27 Aug 2019
Pakistan Fast-Tracks Development of Nine SEZs in the BRI-Backed CPEC
Zones seen as essential for transforming Pakistan's industrial base, while also creating two million new high-salary jobs.
Pakistan has fast-tracked the development of nine of the Special Economic Zones (SEZs) in the China-Pakistan Economic Corridor (CPEC), one of the country's key Belt and Road Initiative (BRI) projects. With China now committed to an investment of up to US$62 billion in the CPEC, the Pakistan government is keen to bring the zones online as quickly as possible.
In line with this, Imran Khan, Pakistan's Prime Minister, last month made it clear that delivering the required gas, electricity and water connections to the SEZs, while also enhancing land connectivity, were now government priorities. In a move to streamline the process, he also appointed Zubair Gilani, Chairman of the country's Board of Investment, to act as the lead co-ordinator between federal and provincial government bodies.
Khan's intervention has been widely seen as a sign of just how important the SEZs are to Pakistan's future economic development. Indeed, their significance is twofold – firstly, they are set to play an essential role in upgrading the country's domestic industry base and, secondly, they are expected to provide some two million well-salaried jobs for local workers. Despite the apparent urgency, though, land-acquisition agreements are still to be finalised for many of the Zones, while the required infrastructure has yet to be installed at any of the sites.
Indeed, while all the sites are in various stages of development, few are anywhere near complete. In the case of the Rashakai SEZ, for instance, the Khyber Pakhtunkhwa Economic Zone Development Management Company and the China Road and Bridge Corporation (CRBC) came to an initial agreement with regard to funding and managing the project in November 2018. In July this year, the CRBC signed a Memorandum of Understanding with the Habib Bank (HBL), a Zurich-headquartered commercial lender, relating to financial collaboration on the project. Under the terms of the agreement, CRBC will focus on attracting international and domestic investors, while HBL will provide financial advisory services and assist in the overall fundraising process.
At a slightly more advanced stage is the China SEZ in the southern town of Dhabeji. Some 1,530 acres have been earmarked for the project by the Board of Revenue in Sindh, the town's home province, with a detailed feasibility study having been completed in April 2018. Yet more progress has been made in the case of the Allama Iqbal Industrial City Zone in Faisalabad, the country's third-largest city, with 80% of the required land having been acquired and a ground-breaking ceremony scheduled to take place within the next few weeks.
For ICT Model Industrial Zone in Islamabad, the country's capital, finding sufficient available public land is proving to be the major problem. According to the Capital Development Authority, the local planning body, not only are there very few suitable sites, but the project is also competing for space with the city's proposed National Science and Technology Park SEZ. In Karachi, some 1,400km to the south, however, an agreement has been reached, in principle, with Pakistan Steel Mills to repurpose some its land for industrial park use, although the precise terms and the required compensation are still under negotiation.
Slightly more progress has been made with regard to the Mirpus SEZ in Azad Kashmir, the semi-autonomous region some 140km east of the capital. About 178 acres of land have already been acquired for Phase I of the project, with agreement close on two further deals that will see 717 and 193 acres secured in line with projected Phase II requirements. Similarly, 350 acres have been acquired for the development of the Mohmand Marble City SEZ in the Federally Administered Tribal Areas (FATA) in the northwest of the country, while 250 acres have been acquired for the Moqpondass SEZ in Gilgit, a city in the far north. In the case of the two latter projects, the outcomes of government-commissioned feasibility studies are also being waited on.
Once the parks are approaching completion, the focus will switch to rapidly acquiring additional investors through a series of tax incentives and the promise of a very accommodating business environment. The latter is seen as particularly important given that Pakistan's ranking on the World Bank's Ease of Doing Business Index fell to 136 this year, a considerable drop from its number 60 position in 2006. The plans now in place should see the country return to the top 100, at least, within a few years, according to Gilani.
● The nine China-backed SEZs in the CPEC are the Rashakai Economic Zone in Nowshera (Khyber Pakhtunkhwa); the China Special Economic Zone, Dhabeji (Sindh); the Bostan Industrial Zone (Balochistan); Allama Iqbal Industrial City, Faisalabad (Punjab); the Islamabad Capital Territory (ICT) Model Industrial Zone, Islamabad; the Industrial Park on Pakistan Steel Mills Land at Port Qasim near Karachi (Sindh); the SEZ at Mirpur (AJK); Mohmand Marble City (formerly FATA); and the Moqpondass SEZ in Gilgit-Baltistan.
Geoff de Freitas, Special Correspondent, Islamabad