CPEC Special Economic Zones: A Strategy of Pakistan’s Economic Growth

Industrial development is considered one of the most reliable strategies to promote the long-run growth of an economy. Many countries have been adopting industrial development planning to improve their economic growth over the last few decades. The Asian Tigers can be a glaring example in this regard. In the pursuit of industrial development, one strategy is to specify areas for industrial development such as business parks, industrial estates, export procession zones, or special economic zones. For instance, since 2009, nearly 1750 Special Economic Zones (SEZs) have been established by China at provincial and state levels. According to estimates, SEZs have contributed about 22% of China’s national GDP, 46% of Foreign Direct Investment (FDI), and 60% of exports. Moreover, 30 million jobs have been generated by these SEZs in China. Pakistan has also endeavored to pursue this strategy for economic growth in the past but it could not generate desired results, but now under CPEC, it has unleashed its comprehensive plans to establish nine SEZs in various parts of the country. This time it seems that it will work for Pakistan’s dream of economic prosperity.   

A Special Economic Zone (SEZ) is a specific area of the land used to promote industrial growth in a country by providing more lenient economic and tax policies as compare to general economic policies in a country. The first modern-day zone was established in 1959 in Shannon, Ireland. Following its success, the model was replicated in various economies such as India, Singapore, Taiwan, and Iceland. The success of these zones in promoting exports and bring industrial transformation in developing countries led other developing countries to follow the same path. Soon the number of zones increased from 79 in 1975 to 845 in 1997, and by 2019 there were 5400 functioning SEZs in 147 economies of the world, and 500 were in the pipeline. Of these SEZs, many have been successful, such as in the Republic of Korea, Taiwan, China, Vietnam, Bangladesh, Mauritius, the Dominican Republic, and El Salvador, and have paved their way towards industrialization, economic development, and growth.

In Pakistan, seven SEZs were established between the period 1983–2005 to move its economy away from import substitution industrialization and to adopt the export-oriented approach. Unfortunately, however, the impact of these zones on the wider economy had been negligible owing to the lack of infrastructural facilities, structural deficiencies, and incompetent policies of the government. Now, under the China-Pakistan Economic Corridor (CPEC), nine new SEZs are proposed to be set up at different locations in Pakistan which include Rashakai Economic Zone, M-1 in Nowshera, Dhabeji Special Economic Zone in Thatta, Bostan Industrial Zone in Pishin, Allama Iqbal Industrial City in Faisalabad, ICT Model Industrial Zone in Islamabad, Industrial Park Pakistan Steel Mills Port Qasim in Karachi, Mirpur Industrial Zone in AJK, Mohmand Marble City in Mohmand Agency and Moqpondass SEZ in Gilgit-Baltistan.

Rashakai Special Economic Zone (REZ), which is located near M-1 Nowshera, is being established in Khyber Pakhtunkhwa (KP). The REZ, occupied area of 1000 acres of land, will be developed in three phases. As per Federal SEZA Regulations, 702 acres are designated for Industrial use. In the first phase, 159 acres will be developed. 279 acres in the second phase and 264 acres will be developed in the third phase. An area of 76 acres has been allocated for commercial use. The connected districts and easily available resources make this economic zone perfectly feasible for the industries in fruit and food processing/packaging and textile. The industrial clusters/sectors proposed/planned for the REZ include Garment and Textile Products, Home Building Materials, General Merchandise, Electronics, and Electrical Appliances, and Automobile and Mechanical Equipment.

Dhabeji Special Economic Zone (DSEZ) is going to be established in Thatta and the Government of Sindh has allocated an area of 1530 acres for this economic zone. The DSEZ will also be developed in three phases. Moreover, it is located at an advantageous location as it has easy access to Port Qasim which will save time and also inland transportation costs. DSEZ has the potential to transform into an Expatriate Enclave with modern infrastructure and a financial incentive package. Sindh Economic Zones Management Company (SEZMC), Government of Sindh, is the provincial agency to develop and manage Dhabeji SEZ. The industrial clusters/sectors proposed/planned for this SEZ include Steel-Foundries, Automotive and Auto parts, Chemical & Pharmaceuticals, Consumer Electronics Engineering, Textile & Garments, Warehousing, Building Material, and FMC.

