Pakistan has the potential to become a hub of economic activity for countries in Central, South and West Asia if it follows the Economic Corridor Development (ECD) model, the Asian Bank has said. of development in a study published Wednesday.
The AfDB study, titled “Developing Economic Corridors in Pakistan: Concept, Framework and Case Studies“, examined how Pakistan could address economic challenges through ECD.
In the foreword, the Director General of the AfDB’s Central and West Asia Department, Eugene Zhukov, noted that Pakistan had not yet been able to achieve a sustained growth trajectory “to go beyond its dull and intermittent historical pattern, characterized by ‘booms and busts’ every three to four years”.
“Through market reforms, Pakistan needs to transform its economy into an export-led growth trajectory. In addition to improving the competitiveness and productivity of the economy with a vibrant private sector, attracting domestic and foreign investment to support this transformation,” he added. noted.
The official went on to say that Pakistan has already adopted and implemented an ECD-focused strategy as part of its core development and growth framework.
“ECD can be one of the most credible ways to help the government meet its socio-economic goals of reaching upper-middle-income status by 2025,” Zhukov said.
However, he warned that private sector development and a fair and efficient tax system were also needed to transform the economy into export-led growth.
Defining ECD, the study states that it aims to promote economic growth by connecting different economic agents along defined geographical areas.
When implemented successfully, ECD supports economies of scale and scope and induces economic transformation and diversification through foreign direct investment.
“By improving national connectivity and linking lagging regions [including secondary cities] with centers of urban growth, ECD can help Pakistan become a hub of economic activity for countries in Central, South and West Asia,” the study states.
He said the country could “revitalize” its economic growth by facilitating economic hubs by strengthening them with an efficient transport network based on “robust infrastructure and supported by a business-friendly policy framework”.
However, he pointed out that Pakistan currently lacks the necessary administrative apparatus to effectively manage ECD.
“Its complex tax administration and compliance requirements hamper the growth and expansion of private investment, weak project management and implementation, and a consistent regulatory framework for land use and urban development lack”.
The study offered several recommendations that could enable Pakistan to address these challenges:
- Empower a central planning and corridor development agency to oversee the development and overall management of ECD.
- Strengthen a comprehensive policy framework for ECD, including streamlining policies for transportation, logistics, public-private partnerships, land use, zoning regulations, business regulatory frameworks, and tax regimes.
- Provide institutional support for skills development to align workforce skills with industry needs.
- Link existing industrial clusters and urban areas to new industrial hubs and urban centers through infrastructure networks.
- Seek ways to channel partial resources from overseas Pakistanis to profitable investment ventures to fund ECD-related projects.
The study also identified four routes that could be used for a pilot ECD programme: M4 highway linking Faisalabad and Multan, N70 (national highway) linking Multan and Killa Saifullah, N50 (national highway) linking Dera Ismail Khan and Kachlak, and the Hazara highway. (E35 Highway) from Islamabad to Mansehra.
Explaining the rationale for route selection, the study said: “[They] offer real untapped economic potential with opportunities for diversification; a good synergy of development to link production networks, in particular small and medium-sized enterprises, to markets and other economic agents; close links with the CPEC (China-Pakistan Economic Corridor) and CAREC (Central Asian Regional Economic Cooperation) routes; and favorable prospects for connecting and realizing the economic potential of the underdeveloped regions of Balochistan and Khyber Pakhtunkhwa. »
Maximize the benefits of CPEC
The study also addressed CPEC and stated that it could achieve a number of economic goals if implemented successfully.
However, he warned that CPEC alone could not improve the economy and should be supported by structural reforms to unlock its true potential.
The AfDB report suggested four policy recommendations to fully benefit from CPEC.
- Undertake structural reforms to facilitate private sector development.
- Broaden the tax base to leverage the country’s tax revenue potential and improve the fairness of tax collection.
- Use transport infrastructure under CPEC to maximize return on investment and make it a multilateral initiative.
- Accelerating the development of nine special economic zones planned along CPEC roads.