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CPEC to help PR improve performance: PM

Prime Minister Nasir-ul-Mulk Tuesday said that with CPEC, there is a huge potential and scope for Pakistan Railways to further improve its performance and increase its share both in passenger as well as freight transportation sector by offer quality services to its customers.

During a briefing about the performance of Pakistan Railway, the prime minister directed that a comprehensive plan would be worked out to overcome the existing challenges for the consideration of the incoming elected government.

The briefing was attended by Minister for Railways Roshan Khursheed Bharucha, Secretary to the PM Suhail Aamir, Secretary Railways Muhammad Javed Anwar and senior officers of Ministry of Railways. The prime minister was informed that as a result of right mix in service the passenger share in Railways has increased from 13percent in 2013 to 31 percent in 2017.

Pakistan Railways recorded a revenue of Rs50 billion in 2017-18 as compared to revenue of Rs15.5 billion in 2011-12.

The prime minister was briefed about organizational structure, rail network, past performance and the future development strategy under National Vision 2025 in the Railways sector.

The prime minister was also briefed about the new business plan and various initiatives taken, both in freight as well as passenger transportation sector, for the revival of Railways and increasing its revenues. The prime minister was also briefed about the progress made in various rail network extension projects under the CPEC.  It was informed that Main Line-1 (ML-1) project from Karachi to Havelian was being upgraded as Early Harvest Project under the CPEC.

It was informed that feasibility study for upgradation of ML-2 (Kotri-Attock) project has also been completed. Similarly, feasibility studies were in progress on extension of ML-2 (Gwadar-Basima-Jacobabad and Basima-Quetta) and extension of ML-3 (Quetta-Bostan-Zhob-DI Khan-Kotlajam) projects.

The prime minister was also apprised about the challenges faced by the organisation including the issue of pension liabilities that contributed to 34 percent of the total expenditure of the organisation.

The prime minister appreciated the performance of Pakistan Railways especially various initiatives taken under the strategic business plan.

SOURCE:https://nation.com.pk/20-Jun-2018/cpec-to-help-pr-improve-performance-pm

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CPEC: the governance challenges ahead — II

Pakistan faces both internal and external security threats. The monster of modern terrorism, however, is a post-9/11 phenomenon. When General-cum-President Pervez Musharraf supported the US-led War on Terror (WoT) against the Taliban, the latter, in reaction, started targeting the Pakistani society and state. Resultantly, more than thirty thousand civilians and law enforcement officials have lost their lives in multiple acts of terrorism since 2003. Nevertheless, the overall number of causalities have dropped since 2014 owing to some legislative and executive measures taken by the government, but suicide bombers are still a real threat. Finding opportunity, any terrorist organization can strike. The country’s security apparatuses are the most tempting targets, while minorities are the most vulnerable.

Most of the people who died in terror attacks were ordinary Pakistani citizens, both Muslims and non-Muslims. But foreigners have also been targeted. For example, an American national was kidnapped and later killed in Karachi some years ago. Iranians have also been targeted.

Similarly, the Islamic State (IS) abducted, as per media reports, two Chinese nationals who were Christian missionaries, near Quetta in 2017. The couple was eventually killed. This seemed like an attempt on the part of the terrorists to malign China-Pakistan relations, in general, and the China-Pakistan Economic Corridor (CPEC) project, in particular. Moreover, another Chinese national was also killed in Karachi, reportedly by extortionists. The deceased Chinese citizen, according to Pakistani officials, was working for a non-CPEC firm called Cosco Shipping Lines Pak (Pvt) Ltd, which has been doing business in Pakistan since the early 1990s. If analysed objectively, in both cases, the Chinese nationals were residing or working in Pakistan in their private capacity. Furthermore, they were not related to CPEC in any capacity. Noticeably, the missionary couple and the private-firm employee were provided due security by the government. However, in both incidents, the Chinese citizens seemed to have violated security protocols, which cost them their lives.

