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HomeGeopolitical CompassEast AsiaChina–Pakistan Economic Cooperation: The Case of Special Economic Zones (SEZs)

China–Pakistan Economic Cooperation: The Case of Special Economic Zones (SEZs)

Authors: Ejaz Hussain, Muhammad Furqan Rao

Affiliation: Iqra University (Islamabad, Pakistan), Tsinghua University (Beijing, China). 

Organization/Publisher: Fudan Journal of the Humanities and Social Sciences

Date/Place: August 28, 2020/ China

Type of Literature: Article 

Number of Pages: 20

Link: https://link.springer.com/article/10.1007/s40647-020-00292-5

Keywords: CPEC, SEZs, BRI, China, Pakistan

 

Brief:

The article argues that Special Economic Zones (SEZs) allow mutual economic cooperation between China and Pakistan and enable new openings beneficial to sustaining industrialization and consolidating the China-Pakistan Economic Corridor (CPEC). The authors, who are academic researchers in Pakistan and China, describe the pre-CPEC situation and how the failure of SEZs was because of remoteness from industrialized and urban areas. China and Pakistan signed a memorandum in 2013 which was later formalized in 2015 when Chinese President Xi Jinping visited Pakistan and allocated USD $46 billion to realization of the long-term project. Initially, the agreed SEZs were over a hundred which were later reduced to forty-six; four were completed in the first phase. The authors claim that SEZs under the CPEC have the potential to work as a strong economic incentive and enhance commercial attractiveness for further foreign investment. Such zones can attract the skilled diaspora community to invest in their own country. The new opportunities would strengthen bilateral trade, which would especially help Pakistan whose economy is underperforming. In addition to enabling Pakistani companies to learn modern trade and business techniques from their Chinese colleagues, SEZs offer an opportunity to strengthen technology cooperation between Chinese and Pakistani companies. The authors then highlight the structural, political, and security challenges of the SEZs. A big structural challenge is the differences between political parties and other stakeholders over the final physical site(s) of the SEZs. At present, lack of an efficient and trained management team and workers to operate modern technology reduces the opportunity of employment. Disagreements among the political elite and public demands more transparency and fair play in terms of publicly detailing the pros and cons of different agreements reached between Chinese and Pakistani authorities. The authors’ strategic proposals include: to abide by the principle of economic competitiveness of the area where a Special Economic Zone is proposed and announce policies on mutual coordination; to implement the revised Special Economize Zone Act of 2012 but also devise a policy to provide adequate funds to small to medium-size firms that lack indigenous financial stability; and to avoid conflicts, a “permanent inter-parties coordination body” is necessary to help generate consensus on policy issues. Regarding the security situation, Pakistan has established a security regime to safeguard the Chinese labor from internal threats, and privatizing security is highly discouraged based on bad experiences involving the security firm Blackwater and the CIA. The authors recommend more coordination between Pakistan and Iran, and mention that China can encourage regional cooperation for peace and may also convince the USA to engage Pakistan, Afghanistan, and India in a manner that reduces strategic uncertainty.  

 

By: Razia Wadood, CIGA Senior Research Associate

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