New Economic Geography (NEG), was promoted by Paul Krugman in the 1990’s.
He explained why agglomeration takes place? That is, why economic activity clusters emerge in specific locations.
The models he used mostly consider, Increasing returns to scale, Transformation costs and Factor mobility to analyse core – periphery structures.
Question arises why even agglomeration Occur? The answer probably is: It occurs majorly due to the benefits that clustering offer. e.g. infrastructure and skilled labor pools.
Transformation cost is subsidised by location choices.
Factors of production. e.g. labor and capital help in shaping the concentration
It is believed that NEG helps in understanding the regional development, trade patterns as well as the design of Urbanisation.
Few examples of the core concept that help in understanding NEG can be Silicon Valley tech cluster. This can be described as Agglomeration Economics. It implies on firms clustering together, enjoying equal benefits. Increasing returns to scale applies to firms producing efficiently in specific locations. Another core–periphery model identify the Economic Activity which concentrate in core regions, supplies resources.
When locations are chosen, consider importantly those having reduced transportation costs.
Applications of these include:
= Regional development strategies
= Trade pattern analysis
= Urbanisation and city growth
= Policy Implications for Regional
Disparities one may wonder why Industrial Clustering only in Karachi and Lahore?
In case of Karachi, first and foremost there are very important Port facilities available, infrastructure and skilled labor intensive industries, e.g. textile and finance.
While if consider Lahore, it is close to the markets, infrastructure, and government incentives drive growth. Faisalabad, Sialkot and Gujranwala are also industrial centres, but Karachi and Lahore have specific advantages that makes them important a
Gawadar and karachi Port face significant impacts from the closure of potential Strait of Hormus .Gawadar port has become an alternative trade route, resulting in increased traffic. Also shipping companies rerouting to Gawadar to safe passage, Increasing cargo activity. Too much shipping traffic at Karachi port due to its location importance and increased transit trade for Iran, China and Central Asia States.
Lt General (retd) Nasir Khan Janjua, former national security adviser, said that, Global order was undergoing in fundamental transformation in which geo-economics not war would shape the Future. He was speaking at the 10th anniversary of the Golden Ring Economic Forum (GREF). He further argued that peace and economy will dictate the order, in the coming era.
This is the importance of New Economic Geography.
Presently, the most important, the key point considered is CPEC impact. Reduced transportation costs must improve connections now. It may shift Economic activity to previously peripheral areas (i.e Gawadar port development).
Economists are very hopeful that there is lot of potential for new growth centres along the CPEC routes.
Policies practiced primarily focus on investment in infrastructure, that is on roads and energy in regions lagging behind in it. Review and refresh training in skills in Peripheral regions located at the boundaries will be greatly beneficial.
Currently, economists are very hopeful that CPEC will gave positive impact on Pakistan’s regional development. It is believed that CPEC is able to transform Pakistan’s economy by reducing transportation costs, improving connectivity and creating new growth centers as well.
Gawadar port is considered a key CPEC project. It is expected to boost economic activity in previous peripheral areas , with job creation to potential candidates and infrastructure development.
CPEC is also expected and considered to promote industrial growth, production in Special Economic Zones ( SEZs ) .This activity of industrial growth will attract investment and result in the increase of exports that is the vital requirement. According to one government report this project is capable to generate approximately 800,000 jobs in 15 years with the increase in GDP growth rate by 2–2.5 % each year till 2030.
To achieve full advantage of CPEC Pakistan must invest in building infrastructure. In rural areas incentives like tax subsidies should be given. Moreover, if skills training given to interested youth, will beneficial.
