- Friday, 28 October 2016 10:13
by Dr. Shahid Mahmud
The author is Chairman and CEO of the Interactive Group
Harking back into history, the vast Eurasian geographical region has witnessed the development of several trading routes, linkages and bonds which have promoted regional connectivity. Such trade routes need to be broadly defined as being harbingers of political, security, mercantile, cultural and natural universes, where they act as both knowledge corridors, as well as pivotal routes for cross cultural contact. Due to the multidimensional nature of the Eurasian routes, many communities, with diverse ethnic lineages, managed to prosper from increased knowledge, cultural contact, as well as trading routes.
The connections between the Western and Eastern states Eurasia was promoted through the Silk Route, an ancient network of trade routes dating back to the Han Dynasty from 207 BCE to 220 CE in China. Its geographical importance can be understood in light of its ability to connect the Asian Continent with the Mediterranean Sea. Encompassing North Africa, with Egypt and Somalia, as well as Arabia, Persia, Java and India, the Silk Route was a manifestation of how regional connectivity can be promoted between the East and West.
Yet the significance of the Silk Route notwithstanding, the Amber Route, which connected the Baltic Sea to the Mediterranean Sea, is another example of how trading routes were promoted in the North, and the South of Europe, as well.
As the name aptly suggests, Amber as a gemstone which has been appreciated for its color and natural beauty since the Neolithic times to create jewelry, was transported from the coasts of the North and Baltic Seas to modern day Italy, Syria, Greece, the Black Sea, and Egypt, thousands of years ago.
The fact that the importance of forging trading ties between various states and empires was stressed on in history, its relevance can be understood in the modern context in geographical locations such as South Asia which continue to grapple with poverty, security issues and a lack of good governance.
One of the main routes which has defined South Asian trade and regional connectivity throughout history is the Grand Trunk Road, which is one of Asia’s oldest roads. It has linked the eastern and western regions of South Asia by connecting it with Central Asia. From Sonargoan in Bangladesh to Kabul in Afghanistan, the Grand Trunk Road has been described by the author of the Jungle Book, Rudyard Kipling as ‘… such a river of life as nowhere else exists in the world.’
These trade routes have played a key role in human development, particularly after communities were formed and tribes, clans and ethnicities mushroomed across geographical regions. Given the elaborate nature of such communities, there arose a dire necessity to trade in goods and services with other communities for both self-interest and for the purpose of fostering goodwill and amity through trade links.
The passage of time has witnessed how these trading routes blossomed into centers that met the needs of diverse communities through nurturing other non-trading aspects, such as security, safety, hospitality, communications and services. These routes acted as vehicles for multidimensional and directional cultural fusion, as well as instigators of social change through the promotion of prosperity. Exchanges have ranged from the Amber trade between Northern and Southern Europe, to Europe benefiting from Asian spices and cuisines.
The cultural and religious contact between Buddhism, Islam, and Christianity is another grandiose example of how such trading links were more than just an exchange of goods and services, but were more in line with an exchange of ideas, doctrines and beliefs. If one were to broadly categorise the salient aspects of trading links in history, they would include political (dynastic), mercantile (trade in goods and services), cultural (ideas, peoples and beliefs), as well as natural (geographical, climatic and knowledge of flora and fauna), aspects.
In modern times, there is a necessity to promote greater interregional trade and more connectivity for the purposes of expanding any states or community’s economic potential. Hence, lessons can be drawn from historical trading routes in modern times to generate more inter-regional economic connectivity. However, their tenability and survival heavily depends upon how policy makers, stakeholders and various actors develop cogent strategies for their development and sustainability, particularly in times when the global climate is being held hostage to arms races, terrorism, social upheavals and refugee crises. It is within this context that the China Pakistan Economic Corridor (CPEC) gains considerable traction and relevance, not only for Pakistan and China, but for prospects of regional connectivity and integration. As an institutional matrix, for the purpose of promoting development, trade and regional integration, the CPEC aims at upgrading Pakistan’s infrastructure by stimulating economic and trading activity across the region. The corridor is part of the One Belt One Road strategy proposed by Chinese President Xi Jingping which focuses on connectivity between China and Eurasia and consists of the two integral components of the Silk Road Economic Belt and the Maritime Silk Road. The development of infrastructure, knowledge corridors and economic free zones gives CPEC immense potential to act as a catalyst for sustainable change in Pakistan, as well as the region, and similar to most trading routes historically, the corridor’s relative utility is also time bound. A myriad of different factors will determine the success of the project which range from adequate policy making centering on its deliverables to the provision of security.
To analyze CPEC’s ability to act as a game changer as far as regional connectivity is concerned, it is important to start with its strategic importance as a corridor, as a project and as a plan.
Treating CPEC as a strategic priority will not suffice unless and until an appraisal of how the investment is taking place is taken into account. The overall amount of investment taking place is secondary to the more integral aspect of how much is invested in the corridor. The involvement of business, corporations, and industrial complexes in terms of tapping into the corridor’s potential and generating more economic activity will be a crucial yardstick for the long term sustainability of the corridor.
Key ingredients will determine a model for CPEC which can ensure its sustainability. Firstly, there needs to be a dynamic intersection of strategic foresight where common goals and objectives need to be shared and striven towards. Secondly, there needs to be convergence in terms of values and norms shared between both Pakistan and China, in order to ensure its successful implementation. Lastly, adequate project planning and phasing could possibly guarantee CPEC’s development. Such a layered approach needs to be reflected in the creation of an adequate infrastructure delivery model at the ongoing stage of CPEC’s development. This delivery model however, needs to find a way to involve grassroots level entrepreneurs who are key players in ensuring that CPEC becomes a route of their choice and ambitions.
