Cai Fang, from educated youth to scholarly vice-ministerial official, has been showered with honors. “Unlike some of my peers, I don’t regard economic research as a way of getting rich, but as a way of life. I see economic research as a career in work time, and see thinking about economic issues as pleasure in leisure time,” he once wrote.
The scholar with such vision and 16 years of experience as the director of the Institute of Population Studies of the Chinese Academy of Social Sciences, has infused more practical significance into the interview on the Pakistan’s labor force. The reporter was lucky to have chance to interview Cai Fang after the CPEC Summit in Islamabad on June 20, when he waited for a meeting with Pakistani Prime Minister.
Reporter: The advantage of local labor force is one of the key considerations for Chinese enterprises to relocate in Pakistan, but some of them have also expressed concerns about the quality of Pakistani labor force, such as unpunctuality, less hardworking, and so on. What’s your comments?
Cai Fang: The key to turn the advantage of the labor force into an economic advantage and finally a comparative advantage in the international market is reform. And the first step in reform is to make the labor flow. Labor force does not automatically enter the labor market when needed as there are labor in agriculture, surplus labor, unemployed or semi-employed labor. Here a lot of basic work needs to be done. First is the system. We should gradually develop a labor market. To some extent, this market cannot be formed all at once, it is in the development process of continuous reforms.
Secondly, even if the labor force is available and cheap, whether their education level, professional skills, discipline performance can adapt to the industrialization development, it also has a process. Before China’s reform and opening up, education has already been developed, our labor force is of high cost performance. Therefore, the mobilization of the labor force through reform has been transformed into an economic advantage.
I think there are potential advantages for Pakistan, but still a lot of work to do. I’m not saying that abundant cheap labor can be converted into demographic dividend at once.
Reporter: In Pakistan’s GDP, especially in regard of its foreign reserves, the overseas remittance takes a high proportion. A lot of labor force work abroad. Is this the labor flow you’ve mentioned?
Cai Fang: In fact, to some extent, it has a reason why it flows abroad but not flows to its own industrial areas. Some countries or regions with relatively active and even rapid economic development already have labor markets. However, labor market is not a place where everyone comes to make deals, to buy and sell labor; It is formed by a whole set of systems and institutional mechanisms, such as how to confirm the employment relationship, how to determine labor prices, wage levels, how to protect workers, how to ensure their social insurance and so on. Although sometimes the level of social insurance is not high, it is an important link in the institutional arrangement.
So, labor market is a comprehensive and complex institutional form, which needs to be developed. Pakistan’s labor force can flow out shows that a relatively mature labor market has already be generated in those destination countries.
Reporter: So, the Pakistani market is unable to retain these workers?
Cai Fang: if your infrastructure construction — when I say infrastructure, it’s soft, it’s system construction. If the infrastructure construction of the system is not in place, in fact, it will be difficult to turn your abundant labor force into the real economic resources to some extent.
Reporter: touching on system construction and reform as you just mentioned, Pakistani Prime Minister Imran Khan has put forward a series of systems and measures. Most of these systems and measures are top-down approach, it doesn’t seem like the bottom-up endogenous motivation of ordinary people in China during the early years of reform and opening-up.
Cai Fang: We can’t just say that a society is problematical because it hasn’t changed or hasn’t changed as you expected. In fact, it happens for a reason. It has some economic logic or political foundations. To some extent, it needs a tipping point. In my opinion, the current economic situation in Pakistan is not very good. It is a short-term cyclical problem, but short-term stress can sometimes be a driving force to solve long-term structural problems. So we expect Pakistani people to take this opportunity to make some in-depth reforms. But we can never say which way it should go for we are different in basic system. We have different culture and religion. It should learn what is good and discard what is bad according to its own national conditions, and then finally forming its own development path.
Reporter: What role might Pakistan play in your “International Version of the Flying Geese Model”? As you just mentioned, its economic growth expectations next year have fallen to 2.4%.
Cai Fang: As for the International Version of the Flying Geese Model based on comparative advantage, it refers to countries that have potential demographic dividend. These countries have abundant cheap labor which can meet the requirements of specific industry chain. With the improvement of infrastructure, human capital and business environment, these countries can join the Flying Geese Model by mobilizing foreign investment and domestic resources. Belt and Road Initiative creates such an opportunity for them. The first step is to ensure connectivities, which refers to infrastructure construction in a broad sense. Then entrepreneurs in our country and other countries in the world will see the basic qualification of these countries. Entrepreneurs are always the most sensitive components, and they will find opportunities to make profits. So I think in the long term, Pakistan can be a potential experimental ground for the “International Version of the Flying Geese Model” as I said before.
International Version of the Flying Geese Model: as China’s economy crosses the ‘Lewisian Turning Point’, labor shortages are prominent in coastal areas, causing labor-intensive manufacturing industries to lose their comparative advantage first. At the same time, central and western regions are ready to embrace industrial transfer, forming a “domestic version of the flying geese model.” As the labor-intensive industries finally lose their comparative advantages in China and need to form a new “International Version of the Flying Geese Model”, some manufacturing industries are moving to labor-rich neighboring countries and regions such as Africa. BRI takes infrastructure construction as the first step to drive industrial transfer, which is in line with the general development track of the Flying Goose Model, also proves effective for China’s own gradient development practice.
The article is translated by Chen Jinglin and Liao Yifan.