Pakistan: Budget 2020 and CPEC

Even though we cannot blame the Pakistan government for the bleak state of economy at a time when the whole world is suffering major losses due to COVID-19, it won’t be wrong to say that the 2020-21 economic survey and budget documents are presenting a dismal picture of Pakistan’s economy. The economy has contracted. Major production sectors, except agriculture is showing negative growth. Government could not achieve any major target of major indicators of economy.

However, the choices by government to combat this situation would be major area of interest to watch. Although, the situation is complicated but certainly Pakistan have options to combat it like China Pakistan Economic Corridor (CPEC). It is not rhetoric but a reality. To exploit the CPEC for economic revival would require a comprehensive policy and action plan.

First of all, Pakistan should stop listening to international experts and focus on the country’s needs and ways to doing business. The mantra to keep happy or satisfy all, will not work. Every country has its own interest which they try to put forward through different organizations by providing them funding at one name or other.

Also, Pakistan should not give head to the propaganda mechanism used by international experts and keeping working on indigenous solutions and take actions which are needed for the development of country. Besides, we also need to share our narrative and facts very clearly and loudly, which will help our people to understand the propaganda. It will pave way for smooth implementation of CPEC.

Second, Pakistan needs to focus on our strengths and stop buying fake dreams. We need to understand that at this point of time, our strength is agriculture.

CPEC provides us an excellent opportunity to capitalize on it. Recently, Pakistan and China have signed a MoU to strengthen our cooperation. China has also agreed to provide US$ 100 million for agriculture sector under social development program during this year. It would be a good chance for Pakistan to use this fund for development of agriculture and fight the challenge of locust.

The biggest challenge in supply chain of agriculture is the shortage of cold storage and quality of transport with cold storage facility. The investment in supply chain will help Pakistan in different ways – It will increase the shelf life of perishable commodities, help maintain quality of perishable and non-perishable commodities, and consumers will get quality products.

The second area for short-term would-be establishment of quality control and certification facilities. It is the biggest hurdle to enhance our agriculture trade along with supply chain.

The availability of these services will give a boost to agricultural export in the short run. In the long run, Pakistan will benefit by attracting investment in sector for mechanization and climate compatible agricultural practices.  Climate change has emerged as the biggest challenge for agriculture. Pakistan is already suffering and during the current year we have witnessed the un-expected rain at time of harvest of Rabi crops. The cooperation under CPEC can help us to combat these challenges.

Third area would be construction projects under the CPEC including ML-1, road infrastructure, dams and most importantly SEZs and service facilities. In a positive news, Pakistan has allocated a good amount of resources for different construction projects in the budget. Although it is not according to demand, but it is a good start.

However, there is less focus on physical infrastructure of SEZs and within SEZs like residential, services and industrial buildings. By focusing on these areas, government can attract good investment from China through different Chinese government institutions and companies.

Hence, government should immediately start negotiation with China to secure investment for industrial, services and residential infrastructure. Residential infrastructure is already a priority of government of Pakistan. Hence, government should look for investors from China, which can invest in SEZ residential infrastructure. It would be easier to convince China, as China has already committed US$ 100 million for housing projects in Pakistan under social development program.

Fourth, under CPEC, government can talk with China for the inclusion of some SMEs or products in the supply chain of China. For example, we can negotiate to include some parts of machinery or food items. It will help Pakistan to secure export market through established products. In the present scenario, inclusion in China’s supply chain is our only hope to recover the export loss in short run because China is only exception with positive GDP in this COVID-19 crisis.

However, to exploit the benefits of CPEC, Pakistan needs wisdom and have to move away from the street smartness approach. Unfortunately, we are trying to be “street smart” by ignoring sustainable benefits and focusing on gimmicks. Our strategy seems to be opposite of the saying “one bird in hand is better than two in bushes”. We keep eye on two but ignore what we have. For instance, presently, we talk a lot about digitalization but ignore the facts. We don’t have the resources for it. There is no second opinion about the importance of digitalization, but do we have all instruments of digitalization or we are just focusing on internet or some services related to digitalization? The wise strategy would be to look at available opportunities and plan digitalization according to development status in a step wise manner.

Lastly, in our current situation, CPEC is our strength and the best opportunity available. We need to focus on it and accelerate the implementation of CPEC. For the same, we need to consolidate our efforts and institutional mechanisms. Right now, there are a good number of champions of CPEC, which sometimes delay the implementation of some decisions. The best candidate for consolidation would be the CPEC Authority. It is already doing a good job as we have witnessed improvement in management of CPEC. However, strengthening of the authority will give it more space to play.