By Abdul Wajid Khan ISLAMABAD, Feb 07 (INP-WealthPK): The Asian Development Bank (ADB) has said that the successful implementation of China-Pakistan Economic Corridor (CPEC) can transform Pakistan into an economic hub for Asia. In its latest report titled ‘Economic Corridor Development (ECD) in Pakistan: Concept, Framework, and Case Studies”, the bank said CPEC is an opportunity for Pakistan to enhance connectivity and improve its export position. It called for implementing the necessary structural reforms like private sector development or tax reforms to unleash the potential brought with CPEC, according to WealthPK. “If CPEC is successfully implemented, Pakistan can harness its strategic geopolitical location, improve its regional and international economic connectivity, enhance industrial development, and become an economic hub for Central, South, and West Asia. It can maximise the benefits of the international linkage between the CPEC and the Central Asia Regional Economic Cooperation (CAREC) programmes and their routes,” the bank noted in its report. The report suggests full utilisation of the infrastructure built under the CPEC to expand trade and regional cooperation. Furthermore, the government should expedite the development of the nine special economic zones (SEZs) planned along the CPEC routes. The report further highlights that the CPEC is an initiative to build economic connectivity and regional integration between China and Pakistan, also calling for structural reforms for private sector development. It underscores the need for tax reforms to broaden the tax base and enhance the perceived fairness of the tax system. The ECD aims to promote economic growth by connecting different economic agents along defined geographic areas. When successfully implemented, the ECD supports economies of scale and scope as well as agglomeration. The ECD induces economic transformation and diversification through foreign direct investment (FDI), according to WealthPK. The ADB report points out a lack of exports hampering Pakistan’s economy as major exports are low value-added items like textiles and foods. Also, the composition of export items has remained stagnant since the mid-1980s when almost all Asian countries experienced export-led growth. It highlights that initial conditions such as high literacy rates and low-income inequalities have contributed to industrialisation in East Asia. The report notes that Pakistan needs to enhance its productivity and competitiveness in a highly competitive and evolving global landscape by achieving an export- and manufacturing-based structural transformation. The ADB study proposes horizontal and vertical interventions to achieve structural transformation. The horizontal intervention involves improving the regulatory framework for the business environment, increasing infrastructure investments and enhancing market access and compliance. Vertical interventions, on the other hand, include promoting entrepreneurship and innovation for industrial diversification, promoting linkages across private sector players, and increasing value addition through human capital development. The study has also identified four pilot corridors for Pakistan to operationalize ECD: (i) Motorway (M4) linking Faisalabad (Punjab) and Multan (Punjab) in Central Punjab; (ii) National Highway (N70) connecting Multan and Killa Saifullah (Balochistan); (iii) National Highway (N50) linking Dera Ismail Khan (Khyber Pakhtunkhwa) and Kachlak (Balochistan); and (iv) Expressway (E35) from Islamabad to Mansehra (KP), which will likely be extended to China and Central Asia in the future. The ADB report says that these transport corridors have economic potential for better scale and diversification. And to unleash that potential, the government needs to invest in public infrastructure. To develop economic corridors, the government could also consider establishing special economic zones along transport corridors. The government should give special consideration to local endowments, such as the skills mix of labour, availability of raw materials, local market conditions, and access to amenities like electricity, water and sewerage in the industrial estates. In addition, the government must establish a regulatory framework to provide proper financial and other incentives for businesses to operate in these SEZs. Pakistan will need to develop a master plan for the identified transport corridors. SEZs can be a powerful platform for attracting domestic investment and FDI, especially when addressing structural, institutional, regulatory and infrastructural barriers. SEZs can foster export-led industrialisation for jobs and welfare gains. The ECD as a holistic strategy can also help drive structural transformation and achieve balanced development for absorbing the three million new entrants into the labour force each year. Around the world, the report highlights, there were about 4,300 SEZs in more than 130 economies in 2015. In China, SEZs contributed about 60% to the country’s total FDI and exports, 30% to gross domestic product (GDP), and 6.3% to employment in 2015. For a smooth transition from SEZs into economic corridors, this study suggests Pakistan pay attention to improving trade facilitation, relaxing the regulatory regime, and increasing transparency. The study also offers the policy suggestions to unleash the socioeconomic benefits of urbanisation and industrialisation. First, the government should develop an evidence-based targeted strategy for delivering affordable and reliable public services, including the public transport system, water supply, and sanitation facilities, solid waste management, education, and skills development. Second, it should ensure access to affordable housing for factory workers and the low-income labour force. Third, the roles and responsibilities of the federal, provincial and local governments need to be streamlined, and vertical governance imbalances in revenue generation should be reduced. Fourth, SEZs should be fully utilised as a spatial economic unit to create synergy between urban and industrial development processes. The ADB report suggests that Pakistan should pursue its economy’s structural transformation to relax the balance of payment constraints on growth and sustain the high-growth episodes.