'Corruption-free, competent governance key to make CPEC a success'

Former Finance Minister Dr Salman Shah said on Tuesday that corruption-free and competent governance will be a key to make China-Pakistan Economic Corridor (CPEC) a success and increase Pakistan's GDP up to $1,000 billion by 2025.
"Pakistan's establishment and political parties realize and have consensus on economic growth importance, as there will be demographic and security challenges in case of failure," said Shah while delivering a speech at an event "Geo-strategic, Economic Opportunities and Challenges" organised by Swiss Embassy and Swiss Business Council in Pakistan to mark the 10th anniversary of the Swiss Business Council in Pakistan. The event was attended by a large number of ambassadors of different countries.
He further said that military and judiciary are so focused on governance of everything that something good would be reflected in governance ranking. Institutions might become better, he hoped.
He said that the CPEC is the game changer for Pakistan, adding that possible targets under CPEC by 2025 include that the GDP can increase to $700 to $1000 billion by 2025 from the current level of $300 billion. External balanced trade can increase to $700 billion per year from currently $70 billion including 70 percent with China.
Foreign Direct Investment (FDI) can be enhanced to $50 billion per year with 50 percent from China through CPEC projects. Around 500 top Chinese multinational companies would establish base in Pakistan in textile, automobiles, computers, electronics and petro-chemicals. Furthermore, 25 million new jobs would be created. There would be 100 flights a day between Chinese and Pakistani cities. Meanwhile, 25 million Pakistanis and Chinese would visit each other's country every year. Shah said that to turn CPEC into an engine of growth and prosperity, the government of Pakistan in collaboration with the private sector will have to create a superb transport and logistics system to underpin the CPEC. This will require a comprehensive transport and logistics strategy built around the private sector (local and foreign) and a five years plan along the institutional structure to build the sector. "It must establish the National Integrated Logistics and Transportation Authority (NILTA) and empower it to develop the strategy and five year plan and ensue its implementation," he added.
The former finance minister said that China can be a big source of investment capital, and technology know-how for development of Pakistan's economic potential, a huge market for exports that can generate growth of 8 to 10 percent per year, boosting exports and economic prosperity over the next 30 years. This would require pursuing a national agenda for gaining access to the Chinese domestic markets and benefiting from economic integration with China with the aim of rapid development of Pakistan. The economic networking with China would need a customs union on the line of Turkey-EU or a FTA on the lines of Mexico-USA NAFTA.
The CPEC is being hailed as an economic game changer by the government of Pakistan. The project firmly embeds Pakistan in the Chinese strategic 'One Belt and Road' initiative. Whether it becomes a game changer for Pakistan will depend on the extent Pakistan can use CPEC as a stepping stone for boosting its global competitiveness, he added. This will depend on the extent of future Pakistan-China economic integration and the commitment of both the governments of Pakistan and China towards that end.
He further said that nearly 25 million people will be added to working age population every decade in Pakistan, meaning 2.5 million jobs every year. Current labor participation rate is 54% primarily due to non-participation by females in labor force. If this participation rate follows SEA trajectory then nearly Pakistan will require 4.24 million jobs to be created every year. This means pro-job growth is promoted. This is ideal time to capture 85 million jobs from China & South East Asia.
The working age population (WAP) of the BRIC countries experienced strong growth until 2015 but it will fail from now onwards. Only India's WAP will continue to grow. Brazil's will be flat while China's and Russia's WAP will fall sharply. The vast bulk of WAP will come from sub-Saharan Africa, India and a few other Asian counties including Pakistan, he added.
He further said if the current urbanization trends continue, then Pakistan's urban population will be around 70% inline with urbanization of Middle Income Countries, which will lead to agglomeration benefits. Cities will have to grow 2.6 times to provide for migrating population; opportunity and strain on resources. Agricultural efficiency and productivity to be enhanced to match urban demand and low labor availability per acre, he added, saying managing & channelizing urbanization is going to be critical. He said there is need for policies aiming improvements in business environment, productivity and competitiveness. Policy areas that have the potential to raise manufacturing productivity across the country are important.
Policies should also include the critical agribusiness value chain (amounting to one-third of South Asia's GDP), the need to reform agricultural markets, price regulations, product standard and poorly targeted subsidies. The logistics system requires huge amounts of investments, conducive regulatory environment and specialist expertise to manage transport and logistics as a system designed to facilitate production and promote trade flows.
The return on investment on logistics in turn depends on economic reforms that expand the volume of trade that flows through the logistics hub on a sustainable commercial basis.
Instead of Dubai, Karachi and Gwadar should look at Rotterdam as a role model and trade up to $40 trillion can be handled through these two ports. China is now one of the world's largest economies with GDP on PPP basis of $20 trillion. It has the largest foreign currency reserves of $3.6 trillion. It is the largest exporter with exports stand at $2.341 and 3rd largest importer with $1.961 imports.
With the world's largest population which is switching from an investment-driven growth strategy to a consumption-driven growth strategy with major opportunities for neighboring Pakistan, he said.