Industrial Emergency (Part-I)

Hassnain Javed

JANUARY 4, 2020

Pakistan today is still not recognized globally as an upcoming economic superpower with robust growth, vast opportunities, and an aspirational middle-class. Besides many factors that make Pakistan a vital cog in the global economic system is its much-touted demographic dividend, driven by a large population of working-age youth. Although, such demographic dividend has been billed as a strategic advantage that will help propel the nation into the realm of developed country status.

However, recognizing that the dividend could just as well become a liability if not adequately leveraged and made capable of addressing the world’s challenges, therefore Pakistan government need to launch the Skill Pakistan and Startup Pakistan programmes. This much-needed focus on developing an environment and ecosystem to foster entrepreneurship has the potential to transform the country into a hotbed of innovation while creating large-scale employment, if implemented well.

Such initiatives have to be integrated and made to work efficiently with already existing programs that encourage industry and innovation. Only then can vibrant and sustainable ecosystems be built within a stable, yet dynamic business environment. Based on the developed economies experience, one highly successful policy initiative that has encouraged business activity over the years, especially export-driven business, is the Special Economic Zones (SEZ) programme that came into being through the establishment of special economic zones. While the key objectives of the SEZ programme are to attract foreign investment and boost industrial development, many of the benefits accorded to SEZs create an ideal environment for business ideation, employment generation, and upgrading of knowledge capital – all of which share common purpose with the earlier stated goals of leveraging Pakistan’s demographic dividend and fostering entrepreneurship.

There exists a misconception that the central role SEZs have played in boosting industrialization is on account of the fiscal benefits accorded to SEZ units. While financial benefits including various tax exemptions have great appeal to companies in capital-intensive manufacturing industries, there are a host of other benefits of operating in an SEZ that are often overlooked. SEZs are self-contained enclaves with infrastructure designed for industry, and often are integrated townships with social infrastructure also included. Logistical and warehousing infrastructure and backward and forward linkages enable smooth operations and vast opportunities. Single window clearances, ease of startup, and procedural efficiencies are also characteristic of SEZs. With focus being on exports, SEZs are usually located in proximity to ports, thus enabling easy movement of goods. All of these factors come together to enable the entrepreneur to focus solely on their core competencies and responsibility of growing the business.

There exists a misconception that the central role SEZs have played in boosting industrialization is on account of the fiscal benefits accorded to SEZ units

SEZs offer immense opportunities for contract manufacturing in mineral resources, gem and stones, food processing, and many other high-growth sectors. With digital transformation and the new economic order profoundly impacting these and many other industries, they are ripe for disruption through product and process innovations. And SEZs are well positioned to provide a robust platform to these new-age businesses. We only have to look at the Chinese model to learn how entrepreneurship and wealth creation have blossomed within SEZs. Many of China’s wealthy entrepreneurs have built their businesses within SEZs, taking advantage of infrastructure, logistical, supply chain and other benefits offered by them. In fact, they have become the epicenter for manufacturing economies in many parts of the world, and have propelled these economies to new heights.

Today, I put forth the case of Gilgit Baltistan special economic zones, which requires industrial emergency and dire attention by the current government to best exploit the competitive edge over existing natural and mineral resources prevalent in the region. Poor utilization of the competitiveness of the Gilgit Baltistan special economic zone is one of the ambiguous issues that has held the Pakistan economy back from a genuine chance towards sustainable transformation and rapid economic growth. Since the independence of Pakistan in 1947, development in the Gilgit Baltistan zone has been slow, focusing only on essential aspects without attempting to cope with changing global conditions. However, inability to adapt to these global changes may threaten the Gilgit Baltistan competitive edge in the near future. In this context, development in the Gilgit Baltistan region is essential to expand its role from domestic facilitator to international contributor in global trade which reinforces its economic growth, contribute to solve various socio-economic problems, and promote the environmentally sustainable practices in Pakistan.

Accordingly, the Pakistan government started their first wave of the transformational reform after launch of the Belt and Road Initiative by the Chinese government in 2013. Under which China-Pakistan Economic Corridor development initiated that further introduces sustainable development strategy for Pakistan, and by 2017, the Gilgit Baltistan area has declared a special economic zone. These initiatives provided new roadmaps covering the inclusive green growth in the country that could be achieved through sustainable utilization of the Gilgit Baltistan zone. In a developing country like Pakistan, accelerating economic growth while also protecting the environment are interlinked challenges, neither of which can supersede the other. Accordingly, it is important to support the sustainable development in Pakistan to achieve the country’s prosperity without destroying the environment. In this regards it is essential to address this question, why sustainable development is a must in this modern era? Globally, developing countries have to stop 1.4 billion people out of abject poverty by enhancing their economic growth; meanwhile, ensuring that these economic activities are correlated with the low carbon growth which reduces the aggregate carbon footprints.

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