CPEC SEZs to act as catalyst for booming exports in Pakistan

Pakistan has been facing the issue of trade deficit over the last few decades with the situation getting worse over the last decade due to its reliance on imported goods.

According to the State Bank of Pakistan, Pakistan's exports during the FY2020 stood at 22,536 million U.S. dollars whereas its imports were 43,645 million U.S. dollars, indicating a sharp trade deficit due to the lack of export-oriented products made by the country.

To uplift the export sector of Pakistan, nine special economic zones (SEZs) have been identified under the China-Pakistan Economic Corridor (CPEC) where joint ventures from Pakistan, China and other foreign countries will be formed to enhance industrial production.

Pakistani experts and officials believe that the SEZs will play a great role in writing a new chapter of economic development of Pakistan because the government is offering a lot of incentives for the industries to be set up in the zones and a large number of investors are taking interest to invest in them, and more are expected in the future.

In a conversation with Xinhua, the country's Finance Minister Shaukat Tarin said that Pakistan's foreign direct investment (FDI) in the export sector has been almost zero and CPEC SEZs are one of the main focuses of the Pakistani government to uplift the export sector by attracting the FDI.

"Pakistan's exports are only 10 percent of our GDP, and we are taking measures to increase them to at least 40 percent, and in this regard, we are making plans and forming policies to tap the potential of CPEC SEZs," Tarin said.

He added that Prime Minister Imran Khan has held three meetings on CPEC in the last few days and the government wants to speed up the formation of the SEZs and in this regard, a coherent strategy is being formed to facilitate Chinese and other foreign investors to invest in Pakistan.

"China is currently outsourcing its industry to some foreign countries, our government also wants Chinese industries specially the textile and leather industry to be relocated to Pakistan, because we have the expertise, infrastructure and experience in this sector, and relocation of Chinese industrial units to our country will give a boom to our textile exports," Tarin told Xinhua.

He also hinted at some new incentives for SEZs which will be approved by the prime minister after more meetings on CPEC with officials, following which doing business in the SEZs will be much easier.

According to the latest legislation made in 2012 about CPEC SEZs, called the SEZ Act, the federal government has to provide utilities including gas and electricity to the SEZs whereas all other procedures including land requisition have to be done by the provincial government.

While work on some SEZs is still at their initial phase, it is at full pace in some others including the Rashakai SEZ of the country's northwest Khyber Pakhtunkhwa province and the Dhabejii SEZ in south Sindh province.

The Allama Iqbal Industrial City, an SEZ in Faisalabad district of Punjab province, is being quickly developed by the state-owned Faisalabad Industrial Estate Development and Management Company (FIEDMC), and it is likely to be among the first SEZs to start the industrialization process.

Talking to Xinhua, Mian Kashif Ashfaq, chairman of the FIEDMC, said that some 2,200 acres of land have been allocated for industrialization out of which about 820 acres have been sold to export-oriented and import substitution industries.

"The government is giving a lot of incentives to the industrialists investing in the SEZs including tax holiday for 10 years and duty waiver on plant and machinery among others, so it wants us to give land for construction mainly to the industries which will boost or support export sector of Pakistan," he said.

He said that many joint ventures and foreign investors have either bought the land or showed interest in investing in the SEZ, and in order to facilitate them, they have formed a team to help the investors complete formalities.

"We are having investors from different parts of the world, and we are also giving preference to Chinese investors for whom we have allocated 1,000 acres of land where they will set up their industry," he said.

The FIEDMC chairman said that the land to the investors will be given at a very lucrative price and unlike other SEZs of the world, the investors will be given ownership of the land rather than leasing the land to them. "The investor has to pay 15 percent of the money and the remaining has to be paid in four years, following which the industrialist will get ownership of the land."

According to CPEC Center of Excellence, a think-tank working under the country's ministry of planning, development and special initiative, the investment opportunities in the SEZ lie in the fields of light engineering, pharmaceutical, steel, food processing, chemical, marble, plastic and packing, gem and jewel, food beverages, cooking oil, ceramics, minerals, agriculture machinery, iron, motorbike assembling, electrical appliances and automobile and electronics.

Experts believe that the foreign investors will tap the potential of CPEC and China's Belt and Road Initiative (BRI) to find export markets for their products, besides catering to the local market of 220 million people.

Abdul Azeem Uqaili, Chief Executive Officer of Sindh Special Economic Zones Management Company, also expressed the same views in a conversation with Xinhua, adding that Pakistan is located at a strategic location of the BRI, which not only gives it a chance to connect to the outside world but also attracts foreign investment inside it.

"We in Dhabeji SEZ Sindh received a very good response and many bids are expected to be submitted from potential investors, we are looking for Chinese textile industries to relocate to Pakistan because we have all the experience and cheap labor force to run such industries in an efficient way."

He said that his country has now all the potential to start massive industrialization and the investors who invested in Pakistan now will be pioneers of many sectors of the industry in the country and may get huge benefits in the future.

"A few years ago we could not even think about setting up industry in Pakistan because we did not have enough electricity supply and we were facing an acute energy crisis, our roads were in a poor condition and our connectivity was weak, but the first phase of CPEC brought a revolution and enable Pakistan to be in a position to start industrialization process with adequate electricity, enhanced connectivity within the country and outside the borders."

Uqaili said that the local investors and people associated with the industry like himself are hopeful that CPEC, which enhances connectivity in Pakistan, will also enable it to tap on the potential of its strategic location by making the SEZs a success story.