The first step towards the establishment of CPEC Special Economic Zones in Pakistan is the awarding of a concession to a Chinese state-owned developer for Rashakai. This agreement was signed last month and construction is expected to commence soon. This was originally scheduled to happen during a planned visit by the Chinese President to Pakistan. The zone is slated to be built next to the M1 Motorway. The Rashakai Economic Zone is expected to face competition from other SEZs in the Punjab region.
CPEC Special Economic Zones in Pakistan
Pakistan’s CPEC project plans to develop nine Special Economic Zones (SEZs), three in each of the three provinces. Of these, three are priority SEZs. The federal government will oversee the creation of these zones, approve the SEZ Act 2012, and provide utilities for them. The provincial governments will also be responsible for developing the zones.
The establishment of SEZs is a major part of Pakistan’s economic and political reforms. This is intended to promote industrialization, create jobs for Pakistanis, attract Foreign Direct Investment, and boost exports. However, the construction of SEZs in Pakistan is not without its challenges.
The SEZs should complement the local industries, not compete against them. This will ensure that the SEZs are sustainable. They should also focus on high-value added industries and link with local clusters to provide better job opportunities. In addition, they should offer full property rights protection to ensure long-term sustainability. They should also encourage Chinese firms to produce intermediate inputs that can be exported internationally. The finished products should also be exported primarily to international markets.
A major challenge facing SEZs in Pakistan is access to finance. Moreover, the SEZs lack adequate infrastructure facilities, which slows down the economic activity. The government must ensure a sufficient supply of electricity and gas. This will ensure that they are accessible for local and foreign investors.
It is essential that the federal and provincial governments cooperate with each other in order to build a successful SEZ. Imran Khan, the Prime Minister of Pakistan, has prioritized the delivery of gas connections to the SEZs and the enhancement of land connectivity. Imran Khan has also appointed Zubair Gilani as the lead co-ordinator of the project.
This project will reduce Chinese dependence on the South China Sea and the Sea of Malacca. It will also create an alternative route for energy from the Middle East. This will reduce shipping costs and transit times. The current sea-route to China is about 12,000 kilometres long. By contrast, Gwadar Port is about three-and-a-half-hours away from Xinjiang province.
CPEC is a joint venture between China and Pakistan. The aim of these special economic zones is to attract Chinese investors to invest in Pakistan’s infrastructure and energy projects. This initiative is a win-win situation for both nations. The investment in CPEC has been significant, and CPEC has the potential to bring a new era of industrialisation to the region.
Electricity shortages
Despite the many positives CPEC has to offer, the pace of its implementation is slow, and the country is facing serious electricity shortages. The government and policymakers need to revise their approach and speed up the project if they hope to gain maximum benefits from it.
Energy projects are responsible for two-thirds of CPEC funding, and nearly 40 percent of the planned generation capacity uses coal, a fuel that is associated with high public health costs. In addition to the energy-related challenges, Pakistan has largely failed to realize its promise of establishing a higher-value manufacturing hub. As a result, a large number of the planned SEZs remain empty and underutilized.
The government is currently working on adding more capacity to the grid to address the problem, but this will take time. One solution is to transition to cleaner energy sources. Wind generation is a growing source of electricity in Pakistan, and the country has enough potential to meet its entire electricity demand. Another solution to the problem is the China Pakistan Economic Corridor (CPEC) project, which will bring new investment from China in power generation and transmission facilities.
Meanwhile, the floods in Pakistan have been threatening Pakistan’s food security. They are endangering export revenues from agricultural products, which the government relies on for its foreign debt and energy import bills. With rising global oil and LNG prices, Pakistan has been faced with massive inflationary pressures, and flooding has only made things worse.
Meanwhile, the Chinese government has recently announced a deal with Pakistan to co-finance the $8.2 billion railway upgrade project in Balochistan. The Chinese government is providing the money for the project at a 1.6 percent interest rate. In addition to that, the Chinese government is providing funding to Pakistan’s Metro train and bus project. According to Business Recorder, the Chinese government has also provided financing for the Lahore Metro.
