Can SEZ Industrial Parks Help Pakistan Become an Export Powerhouse?
Asian Tigers built their strong economies by becoming export powerhouses. China has done so in more recent decades. How can Pakistan do the same? An answer to this question came this week from Karen Chen of China's Challenge Apparel. Here's what she said as reported by Dawn News:
“Chinese want to shift their business to a place where they can set up their operations in 3-6 months. You know when you go overseas to invest even in Africa they have industrial parks ready. You just go there and enjoy the ‘plug-and-play’ facility. No firm wants to waste two years in acquiring land and another couple of years in securing utilities to start operations. By the time you get utilities the opportunity is gone and you are already out of business. This is the biggest problem in Pakistan.”
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https://tribune.com.pk/story/2284513/43-chinese-firms-all-set-to-invest-in-gwadar-sez-cophc
Talking to The Express Tribune, the chairman said that besides infrastructure and energy projects, various industries, including textiles, chemicals, automobiles and mobiles, would be set up in the Gwadar industrial zone, which will create more employment opportunities.
Baozhong rejected the reports circulating in the media about hindrances in the multibillion-dollar project, saying that work on CPEC is going on in full swing and there are no impediments as the “government of Pakistan is extending full cooperation”.
“Despite the coronavirus pandemic, the pace of work has not slowed down and many CPEC projects have been completed ahead of time,” Baozhong said, adding that after the completion of CPEC, Gwadar will become the largest port in the region and an important economic hub in the world, which would benefit various countries.
“The Gwadar Port is fully operational and cargo ships have started arriving,” he said, announcing that a liquefied natural gas terminal will also be established at the port.
“CPEC is a great economic project,” he said. “It is a symbol of the cohesive relationship between
Pakistan and China and a testament to our friendship.”
Donning the national dress of Pakistan, he chanted the slogan "long live Pak-China friendship".
On the attire, he said, "I like shalwar kameez as my heart beats for Pakistan."
Meanwhile, Gwadar Development Authority Director General Shahzeb Khan Kakar told The Express
Tribune that under the 2050 Master Plan, the issues of water and electricity for the “150,000 people” of Gwadar would be resolved by the end of next year (2022). However, the people of the port city claim that their population is over 300,000.
“Work is in full swing on a desalination plant, which will convert five million gallons of seawater into drinking water and a 300 megawatts coal-fired power plant,” Kakar said. “Both the projects will be functional by January 2023.”
He also announced projects worth Rs20 billion for the uplift of the people of Gwadar.
“Efforts are afoot to turn Gwadar into a tax-free economic zone and a port city,” he said, adding that a one-window system is also being introduced to facilitate investors.
He shared that they were inviting the business community to establish industries in Gwadar for the generation of revenue. “A 250-km road network has been laid in Gwadar,” Kakar said, adding that an industrial zone in Gwadar would comprise three divisions. “An education city and a diplomatic zone will also be established in the port city.”
Further, Balochistan Department of Industry and Commerce Additional Secretary Manzoor Hussain said that the provincial government has formulated rules for allotment of land in industrial zones in the province. “Land will now be allotted in industrial zones only to those industrialists who will set them up within the stipulated timeframe,” Hussain said, adding that work on development projects in Gwadar was under way under CPEC.
On the development of the port city, Gwadar Industrial Estate Development Authority Managing Director Attaullah Jogezai said that the provincial government will soon allocate 20,000 acres of land for the special economic zone.
Gwadar Club Chairman Brigadier (retd) Asif Mehmood said, “Special security arrangements have been made in and around Gwadar, which has led to peace in Balochistan.”
https://www.bloomberg.com/news/articles/2021-02-23/maple-leaf-cement-mulls-expansion-as-pakistan-demand-revives
Maple Leaf Cement Factory Ltd., a Pakistani maker of the construction material, is considering boosting capacity by almost a third to tap demand as the economy recovers, people with knowledge of the matter said.
The Lahore-based company plans to increase its capacity by about 7,000 tons a day at its current facility, the people said, asking not to be identified citing a private matter. The proposal is in final stages and the company is discussing the plan with banks and machinery suppliers, the people said.
Prime Minister Imran Khan’s move to offer tax cheats amnesty for investing in building homes has spurred a construction boom and is helping revive economic growth. Local sales for the building material is expected to rise 17% in the year ending June, the most in five years, according to Insight Securities Pvt.
Read more: Tax Cheats Get Free Pass If They Invest in Pakistan Housing
The company’s shares rose 1.2% at 1:30 p.m. in Karachi after jumping as much as 2.3%. The stock has almost doubled in the past year compared with 14% gain in the nation’s benchmark KSE-100 Index.
