Not-so-special economic zones.

Byline: Nasir Jamal

Global experience shows that Special Economic Zones (SEZs), geographically defined and delimited areas to set up manufacturing and services industries, can prove to be an important vehicle for attracting international and domestic investment, diversifying and boosting exports, creating jobs, reducing regional disparities and encouraging the transfer of technology.

By offering an attractive mix of policy and fiscal incentives to investors, governments often insulate them from the uncertain external business environment that governs the industry operating outside of these areas.

Like China, India and South East Asian economies, Pakistan has also strived for decades to develop such zones to woo investment. But none of these past experiments have succeeded. Even the SEZ Act 2012, which was amended in 2016 to make these zones attractive for investors, has failed to produce desirable results because of inadequate incentives and bureaucratic involvement in their creation and operation.

The situation calls for an immediate revision of the strategy if the country is to encourage the creation of, and attract investment in, the existing or planned SEZs - especially the ones notified under the China-Pakistan Economic Corridor (CPEC) to persuade Chinese firms to relocate their textile and other value-added, export-oriented units to the country - by providing utilities and offering meaningful policy and fiscal concessions to investors.

In background interviews with Dawn, people involved in the development of SEZs under the CPEC initiative describe the procedure for their establishment as cumbersome and concessions offered to the investors inadequate. On top of that, the involvement of the Board of Investment (BoI) at every stage - from the approval of an SEZ to the selection of consultants/contractors for its development, allotment of plots to prospective investors and the approval of applications by investors for availing fiscal incentives allowed under the SEZ law - is frustrating and self-defeating.

As if that wasn't enough, investors are also reluctant to invest in SEZs owing to the unavailability of utilities - power, gas and water. For example, some Chinese firms that bought plots in the under-construction Allama Iqbal Industrial City (AIIC), one of the three SEZs in priority under CPEC were reported to be delaying the construction of their facilities unless the management gave firm guarantees for the provision of electricity...