Impact of CPEC in Pakistan Banking Sector

 

Impact Of China Pakistan Economic Corridor (CPEC) In Pakistan Banking Sector

A Karachi-based bank receives the latest stock update from its Hong Kong counterparts in an instant. The information is passed on to Doha customers and he orders electronic equipment made at Chengdu to be transported across the proposed CPEC route and then by sea to the final destination. Amazing speed and dynamics as goods, data, and money move from one part of the world to another, overcoming destructive landscapes, exploring new seas, disregarding traditional means of communication, taking over the world online, and using unused energy. The global connection to trade has always been determined and constantly determined, rebuilt, and rebuilt human life on a scale never before imagined. London shoppers buy clothes made in Pakistan. The Chinese watch American TV shows. The Arabs are using software developed in Silicon Valley to promote land reform. The vibrant influence of international trade on people's lives is marked by the true meaning of the word. Both literally and otherwise, international trade has a profound effect on the way people engage in health and business.

But the concept of globalization is not new, in fact, it can be traced back to the time of the Han Dynasty in 221 BCE when all of China came under one monarchy. About the same time, Alexander's conquest set the stage for real Western-Eastern civilization that expanded existing road links and created new trade routes. Over the next few centuries, a major web of commercial networks emerged that included continents that painted silk, tea, clay, and jade in China while gold and glass goods came from Rome, the western terminal of the famous Silk Road. Along the way, much of the material was imported from most of the provinces and local governments of the Middle East and India, which eventually benefited the local people. The trade links built around the 5,000-mile Silk Road were commercial, cultural, technological, but also naturally financially viable. Goods, technology, and even diseases of all kinds were exchanged; such was the power of international trade. At the time, the roads were long, deceptive, and unpredictable. And cross-country skiing was surprisingly risky but the high demand for goods led to the creation of a complex web of trading networks that were adequately supported by local and financial lenders supported by local governments and industry.

The long-awaited restoration of the old Silk Road (as included in the One Belt, One Road Project of China) has the potential to truly transform the world economy more than ever before in history. This is the largest deal ever funded since the Marshall Plan launched by the USA in Europe after World War II will involve more than 60 countries and is likely to generate $ 2.5 million in trade, if the regional system works by design. The regional agreement promises to provide economic assistance to the countries involved, linking them to international trade networks. Think of the positive side of that sector that passes through Pakistan and affects the lives and finances of the average Pakistani people. This life-changing, sport-changing, gold goose converted into a trade route is called China Pakistan Economic Corridor.

The $ 46 billion China Pakistan Economic Corridor (CPEC) is an integral part of the OBOR project that links parts of West China and Central Asia Republics to the port of Gawadar in the Arabian Sea. Gawadar's deep seaport is located just outside the Strait of Hormuz and close to the world's largest oil trade route and is the closest trade route to the Central Asian open country with vast natural resources and unsustainable market capabilities. And Pakistan will benefit from all of that because this CPEC is not just a trade-off but a comprehensive life project that includes power projects, railways, 25 industrial areas, and cross border fiber optics that will connect Pakistan and the world both technically trade sectors.

Developing countries suffer from restrictions on market access, lack of funding, and limited domestic infrastructure to finance economic activities. In that context, CPEC promises to take Pakistan straight to the international strike where the big players are playing.

But here's the thing: when the global trade fever starts with CPEC, Pakistan must be ready to accept it.

The ability to meet the challenges of international trade and to achieve this will largely depend on the willingness of the Pakistani banking and financial sector to adapt to the new trading environment.

The influence and impact of domestic and domestic players and the massive domestic economic power can be reversed by the slow pace of international trade going back and forth on CPEC roads. Pakistani banks will have to adjust their strategic position in order to benefit from the cash flow caused by the increase in transit trade in the country.

Increased integration of increased trade and more international trade across the CPEC's proposed routes will create new challenges, opportunities, and risks in the Pakistani banking and financial sector that provides financial services to local and foreign businesses, government and local and foreign investors.

If history provides any guidance, the well-known fact is that the Pakistani economy has never relied so heavily on massive trade prices (and the current trading volume of about $ 80 billion) as it will soon. Once again, Pakistan's central bank (State Bank of Pakistan) in particular will need to use interest rates to keep inflation afloat, and some banks may need to make major changes in their positions by managing some of their strong and some less serious but intelligent changes and tweaks here and there. finance to meet the dynamic potential of a new commercial environment in Pakistan. The economic shock that comes from a new trading environment can be positive and negative depending on how they deal with it. Therefore, adjustments need to be made that can lead to a better career for many.