Bostan, a special economic zone, will be established in Balochistan over an area of 1000 acres. This SEZ is located in the Pishin district which has geographical proximity to Quetta, Qila Saifullah, Ziarat, and Qila Abdullah. Moreover, the available means of connectivity make this economic zone feasible for business ventures. The industrial clusters/sectors proposed/planned for this SEZ include Fruit Processing, Agriculture machinery, Pharmaceutical, Motor Bikes Assembly, Chromite, Cooking Oil, Ceramic industries, Ice and Cold storage, Electric Appliance, and Halal Food Industry.

The largest Special Economic Zone, among the SEZs in Pakistan, is Allama Iqbal Industrial City (AIIC) as it is being established over an area of 3217 acres. It is adjacent to M-3 which makes its access easy to export facilities. It comprises a large number of projects including textile, pharmaceuticals, information technology, chemicals automotive, service complex, etc. Since November 2019, the construction of this economic zone has been started. Minimum 1-acre land is available for the investors. Moreover, Faisalabad Industrial Estate & Management Company (FIEDMC) is developing the body of AIIC. Many national and international companies have shown their interest to start a business within the premises of AIIC.

ICT Model Industrial Zone will be established over an area of 200-500 acres in Islamabad. The zone will have easy access to well-established infrastructure, logistics networks, and trade routes. The provision of utilities such as electricity, water, drainage, and communication systems will ensure successful businesses in this economic zone. The planned/proposed sectors for this economic zone include IT & related industries, Steel, Food Processing, Pharmaceutical & Chemicals, Printing and Packaging, and Light Manufacturing.

Industrial Park Pakistan Steel Mills Port Qasim will be established in Karachi over an area of 500 acres. Port Qasim has the largest oil terminal among other terminal facilities including container, liquid chemical, and multipurpose terminal making the business easier at that place along with the availability of basic utilities like portable water, power, gas, telecommunications, banking, and other facilities including transhipment and transit trade facilities with Afghanistan and Central Asian Republics. The proposed/planned sectors for this SEZ are Steel, Auto & allied, Foundry and Fabrication, Warehousing & Logistics, Pharma, Chemical, Printing and Packaging and Garments, etc.

Mirpur Industrial Zone will be spanning over 1078 acres in Mirpur, the district of Azad Jammu and Kashmir (AJK). Well-established infrastructure would make this economy a great success. Presently, the feasibility study of this economic zone is in progress. Mix industry is proposed at Mirpur Industrial Zone. Moreover, Mohmand Marble City (MMC) will be established in the Mohmand Agency of KP over an area of 350 acres. It is pertinent to mention that Mohmand Agency is adjacent to Bajaur Agency, Khyber Agency, and Charsadda which are naturally enriched with minerals such as Uranium, dimensional stones, granite, manganese ore, marble, coal, and limestone. Marble and other Mix industry are proposed industrial clusters.

Moqpondass SEZ Gilgit-Baltistan is among the nine proposed SEZs under CPEC, this economic zone is located in Gilgit-Baltistan (GB). The land for the construction of this SEZ has been allocated by the Government of GB. The region is rich in fruits and precious stones. The potential industries for this economic zone are marble and granite, iron ore processing, fruit processing, and value addition, steel industry, mineral processing and value addition, and leather industry. The success of the economic zone will not only benefit the economic growth of Pakistan but also bring economic prosperity for the people of the entire region.   

The government of Pakistan has announced incentives for Special Economic Zones which will enhance the Foreign Direct Investment (FDI) in the country. For instance, the SEZs will be exempted from all taxes on income for 5 years for developers and 10 years for enterprises. These special economic zones will significantly contribute to the socio-economic development of the country. The transfer of the latest technology in SEZs will also play a key role to boost the national economy. Moreover, these economic zones are likely to create over one million jobs in Pakistan.

The government of Pakistan has expedited its efforts to generate the desired results from the proposed special economic zones in the country. Recently, Federal Minister for Planning, Development, Reforms, and Special Initiatives Asad Umar has visited FIEDMC. During his visit, he has said that Allama Iqbal Industrial City will be completed on a war footing so that process of industrial development can be further accelerated. These special economic zones have the potential to change the fate of the crippling economy of Pakistan and consequently to improve the standards of living of the entire Pakistani population.


Newsletter SignUp