Can SEZ Industrial Parks Help Pakistan Become an Export Powerhouse?

[Riaz Haq]

Asian Tigers built their strong economies by becoming export powerhouses. China has done so in more recent decades.  How can Pakistan do the same? An answer to this question came this week from Karen Chen of China's Challenge Apparel. Here's what she said as reported by Dawn News:

“Chinese want to shift their business to a place where they can set up their operations in 3-6 months. You know when you go overseas to invest even in Africa they have industrial parks ready. You just go there and enjoy the ‘plug-and-play’ facility. No firm wants to waste two years in acquiring land and another couple of years in securing utilities to start operations. By the time you get utilities the opportunity is gone and you are already out of business. This is the biggest problem in Pakistan.”

Pakistan Industrial Development Corporation Building in Karachi

Pakistan was the original "Asian Tiger" back in the 1960s when other developing Asian economies sought to emulate Pakistan. It became an export powerhouse in the 1960s when the country's manufactured exports exceeded those of Thailand, Malaysia and Indonesia combined.  The creation of major industrial estates in Karachi under President Ayub Khan's industrial policy incentivized industrial production and exports of value added manufactured products such as textiles. Now the country's industrial output lags its neighbors'. 

History of Pakistan's Manufactured Exports

With Chinese looking to relocate some of their industrial production to low-cost countries, Pakistan has a golden opportunity to grow its industrial output and exports again. Here's Karen Chen explaining why:

“Vietnam is too crowded already and moved into automobiles and electronics. There is no space for investment in Vietnam. Myanmar doesn’t have infrastructure. India is terrible. In Bangladesh you don’t have right conditions for setting up fabric units. So Pakistan is the ideal location for such garment manufacturing because of abundance of cheaper labour. The investment and tax policies for SEZs and new projects are also good. We’ve confidence to be at here.”

Seizing the opportunity to attract export-oriented investors will help Pakistan avoid recurring balance-of-payments crises that have forced the nation to seek IMF bailouts with all their tough conditions. Focusing on "Plug and Play" Special Economic Zones (SEZs) is going to be essential to achieve this objective.

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[Riaz Haq]

Zhang Baozhong, the chairman of China Overseas Ports Holding Company – the firm that operates Gwadar Port – has said that the first phase of the special economic zone under the China-Pakistan Economic Corridor has been completed in which 43 Chinese companies are going to invest while 200 more firms have been registered for the purpose.

https://tribune.com.pk/story/2284513/43-chinese-firms-all-set-to-in...

Talking to The Express Tribune, the chairman said that besides infrastructure and energy projects, various industries, including textiles, chemicals, automobiles and mobiles, would be set up in the Gwadar industrial zone, which will create more employment opportunities.

Baozhong rejected the reports circulating in the media about hindrances in the multibillion-dollar project, saying that work on CPEC is going on in full swing and there are no impediments as the “government of Pakistan is extending full cooperation”.

“Despite the coronavirus pandemic, the pace of work has not slowed down and many CPEC projects have been completed ahead of time,” Baozhong said, adding that after the completion of CPEC, Gwadar will become the largest port in the region and an important economic hub in the world, which would benefit various countries.

“The Gwadar Port is fully operational and cargo ships have started arriving,” he said, announcing that a liquefied natural gas terminal will also be established at the port.

“CPEC is a great economic project,” he said. “It is a symbol of the cohesive relationship between

Pakistan and China and a testament to our friendship.”

Donning the national dress of Pakistan, he chanted the slogan "long live Pak-China friendship".

On the attire, he said, "I like shalwar kameez as my heart beats for Pakistan."
Meanwhile, Gwadar Development Authority Director General Shahzeb Khan Kakar told The Express

Tribune that under the 2050 Master Plan, the issues of water and electricity for the “150,000 people” of Gwadar would be resolved by the end of next year (2022). However, the people of the port city claim that their population is over 300,000.

“Work is in full swing on a desalination plant, which will convert five million gallons of seawater into drinking water and a 300 megawatts coal-fired power plant,” Kakar said. “Both the projects will be functional by January 2023.”

He also announced projects worth Rs20 billion for the uplift of the people of Gwadar.
“Efforts are afoot to turn Gwadar into a tax-free economic zone and a port city,” he said, adding that a one-window system is also being introduced to facilitate investors.

