The recently-established industrial estates operated by the National Industrial Parks, which are under the Ministry of Industry, remain unpopulated for a number of valid reasons. This needs to be identified and addressed. The federal government has planned to establish 29 Special Economic Zones under CPEC all over the country.
Pakistan's economic planners are of the opinion that the Special Economic Zones may prove to be a turning point for the industrial sector of the country, as economic zones have played a key role in industrial development in many Asian economies. The State Bank, which periodically presents its analyses on the economy, has its own opinion on the subject. "Despite continued uncertainty in the global economy and subdued external demand, improved industrial growth in Pakistan may gain further momentum going forward due to investments under CPEC," according to the State Bank.
In its annual report for Fiscal Year 2015-16 (FY16), the State Bank said Pakistan has lagged behind even its South Asian peers in exploring the option of the Special Economic Zones to attract foreign direct investment, promotion of industrialisation and economic growth. For this purpose, the federal government has asked the provinces to identify locations for these zones in their territories. The State Bank has projected that once implemented, these SEZs could enhance the country's productive capacity, expand its exports base and provide a major impetus for economic and social development through their backward and forward linkages with the rest of the domestic economy.
The State Bank stated that many developing countries, especially those in East Asia, used this framework as a policy tool to promote industrialisation and economic growth. Pakistan has also adopted this strategy by creating various industrial estates and export processing zones. A review of the country's experiences shows, however, that not every economic zone has been successful in meeting its objectives. While the most successful zones are found in East Asia and Latin America, the majority of African zones could not replicate this success, despite technical assistance and funding from donors.
Economic zones in Pakistan "also remained largely ineffective in boosting industrial growth, investments, and exports. In this backdrop, the renewed emphasis on this strategy under CPEC is a welcome development, as this would allow Pakistan to learn from the successful experience of China."
The observations of the State Bank need careful analysis and conclusions drawn to move on with the planned 29 Special Economic Zones. Punjab, Khyber Pakhtunkhwa and Sindh have identified 24 potential sites for investing billions of dollars to establish the Special Economic Zones while Balochistan has the Gwadar Port, the Container Terminal and the Special Economic Zone being developed by the Chinese at Gwadar under a long-term agreement. This is the fastest moving initiative under the CPEC and the population of the area has already started to gain benefits from these developments.
China has committed to Pakistan that it will develop Gwadar Port and the SEZs on a fast track so that by end 2017 they showcase it as a model for other such initiatives. "First do your homework and establish the right kind of linkages before moving ahead towards the SEZs," China has advised the Pakistanis.
Over the next two and three years, Pakistan and China will have to finalise the proposed sites for the SEZs, ensure infrastructure such as provision of electricity and gas for the SEZs and provide an enabling environment for the private sectors of the two countries to establish the right kind of linkages for making this initiative a success story.
Khyber Pakhtunkhwa, which bore the brunt of the campaign of terrorism, is trying hard to catch up with the rest of the country. KP's newly-established Economic Zone Development and Management Company has embarked on the establishment of Special Economic Zones at Hattar, Mansehra, Nowshera and Dera Ismail Khan, setting up carpet weaving centres, establishment of trucking stations and repair/maintenance parking in Havelian, establishment of dry ports at Havelian, Abbottabad and establishment of light engineering manufacturing units.
The provincial government estimates that there will be an impact of investment to the tune of Rs 300 billion over a five-year period and it will generate over 30,000 jobs. The Punjab government is on its way to developing seven industrial zones to be made available for investors. These are the Quaid-e-Azam Apparel Park at Sheikhupura, the Rahimyar Khan Industrial Park, the Bhalwal Industrial Estate, the Vehari Industrial Estate, the Chunian Industrial Estate, the Bahawalpur Industrial Estate and the M3 Industrial Park in Faisalabad. Punjab's main focus under CPEC is on power plants and infrastructure projects such as the Orange Line for mass transportation in Lahore.
The Sindh government sees the potential locations for the SEZs alongside CPEC in Sindh, including the Marble City Project and Pakistan Textile City in Karachi, the Chinese Special Economic Zone in Thatta, Larkana, Ratodero, Jacobabad and Nawabshah. Its main focus, however, is the Thar Coal Mining and Power Project and infrastructure projects such as the Karachi Circular Railways.
The SEZ Act, 2012, provides the governing structure, which allows both federal and provincial governments to set up economic zones under various administrative frameworks. Specifically, a Special Economic Zone can be led entirely by the government, or it can work in collaboration with the private sector (under different modes of public-private partnership), or even operate exclusively through the private sector.
The State Bank said it is important that both regulatory and administrative bodies have necessary powers, autonomy and available funding. Often weak administrative bodies established to develop, operate and regulate zones result in lacklustre performance by SEZs.
The setting up of economic zones is a good way to facilitate the growth of SMEs, to invite local and foreign investments, to enhance employment opportunities and revenue generation for the state - all of which looks good. But the challenge is to do it right and fast.
The Chinese are faster in doing their part of the CPEC. They are well on their way to developing the Gwadar port and the container terminal and the economic zone in the vicinity of the port area. So are they faster in developing the textile city around Sheikhupura where they intend to transfer textile production from China to Pakistan, much to the discomfort of Pakistan's Textile Industry. They are building a six-lane motorway for its connectivity to Lahore. Pakistan needs to catch up and catch up fast lest it loses out and concede more of its share to China at the expense of Pakistan's strategic interests.
(The writer is former President Oversees Investors Chamber of Commerce & Industry)
Copyright Business Recorder, 2017