EDITORIAL: It seems Pakistan is not going to benefit from the great relocation of China’s labour-intensive industry, especially textile, as the world’s second-largest economy manoeuvres to exploit reduced production costs as well as remove the made-in-China label from a number of its products to win back the US market. There’s been much talk of Pakistan emerging as the principal beneficiary of this exercise ever since the then US President, Donald Trump, slapped import duties on scores of Chinese products as he launched his famous trade war that disrupted supply chains across the world long before Covid upset international trade.
Yet now it turns out that countries like Cambodia, Laos and even Ethiopia — despite higher costs of labour and small markets in terms of population than Pakistan — present far better options for Beijing than its time-tested friend that has got a little too used to taking its largesse for granted. And the main reasons, according to a report recently released by the Pakistan Business Council (PBC), are Pakistan’s higher political risk, weaker intellectual property rights, less competitive energy prices, higher logistics costs and less access to international markets through bilateral or regional trade agreements than its peers.
This is a very serious moment of reckoning for Pakistan. China has become our leading foreign investor over the last few years, but this trend has already started weakening. And in addition to the reasons cited in PBC’s report, Pakistan’s unreliable security environment and chronically low labour productivity also helped tilt China towards other countries. Beijing has long complained about terrorist attacks on its workers and the inability of the government of Pakistan to protect them. Now, it appears convinced that despite all of Islamabad’s assurances, terrorists can more or less strike at targets of their choice, especially foreign workers, at will.
It’s also very concerning that after deteriorating since forever, Pakistan’s labour productivity is now lower than Bangladesh’s, Laos’s and Cambodia’s, and far lower than the likes of Vietnam and China. It could have helped if Islamabad had been a little more farsighted about developing trade relations with other countries, like Vietnam did with countries in Asia and Europe, but since such things were never too high on any administration’s agenda, all we can do now is take a back seat as China distributes its labour-intensive industries across Asia and even Africa.
And so we’ve missed the bus to better times yet again; but only because of our own inability to improve our infrastructure, labour force, security situation and trade relations like any normal country in the 21st century. Therefore, it’s no surprise that we will continue to rely on loans and grants to stay solvent. Yet with the prospect of default now a bigger reality than at any time in our history, we will need to mend our ways in a hurry if we’re to have a fair chance of surviving what is sure to be a tumultuous transformation of the international economic order for countries like ours.
Even if we start now, it will take a long time for results to start showing. Unfortunately, though, the country’s political elite is far too busy fighting over power to give much thought to a long-term economic transformation that will require all parties to play along. That means we haven’t even started to think about the kind of long-term reforms that are going to be needed. And that pretty much sums up why Pakistan continues to lag far behind countries it was once at par with.
This latest Chinese snub, if it can be called that, is a grave reminder of how much we have lost just because we cannot get our priorities right.
Copyright Business Recorder, 2022