Since 1947, Pakistan has been struggling to become a self-reliant economy that can end its dependence on foreign donors that entails with its political subjugation. The challenges on the economic front at present include perpetuation of elitist economy, growing gulf between the rich and poor, fiscal deficit, oppressive tax system favouring the rich, sluggish economic growth, lack of investment in industry to generate growth, dearth of skilled labour, dwindling exports, rising imports, inadequate infrastructure development—just to mention the major ones. Hopesare pinned upon the huge potential of China-Pakistan Economic Corridor (CPEC) that official quarters optimistically claim would be a ‘game changer’ and turn Pakistan into one of the largest economy in the coming years.
CPEC, $46-billion project would create a 2,000-kilometre road and rail link from China’s western hinterlands to the Gwadar Port, creating a network of infrastructure in Khyber-Pakhtunkhwa and Balochistan to match the one originally built by the British (and expanded by successive Pakistani governments) in Punjab and Sindh.To be built over the next several years, the 3,218 kilometre route will connect Kashgar in China’s western Xinjiang region to the port of Gwadar. Currently, nearly 80 per cent of China’s oil is transported by ship from the Strait of Malacca to Shanghai, a distance of more than 16,000 km, with the journey taking between two to three months. But once Gwadar begins operating, the distance would be reduced to less than 5,000 km.
It is time we should come out of “economic despair” and utilise CPEC as an opportunity to reform our out-dated elitist structures that are the main impediments for robust economic growth. A new era of economic development is at our doorstep. We need to upgrade all our delivery systems to make this historic opportunity a success. Much-needed foreign investment and development of infrastructure is coming from China—this is a reality and not an illusion as many skeptics portray. We need to make best use of it. Execution of all projects related to CPEC and those yet not conceived, but bound to come after infrastructure is completed, can bring prosperity for Pakistan—making it one of the largest economies of the world. The challenge of removing inefficiencies from our administrative structures that are change-resistant is formidable but not impossible. There isrealizationwith fast growing need that weshould move towards modern and efficient delivery systems. CPEC being a multi-faceted project will essentially pull public and private sector onto a fast track development mode proving a blessing for Pakistanis who are otherwise suffering on account of lethargy and indifferent attitudes.
At the end of 2015, the economy of Pakistan was the 25th largest in the world in terms of purchasing power parity (PPP), and 38th largest in terms of nominal gross domestic product (GDP). According to British economist, Jim O’Neill, Pakistan has potential of becoming “the 18th largest economy of the world by 2050, leaving behind many strong economies.” According to his projections Pakistan would have a GDP of US$3.33 trillion (almost the same size as the current German economy).
The elite is unwilling, even in its own enlightened self-interest, to contribute on the basis of capacity to bear the resource burden required to build a fairer society. Instead, it has instituted a social order that imbibes the feudal value system and promotes a culture of paternalistic and personal relations (in contrast to impersonal market relationships and a culture of competitiveness in other economies), nepotism and patronage, violation of the rule of law, non-acceptance of the norms of fair play and justice, etc; wrecking institutions meant for checking such excesses. Even a slowly growing middle class from non-elite backgrounds has adapted to these value systems, creating a crisis of legitimacy for the state and its institutions—Shahid Kardar, Overhaul the system
It is worth mentioning that evenbefore the stone-breaking of CPECH, Moody’s Investor Services—one of the three largest credit rating agencies in the world— described the project as a ‘credit positive’ for the country, implying that the economic growth generated will eventually help the government’s finances.
After taking into account the size of investment in CPEC, all credit rating agencies made positive remarks that energy projects throughout the country would ultimately reduce the cost of power generation, lowering the need for electricity subsidies—a key burden on the federal budget—and “improving economic growth, which would in turn increase tax revenues for the government.”Obviously these two factors can substantially reduce the budget deficit and resultantly ever-increasing debt servicing. It is true that much of the project’s key benefits would not materialise until 2017, but some of the benefits from the economic corridor would certainly begin during the current fiscal year.
The biggest failure of our ruling elites has been protection of existing structures that are outdated and incapable of delivering. Judiciary and civil services are not delivering and their decay is converting into a collapse. Political elite, alienated from masses, is insensitive towards socio-economic justice. The rulers by ignoring well-being of masses infringe their fundamental rights, but keep on extorting more and more taxes from them for their luxuries and personal comforts—Huzaima Bukhari, Towards Flat, Low-rate, Broad & Predictable Taxes
CPEC envisages 21 agreements for energy (gas, coal and solar energy) and 14 out of these will be providing up to 10,400 megawatts (MW) of energy by March 2018, to make up for the 2015 energy shortfall of 4,500MW. According to China Daily, these projects should generate up to 16,400MW of energy altogether. This is what we really need to induce local and foreign investors for establishing new businesses.
The institutional structure of Pakistan’s economy is designed to generate rents for the elite at the expense of the middle classes and the poor.” It is this structural characteristic of the economy and not just bribery that prevents sustained high economic growth and equity in Pakistan—Dr. Akmal Hussain, Restructuring for economic democracy
The fruits of CPEC Connectivity would be enormous for the entire region without which, the huge potential of trade within South Asia cannot be achieved. Imagine hundreds of service stations along the roads giving employment to our youth, acceleration of trade between different parts of Pakistan, boost totourism, peace and prosperity as Afghanistan, India and Iran transit trade through the CPEC. There is no doubt that this wouldbring prosperity to the millions inhabiting South Asia. It is thus imperative for the government of Pakistan and all stakeholders to highlight the advantages of the CPEC and create an atmosphere of love and fraternity among all the beneficiaries. The new dawn of economic well-being for Pakistanis is not very far and the only thing we need to do is to ensure that all citizens get adequate opportunities to prosper and benefit equally from economic growth. We must move fast to end economic apartheid that is presently inbuilt in our elitist structure. Without removing these distortions, the real benefits of even mega project like CPEC could be wasted. Equitable growth can come through this great initiative if we implement Chinese model that “a harmonious society should feature democracy, the rule of law, equity, justice, sincerity, amity and vitality.”
Dr Ikramul Haq, Advocate Supreme Court and author of many books, is Adjunct Faculty at Lahore University of Management Sciences (LUMS)