy has largely been removed in the early harvest phase, completion of work on the western corridor and all-weather yearlong connectivity through the Karakoram Highway (KKH) should be done in the ongoing phase. As it is commonly known in logistics, “a chain is no stronger than its weakest link”, at the same time, we also need to look at the clearance processes and establish customs special supervision areas at the SUST border post and Gwadar Port where time delays can cost the national economy significantly. Seamless connectivity through fast speed internet via optical fibre needs to be ensured to realize the true potential of the corridor.

The time is ripe for Pakistan to benefit from the regionalization of Asia and assume a leading role as the transhipment hub for the region. We must capitalize on the opportunity the BRI offers. On July 17, a freight rail route was established between Bishkek, Kyrgyzstan and Xian, China marking the opening up of the China-Europe freight route. A similar route can be established within South Asia if serious efforts are made.

In the second phase of CPEC, the government is gearing up to uplift less developed areas of Pakistan, and promising greater regional integration. However, the biggest dividend can only be earned through the industrial cooperation phase by exploring new policy reforms and incentive packages to maximize the pull factor.

The government is also taking steps to encourage private-sector participation and creating an enabling environment by reducing risks and promoting complementary policies to strengthen trade, logistics and business cooperation and improve business-to-business (B2B) links. The second round of the China-Pakistan Free Trade Agreement also offers enormous opportunities. If Pakistan succeeds in capturing even one percent of the Chinese market share through the BRI, this can increase Pakistan’s exports to new records.

The CPEC Business Forum and the China-Pakistan Business Council, therefore, have a huge task ahead of them. Joint business bodies and provincial business chambers should create and manage trade and business links and strengthen the channel of communication between the business communities of the two countries.

All in all, alongside enormous economic opportunities from the BRI, there are certain challenges that require pragmatic handling. One of the major challenges is to achieve synergy and harmony in policy implementation and execution so that economic reforms are achieved in shortest possible time for mutual gains. The establishment of the CPEC Authority will, it is believed, address these issues of coordination and fast implementation.

The writer is a project management specialist and a faculty member at various universities.

Email: [email protected]

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