With the economic engines of growth moving from the Global North to the Global South, the Asian continent has witnessed unprecedented progress in the current and last few decades of the past century. The rise of China is an important factor in this regard and with its multibillion-dollar project of the Belt and Road Initiative (BRI) it envisions a Chinese led economic order thus replacing the Western model of economic development. Pakistan has been fortunate enough to be the launching pad of this gigantic project through the China Pakistan Economic Corridor. The project has been labelled as a ‘game changer’ which can boost the economic prospects of Pakistan in the future.
One of the important components of this mega-project is the Special Economic Zones (SEZ). These SEZ’s are defined as ‘a specific area of land used to promote industrial growth in a country by providing lenient economic and tax policies as compare to general economic policies in the country.’ These kinds of zones therefore can prove to be the back bone for the boosting of a country’s economy.
Being planned to be developed in the 2nd phase (or the Long-Term Plan) of the CPEC, the special economic zones can provide enormous opportunity for boosting employment and job creation.
Meanwhile the projects which have been planned to develop include the Rashakai Economic Zone, M 1, Nowshera, China Special Economic Zone Dhabeji near Thattha, Allama Iqbal Industrial City M 3, Faisalabad, Bostan Industrial Zone, ICT Model Industrial Zone, Development of Industrial Park on Pakistan Steel Mills land on Port Qasim, SEZ at Mirpur, Mohmand Marble City and Maqpondass SEZ in Gilgit Baltistan. In most of the projects the land has been acquired or earmarked with development of on an area of 200 acres in the case of Bostan Industrial Zone in Baluchistan. It is important to note that initially the 46 SEZ’s were planned, however later the *Ministry of Planning reduced these to nine. Out of the nine SEZ’s China intends to develop the first three of the above-mentioned projects.
The industries included in the economic zones are marble/ granite, iron ore processing, fruit processing, steel industry, mineral processing units, leather industry, pharma, chemical printing and packaging and garments industries etc. Many of these kinds of plants are already operational in Pakistan, and the smooth execution of these future projects will help increase the industrial base while attracting foreign direct investment. The possible inclusion of other countries in the CPEC project is a good omen, as they can help Pakistan by giving the technical expertise and machinery for running the plants. As Pakistan being is mainly an exporter of raw materials and cheap labour to other countries, and these projects will certainly help in boosting its export potential by the indigenous conversion of the raw materials into the finished products with employing the indigenous labour.
One of important aspects of a successful SEZ is the location of the industrial sites. If these projects are launched in the vicinity of a densely populated areas and urban centres, they can make a win-win scenario for the community and the industry. In such case these projects can develop close integration with the local industry as well. These projects can also result in urban knowledge spillovers, which can help in the development of a knowledge-based economy.
SEZ’s are important, as in the case of successful operation, they become the catalysts for integrating the domestic economy with the global economy. This is the need of hour for a developing country like Pakistan. However, this requires proper strategising, planning of nodal cities, development of Metropolitan transport networks and so on.
These projects offer a huge opportunity for the human resource development of Pakistan. The industrial development can be beneficial for the local populace and also boosts the agricultural sector. The fruit processing plants, if established on quality standards can improve the fruit export of Pakistan. The labour-intensive industries will help in the opening of new opportunities for the skilled workers and expand the job market of Pakistan. This will require opening and provision of more and more poly-technic training institutes and training courses like the diplomas in electrical engineering etc. The Chinese government can help Pakistan in the initial phases, however indigenous job training and skill development will prove to be beneficial for the country in the long run.
Nevertheless, there are certain challenges which have to be taken care of for the optimum utilisation of these economic projects. There will be a need to train sufficient manpower to become able to be employed in these industries. Moreover, there will be a need for skill development and technological prowess as well. The modern special economic zones employ advanced technology like robots, artificial intelligence (AI) and 3D printing. The modern economic zones have this kind of edge, with prices coming down as compared to the goods manufactured on traditional methods. This important factor needs to be considered and the Chinese companies can help Pakistan a lot in this sector. In addition to this the academia – industry linkage needs to be established as well. In China universities have their campuses in the economic zones as well for helping in the R&D activities for product development etc. This kind of model can also be applied in Pakistan. The Higher Education Commission can take important steps in this regard. This will not only help to improve the industrial sector but also the Higher Education sector of Pakistan, providing new avenues of research for the university students in the fields of engineering, technology, management and human resource development.
The most important factor in the maximum output from these industrial zones is related to the kind of manufactured products. The production of finished goods must be the top most priority, which can help in the reduction of the balance of payment deficit of Pakistan to a great extent. In this regards the focus should be on the intermediate products like, auto and electronic parts.
In addition to this there needs to be strict checks on the environmental impacts of these industries, and proper measures should be taken in this regard. This is important as Pakistan has ratified the Paris agreement in November 11, 2016, and therefore has to comply with its standards. Political unity will play the central role in the establishment of these kinds of zones, and the government will have to make measures to address the grievances of all the stakeholders. The security situation of Pakistan is another important factor in the execution of the project. Pakistan has remained a victim of terrorist incidents in the past and therefore it will have to take precautionary measures for the protection of the Chinese engineers working at the various sites and economic zones.
The relocation of the industry from China to Pakistan, and the resultant uprooting of the local industry is one of the main fears due to which there is an apparent hesitation in some of the provincial government administrations. An example of this is the Pakistan’s offer to China of the relocation of dying industry from the latter where except the KP government, all the other provincial administrations including Gilgit Baltistan and AJK have refused. These issues including the others will have to be tackled to ensure smooth progress.
In a nutshell the economic zones can prove to be harbingers of economic development and prosperity, but the picture will remain incomplete unless the other vital elements are not developed alongside these projects. The issues of environment, governance, political discord, competition with the local industry, red tape etc. will remain there. It is only a good and efficient government which can solve these issues, in an inclusive manner i.e. by involving all the stake holders. The incumbent government has pledged to make the trade deals between China and Pakistan transparent, which is a good step in the right direction. However, much needs to be done as there are many impediments. The development of a good transportation network is the first requirement of any economic zone and then comes the urban development and so on. The establishment of the economic zone near Faisalabad is a classic case as it has a densely populated city in its vicinity, with a motorway and road connection. It also has another industrial zone near it and therefore it meets more or less all the prerequisites of a successful economic zone. Other economic zones can also be designed keeping these prerequisites in the planning stage.
The writer is a Researcher at Center for Global and Strategic Studies
