Most international economic forums and global reports on economic development in South Asia ambitiously highlight the boosting economy of Pakistan because of the rising investment and infrastructure projects under the China Pakistan Economic Corridor (CPEC).   The plan envisions a deep and broad diffusion into most sectors of Pakistan’s economy as well as its society. The sheer scope of CPEC means that decisions made now will have consequences in the long term.  The table below highlights the investment distribution among various sectors.

    Investment (US$ bn) Domestic Share(%)  Domestic Share (US $ bn)
Energy 33.8
  Coal 7560 MW 8.8 20% 1.8
  Wind 200 MW 0.5 20% 0.1
  Hydel 1590 MW 4.2 50% 2.1
  Solar 1000 MW 1.7 0% 0
  Second Phase 6445 MW 9.5 20% 1.9
Mining Expenditure 9 50% 4.5
Road 5.9 80% 4.7
Rail 3.7 50% 1.8
Mass transit in Lahore 1.6 50% 0.8
Gawadar Port 0.7 50% 0.3
China Pak Fiber Optics 0 0% 0
Total 45.7 18.1

Figure 1: Distribution of investment among sectors[1]

While a lot has been highlighted on the quantum of investments, there is a lack of discussion around the impact of investment on labour and labour market structures in different provinces.   It is highly essential to include labour as the key component because an effective workforce will be the driver of these projects. It is imperative and evidently supported that economically developed countries show a coherent well-structured labour market force and policy that can complement growth. Pakistan, unfortunately, needs a lot of structural changes to establish an organized labour market. The impact of investment under CPEC can be fully utilized when both critical factors labour skill and laws are brought into account.  The investment claims to generate between 400,000 to 700,000 jobs during 2015-2030 as indicated by DAWN News however, there is no pragmatic evidence supporting the stated numbers.

Unfortunately, due to the lack of employment and unstructured labour market, the supply of skilled labour has been a challenge. In Pakistan, a large section of the labour market is segmented as informal. According to Labour Force Survey[2] 2014-15, informal sector accounts for more than seven-tenth (72.6%) of non-agricultural employment, more in rural (76.1%) than in urban areas (69.2%).  The share of female (78%) is more pronounced in the rural informal sector than male (75.7%).   Sector segmentation of the informal market is; wholesale and retail trade (34.1%), manufacturing (23.2%), construction (16.4%), community, social & personal services (14.5%) and transport (10.9%).    The new 2010 Labour Policy has set parameters to address the issue of workers in the informal economy, but the business rules have not yet been drafted.   The fate of National Policy draft for home-based workers is also unclear since 2010, which means 7 million workers face exploitation as wages paid to them is a fraction of that paid to workers in the formal sector.  Majority of the employed workforce is semi or unskilled labour.  The informal sector is partly documented and does not pay tax and declare their income.

Having said that, the formal labour market presents a mixed picture of hope and despair as indicated in the ILO report “future of work” Pakistan. The labour force largely comprises of young women and men who are full of potential and creativity but lack opportunity and facilitation. Pakistan has rectified 36 International Labour conventions, a large number of labour laws have been legislated and political leadership is always willing to go for more legislation – however, the implementation of laws is rather weak.

Under these circumstances, if we review the current positioning of labour in various  CPEC projects we can see that the labour that is employed is being regulated under domestic labour law which suffers from high impediments. Moreover, the deficit in demand-driven quality labour and formal market structure is the rub that will hurt the economic indicators and comprehensive development in every sector operating under CPEC.  It has been seen that since construction began two years ago, there have been reports of about 100 on-site deaths and injuries. Causes of fatal accidents include falling from a height, electrocution, collapsing structures and fire at the makeshift residences of low-tiered workers. In early 2016, Chinese and Pakistani consultants met to discuss the higher rate of accidents. It was noted that the contractors were not implementing the health, safety and environment plan. Despite the concern of officials, nothing has changed. To many so-called proponents of growth, this makes sense:  unskilled Labour, lower labour costs lead to lower production costs, enabling firms to compete internationally. But this loses sight of the fact that a weakened, low-skilled, low-wage labour force will prevent firms from moving beyond the production of low-value-added goods.

It is important that earlier to the employment of labour in these initiatives, structured policy framework is established and implemented. The initiatives like “Female Dump Truck Driver Programme” held by the Sindh Engro Coal Mining Company (SECMC), in Islamkot demands evaluation in current labour supply and structure under which it operates. In the current situation, employing labour in the joint initiative may lead to a challenging work environment.

Additionally, alignment of Technical and Vocational Training programs to the skill need in the market is very essential.   Pakistan labour market needs at least one million skilled capital of human resource operating under formal work structure to help succeed in economic blueprint under CPEC. Policymakers must realize that structuring labour market immediately is the only way to accommodate labour force successfully which will drive higher growth.

In order to accommodate the labour force in gainful occupations and establish a mutually beneficial commercial relationship, it is imperative for Pakistan to stipulate a minimum level of domestic labour for all joint initiatives. Second, create a model that improves working conditions and thereby workers’ productivity. Third, ensure that all industrial zones and joint projects automatically include training facilities, with an appropriate proportion of these devoted to training women. Fourth, make it mandatory for all industrial zones and joint projects to provide their workers with insurance benefits. In doing so, CPEC could revolutionize a new model of labour in Pakistan.

[1] SDPI CPEC Policy Brief

[2] Labour Force survey Pakistan 2014-15