EDITORIAL: That the Prime Minister’s Office is working on “framing an effective strategy for Chinese industrial relocation in Pakistan” makes a lot of sense considering how the new finance minister stressed in a recent press conference the need to populate Specialised Industrial Zones (SIZs) and attract foreign investment. The timing is no doubt meant to take advantage of China’s own process of transfer of its sunset industries to countries like Vietnam, Thailand and Cambodia as its move up the technology ladder forces a recalibration of production priorities inside the country. That explains why the Board of Investment (BoI) believes that “devising an all-inclusive marketing strategy will not only facilitate existing but also promote new Chinese businesses in Pakistan.”
It is being reported that everybody in government is taking very serious interest in the matter, all the way up to the prime minister, most likely because Beijing is our best bet of enhancing foreign investment inflows in the present environment; especially in the immediate- to medium-term. And if the Chinese must shift some of their industries elsewhere for reasons of their own, then it is in our best interest to offer them better terms than others to create a double coincidence of wants so that this process can then proceed quickly. For that to happen successfully, though, the government would have to restrict itself to the role of a facilitator and let the private sector take the lead in forging joint ventures with Chinese manufacturers that opt to set up shop in our SEZs.
Production from industries that relocate will be exported from Pakistan to China itself and other countries, of course, and joint ventures (JVs) would do best because Chinese manufacturers that have a share of the global market would remain engaged and involved in it. More than 40 state-owned as well as private Chinese companies participated in a BoI-arranged symposium on Chinese investment in Pakistan the other day, which is a very good sign, and seemed happy with what they saw and heard. That they then let the organisers know, in quite some detail, of some of the issues that they face and also offered suggestions is particularly encouraging because now both sides can look forward to delivering something tangible in successive rounds.
This is a very precious window and successfully exploiting it might just bring the kind of foreign inflows that the economy really needs. Up until now the highish interest rate environment has given carry traders enough incentive to leverage themselves to the hilt and flood the local market with hot money; buoying the stock market and driving up the rupee for much of last year. But more solid assurances will be needed going forward, and more foreign direct investment (FDI) is usually the best answer to such dilemmas. Yet this is also going to be a time-barred window. And we will do nobody any favours even if we stitch together the best plans if we do it by the time Beijing has already made up its mind about other options.
Perhaps this is the opportunity everybody was waiting for to take the knife to all the red tape that strangles our ‘ease of doing business’ initiatives and also cut the bureaucracy down to its right size. This is something that has poisoned our investment climate since forever and even the Chinese have increasingly complained of it ever since the China Pakistan Economic Corridor (CPEC) took off. Since we need serious foreign investment to stimulate the economy, and there’s nothing better than facilitating Chinese industrial relocation in Pakistan at the moment, how successfully the government is in persuading them will determine how much money it is able to market into the country in the buildup to the next election. Hopefully, it will put the right pieces in the right squares and let the private sector take the lead, enabling it to enter into JVs with Chinese manufacturers where it can and overseeing the overall process from a distance that is comfortable for everybody. But it will have to decide quickly and move fast if it is going to keep up with the working speed of the Chinese.
Copyright Business Recorder, 2021
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