March 07, 2019
Currently, 33 Special Economic Zones (SEZs) are being planned under the China Pakistan Economic Corridor, with an approximate total cost of US$62 Billion. The construction of the Special Economic Zones, is a proposal by the provincial government, and all locations are selected at the provincial level. Private investments alone consist of 90 percent of this budget under CPEC’s Long Term Vision-2030. The manufacturing industry in Pakistan as a percentage of GDP has been stagnant at (19.5pc now, 20.5pc a decade ago), and Investment to GDP has decreased (from 20pc to 15pc). The China Pakistan Economic Corridor can aid Pakistan in reversing this trend. According to the Executive Director, Centre of Excellence, China Pakistan Economic Corridor (CPEC) Dr Shahid Rashid, in the second phase of the corridor, nine special economic zones would be built in all the four provinces including Gilgit Baltistan, FATA, and Azad Jammu and Kashmir. The feasibility studies on the three out of nine prioritized locations are complete including, Dhabeji (in Sindh), Faisalabad (in Punjab) and Rashakai (in KP). Also construction work on these three economic zones is soon to be started after the breakthrough from Prime Minister, Imran Khan’s visit to China.
Rashakai Economic Zone (REZ), is a flagship project of Khyber Pakhtunkhwa Economic Zones Development and Management Company (KPEZDMC), which spans over a 1000 acre land. The REZ is important for Khyber Pakhtunkhwa (KP), because of its imminent trade position. The location is connected both through air and land routes via Airport in 50 KM, dry port in 65 KM, railway Station in 25 KM, highway in 5 KM and the city center in 15 KM. Moreover, it is strategically, located on the M1 Motorway at the bridge between CPEC and Burhan interchange. On top of that, REZ also serves as connecting grounds for the Northern areas of Khyber Pakhtunkhwa and it shares a border with Afghanistan. Since KPEZDMC has been involved with the construction of Rashakai Economic Zone from the start, the infrastructure boasts of international standards with an additional one window operation to assists the industrialists. The enterprises in this zone will have access to all the basic amenities including, water treatment plants, vocational training facilities, state of the art IT systems, security, uninterrupted water and energy supply.
Keeping in mind the special features of the areas near it like, connected districts and resource pool, REZ is ideal for food items, industries in fruit & food packaging, textile, and auto manufacturing. Also proximity to natural resources Gemstones, Metal Ores, Soapstone, Magnesium and Phosphate at Abbottabad allows the setup of industries like marble processing, furniture, electrical products, pharmaceuticals, Matchbox manufacturing, sugar mills, tobacco, and juices.
Another incentive for the industrialists in the zone, would be the proximity to expo center in the residential area. This 50 acres plan is initiated by the Federal Government in order to promote exports of Khyber Pakhtunkhwa in areas all over the country and internationally. Construction of SEZ’s would simultaneously boast the economy as well as the country’s export, creating shared knowledge between related industries and thousands of employment opportunities.
In Pakistan, a major setback in initiating industrial growth is the lack of infrastructure, which is essential for sustainable economic development. The creation of Special Economic Zones in Pakistan will facilitate the alleviation of this concern. This could only be possible, if Pakistan follows a consistent government policy plan and regulation. Only then will Pakistan attract a sustainable investment and fully reap the benefits of CPEC.
The potential projects at the Rashakai Economic Zone could be of intermediate goods production for – auto, electronic parts and components etc., which contributes a major chunk in the import bill of Pakistan. With the devaluation of Pakistani Rupee, the trade deficit for Pakistan increase in imports and stagnant exports has wedged a huge gap. Therefore, manufacturing of intermediate parts would be imperative to boast the final good production, as well as decrease Pakistan’s reliance on expensive imported parts. A large number of Chinese companies can thus offer strategic alliances and ample opportunities for joint ventures to achieve economic development in the region.
The setup of vocational and technical training with the Chinese support is also imperative for the efficient human development of the labor working in SEZs. Along with the organized training institutes in Pakistan, it is proposed Chinese universities should also provide research and development department at the site location, for business development strategies. Finally, I am of view Pakistan can capitalize on China’s expertise in Artificial Intelligence (AI) and robotics to bring down operational costs. Such a measure would allow Pakistan to create a low cost advantage in comparison to traditionally manufactured goods. Therefore, the assistance from Chinese companies would be pivotal for the integration of innovative manufacturing machinery at the SEZs.
As mentioned earlier, the economic effect of such a venture would be the sizable decrease in Pakistan’s trade deficit as well as the creation of new skilled labor, which would in turn lower down the unemployment rates in Pakistan. Shazad Dada, Chief Executive Officer of the Standard Chartered Bank, said that the Chinese president’s strategic Belt and Road Initiative has promised 85 million new jobs and $2.5 trillion in additional international trade. This initiative has gained support from a total of 100 countries and international organizations along its route, and 80 of them have already signed an agreement with China. Currently, the total trade between China and other countries along the Belt and Road and Initiative exceeded $3 trillion between 2014 and 2016, and the trend is expected to continue in future. In order to maintain its growth momentum, around 8 trillion of investment in infrastructure is required. The careful execution of this initiative can ensure that the investment target is met and the future of Pakistan transformed in the decades to come.