Can CPEC Make Pakistani Manufacturing More Competitive?
In addition to a basic sense of security, the cost of production and availability of required skills are essential for making manufacturing competitive. Cost has several components: labor cost and abundant, cheap energy and infrastructure. Skill comes from education and training infrastructure. Will CPEC (China-Pakistan Economic Corridor) help Pakistan achieve competitiveness on these fronts?
|Pak-China Industrial Corridor Source: Wall Street Journal|
Abundant, Cheap Energy:
Costs rise dramatically if expensive plant and equipment are not fully utilized due to lack of gas and electricity. It is hard for a manufacturer to be competitive if its factories lie idle for many hours a day due to load-shedding as has been the case in Pakistan for many years.
Manufacturers rely heavily on efficient supply chains. They need required parts delivered on time to continue to operate. Others who depend on their output need to have their orders filled on a just-in-time (JIT) basis. All of this not possible without reliable transport infrastructure over roads, rails, air and sea.
Energy and infrastructure are necessary but not sufficient to be competitive. Availably of skilled labor is just as important. If the education and training infrastructure does not supply the required skills, then it's not possible for an economy to be competitive.
China Pakistan Economic Corridor:
Can China Pakistan Economic Corridor deliver energy, transport infrastructure and skilled labor to improve Pakistani economy's competitiveness? It appears that the first two will be in good shape after CPEC projects are completed. However, significant questions remain with regard to the education and vocational training infrastructure to build the required skilled labor pool.
Abundant, cheap energy, transport infrastructure and availability of skilled labor are essential for improving Pakistan's manufacturing competitiveness. It appears that the first two will be in good shape after CPEC projects are completed. However, significant questions remain with regard to the education and training infrastructure to build the required skilled labor pool.
CPEC Industrial Corridor
Software (Education) Vs Hardware (Infrastructure) Focus in Pakistan
Declining Investment Hurts Pakistan Economic Growth
Software (Education) Vs Hardware (Infrastructure) Focus in Pakistan
Declining Investment Hurts Pakistan Economic Growth
Tim Cook, CEO of Apple at the 2017 Fortune Global Forum /CGTN Photo
Talking about Apple's operations in China, Cook said the company holds 15 percent of the country's smartphone market, but noted that the focus is to produce the best products.
He also noted that there are two million app developers in China who are contributing to the app store, and "these are inspiring entrepreneurs."
Cook also attempted to set the record straight about the misconception that Apple products are "designed in California, and manufactured in China."
"The truth is the process engineering and process developments that are associated with our products require innovation itself, not only on the products the way it is made."
Cook also elaborated on the concept of humanity within the realm of technology, which he touched upon a couple of days ago at the fourth World Internet Conference.
He said Apple stands at the intersection of technology and liberal arts, with users at the center. He maintained that a great user experience should be the focus, and noted that in a world where tech can do anything, developers should put humanity at the center of their creations.
We are talking about a financing mechanism that is essential to bridge the time lag between a product’s shipment from one market and its arrival and inspection in another. Reducing this delay helps build trust and minimizes many of the risks arising from such complex transactions, such as a lack of timely payment, exchange rates and the deterioration or loss of goods and services.
Trade finance likes to manifest itself in the form of letters of credit, guarantees or insurance and is usually provided by intermediaries, such as banks or financial institutions. One of its most current forms involves bank-to-bank transactions, where one bank provides an account and related services to another in a relationship is called correspondent banking.
According to an Asian Development Bank Institute paper, adequate and reliable trade finance creates exports opportunities: “[I]t enables firms which would otherwise be considered too risky, to link into expanding global value chains and thus contribute to employment and productivity growth”. Trade is no longer just for the big boys.
FinTech solutions could potentially solve some of the transparency and risk-related processes and transaction costs, as well as fees, associated with banks’ due diligence checks by providing trusted platforms to connect seekers and providers of funding, rather than piles of paperwork.
The good news is that some initiatives are emerging. For example, some FinTech firms in the US and Singapore are starting to offer web-based platforms allowing users to post assets for distribution, negotiate deals, and manage supporting documentation.
FinTech solutions could finally find their niche in the finance sector and kill two birds with one stone. On the one hand, they could allow for the development of innovative start-ups that have been in the shadows for too long while creating new opportunities to link up with markets; on the other hand, they could offer an easier and cheaper way to access finance through a user-friendly platform that’s accessible by phone. Our Burmese entrepreneur would certainly find it easier to buy a phone than to open a bank account.
Now take off your rose-tinted glasses for a minute and feel that bittersweet taste in your mouth. Every joy has a dark side. Given the nascent nature of FinTech, regulatory frameworks are still uncertain and concerns related to intellectual property and data protection are yet to emerge. This may prevent some companies from adopting these solutions and being able to see the benefits, which include security, risk and cost reductions, and speed, to name but a few.
Discussing the energy sector under CPEC, there were 16 projects prioritized with the total capacity of 10,400MW as well as 8 actively promoted projects. Year 2017 has witnessed the operationalization of 2x660MW Sahiwal Coal-Fired Power Plant, 50MW Dawood Wind Farm and 50MW Sachal Wind Farm. Near to completion are the 900MW Quaid-e-Azam Solar Park in Bahawalpur (90% work has been done) and 100MW Jhimpir Wind Farm. 2x660MW Port Qasim Coal-fired Power Plant, 4x330MW Engro Thar Coal-fired Power Plant and Surfice Mine in Block II of Thar Coal Field, 720MW Karot Hydro-Power Project, and 873MW Suki Kinari Hydropower Project are under construction.
