CPEC: ANALYZING THE MEDIATING ROLE OF INFRASTRUCTURE FOR REGIONAL ECONOMIC INTEGRATION

Muhammad Abdullah, Ayza Shoukat and Hamid Mahmood
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Muhammad Abdullah: Assistant Professor of Economics at Department of Economics, University of Sahiwal, Pakistan
Ayza Shoukat: Lecturer in Economics at Department of Economics, University of Sahiwal, Sahiwal.
Hamid Mahmood: Ph.D. scholar in University Sultan Zainal Abidin,Kuala Teregganu, Malaysia.

Bulletin of Business and Economics (BBE), 2021, vol. 10, issue 3, 8-16

Abstract: Regional economic integration (REI) is an arrangement between the economies of common regions to encourage unrestricted trade, capital flows regional peace macroeconomic cooperation through linking infrastructure and a common set of rules. Although, REI is constituted by several factors, yet the fundamental factor in international trade. China Pakistan Economic Corridor (CPEC) is the emerging discourse among global researchers as well as policymakers in Pakistan and China. CPEC offers huge capital inflows, grand physical infrastructure projects and a flow of skilled workforce to Pakistan. Empirical evidence has proved the significant contribution of infrastructure towards economic growth yet the role of infrastructure in promoting REI is veiled. The current study postulates that CPEC can play a pivotal role while elevating REI through infrastructure development in Pakistan. we have empirically tested the data from 1972 to 2019 and used trade openness as a key indicator of REI. For infrastructure, a composite index has been formulated. Empirical analysis of our study confirms that REI is sensitive to infrastructure; infrastructure positively affects REI. Based on empirical evidence, we propose that projects under CPEC are likely to contribute positively towards increased REI. Further, the success of this project is linked with the adaptability of Pakistan with the challenges. A sound political governance is the key element for CPEC to be accomplished and deliver its fruits. Pakistan needs to focus on political harmony and consistent development policies. Besides, control over rate of rate of inflation and a suitable exchange rate can also mend the road for smoothening the process of REI.

Keywords: CPEC; Regional economic integration (search for similar items in EconPapers)
Date: 2021
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