CPEC and inclusive growth

Pakistan has had very high disparities in growth, as the major cities of Pakistan have large Human Development Indexes (HDI), while a few cities of Balochistan are worse than cities in Africa. The China-Pakistan Economic Corridor (CPEC) provides a chance to Pakistan, especially the youth, to avail a chance of inclusive growth in the country.

Through the resolution of energy and infrastructure bottlenecks, CPEC provides a chance to link the poorest districts with the market, which will provides avenues of opportunities for the the local youth. Furthermore, in order to make CPEC sustainable, it is important that environment and climate change factors are incorporated along the CPEC projects.

The Pakistan National Human Development Report 2017 points towards large disparities in human development across districts and cities of Pakistan. The HDI of 0.877 for Lahore is on average equal to that for France and Spain. It is higher than the average HDI for Saudi Arabia, the UAE and many other countries. Lahore and five other cities of Pakistan fall in the Very High Development Category.

On the contrary, 14 districts, mostly in Balochistan, are worse than the poorest countries such as Niger, South Sudan in terms of their HDI values. Similarly, according to UNDP Human Development Report 2018, the HDI for women is 25% lower than for men. Women labour force participation of 24.9% is the lowest when compared to India, Bangladesh and Sri Lanka. Factoring inequality in human development across regions and using gender as a measure, shows that growth in Pakistan has been less inclusive.

There are, however, huge opportunities for inclusive growth in Pakistan. The burgeoning youth population, if provided skills and capacities, will not only drive growth but their participation will also make it more inclusive for two reasons. First, they constitute the largest population segment. Second, like women, they have not fully benefited from the growth process thus far. Youth unemployment is higher than the overall unemployment rate in the country.

Innovation in technology and other sectors is creating new avenues for growth and livelihoods. Federal and provincial governments have set up funding windows and incubation facilities to promote innovation and entrepreneurship. Some of the startups by young entrepreneurs have generated promising results. Technological innovation, if sustained and expanded, can play an important role in inclusive growth. They will contribute to diversification of the economy and in creating a knowledge-driven services sector.

China Pakistan Economic Corridor (CPEC) offers another opportunity for inclusive growth. The CPEC projects will undoubtedly help overcome some of the structural bottlenecks to growth in energy and infrastructure sectors. However, CPEC will have a higher balancing impact if it properly integrates inclusion and sustainability concerns. For instance, by making special efforts to connect the poorest districts to markets, the CPEC projects could generate higher social impact in the form of jobs and entrepreneurship opportunities. Coupled with supplementary projects like skills development, infrastructure connecting poor regions to main CPEC routes and special initiatives to promote women’s participation in economic activities, would demonstrate the benefits that CPEC could bring to people.

Besides its economic impact, CPEC benefits should also be evaluated and measured using sustainability indicators. We know that a large segment of the population, around 60%, still rely on agriculture directly or indirectly. Climate change directly impacts agriculture and thus the lives of around 40% of the labour force which are employed in agriculture sector. Pakistan is the seventh-most vulnerable country to climate change effects. CPEC projects should, therefore, fully embed environment and climate change concerns to make the growth process both inclusive and sustainable.

Recent research concludes that inequality constrains long-term economic growth. It also suggests that higher the initial level of inequality, both income and non-income, the smaller the poverty reduction effect of per capita income growth. Economic growth which provides opportunities for the inclusion of all segments of society tend to be sustainable in the long term. In the context of Pakistan, engaging youth, addressing regional disparities and capitalising CPEC are key opportunities for inclusive growth to benefit everyone.

It is encouraging to note that human development is high on the government agenda. Regions and districts within Pakistan which are low on human development are also the ones which are poor economically. Connecting them to markets and vitalising economic growth in these regions will make the growth process inclusive and accelerate the pace of human development.

"Monitoring Desk"



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