29 Special Economic Zones to be established under CPEC

Federal government is planning on establishing about 29 Special Economic Zones (SEZs) in all of the four provinces under China-Pakistan Economic Corridor.

SEZs will be capable of enhancing country’s economic capacity, expanding the exports and providing much-needed momentum to the country’s economy. They’ll prove to be a turning point in the industrial development and infrastructure also. Pakistan has always been lagging behind the other South Asian countries in utilizing the SEZs benefits.

What are SEZs?

The idea of SEZ first started in New York in 1937. As per SEZ Act of Pakistan,

“Special Economic Zone (SEZ) is a blanket term for various types of specialized zones with specific types of enterprises operating in a well-defined geographic area where certain economic activities are promoted by a set of policy measures that are not generally applicable to the rest of the country. Successful SEZs offer immediate access to high-quality infrastructure, uninterruptible power supply, clearly titled land, public facilities, and support services.

The fiscal benefits under the SEZ law include a one-time exemption from custom duties and taxes for all capital goods imported into Pakistan for the development, operations and maintenance of a SEZ (both for the developer as well as for the zone enterprise) and exemption from all taxes on income for a period of ten years.”

As per 18th Amendment, provinces can now independently formulate their investment and trade policies. SEZs will be a source of their collaboration in designing lucid policies.

The challenge to be faced by SEZs will be in selection of the area. Government should select remote locations so that other locations are not over crowded. They should design a unique incentive structure to attract potential investors. They should also provide residential facilities near economic zones.

Already established industries in Pakistan like textile, cement, household appliances, surgical equipment, mineral resources etc., will be the potential candidates for such SEZs.

This will be a huge step for Pakistan if properly implemented. Considering that China is also in the phase of upgrading its industrial base, CPEC may face some issues in obtaining the necessary material. The adequate coordination between two countries and the provincial and federal governments of Pakistan and designing an appropriate incentive structure are the necessary conditions for the success of SEZs under CPEC.