In February 2015, the Asian Development Bank (ADB) and the Government of United Kingdom Department for International Development (DFID) agreed upon a Pakistan Economic Corridors Program (PECP) to support the government's strategy to strengthen regional connectivity and trade, accelerate economic growth, and create jobs. The program comprises (i) significant investment in transport, (ii) investment and technical assistance (TA) to promote public private partnerships (PPPs), and (iii) TA to support transport sector policy and economic corridor planning. DFID will contribute up to GBP 262 million of grant co-financing for ADB's operations in these areas. ADB will act as administrator of the 5-year program from March 2015 to March 2020.
Within TA provision under the PECP, a small-scale policy and advisory technical assistance (S-PATA) is proposed to identify potential economic corridors to enhance trade, regional connectivity, growth and job creation. The outcome will be identification of viable economic corridors for further assessment and planning under a subsequent larger TA, which will detail policy actions and investments along the corridors to achieve their potential.
The outputs of the S-PATA will consist of:
(i) A final report with prioritization of about 4 potential economic corridors that have synergy with government plans (including CPEC), and ADB investments, starting with the investments under PECP. The latter investments include the M4 motorway linking Faisalabad and Multan in central Punjab, the N70 and N50 national highways linking Balochistan with the rest of the country, and the E35 expressway from Islamabad to Mansehra in Khyber Pakhtunkhwa and onward to China and the Central Asian Republics.
The report will provide the rationale for selection of each of prioritized corridors, including a description of (a) alignment with government plans; (b) the nodes along the corridor, their characteristics in terms of population size and density, the nature of economic activities, and other relevant economic and social indicators; (c) the nature and extent of connectivity between the nodes related to transport, communications, transport and trade facilitation, etc.; and (d) an initial assessment of economic thrusts for each corridor, and their strengths and weaknesses.
The report will also outline (a) methods (e.g. econometric models, value chain analyses, focus group discussions, among others) required for further detailed assessment of prioritized economic corridors under the larger TA; (b) an assessment of existing sources of national and provincial data and gaps that could be filled, e.g. with geographic information systems and surveys; and (c) design of surveys as appropriate.
The report will identify key government agencies and other main stakeholders involved in the development of selected corridors and mechanisms for institutional coordination during the formulation and implementation of the subsequent larger TA.
The report will describe potential challenges and mitigating measures for the development of selected corridors.
(ii) Agreement among the government agencies and other main stakeholders identified above on the corridors selected and prioritized for further detailed assessment.
The outputs will be based on extensive consultations with key stakeholders, including the main government agencies with responsibilities for aspects of corridor development, key private sector representatives (financiers, producers, suppliers, distributors) active along the corridor, research institutes and non-government organizations, potential representatives of communities along the corridors, other development partners with an interest in corridor development, as well as relevant ADB sector experts (transport, urban, agriculture, energy, public sector management, industry, finance, trade and others as necessary).
PROJECT RATIONALE AND LINKAGE TO COUNTRY/REGIONAL STRATEGY
The proposed S-PATA aims to identify a few viable economic corridors in Pakistan for subsequent detailed assessment under a larger TA. The S-PATA is aligned with ADB's country partnership strategy 2015-2019 for Pakistan (CPS) and is included in the ADB's Country Operations Business Plan 2016-2018. The proposed S-PATA is complementary to ADB's ongoing support to Pakistan for infrastructure and institutional development, including in energy, agriculture, urban services, and, as noted above, in transport and PPPs.
Pakistan's macroeconomic environment has improved since fiscal year (FY) 2013, with the increase in foreign exchange reserves, smaller fiscal deficits, and low inflation (footnote 1). The rate of economic growth also rose to a provisional 4.2% in FY2015, but remains below the estimated 7% rate required to create sufficient jobs for a rapidly expanding labor force. Over the years, the poverty rate has declined, but substantial regional disparity exists in poverty between rural and urban areas and among provinces.
Development of corridors to promote inclusive economic growth and raise living standards is a key priority of the federal and provincial governments in Pakistan. The government's national plan, vision 2025, envisages development of economic corridors, comprising energy, industry, trade and transportation to be beneficial reflecting the country's strategic location at the intersection of south, central, and west Asia. The strategies of provincial governments also emphasize development and management of urban areas and economic nodes, connectivity among them, and promotion of agriculture, industry and/or services in them. The initiatives include the China-Pakistan Economic Corridor (CPEC) at the national level, and new industrial estates, economic zones, transport systems, urban development, and promotion of agriculture and services in the provinces.
Economic corridors connect economic agents along a defined geography, using transport and communication to link economic nodes or hubs, usually centered in urban landscapes, with smaller nodes that may exist in between them, and the land surrounding the corridor in its vicinity. Viable corridors require that the nodes linked by the corridor are substantive centers of actual or potential economic activity.
Some of the considerations in corridor development include current concentrations of population in different nodes along the corridor; endowments of natural, physical and human resources; existing and potential economic activities in the nodes; connectivity among the nodes; patterns of rural-urban migration; and investments (e.g. in infrastructure) and policies required to develop the corridor. In Pakistan, the necessity for the government's continued fiscal consolidation, insufficient public sector resources available for investment, limited capacity in government agencies, and the need for coordination among different agencies, mean that the success of corridor development will depend on feasible plans that take these constraints into account. Promoting private sector participation in the planning and implementation and realizing private sector investment will be crucial factors for success.
Development of economic corridors to enhance trade, regional connectivity, growth and job creation.
Under the Small-scale Policy and Advisory Technical Assistance (S-PATA) for mapping of economic corridors, international and national consultants will be recruited to identify viable economic corridors under the Pakistan Economic Corridors Program (PECP). The consultants will comprise thematic experts on economics, regional/urban planning, sociology.
1. Economists, regional/urban planners, sociologists (international, 8 person-months; national, 10 person-months)
2. Analyst (national, 6 person-months)
3. Resource Persons (international, 1 person-month; national, 1 person-month)