The South Asian nation is witnessing a wave of expansions in the cement industry with Lucky Cement Ltd., Kohat Cement Co. and Fauji Cement Co. deciding to increase capacity, while D.G. Khan Cement Co. is expected to take a final decision by the end of this month.
Maple Leaf will use internal funds to finance the expansion and won’t sell additional shares, one of the people said. The company did not respond to a request for comment.
With cement, fuel and car sales rising to levels before the pandemic, Khan’s government is targeting a growth of 2.1% in the current financial year, after the first contraction in 68 years in the year ended June.
https://nation.com.pk/03-Apr-2021/chinese-company-to-carry-out-marketing-for-rashakai-sez
The China Road and Bridge Corporation (CRBC) would carry out the marketing campaign for the Rashakai Special Economic Zone under China Pakistan Economic Corridor (CPEC) expressing interest to work with the Board of Investment in this regard.
In a meeting with Minister for Planning Development and Special Initiatives Asad Umar here on Friday, the CRBC Vice President Sun Yaoguo along with a delegation said that external marketing of the SEZ to local and foreign investors was crucial for its full operationalization.
The meeting reviewed the Rashakai Special Economic Zone (SEZ) and CRBC’s mega-project Karachi Coastal Comprehensive Development Zone. The vice president of CRBC stated that the development work of Rashakai SEZ was being carried out at a fast pace and to that end the necessary resources had already been mobilized.
He assured the minister that the timelines for the projects would be strictly observed. The minister said that the industrial cooperation was the need of CPEC and the government was keen to see early completion of the project and the ministry of energy had already expedited the work on supply of electricity and gas to the SEZ.
He said that BOI would fully cooperate with CRBC for effective marketing of the SEZ. Asad Umar said that it was the first time in Pakistan that the foreign developer would be marketing an Industrial zone. He hoped that CRBC would be able to attract substantial investment in the SEZ from Chinese investors.
During the meeting Mr. Sun also briefed about CRBC’s mega project Karachi Costal Comprehensive Development Zone in collaboration with the Ministry of Maritime Affairs and the government of Sindh.
He said that the project would add substantially to the city’s economy landscape and would be generating employment opportunity for a very large number of populations of the city.
The minister said that the Karachi Costal Development Project was an important project and the federal cabinet had approved the signing of a Memorandum of Understanding (MoU).
It will give a boost to the business and technology sectors and provide employment opportunities to the people.
KATHARINE ADENEY, FILIPPO BONI
https://carnegieendowment.org/2021/05/24/how-china-and-pakistan-negotiate-pub-84592
The development of Gwadar was as much of a priority for Pakistan as it was for China. Although China’s strategic calculations are often emphasized, the port of Gwadar was a Pakistani-initiated proposal in the early 2000s that was only later rebranded as a BRI project after 2013. All Pakistani governments over the past twenty years, both military- and civilian-led, have encouraged China’s involvement in Gwadar, while Beijing in turn sees the port as a strategic access point to the Indian Ocean.
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The CPEC’s chosen route was affected by partisan Pakistani politics. The decisionmaking behind the corridor’s geographic route was an early indication that Pakistan’s preferences have been key in shaping how the CPEC has unfolded on the ground. In particular, the choice to prioritize projects in Sindh and Punjab stemmed from then prime minister Nawaz Sharif and his party’s desire to obtain medium-term electoral gains, alongside China’s interests in developing projects in Pakistan’s more economically developed provinces.
Despite its initial suspicions of the CPEC, the Pakistan Tehreek-e-Insaf (PTI) has been as partisan in its use of the CPEC as its predecessor was. Since taking office in 2018, the PTI’s focus on socioeconomic projects has not deviated markedly from the Pakistani government’s previously formulated plans for the CPEC. But its choice of the Rashakai special economic zone (SEZ) in Khyber Pakhtunkhwa, over others rated more favorably in feasibility studies (and despite a strong Chinese preference for an alternative location), undermines the narrative that China is always the one distorting market forces with ill-suited BRI projects.
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Energy projects were initially prioritized by Pakistan’s choice. The majority of first-phase CPEC investments went to energy projects, most notably coal power plants. This preference for coal was part of Pakistan’s desire to diversify the composition of its energy markets. This goal was also in line with Sharif’s and his party’s preference for energy projects to end the country’s electricity shortages in order to secure a 2018 reelection bid.
