Pakistan Institute of Development Economics

THE PAKISTAN DEVELOPMENT REVIEW 

Sufficiency Analysis of Local Production Capacity in Punjab for the Requirement of CPEC

China Pakistan Economic Corridor (CPEC) is most significant project in the history of Pakistan. The total investment volume of CPEC is about US $46 billion out of which US $9.79 have been allocated to transport infrastructural projects. Successful implementation of CPEC requires fulfilment of construction and infrastructural needs that depend greatly on three major sectors: cement, stone crushing and steel. Keeping in view the importance of these three sectors, present study endeavours to assess whether these sectors have sufficient capacity to meet the infrastructural investment regarding CPEC. We use latest CMI 2010-11 data of Punjab province and employ DEA bootstrap technique in order to measure capacity utilisation for the three sectors. The results reveal that Steel, Stone and Cement sectors are utilising 35 percent, 50 percent and 60 percent capacity respectively. Conversely, there is un-utilised capacity of 65 percent, 50 percent and 40 percent in steel, stone crushing and cement industry respectively. It may be concluded that there is enough un-utilised capacity in these sectors to fulfill the rising demand for the completion of CPEC. Furthermore, on the basis of regression results, we recommend that Government may implement policies that ensure smooth provision of energy in order to enhance capacity utilisation. It is also recommended that there is no need of further expansion of firms in current scenario.

Hafiz Ghulam Mujaddad, Mumtaz Anwar Chaudhry

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