Pakistan can achieve economic revival as transshipment hub for trade with China

By Hu Weijia Source:Global Times Published: 2018/2/27 22:18:40

Pakistan's economic woes have worsened five months before national polls, according to a report by Bloomberg. China will likely be willing to offer more assistance to help its neighbor improve economic conditions, but the question is how to find an effective way.

Pakistan's trade deficits are hitting records while its foreign exchange reserves continue to fall, Bloomberg reported. Pakistan's economy is facing chronic problems for many reasons, but the fact that Pakistan's GDP grew 5.3 percent in fiscal 2017 - the fastest pace in a decade - can't be ignored.

The two countries will move ahead with the China-Pakistan Economic Corridor (CPEC), which has become a driving force for Pakistan's economic growth. The question is how its investment-driven growth can be transformed into internal momentum for economic expansion.

While the first phase of the CPEC concentrated on infrastructure projects, the second part should focus on setting up special economic zones and establishing mutual connectivity to support economic integration.

Pakistan's strategic location is a major attraction for companies to invest in and obtain lucrative returns. Now, the nation must give full play to its advantages.

The most important maritime trade route that China has now is through the South China Sea and the Strait of Malacca. The CPEC is designed to connect Gwadar Port in Southwest Pakistan with China's inland areas, offering another route for Chinese importers and exporters.

Improvements in Pakistan's trade-related sectors, such as warehousing, logistics, integrated services and e-commerce, can turn the nation into a new transshipment point for exports to China. Efforts to upgrade the bilateral free trade agreement will also help realize economic potential.

Trade and financial deficits have long been seen by some observers as the thorniest issues faced by the South Asian country. Making Pakistan a new transshipment point will help the nation boost exports and slash its trade deficit with China. This situation may also help Pakistan conserve its foreign exchange reserves.

China is expected to continue to encourage outbound investment, but investors should also be reminded to exercise caution. The CPEC is one of the flagship projects in China's Belt and Road initiative. The Chinese government should give more guidance to companies with an eye to the South Asian country to reduce the risk of inefficient investment.

The author is a reporter with the Global Times.


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