The challenges facing SEZs. Despite China’s and Islamabad’s agreement to focus on and prioritize a few SEZs and China’s desire to relocate some industries to lower-cost production areas, the development of SEZs has been slow. This has been the result of a cumbersome bureaucratic structure and the politicization of these projects.
Rhetoric on the CPEC has often failed to match reality. The lofty language on the CPEC has generally failed to measure up to the realities on the ground when it comes to delivering for the people of Pakistan. Many projects aimed at winning Pakistani hearts and minds have been included in the CPEC, but these have often not materialized or have been delayed.
https://www.globaltimes.cn/page/202105/1224954.shtml
On the whole, weak foundation, and small scale are major problems holding back speed of Pakistan's industrial development. Industries such as cement and automobile manufacturing have long been overly protected, some analysts say.
Secondly, Pakistan's economic development relies heavily on external markets, but the dominant export industry, the textile industry, does not have outstanding advantages.
Thirdly, Pakistan has low domestic savings rates and low domestic investment rates. The Pakistani government attaches great importance to attracting and utilizing foreign investment, but the level of foreign investment in Pakistan is significantly affected by the regional and domestic security situations.
Fourth, low fiscal revenues and heavy external debt burdens have been major problems in Pakistan's economic development, limiting the government's ability to invest. The heavy debt burden has limited the government's ability to invest in public sectors.
Since the COVID-19 outbreak, the significance of the construction of the CPEC has become a key highlight for the country's economic development. The construction of the CPEC will play a supporting role in Pakistan's economic recovery in the post-pandemic era. Pakistan should seize the opportunity to formulate scientific development plans to advance domestic industries with competitive advantages.
Speaking of China-Pakistan industrial cooperation, agriculture is the sector that could help Pakistan consolidate its industrial advantages and industrial chain, and help the country quickly gain foreign exchange earnings through exports. At the same time, China should open its market to Pakistani agricultural products and fruits, and expand imports of Pakistani agricultural and industrial products.
The textile industry is a traditionally strong industry in Pakistan. When China's textile industry is shifting outward due to labor price rises, Pakistan should seize the opportunity to use the advantages accumulated by China's textile industry to upgrade its own industry and accept orders from aboard. In addition, the Indian textile industry has largely come to standstill due to the latest resurgence of the pandemic, and a large number of global orders have been transferred to other markets, including China.
Pakistan should seize the opportunity of global value chain and industrial chain restructuring to develop its emerging industries.
For example, since 2020, affected by India's increasingly hostile attitude towards Chinese companies, many Chinese mobile phone brands in India have begun to move their factories to countries like Vietnam, the Philippines, and Indonesia. This is also an opportunity for Pakistan.
A $1.7bn electricity transmission line on the China–Pakistan Economic Corridor (CPEC), which was begun in December 2018, was inaugurated in a ceremony held in Islamabad and Beijing at the end of last month.
The 660kV Matiari–Lahore high-voltage direct current line will provide Pakistan’s national grid with a new backbone and improve chronic problems with the country’s energy transmission and distribution grids.
The 878km line was financed and built by the State Grid Corporation of China, which will operate it for the next 25 years.
More than 1,300 Chinese and 6,500 Pakistani workers were employed on the scheme.
Hammad Azhar, Pakistan’s energy minister, said the project would bring stability to the country’s power system. Speaking at the online ceremony, he said the project would “enhance transmission capability and bring relief to consumers”.
Electricity generation in Pakistan has increased dramatically in recent years, thanks to the large-scale construction of mainly coal-fired plants funded by China.
As a result the country has an installed capacity of around 37GW and peak demand of only 25GW, although this is growing at a rate of about 5% a year. However the grid is able to handle only 22GW of power, resulting in chronic blackouts and load shedding, particularly in the summer when demand is highest.
However, problems occur in winter as well. In January of this year, the entire country suffered a blackout after a fault at a power station in southeast Sindh province caused the grid to lose its 50Hz frequency, which caused power stations throughout the country to close down.
This makes the reinforcement of the grid, arguably, the single most important infrastructure scheme for the country’s socio-economic development.
Zhang Jianhua, head of China’s National Energy Administration, told those present at the ceremony that the Matiari-Lahore line was the first large-scale transmission project of the CPEC, and would provide “solid assurance” for power transmission in the south and power supply in the north.
Speaking about the economic corridor in general, Azhar added: “The CPEC is of utmost importance for Pakistan. It will enable the country to enhance industrial production, upgrade energy and communication infrastructure and improve connectivity within the region.”
Of Pakistan’s 207 million people, roughly 58 million lacked access to grid electricity in 2018, including 46% of the rural population.