He shared that they were inviting the business community to establish industries in Gwadar for the generation of revenue. “A 250-km road network has been laid in Gwadar,” Kakar said, adding that an industrial zone in Gwadar would comprise three divisions. “An education city and a diplomatic zone will also be established in the port city.”

Further, Balochistan Department of Industry and Commerce Additional Secretary Manzoor Hussain said that the provincial government has formulated rules for allotment of land in industrial zones in the province. “Land will now be allotted in industrial zones only to those industrialists who will set them up within the stipulated timeframe,” Hussain said, adding that work on development projects in Gwadar was under way under CPEC.

On the development of the port city, Gwadar Industrial Estate Development Authority Managing Director Attaullah Jogezai said that the provincial government will soon allocate 20,000 acres of land for the special economic zone.

Gwadar Club Chairman Brigadier (retd) Asif Mehmood said, “Special security arrangements have been made in and around Gwadar, which has led to peace in Balochistan.”

[Riaz Haq]

Chinese company to carry out marketing for Rashakai SEZ

https://nation.com.pk/03-Apr-2021/chinese-company-to-carry-out-mark...


The China Road and Bridge Corporation (CRBC) would carry out the marketing campaign for the Rashakai Special Economic Zone under China Pakistan Economic Corridor (CPEC) expressing interest to work with the Board of Investment in this regard.

In a meeting with Minister for Planning Development and Special Initiatives Asad Umar here on Friday, the CRBC Vice President Sun Yaoguo along with a delegation said that external marketing of the SEZ to local and foreign investors was crucial for its full operationalization.

The meeting reviewed the Rashakai Special Economic Zone (SEZ) and CRBC’s mega-project Karachi Coastal Comprehensive Development Zone. The vice president of CRBC stated that the development work of Rashakai SEZ was being carried out at a fast pace and to that end the necessary resources had already been mobilized.

He assured the minister that the timelines for the projects would be strictly observed. The minister said that the industrial cooperation was the need of CPEC and the government was keen to see early completion of the project and the ministry of energy had already expedited the work on supply of electricity and gas to the SEZ.


He said that BOI would fully cooperate with CRBC for effective marketing of the SEZ. Asad Umar said that it was the first time in Pakistan that the foreign developer would be marketing an Industrial zone. He hoped that CRBC would be able to attract substantial investment in the SEZ from Chinese investors.

During the meeting Mr. Sun also briefed about CRBC’s mega project Karachi Costal Comprehensive Development Zone in collaboration with the Ministry of Maritime Affairs and the government of Sindh.

He said that the project would add substantially to the city’s economy landscape and would be generating employment opportunity for a very large number of populations of the city.

The minister said that the Karachi Costal Development Project was an important project and the federal cabinet had approved the signing of a Memorandum of Understanding (MoU).

It will give a boost to the business and technology sectors and provide employment opportunities to the people.

[Riaz Haq]

How China and Pakistan Negotiate
KATHARINE ADENEY, FILIPPO BONI

https://carnegieendowment.org/2021/05/24/how-china-and-pakistan-neg...

The development of Gwadar was as much of a priority for Pakistan as it was for China. Although China’s strategic calculations are often emphasized, the port of Gwadar was a Pakistani-initiated proposal in the early 2000s that was only later rebranded as a BRI project after 2013. All Pakistani governments over the past twenty years, both military- and civilian-led, have encouraged China’s involvement in Gwadar, while Beijing in turn sees the port as a strategic access point to the Indian Ocean.

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The CPEC’s chosen route was affected by partisan Pakistani politics. The decisionmaking behind the corridor’s geographic route was an early indication that Pakistan’s preferences have been key in shaping how the CPEC has unfolded on the ground. In particular, the choice to prioritize projects in Sindh and Punjab stemmed from then prime minister Nawaz Sharif and his party’s desire to obtain medium-term electoral gains, alongside China’s interests in developing projects in Pakistan’s more economically developed provinces.
Despite its initial suspicions of the CPEC, the Pakistan Tehreek-e-Insaf (PTI) has been as partisan in its use of the CPEC as its predecessor was. Since taking office in 2018, the PTI’s focus on socioeconomic projects has not deviated markedly from the Pakistani government’s previously formulated plans for the CPEC. But its choice of the Rashakai special economic zone (SEZ) in Khyber Pakhtunkhwa, over others rated more favorably in feasibility studies (and despite a strong Chinese preference for an alternative location), undermines the narrative that China is always the one distorting market forces with ill-suited BRI projects.

