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Under CPEC local manufacturing concerns rising to the challenge

Local manufacturing industries have been finding it hard to influence the local market partially due to price difference between locally manufactured goods and imported goods but collection of multiple projects including Gwadar port development, energy projects, transport infrastructure projects and industrial development projects under China-Pakistan Economic Corridor (CPEC) will have positive impact of the country manufacturing sector.

Industrial development projects under CPEC are aimed at development of new industrial zones. This is advantageous because it will boost Pakistan’s GDP while local manufacturing industries in future would be facing unfair and unjust competition from Chinese established industries. It would be impossible for local industries to compete in the long run at low profit margins. On the basis of the experience of Afghan Trade Transit (ATT), it is also anticipated that there would be an increase in smuggling through the CPEC route. This would be a loss to the national exchequer. In this context if a smuggled goods increases in the local market, it would be impossible for local manufacturers to maintain their market share. This would result in colossal losses to the government due to loss of duties and taxes.

Government has designed a system to prevent smuggling. Both countries (Pakistan and China) have agreed to exchange intelligence between their anti-smuggling bureaus and strengthen customs controls at the border and exchange information to curb illicit trafficking and smuggling across the border. It is seen that no important action has been observed so far. There are still concerns for local industries about the growing of smuggling and illicit trafficking

CPEC may bring a menace that may force local manufacturers in the long run to limit their business activities and confine it only to trading to buy from Chinese-established industries and sell it in the local market at a limit.

Presently China imports raw material from all over the world, including Pakistan. Pakistani exports to China only constitute around 8 percent of Pakistan’s total exports. When the Chinese established industries start their operations in Pakistan these exports would be reduced.

We must not ignore the fact that about 27 percent of our imports are from China, which are also expected to be reduced once Chinese-established industries start operations in Pakistan and this will bolster our balance of payment. It has also come to our notice that the government is considering allowing Afghanistan, Iran, India and other neighbouring countries to trade through CPEC. This in the short-term will augment government revenue.

The government should bring major stakeholders of local manufacturing industries on board while finalizing trade and investment terms for CPEC and ATT, so that their concerns may be resolved. The special tax policies and rebates agreed under CPEC be allowed to all local manufacturing industries, so that healthy market competition is assured.

On the other hand the government should relax policies, taxes and duties for local export oriented businesses and manufacturing units, so that local manufacture competitive edge is maintained.

GOOD OPPORTUNITY

CPEC is a good opportunity for Pakistan to see its economy thrives and claim a significant trade share in the international market. CPEC holds importance in the South Asian region. It is playing a crucial role in creating networks that would connect countries socially, economically and politically.

The China-Pakistan Economic Corridor (CPEC) is proclaimed as a game changer for Pakistan’s economy and regional cooperation. China’s ambitious initiative, ‘One Belt, One Road’, aims to connect Asia with Europe, Middle East and Africa via roads, railways, pipelines, communication networks and industrial economic zones. The principal purpose of this project is to link Gwadar Port in southwestern Pakistan to northwestern region of Xinjiang in China and to provide Pakistan energy and communication infrastructure.

CPEC would represent a positive image of Pakistan and would serve as an incentive for companies from other countries to come and invest in Pakistan.

The rise of China awakens hope and optimism of development for countries in the region. China highly believes in cooperation for the common interests and its remarkable progress has spread its influence across the borders.

Through CPEC, Pakistan can said to be a rising regional power to balance her position against other regional powers in the South Asian region such as India.

According to IMF, the CPEC will help lift Pakistan’s economy as Chinese companies invest in Pakistan it will increase the country’s foreign direct investment and other funding inflows but it may face difficulties in the longer run in repaying them back. This is evident from the IMF report that showed the imports under CPEC could rise up to 11 percent of the total projected imports which is equal to $5.7 billion.

The exports will touch 2.2 percent of the projected GDP in the year 2020. The country’s external financing needs from $11 billion for the current fiscal year will increase to $17.5 billion in 2020.

Pakistan’s economy is highly complementary to that of China and exists in a win-win cooperation of investment, energy, human capital and technology. China is specialized in technology but it needs market for its products and raw materials. On the other hand, Pakistan has abundant intact raw material but needs access to technology to list its industrialization process.

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