CPEC project: Nascent industries afraid of big Chinese firms

Pakistan's business community sees the ambitious USD 46 billion China-Pakistan Economic Corridor (CPEC) project a threat to the domestic industry if the government does not come up with steps to give protection to vulnerable sectors, according to a media report today.
Some business segments in Pakistan think that the flagship project poses new challenges to the country's industry, especially those sectors that are at the stage of infancy or smaller in size compared to gigantic Chinese industries, The Express Tribune reported.
The industries in China have achieved economies of scale over the years primarily because of a huge domestic market, industrial-friendly policies and scores of incentives from the government.

Apart from CPEC, Pakistan has also not been a major beneficiary of the free trade agreement (FTA) with China as the arrangement gives an edge to Beijing and promotes more imports than exports from Pakistan, the report said.
The business community fears that if the corridor is used only for exports from China without giving a fillip to Pakistan's industries by providing a competitive environment, it will prove damaging to the domestic industrial units.
"It is imperative for the government of Pakistan to keep in mind all these factors while negotiating the second phase of the FTA with China," suggests Atif Iqbal, Executive Director of the Organisation for Advancement and Safeguard of Industrial Sector.

He is of the view that in talks with China some leverage should be provided for Pakistan's products to enable the local industry to compete well in the race.

"CPEC can only be beneficial if Pakistan's exports are ramped up with facilitation for the local industry," he says.
In order to create a win-win situation under CPEC, the two neighbours will have to pave the way for a healthy competition among different industries without cutting roots of each other through unfair price wars or dumping of goods.
While inaugurating the revamped Gwadar Port, a strategic deep seaport on November 13, Pakistan Prime Minister Nawaz Sharif called the development a "watershed" moment in the history of Pakistan and the entire region.

He called it a symbol of Pakistan's commitment to China's 'One Belt-One Road' initiative, of which the CPEC is a key part.
The Express Tribune report also noted that in order to
shield Pakistan's infant and vulnerable industries, the government should frame policies in such a manner that these could offer incentives for giving a boost to productivity and pushing exports to China and other markets by taking advantage of the infrastructure being built under CPEC, rather than turning Pakistan into a consumer market.
Owing to electricity and gas shortages, high production costs and the terrorism and extremism threat, the domestic industries have been operating at a disadvantage over the years, it said.

Before achieving economic stability as well as economies of scale, the domestic industries are direly in need of protection, the report said.
"If the government desires to have sustainable industrial growth, it must not only ensure provision of basic utility services including gas and electricity, but also create an atmosphere conducive for business and strengthen the institutions responsible for keeping a check on unfair trade practices," the report said.
The tariff commission needs to be extra vigilant and take immediate notice of unfair trade practices like dumping and subsidisation of foreign goods. The survival of the domestic industry largely depends on price equilibrium in the market.

"In the current scenario when free trade accords are increasingly being negotiated and signed, it is imperative for the trade regulatory authorities of Pakistan to stem the unfair trade practices and safeguard the interests of domestic industry," the report added.