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Energy projects were initially prioritized by Pakistan’s choice. The majority of first-phase CPEC investments went to energy projects, most notably coal power plants. This preference for coal was part of Pakistan’s desire to diversify the composition of its energy markets. This goal was also in line with Sharif’s and his party’s preference for energy projects to end the country’s electricity shortages in order to secure a 2018 reelection bid.
The challenges facing SEZs. Despite China’s and Islamabad’s agreement to focus on and prioritize a few SEZs and China’s desire to relocate some industries to lower-cost production areas, the development of SEZs has been slow. This has been the result of a cumbersome bureaucratic structure and the politicization of these projects.
Rhetoric on the CPEC has often failed to match reality. The lofty language on the CPEC has generally failed to measure up to the realities on the ground when it comes to delivering for the people of Pakistan. Many projects aimed at winning Pakistani hearts and minds have been included in the CPEC, but these have often not materialized or have been delayed.

[Riaz Haq]

CPEC special economic zones to generate huge job opportunities in Pakistan: official

https://english.news.cn/20221215/e0172b03c8b5487d806730149fd7b5fb/c...

Four special economic zones (SEZs) being set up under the framework of the China-Pakistan Economic Corridor (CPEC) are likely to generate about 575,000 direct and over 1 million indirect jobs in Pakistan, a senior official said on Thursday.

The economic zones being established in the country's Khyber Pakhtunkhwa (KP), Punjab, Sindh and Balochistan provinces would bring about immense opportunities for Pakistani people in job and business sectors, Chairman of Special Economic Zones Authority S.M. Naveed said.

"We have conducted a study to assess job opportunities in four out of nine SEZs, including KP's Rashakai, Sindh's Dhabeji, Punjab's Allama Iqbal and Balochistan's Bostan, to find out potential jobs and industries in the SEZs," the official said, adding that the SEZs offer employment in different fields for which the local youth would be trained before the initiation of the industrial phase.

The trained and skilled labor and engineers would not only get good jobs in the economic zones but also enable Chinese and local companies to recruit skilled professionals from local areas, he added.

The potential industries being set up in the CPEC special economic zones include food processing, cooking oil, ceramics, gems and jewelry, marble, minerals, agriculture machinery, iron and steel, motorbike assembling, electrical appliances and automobiles.

Launched in 2013, CPEC is a corridor linking Pakistan's Gwadar Port with Kashgar in northwest China's Xinjiang Uygur Autonomous Region, which highlights energy, transport and industrial cooperation. ■

[Riaz Haq]

KP takes lead by completing first CPEC originated project

https://dailytimes.com.pk/1114618/kp-takes-lead-by-completing-first...

Khyber Pakhtunkhwa Economic Zones Development and Management Company (KP-EZDMC), a public sector company of the KP government, has taken the lead by completing the first phase of the China-Pakistan Economic Corridor (CPEC) flag-bearer Rashakai Special Economic Zone (SEZ), at District Nowshera.


Talking to APP here Sunday, the Chief Executive Officer (CEO) Javed Iqbal Khattak said that the completion of the first phase of the Rashakai SEZ comprising three phases and covering an area of 247 acres, was due in December 2023, but due to better teamwork and coordination with China Road and Bridge Company (CRBC,) it had been completed six months prior of its specified time period. The Rashakai SEZ is the first completed project initiated under CPEC in Pakistan. This marvelous performance shown by a public sector company of Khyber Pakhtunkhwa has given an edge to the province over other provinces of the country.

So far, an investment to the tone of Rs.85 billion has already been made in the zone and besides, Chinese several domestic big industrial groups are also investing in it, he said. The investors are going to set up units for manufacturing Active Pharmaceutical Ingredients (APIs) a raw material for the pharmaceutical industrial units while another investor has also shown interest in establishing a vaccine manufacturing unit in the zone while Pakistan Oxygen, a largest oxygen manufacturing unit has already invested in the Zone.

The current innovative management of company has initiated construction work on 9 new economic zones including two special economic zones of Hattar and Rashakai. 90 percent infrastructure development work at Hattar Special Economic Zone has been completed and now colonization is also in progress in the facility. During the current management, the total assets of the company by the end of the year 2022 have increased to Rs.15.8 billion as compared to Rs.13 billion in 2021.