Why are multinational companies moving their production units from China to Pakistan?
The relocation of Chinese industries to Pakistan would help the country increase its exports drastically.
With increasing geopolitical tensions between the US and China, many Chinese and global manufacturers are thinking to move their production houses from China to Pakistan, claimed a renowned Canadian advisory firm BCA Research in its latest report.
The relocation of Chinese industries to Pakistan would help the country increase its exports drastically. China had also expressed its willingness to relocate its industrial units to Pakistan last year.
The Commerce Advisor Abdul Razak Dawood stated:
Pakistan expects further improvement in the ease of doing business index this year. A significant improvement would be witnessed in 10 critical areas of regulations. Previously, Pakistan had improved its position from 136 to 108 in EODB rank, reflecting that the current government is committed to improving the country’s business environment.
Apart from the funds borrowed by the Pakistani government, net foreign direct inflows, largely owing to Phase II of the China-Pakistan Economic Corridor (CPEC), will continue to increase for the rest of this year. BCA research states that the net foreign direct inflows have already grown by 40% year-on-year during the first six months of this year.
Nearly 63% of this increase in inflows came from China. Although Pakistan’s net portfolio investment was recorded as lower this year, BCA has claimed that the changing macro-dynamics are likely to improve the figures in the coming months.
The BCA research predicted:
Pakistan will receive considerable financial inflows, probably amounting to over $12 billion from multilateral and bilateral sources this year. The country would have more than enough to finance its current account deficit, which was at $11 billion over the past 12 months.
Pakistan has managed to obtain over $3.9 billion from the International Monetary Fund (IMF), the World Bank, and the Asian Development Bank.
G20 countries also awarded Pakistan with a suspension of debt service payments, valued at US$ 1.8 billion. This amount is set aside to fund Pakistan’s welfare programs.The BCA report further stated that the authorities plan to raise US$1.5 billion through the issuance of Euro- bonds over the next 12 months.
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