Setting up CPEC Authority

Setting up CPEC Authority

Two Presidential Ordinances have been issued, one each for setting up China Pakistan Economic Corridor (CPEC) Authority and grant of taxes concession to Gawadar Free Trade Zone and Air Port there. The rationale behind the government’s proposal for setting up this authority had been discussed threadbare by the 22 member Joint Parliamentary Committee on CPEC in its meeting of September 6 and had opposed it on the plea that it will create confusion in the implementation process of multi billion dollars worth projects. Former Planning Minister AhsanIqbal was more critical of the unnecessary exercise of overlapping of subjects and multiplicity of efforts which may cause delay in the execution of CPEC related projects. Members of the Joint Parliamentary Committee had also criticized the government’s intention of issuing a Presidential Ordinance for this purpose.

A Grade 22 officer will be the Chairman of CPEC Authority and the total sanctioned strengthen of officer and staff will be 80. It will monitor the pace of implementation work on mega projects under the umbrella of CPEC. There was a perception about its slow down which may have been created by the statements of opposition leaders and interaction of Chinese diplomats with media persons. The delay in execution of certain project western rout of the corridor, Gawadar Airport and 800 megawatt thermal power station for Gawardar Free Trade Zone lent credence to this perception.

There is no level playing field for both the foreign and domestic investors in the special economic zones. The PC1s for the provision of electricity and gas infrastructure in these zones are yet to be worked out by the concerned ministries. The sky-high electricity and gas tariffs, fuel cost, dearth of highly skilled but cheap workforce, eroded base of Research and Development, highly expensive imported raw material and squeezed credit facilities for investment in small and medium scale enterprises has made the economic environment unfavourable. Bulk of the investment will come in small and medium scale enterprises.

The country has been ranked at the bottom in the World Bank Ease of Doing Business Index 2018.The industrialized countries had outsourced their industries of intermediate technology to developing countries like Malaysia, Bangladesh and India in the pursuit of cheap but highly skilled labour because their industrial base is operating on fourth and fifth generation technologies, and fully functional and flourishing institutions of Research and Development tghere, locally available inexpensive industrial raw material, low electricity and gas tariffs, and tax holidays of 20 years. This sort of favourable economic environment does not exist in Pakistan. The monetary policy is restrictive and fiscal policy is highly regressive. It remains to be seen how a miracle shall be done to substantially lower the cost of doing business and resolve the technical issues that hinder the establishment of SEZs which are inevitable for entering in the second phase of industriaisation after the first one which ended with the disastrous nationalization policy of Z.A Bhutto government.

The multilateral donor agencies including the International Monetary Fund (IMF) and Asian Development Bank had expressed reservations about the cost estimates of 1780 kilometer mainline Ml-1 Karachi to Peshawar railway track up-gradation project and payment issues of high interest bearing Chinese loans. Merely establishment of projects implementation monitoring authority, concessions exemptions in income and sale taxes and custom duty for Gawdar Free Trade Zone cannot be instrumental in reaping the economic benefits of CPEC related projects. There is dire need of bringing significant improvement in the overall economic environment.

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