Pakistan Reader# 291, 7 February 2022
Recently on 4 February, the Asian Development Bank (ADB), has published a report titled “Economic Corridor Development in Pakistan; Concept, Framework, and Case Studies” is the first research by ADB to contribute an academic as well as policy perspective towards development and growth in Pakistan.
The ADB has contributed more than one-third of external loans among the multilateral partners to Pakistan in the first half months of FY 2022. Over the years, the ADB has constituted an important stakeholder in the debt servicing of Pakistan.
One could identify the following issues/takeaways from the report.
First, Pakistan’s geographic location. The report refers to Pakistan’s location at the junction of Central Asia and South Asia; despite that Pakistan has not attained sustained economic growth. Its ‘stop-and-go’ pattern of growth has not helped in the transformation of its economy’s competitiveness and productivity with a vibrant private sector. However, Pakistan has begun to utilise its geographic potential for economic corridor development. In this context, the Economic Corridor Development (ECD) is at the core of Pakistan’s development framework to bring export-led development growth.
Second, the Economic Corridor Development and the CPEC are not synonymous. According to the ADB report, the ECD is different from the CPEC; the latter is only limited to hard infrastructure investment in Pakistan by China. The ECD is a spatial development concept, aimed to organize economies of scale, leverage the network externalities and bring agglomeration of diverse sectoral industries, which is yet to be realized in Pakistan. Hence, the ECD is a cross-sectoral horizontal and vertical strategy to put Pakistan in an export-led growth framework. However, the report does concede that private sector development along with an efficient tax system to rejuvenate revenue generation are indispensable as well.
Third, the ECD is based on three pillars - infrastructure, urban and industrial developments. First, infrastructure development; four key motorways that are assessed to be critical for economies of scale and diversification are Motorway M4, National Highway N70, National Highway N50, and Expressway E3. Along with motorways, public infrastructure investment in region-specific endowments is important to realize the give and take of ECD. The first pillar will supplement efforts in capacity development, market access to networks of urban agglomeration lying along these motorways.
The second pillar is urban development which will not facilitate private sector development and economies of scale but affordable housing for factory workers and low-income labour force.
The third pillar is industrial development, ECD is not just about investment but also about leveraging the concept as a linkage to regional and international trade. The connection of different economic agents in external as well as internal geography has the potential to induce economic transformation through entrepreneurship and innovation while facilitating trade as well. Special economic zones (SEZ) are instrumental in industrial development as clusters of ECD hotspots with a liberalized regulatory framework.
Fourth, the above three pillars are to be supported by four key drivers. They include the following: the economic aspect of local competitiveness and hence innovation; streamlined institutions and regulations for better administration and management of ECD; environment-friendly and gender equality conditions and sustainability of poverty reduction; and fourth, linkage of ECD with the external sector, foreign direct investment and remittances associated thereafter.
Finally, the constraints and limitations of the ECD
Whatever the report has suggested and highlighted has been realized long before in Pakistan. The need for structural reforms to transform the economy of Pakistan into export-led growth has even been included in the latest drafted National Security Policy document of Pakistan.
Another argument that the report proposes is liberalized regime, which means less involvement of establishment in trade policy. The trend in the country has been however contrasting as the army, big landlords and other industrial barons are very much involved in capturing commodity markets. There is a requirement of political will more than just ECD as a magic wand to bring Pakistan out of its perpetuating economic crises.
The report however does not present the case of growth and development from the perspective of Pakistan, for example, the SEZ and its relative importance is explained through case studies from China. The case is required to be made from a cultural and historical context; the competitiveness argument is fixated on the end goal of export-led growth. However, there is a need for pragmatism required for understanding the political economy of Pakistan rather than just the universal discourse on growth. The terminate goal of growth is perhaps recommended a little hastily without understanding the political and geographical destiny of Pakistan.
“Economic corridor development in Pakistan concept, framework, and case studies,” Asian Development Bank, February 2022)
“ADB tells it like it is,” Business Recorder, 6 February 2022