The controversial picture of Pakistan’s current trading area linked to the forthcoming trade image offers a great insight into what local businesses and the financial and banking sector might face as billions of dollars of trade begin to pass through Pakistan. It is important to understand this because CPEC will affect Pakistan on many levels. The current state of Pakistan business is facing severe power shortages of up to five million kilowatts in the summer. This shortage of electricity serves as the backbone of the industrialization process in the underdeveloped economy which means that production lines and industries are stagnating due to a lack of energy. Many companies, banks, private businesses, government offices, and even shopkeepers and students, especially those who have the power to force private generators, turn off the lights. But all that is about to change: the Neelum-Jehlum Hydropower plant, which is the largest offshore power plant operated by any Chinese company, will reduce the 15% power shortage. It will generate 45 billion Rupees or $ 400 million in revenue. It is one of 22 projects included in the CPEC. Therefore, CPEC is truly a game changer as it has the potential to make infrastructure ready to integrate Pakistan with the international trade powers.

Major environmental development is part of a larger investment in infrastructure, with the support of the banking sector and a smaller development of basic infrastructure in Pakistan. land, and lower oil prices.

Therefore, Pakistan's new trading post will be built with CPEC results that will provide greater, seamless, and seamless access to Central Asian countries where business power, banking, and large trade and markets are virtually untouched, untouched, and not exploited or tested. This means that trade prices will either increase sharply, or break the roof, or simply exceed expectations as new markets are explored and the regional economy is poised to become more active. Therefore, the prospect of making critical moolahs after CPEC is very tempting to ignore businesses and banks.

Where there is an increased trade, there is a track record that can be obtained, and there should be a bank nearby. And all trading since ancient times required a more secure approach to all types of financial transactions. And that’s where banks jump in at the big time of entry. Even in the old days when trading took place on Silk Road, lenders and moneylenders acting as small banks offered some kind of security and security in the financial transactions that took place on this route. The security and security of financial transactions are as important as giving real impetus to international trade.

There are two key factors: first and foremost, no country can grow faster and more sustainable in the long run if it stays cut off from international trade. And secondly, no country can be as prosperous as a post-trade economy without the active support of a strong banking sector that facilitates that trade.

In any trading area, the most important thing for an exporter is payment and that the importer receive his goods. If the exporter is unpaid, he sends gifts. Banks can facilitate trade by providing guarantees and other financial services to both exporters and exporters in Pakistan. Payment methods if they are secure and linked to banks can help both trade and banking. International trade has many payment methods including Cash-in-Advance, Letters of Credit, Bills of Exchange or Documentary Collections, and Open Account etc. The cash advance method is best for exporters and is dangerous for importers. However, LCs or letters of credit are regarded as the most reliable and secure means available to foreign merchants which is a guarantee guaranteed by the bank on behalf of the importer that if the LC terms are met by the sender, the seller will receive his agreed payment. Billions of US dollars of trade are secured by LCs given to their banking sector. Documents Collection or Bills of Exchange is another product that banks offer and are available to foreign traders. With this payment method, the bank receives the receipt of the export documents from the seller and if the importer enters with the money, the goods can be claimed and collected by the importer. Even with an open account payment method, banks are used as intermediaries between foreign traders.

Therefore, the biggest question facing the Pakistani banking sector is: are they ready for what is about to hit them? Because there can be 1001 ways to make a real wampum when CPEC starts. Soon, Pakistan's trading platform will become truly global. Banks will have to offer new financial services or old financial contributions in a newly designed package but at an unprecedented rate. The bank will adapt to the new trading environment in the country because it is no secret that international trade is slowing down if financial banks fail to provide secure payment methods.

According to figures from the World Trade Organization, about 80 percent of the world's trade is supported by financial contributions and bank guarantees. The reason is very simple: everyone wants to be on the safe and profitable side when the trade takes place. The exporter wants to receive payment as soon as the goods are delivered and the importer wants to keep his money until he has received the goods because there is a risk involved in international trade. Therefore, the role that banks play in facilitating land trade is enormous. In developing countries, the role of banks is of great importance because the growth of developing countries depends largely on trade prices that are likely to remain stable and resilient if the banking sector is able to meet the needs of LCs, payment guarantees, and other guaranteed financial services. That is how the banking sector should benefit from the shift in trade patterns in Pakistan that will soon connect with the country's vital economy.

Pakistani banks will be able to explore new ways to make more money for themselves and retailers by establishing new non-exchange agreements with corporate countries, negotiating cross-border financial agreements, taking their services globally, and facilitating trade so that trade can move freely across borders.