The overall number of terror-related casualties has dropped since 2014 owing to some legislative and executive measures taken by the government, but suicide bombers are still a real threat. Finding opportunity, any terrorist organisation can strike

Recently there have also been reports of some Chinese citizens involved in financial crimes such as ATM skimming. Such cases remain under investigation. In addition, in April 2018, a number of Chinese workers were filmed assaulting some personnel of the Punjab police in the Noor Pur camp (Khanewal, Punjab). Video footage of this shameful incident went viral on social media. At one point during the scuffle, the country project manager of the concerned company stood arrogantly on the bonnet of the police van with the Pakistani flag visible beside his shoes — this was not the first such incident.

Here, it is pertinent to mention that on December 8, 2017, the Chinese embassy in Islamabad issued a press release that read “the Chinese embassy has received some information that the security of the Chinese institutions and personnel in Pakistan might be threatened.  This Embassy would make it clear that Pakistan is a friendly country to China. We appreciate that Pakistan has attached much importance to the security of the Chinese institutions and personnel”. The preceding is a reflection of China’s growing security concerns vis-à-vis its CPEC related citizens. Even, the number of non-CPEC related Chinese nationals — working, for example, as journalists — have crossed fifteen thousands. Physical security of the Chinese residing and working in Pakistan has, therefore, emerged as a legitimate concern, which the Pakistani authorities need to take into policy consideration.

However, despite the mentioned cases of Chinese citizens being killed by terrorists, the fact of the matter is that CPEC has, thus far, not been targeted by a major terrorist attack on its infrastructure, machinery and work force. However, this should not discourage or devalue the significance of security enhancement on the part of Pakistani authorities. Rather, impending security threats ought to be responded to diligently. This will be easier said than done because it raises questions on the legal, institutional and administrative capacity of the government.

For example, is it the prerogative of the local, provincial, regional or federal government to provide material and physical security to, for example, transportation infrastructure (or to the proposed Special Economic Zones) and the Chinese work force and machinery involved at different stages of construction? If it is a combined arrangement on the part of the provincial and federal government, who will be responsible for implementing the security measures? Which government and at what level, will bear the financial and logistical cost of security? Moreover, if the provision of security is the responsibility of the provincial government, will the province be able to manage it logistically and institutionally? Significantly, will the Chinese companies and human resource be satisfied with the security arrangements provided by Pakistani authorities? These are some major security challenges that Pakistan will have to deal with for the sake of CPEC, which has been termed by both China and Pakistan, as a crucial component of contemporary bilateral relations. I will provide policy input, in this respect, in the upcoming articles in this series.

SOURCE:https://dailytimes.com.pk/255100/cpec-the-governance-challenges-ahead-ii/

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‘CPEC is not a gift’: Professor Jia Yu at the CPEC 2018 Summit

Pakistan should not take CPEC for granted, writes Dr. Jia Yu. Both public and private sectors must take ownership of the opportunities.

 

The economic relations between the two countries have been phenomenal, especially since the turn of the century. Early economic cooperation was based on political and security interests, like Karakoram Highway, nuclear capability, arms trade etc. Also, it was focussed on energy and mining, but there is now a need for diversification. Pakistan has to take advantage of China’s rise on the global scene. There is a tendency towards having even better economic relations based on market forces and there is a lot of under-exploited potentials.

When it comes to win-win cooperation, of course, there is a lot at stake for both countries. Pakistan’s interests lie in promoting growth, private sector investment, employment, exports, technology and transfer of skills as well as in the relocation of Chinese firms. China’s interests lie in overseas production bases, new export markets, energy cooperation, and its need for production capacity relocation.

A successful execution of CPEC will ensure economic progress and stability for both the countries, particularly along the border region.

The two countries signed the FTA in 2006 which came into effect a year later. The FTAs play a major role in the general tendency of increasing trade. Surprisingly, the trade has been relatively low compared to the other neighbors (India, Vietnam, Philippines etc.). And there is a large and widening trade imbalance that needs to be worked on.

There has been a considerable increase in FDI since 2014 which is a positive sign for both China and Pakistan. The main FDI sectors by priority are: power, construction, financial services, and communication. There is, however, very little FDI in the light manufacturing sector.

The Belt and Road Initiative (BRI) is a $900 billion investment, with finance channels targeting green development. It connects more than 60 countries, 60pc of the global population, 30pc of global GDP, and 35pc of global trade.

