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New development plan to stimulate economy and create jobs

New development plan to stimulate economy and create jobs

Pakistan has launched a three-year development plan, hoping to implement major projects to promote better integration of government and social capital and promote rapid economic development. This plan involves 53 large-scale projects with a total investment of 5.2 trillion rupees (about 33.6 billion US dollars) to stimulate economic growth and create more employment opportunities for youth.

Infrastructure development drives the economic growth

Infrastructure development plan is larger than Public Sector Development Project (PSDP) implemented annually by the Ministry of Finance and Ministry of Planning and Development of Pakistan. But the Pakistani government believes that due to various factors such as poor financial management, surplus drain, de-industrialization, and permanent trade imbalances, it is difficult for the PSDP alone to drive sustained and rapid economic growth in Pakistan, so it is imperative to implement a new large-scale infrastructure plan to drive the economy out of trough.

The development plan aims to create more employment opportunities with the focus on infrastructure construction. According to estimates by the National Bank of Pakistan, for the country to achieve employment of 1.3 million people every year and achieve greater poverty reduction, the average annual economic growth rate must exceed 6.6%.

In order to better implement the economic development plan, Pakistan will vigorously improve the investment environment, provide more convenience for corporate investment, and make its participation in infrastructure activities profitable. To this end, existing investment rules and regulations will be revised, a strong government-social capital partnership (PPP) will be established in the economic field, and the government will also provide preferential policies on land use.

Two main areas of development momentum

The new development plan will be divided into two major categories. The first category is to build 29 projects in 11 industries, all relying on social capital investment, hoping to attract 18.74 billion US dollars of direct investment. The completion of the above-mentioned projects is expected to bring 1.02 trillion rupees (about US$ 6.6 billion) in non-tax revenue and 69 billion rupees (about US$ 440 million) in tax revenue for the government every year.

The second category involves 24 projects in 7 areas. The government provides limited investment with feasibility gap subsidies, mainly relying on social funds. The above projects require an investment of 2.3 trillion rupees (approximately US$14.8 billion). It is estimated that after the completion of the second type of project, it will bring in 12 billion rupees (approximately US$77 million) in tax revenue.

The new infrastructure construction plan mainly involves the following areas:

1- Road Construction

Construct a six-lane highway from Sukkur to Hyderabad in the southern Sindh province. The highway can be constructed, operated and transferred on the basis of PPP. At the same time, a 527-kilometer highway connecting Karachi and Peshawar will be constructed.

2- Port Ancillary Facilities

Build ship replenishment facilities in Gwadar Port, set up floating hotels and restaurants on the sea, operate cruise ships and develop resorts in the coastal areas of Balochistan.

3- Air Travel Service Facilities

Franchising operations at major airports such as Karachi, Lahore and Islamabad are permitted, and airstrips and runways will be constructed in major tourist destinations.

4- Energy Facilities

Enterprises implement renewable energy power generation in factories, industrial zones and special economic zones, and arrange transmission through power transmission wheels. At the same time, hydropower stations will be built to meet the production power consumption of some industrial zones.

5- To Build Environmental Protection Facilities

Establish domestic waste environmentally friendly power stations and wastewater production urea plants in Karachi, Lahore and Peshawar. In addition, the plan also involves the construction of fiber optic networks, the introduction of 5G services, the development of resorts, and railway, mining, transportation and agricultural projects.

Challenges to plan implementation

However, to realize this development plan also faces many difficulties. For a long time, the security situation is worrying, and the institutional transaction cost of corporate investment is high. In addition, Pakistan’s tax burden is relatively high, and infrastructure such as water, electricity, and gas is not complete. The overall business environment needs to be further improved.

According to the World Bank’s “Business Environment Report 2020” ranking of 190 economies in terms of ease of global business environment, Pakistan ranks 108th. In short, poverty alleviation, developing an export-oriented economy, attracting investment, encouraging a free economy, and intervening in government investment decisions are the three major challenges facing Pakistan’s economic development.

[box type=”note” align=”” class=”” width=””]Article is written by Vaedy Xiao —  Fote Mining Machines’[/box]

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