If one thing has become clear enough, it is that the success of the CPEC ultimately hinges upon Pakistan’s ability to position itself as a regional and global trading hub. This will require the country to promote industrialization in order to come up with the necessary manufacturing capability for trading purposes.
Even though the discussion on framing industrial policies and special economic zones should have kicked off a lot earlier, it is still not too late to get the act together. The Consortium for Development Policy Research (CDPR) held a policy talk on exploring options for local businesses to benefit from CPEC recently.
Gauging from Ghulam Dastagir’s (Chairman, KP Economic Zones Development & Management Company) presentation, the Khyber-Pakhtunkhwa (KP) government has been particularly active in making up for the lost time. The strained relationship between the provincial and federal government resulted in the KP government actively working to be part of CPEC since last year only when it was properly brought in the loop.
According to Dastagir, one of the biggest challenges of attracting investment in KP has been the security issues and the consequently negative image perception. However, direct interaction with the Chinese government and the provision of some lucrative incentives has allowed the province to garner interesting prospects for setting up industry.
An interesting initiative that is being undertaken is the KP Economic Co-operation Road Show, which will be held in Beijing from 17-18 April. A large number of industrialists, academicians as well as public sector officials will showcase both private and public sector projects to attract investment for joint-ventures with local businesses.
This column feels this is a good example of taking the horse by the reigns which should be followed by other provinces as well. The shift in strategy from constantly blaming the federal government to becoming direct with the Chinese is refreshing and will yield healthy dividends.
So far as the actual development of industrial zones is concerned, Dastagir highlighted the identification of seventeen areas out of which nine will be launched by the end of the current year. In a bid to offset the geographical disadvantage the province has in terms of proximity from the ports, some enticing incentives are available for investors. The KP government will declare all new industrial estates as Special Economic Zones (SEZs) which will give tax exemptions for a period of ten years.
Other incentives being provided by the KP government include reduced financing costs by giving a five percent discount on interest rates, 25 percent electricity discount for unique industries such as mines and minerals.
The provincial government will also provide a 25 percent subsidy on transport cost from Karachi port to the industrial site against import of capital equipment which will be duty exempt. Another important step is the equitable provision of incentives which Dastagir says are available for both local and international investors.
It seems from the eager interest shown in the Hattar Economic Zone by investors that the incentive package is certainly turning things around. More than 400 acres have already been snatched by investors with an additional 1000 acres to be offered soon.
The Rashakai Economic Zone (REZ) cited by the KPEZDMC as one of its flagship projects and spread over a 1000 acres aims to attract marble processing, furniture, pharmaceuticals, sugar mills and the tobacco industry amongst others.
Given that KP has historically been weak when it comes to industrialization with industrial zones being 40 percent empty, it is encouraging to see a proactive approach being adopted by the government in conjunction with the private sector. The direct engagement with the Chinese business community and government sets out an example for other provinces to follow suit.