Pakistani banks will need to find ways to provide effective solutions to overseas retailers. Banks must provide these services in a completely new manner and manage their operations in such a way that banks can remain competitive and globalized for decades to come. Their contributions to LCs and Bills of Exchange must be efficient, effective, and very good if they are better than those offered by foreign banks. Pakistani banks can reschedule their financial operations after a new trading post.

Pakistani banks can use the latest technology that helps to automatically distinguish LCs as they are made in the form of invoices, purchase orders, contracts and other certificates that enable trading across borders. This wholehearted acceptance of technology will put Pakistani banks on par with other banks in the world but will also be more costly, costly and time-saving. This will help increase trading time. Pakistani banks will also have to ensure the accuracy of their data to ensure compliance regulations. This can be done through the use of smart technologies that help ensure timely issuance, verification, and testing of data and documents sent to banks. These are some of the things that Pakistani banks should have if they wish to improve their financial services to facilitate trading and put themselves in a better position to deal with the ongoing trade and transit in the country. Adoption of the right type of technology, better placement of commercial financial services, and making the right adjustments to scale and expected trade size will definitely put Pakistani banks on the world map that has helped the country become more competitive globally and regionally.

The new Silk Road is estimated to generate $ 2.5 trillion in trade over the next ten years and some of these trade will pass through the proposed CPEC routes. China imports 60% of its oil from the Gulf and 48% of China's oil is shipped in tanks that have to travel 16,000 kilometers for three months to reach the Malaka Straits and traverse the fast-moving South China Sea region in opposition to sea routes. That makes trading that route somewhat insecure, uncertain, and fraught with risks. And because of this subsequent uncertainty Gawadar Port offers another expensive alternative that offers billions of dollars in savings. According to statistics alone, CPEC when fully completed will add 2% to GDP growth in Pakistan which will take GDP more than the 6% annual growth rate. That figure in itself speaks volumes about the total cost of the proposed project. It has the potential to bring in huge sums of money that could force the banking industry to grow.

After the CPEC, a large number of opportunities come to Pakistan. The need for strategic management, strategic budgeting, forecasting, planning, general project accounting, investment banking, new and improved financial services will increase significantly. Shipping, storage, transport, and finance sectors will increase with greater financial desire requiring new and improved financial and banking services larger than the standard of living. The need for tax and simplification of the tax regime after CPEC will undoubtedly be enormous.

Anti-money laundering experts, branch managers, financial analysts, CFOs, financial advisers, tax managers, financial management, bank advisers, investment banks, retailers and commercial accountants will be in high demand over the next decade. Financial services and the financial and banking sector will be operational as the CPEC trade begins to flourish.

Increased trade is key to reducing extreme poverty, increasing economic activity and achieving shared prosperity. Evidence shows that countries that are open to trade and better access to markets and better financial support and business and trade management are able to provide more opportunities for their people to become successful entrepreneurs, banks, retailers, and entrepreneurs. With improved participation in the global economy, Pakistan has the potential to become the world's largest economy.

Pakistani banks can learn a lesson or two from Chinese and Indian banks. The top 3 of the world's top 10 banks are Chinese. They have come to where they are today by actively supporting international trade and providing products that have helped to transform local traders into world-class traders. This is because in order to ensure economic growth by two digits, Chinese banks have increased their game and growing significantly to provide funds and credit for China's rapid economic development. Banks in India reach remote areas through a wide network of branch banks.

Risk investments are likely to increase as soon as CPEC trading jumps into the right action. In the short term, the wheels of the economy will start to roll over with rising trade. With the increase in securities and unpredictable investment opportunities emerging in the economy, Pakistani banks are likely to look at a positive financial picture. Even the average fruit retailer is likely to look at investment banking approaches to suggest ways to more fundraising opportunities to promote trade with CARs.

In the aftermath of what is yet to come, the Pakistani banking industry can do a number of things to address the following CPEC challenges: promoting savings through a broad network of branch banks; transforming savings into a capital that can be the basis for economic development and development; to finance the industrial sector and to develop financial markets; to promote business by recording the shares of new or existing companies; and help people discover new skill sets so that they can better cope with the upcoming changes and major changes expected to result from a new commercial environment in Pakistan.

International trade is dangerous. Exports want to be paid and importers want to get their goods. To reduce the risk of losing money or goods, banks offer commercial financial products such as LCs etc., to facilitate trade. Lack of commercial financing could lead to trade and inflation - a situation that Pakistani banks can avoid. The G20 countries already support trade finance. Now the ball is in the court of the banks of Pakistan to lead the case. Now is the time to act or break: easy to trade or risk losing a game to other players.