China-Pakistan agreement set to be signed

Pakistan’s China-Pakistan Economic Corridor (CPEC) committee has given the go ahead for a treaty that will establish new special economic zones (SEZ). It is expected the treaty will pave the way for for industrial cooperation between China and Pakistan.

The newly formed zones will begin in Rashakai in the Khyber Pakhtoonkhaw (KP) province in Pakistan. The Joint Coordination Committee (JCC) is scheduled to meet in Beijing next week to sign the agreement, official sources in Beijing confirmed.

The CPEC met December 8 – chaired by federal minister for planning, development and reform, Makhdum Khusro Bakhtyar – and approved signing an industrial cooperation framework with China to encourage Chinese investors to reposition in Pakistan.

A Pakistani delegation including the chief ministers of the four provinces, the prime minister of Azad Jammu and Kashmir, and the chief executive of Gilgit-Baltistan is set to visit China to sign the agreement.

The KP government has already reached agreement with the Chinese Road and Bridge Corporation for the development of the Rashakai Industrial Zone over the next two years. Both sides are to launch the Rashakai Development Project, with the Chinese set to start a marketing campaign to entice investors to the project. The two sides are further expected to announce the close of the $1.8 billion Lahore-Matiari transmission line and Thar coal-based power project during the JCC meeting in Beijing.

The deadlines for those particular projects were extended by six to seven months, with both expected to be fulfilled by March 2021 rather than August 2020, confirmed official sources.

The conveners of the joint working groups on energy, infrastructure, Gwadar, and planning and industrial cooperation gave a briefing on the agenda for the 8th JCC, which was approved by the cabinet committee on CPEC. The committee advised relevant agencies and provincial governments to identify pilot projects that would be discussed with China during the JCC, in the hope of maximising socio-economic and agricultural development..

The committee reviewed the progress of the Gwadar projects and ordered completion of all formalities for the groundbreaking of Gwadar’s new airport, vocational institute, hospital and 300-megawatt power project by the first quarter of 2019.

The CPEC committee further reviewed the progress of energy projects and issued instructions for encouraging investors to get involved in Thar coal and renewable projects in the future.

The government considers projects on the Western Route high priority, expecting that this will work will ensure the development of underdeveloped areas of the KP and Baluchistan provinces. It was further decided to seek finance from China for the KKH Thakot-Raikot highway and upgrade of the Dera Ismail Khan-Zhob project on the Western Route.

KP is to have the highest number of economic zones, eight, compared to three in Sindh. Baluchistan and Punjab will each have seven zones.

The first SEZ has been established by the KP government at Hattar, aiming to attract close to Rs 300 billion in investment 2016-2021, according to sources. The SEZ target sectors like food, pharmaceuticals, engineering, auto and food packaging.

In Baluchistan, the SEZ are planned for Gwadar, Lasbela Industrial Estate, Turbat Industrial Estate, Dera Murad Jamali Industrial Estate, Winder Industrial and Trading Estate, Mini Industrial Estate, and Bostan Industrial Estate. The three SEZ in Sindh will include an exclusive Chinese Industrial Estate near Karachi, Textile City near Port Qasim and Marble City Karachi.

Once implemented, these SEZ are expected to enhance the country’s productive capacity, expand its export base and help in import substitution. The SEZ have the potential to be a turning point for the industrial sector in the country, as economic zones have played a key role in the industrial development of many Asian countries, say sources.

The China-Pakistan Economic Corridor provides the industrial sector of Pakistan with an opportunity to modernize and become more efficient and competitive. Various energy projects, along with improvements in infrastructure and road networks, will help address some key constraints to growth.

More importantly the development of the SEZ will enable industries to smooth supply chains, enhance collaboration and innovation capabilities, and help grow significant economies of scale, the sources added.

It is accepted however that this process will take time to materialize, and the nature of its trajectory will depend on two primary factors: how the industrial transformation currently underway in China creates potential opportunities for Pakistan, and how prepared Pakistan's economy is to take advantage of the opportunity.

Muhammad Naeem Chaudhry is a managing editor at Multinational News Channel (MNC), an Islamabad-based news agency.