Thursday, 27 August 2015

Pak-China Economic Corridor- a way to opportunities

Pak-China Economic Corridor would provide China with opportunity to make Pakistan’s economy China’s complementary economy which may  not only help China come out of present state of slower growth rate but also provide China a platform to replace its competitor i.e. India from the markets so far  substantially captured by India.  In this way Pak-China Economic Corridor would not only benefit both the countries economically but also give them a decisive strategic edge over India.
China and India are competing in international markets for exporting almost the same categories of goods. A comparison of top ten exports of both countries is given below:
China’s Top 10 Exports
The following export product groups represent the highest dollar value in Chinese global shipments during 2014. Also shown is the percentage share each export category represents in terms of China’s overall exports. Exports from the People’s Republic of China amounted to US$2.343 trillion, up 48.5% since 2010.
1.       Electronic equipment: US$571,045,520,000 (24.4% of total exports)
2.       Machines, engines, pumps: $400,910,983,000 (17.1%)
3.       Furniture, lighting, signs: $93,390,874,000 (4.0%)
4.       Knit or crochet clothing: $92,002,609,000 (3.9%)
5.       Clothing (not knit or crochet): $81,453,227,000 (3.5%)
6.       Medical, technical equipment: $74,020,496,000 (3.2%)
7.       Plastics: $66,816,299,000 (2.9%)
8.       Vehicles: $64,243,754,000 (2.7%)
9.       Gems, precious metals, coins: $63,212,400,000 (2.7%)
10. Iron or steel products: $60,685,405,000 (2.6%)
These top ten exports, mentioned above, account for 67.0% of the total $2.343 trillion Chinese exports.

India’s Top 10 Exports

The following export product groups represent the highest dollar value in Indian global shipments during 2014. Also shown is the percentage share each export category represents in terms of overall exports from India.
1.      Oil: US$61,210,002,000 (19.2%)
2.      Gems, precious metals, coins: $41,224,183,000 (13.0%)
3.      Vehicles: $14,510,174,000 (4.6%)
4.      Machines, engines, pumps: $13,633,175,000 (4.3%)
5.      Organic chemicals: $12,066,802,000 (3.8%)
6.      Pharmaceuticals: $11,704,998,000 (3.7%)
7.      Cereals: $10,109,613,000 (3.2%)
8.      Iron and steel: $9,090,019,000 (2.9%)
9.      Clothing (not knit or crochet): $9,075,053,000 (2.9%)
10.  Electronic equipment: $9,053,992,000 (2.8%)
In 2014, exports from India amounted to US$318.2 billion, up 44.4% since 2010.
These top ten exports, mentioned above, account for 61% of total $318.2 b Indian exports.

 We can see that China is competing India for seven out of India’s top ten export categories. The three categories of which China is not competing India are oil products, pharmaceuticals, and cereals.
It is also pertinent to have a look at the major countries importing from India. Below is a list of India’s top 15 trade partners that imported the most Indian shipments by dollar value during 2014. Also shown is each import country’s percentage share of total exports from India.

India’s Top Import Partners
1.      United States: US$42,583,114,000 (13.4% of total Indian exports)
2.      United Arab Emirates: $33,050,574,000 (10.4%)
3.      Hong Kong: $13,446,458,000 (4.2%)
4.      China: $13,394,433,000 (4.2%)
5.      Saudi Arabia: $12,833,696,000 (4.0%)
6.      United Kingdom: $9,676,935,000 (3.0%)
7.      Singapore: $9,620,308,000 (3.0%)
8.      Germany: $7,773,438,000 (2.4%)
9.      Netherlands: $6,786,550,000 (2.1%)
10.  Brazil: $6,685,921,000 (2.1%)
11.  Viet Nam: $6,522,754,000 (2.1%)
12.  Sri Lanka: $6,423,495,000 (2.0%)
13.  Bangladesh: $6,322,369,000 (2.0%)
14.  Belgium: $5,908,414,000 (1.9%)
15.  Japan: $5,776,009,000 (1.8%)