In order to realise CPEC’s deliverables, it is critical to devise a model that is both sustainable and realistic. Through innovative financing, delivery and sustainable models, the creation of a healthy, rural-urban metabolism which produces more value and results in less delays or wastages is crucial for the operationalization of CPEC and its various deliverables. Such a rural-urban metabolism requires greater attention from policy makers and the government of Pakistan, which can then accelerate its development through a public-private partnership. This can in turn provide optimal economic and social benefits for populations on both sides of the spectrum. The three components of foreign investment, public private partnership through cogent government policy making and self-sustainable markets, can prove to be the catalyst for CPEC’s successful operationalisation. Public-private partnerships (PPP) however, require greater facilitation from the government and policy makers and should not be limited to boosting domestic industrial capacity only. Instead it should strive towards influencing key local and national economic parameters while undertaking CPEC’s projects, to ensure that a conducive environment which allows public-private partnerships to take precedence takes place effectively and holistically. Such an environment requires equal contributions for government lead institutions and the public sector, as well as the private sector and the civil society, where many of these sectors need to play an equal, if not overlapping roles.
The public sector, being at the center of policy making and determining the outcome of various policies which affect the general public, is at the center of CPEC’s tenability due to a wide variety of reasons. Firstly, CPEC requires a legal and institutional framework for the formulation of a successful public-private partnership necessary for the realisation of the corridors deliverables. In addition, there need to be laws, regulations and jurisdictions which govern the progression of robust public-private partnerships. Optimised institutional set ups, with clearly defined roles and responsibilities can lead to less political wrangling, bureaucratic interference and more focus on deliverables. A strong legal setup or framework can also aid the process of dispute resolution, which may arise as far as operational and incidental issues are concerned. Hence, the overall objective of resisting political volatility can be realised through a stable legal and institutional framework.
The public sector also has a key responsibility to play as far as capacity building is concerned. Capacity building can be broadly categorised into diverse dimensions which include individual, institutional as well as country-level capacity building as well. Individual capacity building encompasses training and knowledge building for various upcoming strategists, business managers and scholars through adequate talent and leadership development. Reaching out to populations and incentivising their motivation and interest in the corridor is crucial for the operationalisation of CPEC, as well as the successful implementation of public-private partnerships.
The government has a critical role in developing institutional capacity as well. To realise the implementation of the public-private partnership, the establishment of a PPP unit is an example of leveraging institutions for greater transparency and monitoring. The standardisation of guidelines and tools can supplement the efforts of developing institutional capacity with data collection, project audits and evaluation reports. Such institutions are crucial to ensure that there are adequate resources devoted to monitoring CPEC’s deliverables which can offset delays, time lags or technical issues.
However, it is imperative to understand that while developing robust institutions can supplement the process of implementation, a country wide approach also needs to be sought for long term sustainability. This requires a broad government capacity building program and strategies which reach out to academic institutions, security installations and the general public, for their role and contribution towards the corridor. Without a multilayered, dynamic and holistic approach, it is difficult to envision CPEC as a game changer or a strategy which could result in shared prosperity for all concerned.
The participation of civil society in ensuring that CPEC’s deliverables do materialise is equally critical and cannot be divorced from the wider argument of cogent government policy making having a bearing on the corridor’s deliverables. The civil society in Pakistan and in China must exhibit a willingness to participate through pro-active communication and candid information about the PPP project. Of central importance is transparency and anti-corruption, where a reduction in public-sector receptiveness to corruption by undertaking demand side measures, can be ensued by the government itself to facilitate the role of civil society. To curb corruption, companies can also be discouraged from practicing supply-side measures, which are detrimental to markets and consumer satisfaction. Curbing corruption however, also involves raising awareness of which information dissemination is critical. Proactively communicating the PPP value proposition and its value for the society requires advocacy and channels for disseminating information is required as is the publication of candid project information. In addition, the private sector’s role in responsible service delivery and shaping the public perception of the PPP is also required.
Finally there are the needs of the private sector, which are an important cog in the implementation of the CPEC in its sincerest form. Access to long term finance, safety nets/ guarantees, as well as local industrial development, can facilitate and supplement the corridor. By enabling access to finance and enhancing the private sector’s ability to do so, sufficient and adequately priced financing would give investors something to consider as far as the corridor is concerned. Furthermore, local industrial development has the potential to attract more private sector companies which include both local and multinational corporations. Safety nets can also be issued as guarantees to mitigate risks and promote risk aversion which in the process can lead to a conducive environment for investments and capitalizing on CPEC’s many deliverables which include energy corridors, economic free zones and infrastructure development.
In conclusion, the catalytic economic and social effects of CPEC can only materialise if the government views the PPP as a long term strategy rather than as a series of projects. The public sector must be empowered to provide a legal and constitutional framework for the PPP in order to remove bureaucratic hurdles for the private sector and simultaneously provide guarantees. In this process however, the role of the civil society is equally critical where their accommodation and engagement is necessary. Financing arrangements, industrial development as well as commercial guarantees for the private sector also warrants considerable attention from policy makers.
Through such a unified and targeted approach, the tacit universe of collective knowledge and behaviors can truly materialize for the long term viability of CPEC as a project and a game changer, with a well-planned PPP program for the corridor having a catalytic economic effect.