Year 2017 has witnessed the seventy percent completion of the two infrastructure projects; KKH PhaseII(Havelian- Thakot Section),120 km, Karachi-Lahore Motorway (Sukkur-Multan Section),392 km. Rest of the infrastructure projects are working on their pace while the spine of the CPEC Railway Line ML-1’s complete feasibility report has been compiled up for the further progress. An efficient and fast transportation network is vital importance for the economic development.
In the area of industrial cooperation under CPEC, there are six projects under construction and year 2018 will be witnessing their destiny. China has advantages in experience, technology, financing and industrial capacity, while Pakistan enjoys favorable conditions in resources, labor forces and market. By carrying out industrial cooperation, both sides will achieve mutual complementarity and win-win results.
Year 2017 marked a landmark achievement for Pakistan as Federal Minister Ahsan Iqbal said that CPEC Long Term Plan would be public on 18th of December, 2017 which would further add the prospects for more inclusive research of this mega project. Simultaneously, there are bright prospects to jack up the developments in various sectors which include agriculture, information technology. This demonstrates the success of this meeting and the willingness of China to diversify its cooperation under the CPEC project. In this backdrop, the harmony between the provincial and federal governments is required and they should work enthusiastically for the inclusion of more projects under CPEC and to complete the ongoing projects. It can be hoped that the end result would be productive and the project will be able to proceed. The continuity of the meetings of Joint Cooperation Committee since 2013 to Nov 2017 shows the evaluation and progress of work on the ongoing projects under CPEC. 7th JCC has further deepened mutual cooperation between the two countries under the framework of CPEC and would pave a clear way for Pakistan to enter the phase of Industrial Cooperation.
CPEC has helped Pakistan to mitigate the chronic energy crises which have negative impacts on the economic growth of Pakistan. This energy shortage has hampered the industrial production and the businesses were closed down because of the interrupted supply of energy. CPEC project has played a significant role in this regard whereas WAPDA and KESC failed to resolve this problem of energy shortage. CPEC energy projects based on the wind, solar, coal and hydro power would create the generation of 16,400 MW.
The projects implemented under the China-Pakistan Economic Corridor (CPEC), a flagship project of the Belt and Road Initiative, will not only benefit certain areas but also development in Pakistan, commented China Radio International (CRI) Urdu on Sunday.
“The way in which the CPEC projects have been implemented over the past five years and the results that have emerged show that the purpose of building up CPEC is not to benefit certain areas, but to promote development in Pakistan,” the CRI Urdu said of the progress made in the construction of CPEC projects.
The Urdu service stated that the infrastructure, construction of industries and the elimination of energy shortages will provide an environment for Pakistan according to its resources, which will also benefit the people of Pakistan and guarantee a bright future.
The Orange Line Metro train in Lahore is the first electric public transport project, the introduction of which not only increased travel facilities for the people but also created new jobs.
In the past five years, CPEC projects have created 55,000 direct jobs in the road infrastructure sector, of which 48,000 have been created specifically for local Pakistanis.
According to a spokesman for the Chinese Ministry of Foreign Affairs, major projects with a direct investment of US $25 billion have been completed since the inception of CPEC. The projects completed under it are are part of The Belt and Road Initiative.
As for the shipping of cargo, the trade began at the Gwadar port during the first six months of this year, through which up to 20,000 tons of goods were shipped to Afghanistan; the initiative also created jobs in the shipping sector. There was no doubt that these projects entailed infrastructure as well as energy supply, and job opportunities, the CRI maintained.
According to the proposed two-gap model of economist Hollis B Channery, developing countries should introduce foreign investment and stimulate exports to boost their national economies. In this regard, CPEC has played an important role in the development of Pakistan.
The initiative has also addressed the issue of limited investment potential, insufficient foreign exchange savings and deficits in Pakistan, and has provided excellent quality for Pakistan’s economic growth.
Pakistan’s GDP growth rate is significant and it has created 70,000 jobs in Pakistan, the China-based Urdu service added.
Since its inception, CPEC has considered the elimination of energy shortages in Pakistan as an important sector for construction. Over a period of five years, energy projects under the CPEC framework added 3,340 MW of electricity to Pakistan in early April 2019, accounting for 11% of the installed capacity in the country.
The shortage of electricity has been significantly reduced and in addition to power generation projects, China has built the Matiari-Lahore (an 878 km long, 660 kV) HVDC transmission line project in Pakistan – the second HVDC transmission line in the world to extend the life of the country's power grid.
The construction of the corridor is progressing rapidly, significantly reducing Pakistan's energy problem in the process. Improvement in the transportation infrastructure has laid the foundation for the industrial development of Pakistan. The next phase of the project focuses on industrial cooperation.
Given the pace of the projects, their completion and results, it can be said that CPEC is undoubtedly a new impetus for the sustainable development of Pakistan, the CRI added.