By Abdul Rashid Shakir
A paradigm shift in the economic outlook from consumption to manufacturing is a key to poverty alleviation, economic prosperity and improvement in human development indicators like quality education, good healthcare and a higher level of per capita GDP.
China, with a population of 1.4 Billion, is the only country in the world that alleviated its 800 Million people from poverty just within four decades. This remarkable journey started in 1979 with the reforms like trade liberalisation, free-market economy and opening up of Chinese economy to the rest of the world by Deng Xiaoping, one of the great Chinese leaders like Mao Zedong and Xi Jinping.
Incentivised by the investor-friendly ecosystem developed by the Chinese authorities under Deng Xiaoping, China experienced massive industrialisation due to huge foreign investments. This resulted in making China the “factory of the world”. It perfected the idea of “economies of scale” and inundated the world markets from east to west with affordable Chinese goods. Its focus on “disposable economy” gave it the necessary leverage to produce goods in bulk.
The Guangdong-Hong Kong-Macau Greater Bay Area is a highly industrialized economic region in Southern China that feeds the global supply chains. Zhongguancun in Haidian District, Beijing/China is a bustling megalopolis and a center of Beijing-Tianjin-Shijiazhuang high-tech industrial belt like Silicon Valley in San Francisco, USA.
Since its reforms in 1979, China has been among the world’s fastest growing economies for almost four consecutive decades with average GDP growth of 10% per annum. The World Bank described this growth pace as “the fastest sustained expansion by a major economy in history.”Beijing, Hong Kong, Shanghai, Shenzhen, Guangzhou and Dongguan are the leading financial and industrial centers which are undoubtedly engines of growth not only for the Chinese economy but also for the rest of the world.
In 2010, China surpassed Japan to become World’s second largest economy after the United States. It is currently valued at $18.46Trillion, in recent years, as the Chinese economy has matured, its annual GDP growth has slowed down quite significantly. However, China is capitalizing on its exemplary economic success by adopting the “new normal” of slower economic growth which relies more on domestic consumption, services sector and technology innovation. According to a forecast, China is expected to become the world’s largest economy by 2028, taking over the US economy which is currently valued at $24.79Trillion.
Pakistan has many approaches to adopt and lessons to learn from the Chinese development miracle. Major takeaways include changing the core character of economy from consumption to manufacturing. It implies religious pursuit of massive industrialization by making use of cutting edge technological innovations in the fields of mechatronics, robotics, artificial intelligence, virtual and augmented reality and other allied disciplines of digital revolution like perception management through digital marketing and active consumer engagement via various social media platforms.
The logical corollary of massive industrialization is to develop an export-led economy, which means increasing focus on exports and decreasing reliance on imports. Pakistan is very keen to multiply its manufacturing base not only to create employment opportunities for its growing young population but also to earn valuable foreign exchange by selling its exportable surplus in the foreign markets.
Government is, therefore, aggressively pursuing rapid industrialization by Incentivizing investors to install Industrial units in Special Economic Zones (SEZs) under China Pakistan Economic Corridor (CPEC) framework of cooperation. The development work in these SEZs, especially Rashakai in KP, Dhabeji in Sindh, Allama Iqbal Industrial City in Punjab and Bostan in Balochistan is in top gear. All codal formalities needed for the startups to kick off have been completed, and legal hiccups hindering their growth have been cleared.
Moreover, a business-friendly ecosystem is being developed in the country by ensuring ease of doing business through regulatory reforms in State Bank of Pakistan (SBP), Security & Exchange Commission of Pakistan (SECP) and Federal Board of Revenue (FBR). Potential Investors are being incentivized through exemptions in duty on the import of plant and machinery for industrialization. NOC Regime has been replaced with the Compliance Regime, and One Window Facilitation Centers have been established in all SEZs for providing quick fix to investors’ complaints related to land acquisition and installation of utilities. These measures would not only facilitate new companies to start business ventures and generate employment opportunities in the country but would also attract a lot of Foreign Direct Investment (FDI) to stabilize key macroeconomic indicators
Exports diversification and imports substitution are also being explored by the Government to back up this quest for making Pakistan a manufacturing hub. A proactive foreign policy has been adopted for the purpose, especially for Africa and Central Asia,
Above all, the commitment to cooperate with China in the fields of energy, infrastructure, industry and agriculture under the CPEC framework is no less than Pakistan’s manifest desire to learn and replicate China’s successful development model in these fields. The upcoming visit of the Prime Minister of Pakistan to China in February would be a step forward in the right direction.