Nation special report
ISLAMABAD: Pakistan has invited to other nations around the world to join the multi-billion China-Pakistan Economic Corridor (CPEC) infrastructure project to ease its financial strained situation. According to informed sources, Pakistan is facing monetary crisis and its invitation to other countries is a way out of financial difficulties.
Pakistan Board of Investment (BoI) Chairman Muhammad Azfar Ahsan has invited other nations around the world to join the multibillion-dollar China-Pakistan Economic Corridor (CPEC) infrastructure project, saying the scope of industrial cooperation under the scheme is all-inclusive and open to third-party participation.
CPEC is a central part of the Belt and Road Initiative, under which Beijing has pledged over $60 billion for infrastructure projects in Pakistan, much of it in the form of loans. The plan is part of China’s aim to forge “Silk Road” land and sea ties to markets in the Middle East and Europe.
Speaking at the CPEC Industrial Cooperation B2B Investment Conference on Tuesday, Ahsan invited businessmen from across the globe to invest in diverse sectors of Pakistan’s economy and briefed participants about various “investor-friendly” policies introduced by the government, including the electric vehicle, mobile manufacturing and construction sector policies.“Pakistan has a liberal investment regime,” he was quoted by the Express Tribune newspaper as saying.
Ahsan told participants about the “Pak-China B2B Investment Portal” developed to create opportunities for joint ventures between traders from the two nations and also discussed the Special Economic Zones (SEZs) being developed under CPEC, three out of the nine of which are at an advanced stage of development, namely the Allama Iqbal Industrial City in Punjab, Rashakai SEZ in Khyber-Pakhtunkhwa and Dhabeji SEZ in Sindh.
Attractive fiscal incentives being offered under SEZs include a tax-free period of 10 years and customs duty exemption on the import of capital goods for both developers and enterprises, the chairman said: “Pakistan accords top priority to the development of SEZs under CPEC.”
Board of Investment Secretary Fareena Mazhar said the government treated both local and foreign investors equally.
“There are ample opportunities for foreign investors to invest with 100% equity or joint ventures in various fields as repatriation of investment and profit has been allowed with legal protection,” she said. “There is no requirement of minimum investment for business start-ups.”
International Monetary Fund reforms
Pakistan’s evasion of structural reforms as mandated by donors such as the International Monetary Fund has compounded its financial problems.
Successive Pakistani governments have not acknowledged their inability to implement the identified and agreed (with donors) necessary structural reforms specifically in the prevailing tax structure (which remains inequitable, unfair and anomalous to this day) and energy sector (with the circular debt rising to as high as 2.4 trillion rupees), according to Dawn.
Further, the donors such as IMF have argued in favour of full cost recovery to raise utility charges.
On the other hand, IMF as well as other multilateral agencies have been criticized in Pakistan with respect to their harsh upfront monetary and fiscal policy conditions that have eroded its growth rate.
However, two observations are critical. First, Pakistan is currently on its 23rd IMF programme, with each programme typically of three-year duration, which implies the country has been on a Fund programme for around 69 years out of its 74-year history. True, many of the programmes were abandoned midway into the programme as and when the balance of payments issue was resolved, according to Dawn.
Meanwhile, the Pakistan government is raising base tariffs over and above the fuel adjustment charges and the Quarterly Adjustment Tariffs – major contributors to the inflationary spiral much against the advice of the IMF directed structural economic reforms.
Further, to blame the donors for being a perennial borrower of the IMF on the economy’s reliance on imported machinery and semi-finished products reflects rather poorly on Pakistan’s long-term planning capacity to import substitution policies which were implemented by India soon after independence, according to a report.