CPEC, a central link of BRI, cuts 10,000 miles of shipping by sea, and connects ports from Shanghai to Africa and Europe through Gwadar.

PAKISTAN AND CPEC

If things work out smoothly, Pakistan could use the FDI in its power and transport infrastructure and then in the manufacturing sector with the experience of leveraging SEZs to unlock this trio’s potential for rapid gains in job-rich industrialization. This can be done without unrealistic pre-requirements as the work to lay the foundations for industrialization has already begun.

The potentials are outlined below along with policy options needed to convert them into actions. At a regional level, Pakistan has been growing steadily in terms of GDP per capita since 2010, according to the World Bank. Investors are very keen to a growing economy. Consistent growth of purchasing power (GDP per capita) really matters for domestic consumption; therefore the growth rate must be maintained to catch up with competitors.

Pakistan is one of the world’s largest reservoirs of human capital and has a tremendous potential consumer base. In 2016, the country was home to 193,203,476 people, being the world’s 6th most populous country. World Economic Forum estimates that it will be among the top five populous countries in the world by 2060.

However, a large population is necessary but not sufficient to attract investors. The population has to be equipped with adequate skills to meet industrialization needs. An effort is also needed to attract global buyers.

Thirdly, China and Pakistan have long hailed each other as “all-weather friends”, or “iron brothers” as close as “lips and teeth” in the words of The Economist. There is already solid trust between the two countries, but the Pakistani officials need to visit China more often to convince the private investors for investment opportunities in Pakistan.

The CPEC will improve road, air, sea, and energy infrastructure. It will ensure land, sea and air security. It will enhance trade and investment facilitation and will establish free trade areas that meet high standards, maintain closer economic ties, and deepen political trust. Also, it will enhance cultural exchanges and promote mutual understanding, peace, and friendship between the people of the two countries.

Having said that, the CPEC should not be considered just a ‘gift’ from China, but the Pakistani government should also establish an FDI Advisory Board that shall promote the new image of the country. This includes visiting China more often and ensuring that investors understand the opportunities and benefits available under the CPEC.

Besides, according to the State Bank of Pakistan in November 2017, the country received net FDI worth $207 million out of which $206 million came from China. Potential investors pay significant attention to first movers, other Chinese investors may follow and eventually stay in Pakistan if the government helps the pioneers to be successful.

In terms of binding constraints, a study case of Malaysia estimates that FDI can effectively contribute to growth if it is at least 3.14pc of GDP. Pakistan should be able to compete. This requires overcoming the binding constraints by addressing security issues and risks, hard infrastructure challenges, especially SEZ-specific constraints like energy, roads to SEZs etc. Soft infrastructure challenges include corruption, rule of the law, coordination among institutions, inadequate capacity and cultural biases. Absorption capacity can be adjusted by setting yearly realistic targets of FDI amount.

There are six steps to identify the right industries, as narrated by Prof. Justin Lin. They include identifying countries with consistent growth, with GDP per capita three times as Pakistan’s or was at the same level as Pakistan 30 years ago.

Next comes investigating the existing private investment in those target industries and encourage its development by leasing the market regulations. Attracting global investors into the target industries which lack existing domestic private investment is the third step, followed by paying attention to new enterprises and supporting innovation in the target industries.

Establishing and developing SEZs to eliminate entering barriers, attracting foreign investment, and encouraging industrial cluster. And, finally, providing policy incentives for the first movers, including tax reduction, foreign exchange access, etc.

THE WAY FORWARD

Development can start from ‘low-hanging fruit’ through SEZs. The government should attract first movers to invest and help the pioneers succeed.

CPEC should not be taken for granted. A proactive and systematic approach is needed for attracting investors, together with strong market factors.

Despite long-term and solid trust at the government level, more mutual dialogues and exchanges need to be enhanced in the private sector. Let the peoples get to understand each other.

CPEC and SEZs are open for all investors, including those from other countries beyond China.

The writer is a professor at the Institute of New Structural Economics (INSE), Peking University, China.

SOURCE: https://www.dawn.com/news/1409721