We can see that out of top ten Indian import partners, only three i.e. Hong Kong, Brazil and Singapore are closer to Indian ports than Gawadar port; whereas six i.e. USA, UAE, KSA, UK, Germany and Netharlands are closer to Gawadar port than the Indian ports. Similarly we can see that out of top ten Indian import partners, only two i.e. Hong Kong and Singapore are closer to China’s ports than Gawadar port; whereas seven i.e. Brazil, USA, UAE, KSA, UK, Germany, and Netherlands are closer to Gawadar port than the Chinese ports. It means Gawadar is shorter route to top Indian Import partners than from India and China.

From the comparison given above, we can also see China is competing for seven export categories out of top ten Indian export categories. These seven export categories China is competing with India include electronic equipments, vehicles, gems and precious metals, clothing, iron and steel products, machinery and chemical products. It means China has aquired competitive technology, skills and experience in the field of these export categories. If China is given extra edge over Indian competitors regarding these seven export categories, China may replace India regarding these seven categories. Gawadar Port, as mentioned above, may give China required edge over Indian competitors in terms of distance from the import partners. If China establishes manufacturing units of these seven categories in Pakistan, China may also avail cheaper skilled labor.  In Pakistan minimum daily wages range from $3.21- 3.86; in China  minimum wages range from $ 4.51- 9.90. Electricity in china and india had same rate i.e 8 $ cent per unit in 2011; in Pakistan too it was almost 8 cent for industrial consumers. But, at present. even if it is greater than 8 cent, the difference may be compensated because all major electricity projects are being financed and established by Chinese companies in Pakistan. Raw materials would also be available locally at cheap rates in case of sectors like clothing, gems and precious metals, cereals,  and iron and steel. In other words, China may avail many competitive edges over India, if China establishes manufacturing units of those seven categories in Pakistan.
 In short, Pak-China Economic Corridor may help China in replacing India from international markets importing  Indian top export categories. Among other top ten Indian export categories are petroleum products and cereals. Pakistan may attract investments from the west and the Gulf in the field of these products; if exported through Gawadar, these exports would also have  competitive edge over Indian products due to the factors mentioned above. What is required of Pakistan is to train its manpower keeping in view future demand likely to be accrued from foreign investments.
Apart from Indian factor, Chinese investments in Pakistan and products exported through Gawadar would give China an important competitive edge in exporting its products to North America and Europe which are included in top ten Chinese import partners, and to South America and Africa to whom Chinese exports are increasing at tremendous rates. Similarly, African countries including  Congo, Mali, Gambia, Mauritius, Sierra Leon, Zambia, Angola, and some other African countries, which export to China almost 20-50% of their total exports, would benefit a lot from Pak-China Economic Corridor which would reduce their transportation costs a lot and resultantly enhance their dependence on China which would, in turn,  gain commercial and strategic benefits out of it. 
Apart from commercial benefits, China is also likely to gain a lot in terms of strategic interests out of Pak-China Economic Corridor. This project is going to put China at the central place of regional as well as international politics. Such a changed scenario would also raise international stature of Pakistan. Pakistan may reap the benefits of  being China's comlementary economy but Pakistan should not rest with it. Pakistan should do planning to import and absorb knowledge and technology from China so that Pakistan may become in itself a principal economy instead of complementary economy. For the purpose, Pakistan needs a Pak-China Knowledge & Technology Corridor as well- joint centers of excellence of science and technology may be established in various disciplines; joint skills development centers may be established; and  joint universities may be established.

We may conclude that Pak-China Economic Corridor has opened a widow of opportunities for China and Pakistan. By exploiting opportunities presented by this project both China and Pakistan can not only further better their economic conditions at the cost of Indian economic interests but also gain a strategic edge over their common enemy and competitor i.e. India.

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