By Hamid Mahmood ISLAMABAD, Feb 22 (INP-WealthPK): The Economic Corridor Development (ECD) proposal floated by the Asian Development Bank (ADB), if implemented in its true sense, can help Pakistan exploit its proven, inherent and untapped economic development potential under the China-Pakistan Economic Corridor. Smooth road and rail access to industrial production units, reduced goods transportation costs, quicker delivery time, and lower inventory costs can help flourish business and industry within a corridor in the long-run, according to ADB. The ECD will help the country unlock the economic potential by integrating different sectors such as logistic hubs, manufacturing bases, economic centres, marketplaces and technologically-advanced locations. Economic connectivity and integration have become significant development priorities in the wake of increased economic globalisation. The ECD within or across regions is a critical approach for allocating and channelling physical, economic, social and technical resources in a specific geographic area in order to address the challenges of globalisation. This can assist in creation of new chances for global trade participation and market integration .Economic Corridor Development Framework

Source: ADB

The CPEC, which sees projects worth $60 billion completed till 2030, is meant to improve Pakistan’s regional integration through the development of economic corridors. The early initiatives of the CPEC were construction of energy and infrastructure projects. However, the CPEC's long-term strategy aims to promote industrial cooperation between China and Pakistan, notably through the creation of nine special economic zones (SEZs). The ECD, according to ADB, aims to lay a strong industrial foundation in Pakistan by creating a number of zones for attracting businesses and investments. The SEZs can help in this area by fostering economic growth, boosting exports, creating jobs and reducing poverty. The ADB calls for appropriate planning and programming of SEZs as part of the broader ECD strategy in order to maximise their socioeconomic advantages. The ECD stresses that the SEZs should ideally focus on building and expanding industrial chains rather than individual enterprises to encourage job creation and spur economic growth. Pakistan can copy the Chinese SEZ model, which has focused on building industrial chains. There is disagreement over the kinds of industrial links the SEZs should have. Despite ample research, it is still unclear if vertical chains, horizontal connections, backward or forward linkages are suitable for the SEZs. There have been instances of substantial backward connections being developed in several SEZs around the world. Firms may function well in this environment, but the governments usually become reluctant in allowing this model since the anchor company development generates very few spillovers. Backward links appear to form on a case-by-case basis. If possible, specialist diversification and investigation of both types of links should be considered while designing an SEZ. For the development of the SEZs, the government should improve business environment by offering incentives such as lowering tax rates, removing regulatory impediments, and allowing duty-free import of raw materials. Export-oriented light manufacturing businesses should be attracted to the SEZs by bridging the skill gap between present domestic worker capabilities and the level demanded by investors.