China’s SEZ Model Brings Economic Development to Pakistan
by Tahir Ali
ISLAMABAD, July 1(Gwadar Pro) – As Special Economic Zones (SEZs) have contributed significantly to China’s development, Pakistan, is adopting SEZs for its economic growth by attracting domestic and foreign investment.
SEZs are created, leveraging tax incentives to attract foreign investment that leads to technological advancement. Along with promoting value addition in exports, the SEZs also generate employment and encourage import substitution.
China’s experience in SEZs for advancing economic development has now become a model, which is adopted by many countries including Pakistan.
In a latest development, Chief Minister of Khyber Pakhtunkhwa Mahmood Khan on Wednesday performed the ground breaking of Pak Steel at Hattar Special Economic Zone. The company will “invest USD 50 million and to create 2000 jobs,” according to an official statement. Similarly, KP-Special Economic Zone Authority (KP-SEZA) on June 29 approved the establishment of Sole Enterprise SEZ by Premier Cement Limited (Sapphire Group of Companies) on 600 acres of land with an estimated investment of USD 185 million that will create 600 direct and 500 indirect jobs.
Shenzhen in China is a classical example of utilizing SEZ to promote industrial upgrading in advanced economies.
The Government of Pakistan adopted the concept of SEZ with the commencement of the Special Economic Zones Act 2012. From 2012-2015, the SEZs were placed outside the customs territory of Pakistan limiting their appeal for the investors that wanted to capitalize on the budding domestic consumer market. To make the SEZs investors friendly, in 2015, certain changes including bringing the zones within the customs territory of Pakistan were proposed. In 2016, seven SEZs were notified across Pakistan and thus the new era of economic development kick started.
Official documents show that until FY, there were only seven SEZs in Pakistan; However, with the advent of CPEC SEZs, the establishment of the zones across the country took up pace, showing investor confidence in the industrial regime.
According to the Economic Survey of Pakistan 2021, as of now, 22 SEZs have been approved, while the Board of Investment BOI (Box-IV) has notified 21 of them. These include, four SEZs, three Private SEZs (including two Sole Enterprise SEZs), and a Science and Technology Park that is being established by NUST in Islamabad.
During the 6th meeting of Pak-China Joint Cooperation Committee (JCC) on CPEC held in Beijing, China; establishment of nine SEZs in Pakistan, seven Provincial and two Federal, were agreed under the framework of CPEC Industrial Cooperation. All four provincial SEZs, namely, Rashakai SEZ in KP, Allama Iqbal Industrial City in Punjab, Bostan SEZ in Balochistan and Dhabeji SEZ in Sindh have been accorded approval by the Board of Approvals and are at various stages of development. In order to fast-track development of SEZs, the federal government has ensured provision of utilities to the designated zero-point of the SEZs and had allocated Rs. 4 billion in the Federal PSDP FY2021.
As of May 2021, the 21 notified SEZs together account for approx. 10,029.64 acres of industrial land out of which 5,220.62 acres (52%) have been allotted to investors for setting up of industry with planned investments of Rs 633.9 billion, 43.6% of this comprises FDI component (USD 1.73 billion). It is also significant to mention that under the SEZ Act 2012, a zone enterprise is obligated to start construction within six months and to get into commercial production/operations within 24 months of its approval, whereas title to land is to be transferred only after it has performed regular operations for six months. Unless otherwise extended, upon expiry of the 24 months or the period so extended, if a zone enterprise remains unable to fulfill its obligation the status is to be withdrawn, according to Pakistan Economic Survey 2021.