China-Pakistan Economic Corridor (CPEC) has entered Phase II of its implementation. The infrastructural foundation for roads and highways has been completed to give land connectivity in the first phase. The next stage emphasises the importance of Special Economic Zones (SEZs) to be completed in the next few years. It is pertinent to dissect those SEZs which are being conceived under CPEC. AidData’s policy brief released on 22 March 2022 on CPEC makes it more relevant for local and national research groups to contemplate the significance of SEZs for CPEC as SEZs would be the vehicles that could bring a real economic boost to Pakistan.
Moreover, this web analysis will shed light on the concerns raised about the geographic suitability of SEZs in Pakistan under CPEC by AidData. Theoretically speaking, it is comparatively easy to conceive any plan like CPEC. But at the implementation stage on the ground, several factors may hinder the timetable or different projects get delayed, as we have seen because of the security conditions in Pakistan. The whole process of CPEC is progressing despite some individual events, so it is crucial to appreciate the entire process of CPEC development in Pakistan.
As mentioned at the start, SEZs are pivotal in this whole economic undertaking of CPEC. So first, it is important to know what is an SEZ. An SEZ is a part of a country subject to different economic rules than the rest of the country. The economic laws of SEZs are generally favourable to foreign direct investment (FDI) and attract it. Any investment made by a company or person in one state into commercial interests in another country is FDI. According to the UNCTAD’s World Investment Report issued in 2019, there are more than 5,400 SEZs in nearly 150 countries, up from 4,000 SEZs in 2015, indicating a 35% rise. While many countries have established SEZs, China has had the most success attracting foreign money through SEZs. Shenzhen, Zhuhai, and Shantou in Guangdong province, and Xiamen in Fujian province, established the first four special economic zones in China in 1979. The above discussion is helpful to understand the definition and catalytic role of SEZs in the economic growth of a country. Thus, SEZs are of paramount importance for Pakistan, particularly for CPEC.
Every provincial SEZ, including the Rashakai prioritised-SEZ (pSEZ) in KP, the Allama Iqbal Industrial City in Punjab, Bostan SEZ in Balochistan, and Dhabeji SEZ in Sindh has been approved by the Board of Approvals and is at various stages of development.
The establishment of nine SEZs in Pakistan, seven provincial and two federal, was agreed upon during the 6th meeting of the Pak-China Joint Cooperation Committee (JCC) on CPEC, which took place in Beijing, China. The nine SEZs would be established under the framework of the CPEC Industrial Complex (IC). Every provincial SEZ, including the Rashakai prioritised-SEZ (pSEZ) in KP, the Allama Iqbal Industrial City in Punjab, Bostan SEZ in Balochistan, and Dhabeji SEZ in Sindh has been approved by the Board of Approvals and is at various stages of development. To expedite the development of these SEZs, the federal government has secured the provision of utilities to the specified zero-point of these SEZs. As a result, Rs 4 billion has been allotted to the Federal PSDP for the fiscal year 2021.
Figure 1 – Source: Pakistan Economic Survey 2020-21
Pakistan has almost covered one decade of legislative evolution of SEZ since the passage of SEZ act of 2012, as shown in figure 1. The framework conceived in 2012 has laid the foundation for the protection and progress of SEZs in Pakistan. The current analysis focuses on the SEZ under CPEC, so it is relevant to contemplate feasibility and cost-benefit. The Rashkai SEZ is spread over 1000 acres, is 60 km to the east of Peshawar and 90 km to the west of Islamabad, and it is situated on the Motorway (M1) near the CPEC route. Rashakai is located 800 km south of Khunjerab Pass, 111.6 km from Torkham Border, and 39.6 km from Azakhel Dry Port, which provides it with a particular strategic advantage in serving the markets of KP, Punjab, Southwest China, Afghanistan, and Central Asia. It would facilitate the creation of a business-friendly climate to attract FDI and the relocation of high-tech industries from around the world and facilitate technology transfer. The Rashkai SEZ’s location would likely compound the neighbouring areas’ economic culture. As a result of the economic zone’s advantageous location and abundant resource pool, the following industrial clusters and sectors have the greatest potential for investment:
- Processing and Manufacturing
- Home Equipment
- House Building Materials
- Automobiles and automobile parts
- Agriculture and Horticulture
- Wholesale markets
By analysing the importance of SEZs worldwide and their contribution to a country’s economic growth in terms of FDI, it is opined that Pakistan is moving in the right direction, particularly with SEZs like Rashakai under CPEC. Pakistan has already entered Phase II of CPEC, which is appreciable for both countries. Notwithstanding the concerns raised by AidData, the overall impact of CPEC would likely kick off from Phase II onwards. By keeping the overall time period and scale of CPEC in mind, it is no wonder if some time delays or project delays take place on the way because it is a real-world infrastructural project.