Sunday, October 1, 2017

Pakistan’s quest for industrial revival under CPEC



Hassan Daud
THE integration of the global  economy has enveloped all ar eas of trade, service and movement of capital. Regional cooperation agreements have proliferated and strengthened in recent times to capture this change especially in the global economic landscape. While the region is still gearing up towards realizing the opportunities available through the China’s “One Belt and One Road” (OBOR), Pakistan has already embarked on a path of collaboration for developing infrastructure and enhancing industrial capacity under the ambit of China Pakistan Economic Corridor (CPEC).With the Early Harvest Projects entering implementation and delivery phases, the Industrial Cooperation between the two countries has been set as the key contributor to the phenomenon of the transformation of trade corridors into economic corridors, and framework of industrial development. This will enable Pakistan to formulate new industry clusters and take CPEC to the lesser developed regions of country. With better security, enhanced GDP growth (5.3% from a low of around 2% in 2008) and an improved image of a country bracing for Foreign Direct Investment (FDI), the environment is most feasible for launching the Industrial development phase of the CPEC.The planning of CPEC broadly covers certain targets with first up to Year 2020 set as “Period of Market Cultivation” wherein major bottlenecks to Pakistan’s economic and social development shall be addressed to boost the economic growth. The second target up to year 2025 is marked as “Period of expansion and development”. During this period, processing and manufacturing industries will be developed; significant improvement in the people’s livelihood, balanced regional economic development, and all the goals of Vision 2025 are aimed to be achieved. Third target is up to year 2030. It is termed “Period of Maturity”. In this period, the endogenous mechanism for sustainable economic growth will be in place and with that; the CPEC is destined to bring Pakistan at the pinnacle of leadership in the region. In order to achieve the set targets of shaping a new international logistics network in Pakistan and set up a robust industrial base and promote regional economic integration through stable trade growth, the Government is taking concrete measures to accrue maximum benefits from the Industrial Cooperation Phase of CPEC. It is a fact that as an important platform and component of industrial development, the industrial parks/Special Economic Zones (SEZs) will play an important role in the future progress of CPEC. China’s experience in development and success of Special Economic Zones and their robust industrial development serves a good example for us.The term “Special Economic Zones” was proposed by Deng Xiaoping who is rightly revered as the Principal Designer of China’s reform and opening-up policy. Through these SEZs, Deng by the end of 1970s was able to transform the dynamics of Chinese economic and social progress, giving impetus to modernization. Following that, the past 30 years has witnessed the Chinese economic structure adjustment and the new model of the Chinese economic growth.Today, China is home to world’s leading experts on SEZ planning and development. The China Pakistan industrial cooperation under CPEC provides us ample opportunities to strengthen our domestic economy and build a robust industrial base. Through collaboration and joint ventures, government is making determined efforts to use their experience and modify the same to suit our local environment; thereby developing a domestic model of industrial growth. Accordingly, the investment policy of government of Pakistan gives equal and non–discriminatory treatment to local and foreign investors. Nine prioritized SEZs are being established in approved areas along the Corridor for providing maximum benefits to the investors across the globe. Chinese experts have been invited to engage with stakeholders in Pakistan through workshops and direct interaction with business community. The government has approved broad based incentive package for both developers and already established enterprises which is over and above the incentive package laid down in 2012 SEZ Act.
The fiscal incentive package is for both developers and zone enterprises. It entails one time exemption from all custom duties, taxes and income taxes accruable in relation to the development and operation of the SEZ for a period of five years, starting from the date of signing of the Development Agreement. Similarly for zone enterprises, the new incentive package allows for one time exemption from custom duties and taxes on import of plant and machinery and exemption from all taxes on income for a period of ten years subject to the production date of the units.
The industrial growth has to be driven by the private sector in an open market environment that rewards efficiency, innovation and entrepreneurship. There is a requirement to give this phase the required impetus. The perceived Industrialization under CPEC will also compound the objectives enshrined in “Pakistan Vision 2025”, which aims to strengthen infrastructure construction, tap the demographic dividends, accumulate human and social capital, improve the level of industrialization and develop a competitive knowledge-based economy.
The ultimate objective of Industrial Cooperation between China and Pakistan is not merely the establishment of industrial parks, it is to develop and implement various initiative and projects required to help industrialize Pakistan. The investment in Pakistan through CPEC would strengthen our economy, enable energy security besides overcoming prevailing energy crisis, build-up Pakistan’s industrial capacity and link Pakistan’s rural and remote areas with urban centers for a harmonious rural-urban synergy. Hence, given successful integration of Pakistan’s markets and supply chains with that of China and region, investors can achieve a sustainable and inclusive yearly growth. This, however, is just an “opportunity”, and the “dividend” has to be earned.
—Mr. Hassan Daud is a Projects’ Management specialist and is a faculty member of Projects Management Dept. at various institutes/universities. He has also served as diplomat in China and Vietnam. He can be reached at

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