Pakistan’s desire to improve its industrial base and develop its Special Economic Zones (SEZs) is all set to be materialized through the China Pak Economic Corridor (CPEC). Completion of the projects in CPEC will improve people’s livelihood, eradicate poverty, promote friendly China-Pakistan relations and cement economic ties. The Corridor is also a key to increasing cooperation to promote bilateral trading and investment, thus promoting economic growth of Pakistan and expanding people-to-people contacts and achieve win-win results for sustainable economic development.
Pakistan has been progressing steadily towards achieving the targets set in Pakistan Vision 2025. It is imperative to highlight that the Vision 2025 presents a comprehensive approach to addressing human and social development gaps with an emphasis on developing human and social capital to take full advantage of Pakistan’s youth bulge. Similarly, China’s National Plan 2030 which was released in September last year envisions a Sustainable Development with an ultimate goal of China’s modernization to have some 1.3 billion people living a well-off life. Therefore, a tested model needs reviewing by our own experts to enable the required economic growth for providing improved livelihood and create jobs for the growing population.
Since 1980s, SEZs have been used successfully by China to enable effectiveness, improve export-oriented production, and encourage wider economic reforms. The established economic/ trade zones in China have become an important element by which the Chinese government provides preferential policies to foster the development of technology and industry. When China decided to embark on the journey of development and prosperity, it learned from the experiences of its wealthy neighbors, and experimented with different zone models. Today, China has gathered quite a handful experience of not only developing but operating successful SEZs.
Understanding the development model and characteristics of China’s industrial parks and SEZs is a key while finalizing development strategy for the SEZs as they will play a crucial role in ensuring sustainability and job creation. Since their inception, SEZs in China have been most expedient platform for attracting foreign trade, through joint ventures developing technologies and management expertise, more job opportunities, accelerating the economic development in certain regions, which transformed the economic canvas of their sustainable development. The speed with which China has developed in past three decades is unprecedented and calls for in-depth study by our economists and business community. The past 30 years has seen the Chinese economic structure adjustment and the new model for the Chinese growth. The Economic structure was basically shifted towards a structured growth of the primary, secondary and tertiary industries.
The other factor being ensured is security, both on monitory and physical terms. Realizing the commonality in the desire to gain fast economic growth, many developing regional countries including Cambodia (growth 2017: 5.50%), Laos (growth 2017: 6.9%), and Vietnam (growth 2017: 6.4%) are following the Chinese model within their own characteristics.
In the last 4 years, a CPEC project has demonstrated that Pakistani human capital has the desire and the competence to undertake projects of huge dimensions. Resultantly, the capacity of our organizations like National Highway Authority, Frontier Works Organization and National Logistics Cell has grown to implement projects of massive scale with unprecedented speed. Therefore, the same model of collaboration and learning can be followed in the Industrial Cooperation.
In CPEC, the focus is now on the Industrial development phase and the benefits we can accrue from it. The Nine prioritized SEZs in CPEC are considered potential catalyst for socio-economic development. While preparation for the meeting of expert groups from both sides is well underway, no less important are the preparations by the Provincial Governments for offering a combination of world-class infrastructure and administrative procedures including a standardized SEZ authority established on modern lines to overcome bottleneck towards investment, administrative weaknesses and ineffective management in their respective zones.The Provincial authorities have been asked to complete their respective feasibilities by November 2017 so that case of the best prepared SEZs could be taken up in the forthcoming 7th JCC meeting.
Series of meetings have been held and comparative studies of incentives and trade preferences being offered for investors by potential competitors are being done. It is important that both China and Pakistan give full play to their own comparative advantages to strengthen Economic infrastructure and prevailing methods, extend the chain of industry, add value, and build a comprehensive trading system. In order to capitalize from the experience of China, Government of Pakistan has recently signed an MoU for a consultative study for Leveraging the SEZs with Centre for New Structural Economics (CNSE), Peking University. Renowned economist and former Chief Economist of the World Bank Prof. Justin Yifu Lin will be involved for the study. It may be argued that with Pakistan’s existing business models, established Western or Eastern management skills may not work here in totality without local adaptations, therefore to prepare a well thought economic development model through Industrial Cooperation comprehensive discussions and dialogue with internal and external stake holders are being undertaken.
During discussions with Chinese experts it was learnt that 85 Million jobs are being relocated especially in capital intensive primary industry which provides a chance for Pakistan to step up desire to attract Chinese and foreign investors through JVs and what will this offer to Pakistanis is left to any ones imagination. Another key objective of the industrial Development is to take “Made in Pakistan Products” to Chinese market and the study on leveraging Economic Zones will help identify steps to be taken at right time and in correct directions.
Similarly, the up-gradation of Board of Investment on modern is also being discussed at appropriate forums to provide impetus to the process of development and industrialization. The incentive package and the preferential policies for the overseas investors, outbound remittance of the profits and land use etc are all being carefully reviewed while ensuring that the corporate and individual activities in the special economic zones must stay in compliance with the local laws and regulations. It is a fact that the labor wages have been rapidly increasing in China. China’s upgrading to higher industries will leave space for many low-income developing countries to enter a labor-intensive (including textile, leather, etc.) industrialization development phase. Pakistan is one of only 11 countries to enjoy a bilateral Free Trade Agreement (FTA) with China. Since the Free Trade Agreement was enacted in 2007, FDI from China has grown from less than 15 million in 2007-2008 to an annual average of over $300 million from 2010-2015. These strong economic ties may help Pakistan to take advantage of their excellent relationship with China to capture a large share of these outgoing manufacturing jobs.
Therefore, Industrial development is a key area in CPEC portfolio. Nine Special Economic Zones (SEZs) are being planned to be established in all provinces and regions of Pakistan. These SEZs will cater to relocation of labor intensive industry from China to Pakistan and recreate millions of jobs across the country.
In SEZs, business opportunities will be equally available to all Pakistani businessmen, Chinese businessmen, enterprises, and foreign investors from other countries, either separately or in joint ventures in all sectors depending on nature of investment. In this regard, a holistic incentive package has recently been approved by Federal Cabinet which ensures broad based incentives for all investors. In SEZs, business opportunities will be equally available to all Pakistani businessmen, Chinese businessmen, enterprises, and foreign investors from other countries, either separately or in joint ventures in all sectors depending on nature of investment.
While efforts are in hand to ensure the capture of low hanging fruits resulting from Industrial cooperation between the two trusted friends, understanding of the modern cross cultural management expertise and focused skill based training is also imperative.