There are many issues surrounding Pakistan’s CPEC. The country is afflicted by insecurity and poor governance. In order to sustain economic growth and societal development, a stable, orderly government is essential. In addition, a stable government is essential for the success of CPEC as a joint venture between China and Pakistan. This joint venture must ensure the safety of its workforce, logistics, and infrastructure.
Coal power plants
The Chinese government has offered financing to help Pakistan build coal power plants. The incentives include high rates of return on equity and sovereign guarantees. Some of these incentives are available to all foreign investors, while others are reserved exclusively for Chinese companies. Coal power plants are an important component of CPEC’s energy mix.
The rapid pace of the construction of these projects indicates the government’s high priority of CPEC projects. While Pakistan has a large coal resource, most of its new generation capacity will be coal-based. Since Pakistan has sought to reduce the cost of electricity and conserve foreign exchange, officials have long considered coal to be the best option for building large generation capacity in a relatively short time frame.
The government has also encouraged the use of imported coal to fill the gap in power generation. But while the country has coal resources, most of them are far from population centers. To address the gap, the government has awarded generation and transmission licenses to these power plants. This has enabled these coal power plants to supply power to the national grid.
According to the National Electric Power Regulatory Authority, the coal power plants are expected to increase the country’s coal-fired generation capacity by as much as 20 percent. As of June 2017, Pakistan’s coal-fired capacity was 3 percent, but that is expected to increase to 20 percent by 2025.
While the government has held CPEC up as an example of BRI, it has not helped Pakistan’s environmental credentials. China is a signatory of the Paris Agreement and urged world leaders to stick to it, but the sale of coal power plants to Pakistan locks the country into a path of high carbon emissions.
China’s push to develop green energy in the CPEC Special Economic Zones coincided with the Pakistan government’s desire to increase the use of coal. In addition, China is also looking for new markets for its coal-fired power equipment. As a result, China is providing significant incentives to power companies in Pakistan. The Chinese power companies are eager to partner with Pakistan in its efforts to meet Sharif’s election promises and fast-track CPEC power projects.
Export Processing Zone Authority (EPZA)
In Pakistan, the Export Processing Zone Authority (EPZA) is an institution established to attract foreign investment and boost industrial production in the country. These SEZs allow foreign investors to set up undertakings and re-export products from the countries where they are manufacturing. They also allow foreign investors to establish joint ventures with Pakistani businesses.
For investors who are planning to establish their factories in Pakistan, the Export Processing Zone Authority (EPZA) acts as an intermediary between the investors and government agencies. The Authority processes applications for utilities within a factory and coordinates with different agencies to ensure a smooth process of building and operation. Moreover, factories in these zones must adhere to certain construction bye-laws that are applicable to the region. The investor may hire contractors for the project or make use of the services of contractors already working in the EPZA. Moreover, investors can also acquire VIP cards to facilitate hassle-free movement within the zone.
In Pakistan, there is a need to develop detailed SEZ policy in order to achieve the maximum impact from SEZs. Such a policy should guide the various industrial and federal policies that are relevant to the SEZs. Further, it must reconcile the SEZ policy with other instruments of investment policy in the country. For example, the SEZ policy must be consistent with budgetary measures and various federal and provincial industrial policies.
The Export Processing Zone Authority (EPZA) is a government venture with the main objective of accelerating industrialization in Pakistan and increasing export volume. It is a strategic investment vehicle that creates a favorable environment for ambitious export-oriented projects that attract foreign investment and new technology to the country. However, it is not a panacea and it will take time before the full benefits of the Export Processing Zone Authority are realized.
The SEZs are also important test labs for policy reforms. However, effective monitoring and evaluation frameworks are essential for SEZs to be successful. In developing economies, it is difficult to introduce wholesale reforms at once. As a result, SEZs serve as test beds for policy experiments, allowing the government to roll out successful reforms gradually to the rest of the country.
