Tag Archives: Special Economic Zones (SEZs)

Free trade with China may Dampen Investment in SEZs?

on 01/06/2018

Pakistani Manufacturers start selling Chinese-made products with ‘Made in Pakistan’ tags!

Beijing’s push for further trade liberalization under second phase of the Pakistan-China free trade agreement (FTA) may severely dampen prospects of Chinese investment in prioritized special economic zones (SEZs) being set up under  (CPEC).

It would be convenient and cheaper for Chinese companies to manufacture in China and import products into Pakistan at zero duties, which would render the SEZs useless, officials in the Board of Investment (BOI) fear.This will also dash Pakistan’s hopes of starting a new wave of industrialization as almost 60% of the national output is contributed by the services sector which is not job-oriented. This means Pakistan is en route to becoming a trading nation.

Another worrisome aspect of the proposed second phase of the FTA, called FTA-II, is that it is shrouded in secrecy. Both Federal Board of Revenue (FBR) and the BOI were not aware of the tariff lines on which the commerce ministry wanted to slash duties to zero.

The timing of the FTA-II is also a matter of concern for some government agencies as Pakistan is not yet ready for further open trade due to a lack of product diversification and high cost of doing business.The Commerce Ministry says it will not sign the FTA unless every stakeholder is on board including the BOI and FBR.

Prime Minister Shahid Khaqan Abbasi will visit Beijing next month and the government intends to sign the expanded FTA with China. Pakistan has reportedly agreed to offer zero duties on 75% of tariff lines, which constitute roughly 5,340 out of total 7,120 tariff lines. About 35% of tariff lines were already subjected to zero duties, which have caused huge losses to the domestic industries.

It was unearthed in a meeting of the Senate Standing Committee on Finance that Pakistani manufacturers have even started importing goods from China and selling them as ‘Made in Pakistan’ products by placing their stamps on them.The FBR is concerned that the proposed 75% reduction in customs duty will adversely hit its revenues. However, the government said it did not care about the revenue loss because the FTA-II would help increase Pakistan’s exports to China from the current $1.5 billion to $9 billion. – ER Monitoring Desk

CPEC should be open to Pakistani firms like to Chinese: Dr. Ishrat Hussain

on 04/04/2017
Calls for ensuring level playing field for Pakistani, foreign companies

Renowned economist and former Governor State Bank of Pakistan has said CPEC should be open to Pakistani firms on the same terms as to the Chinese adding Commercial banks should finance Pakistani companies, either stand alone or in joint ventures with the Chinese companies in collaboration with the infrastructure development fund.
Mr. Hussain believes: one of CPEC’s benefits would be the training and development of skilled manpower. Plans have to be made to assess long-term manpower requirements, both for construction as well as the operational phases of CPEC projects.
 “Various categories and levels of training programmes have to thus be designed and then assigned to credible, pre qualified providers. Particular attention should be given to train youth from backward areas, starting with Gwadar all the way to the Karakoram Highway.
A number of private and non-profit organisations are actively engaged in quality vocational and technical training, mainly in Karachi and Punjab. These organisations should be invited to set up similar facilities in other parts of the country where CPEC projects are being executed, he writes in an article.
In addition to this formal training, internships and attachments with Chinese companies working on the projects should be made an integral part of the curriculum. If there is one lasting legacy for which CPEC should be remembered, it is investment in producing skilled and trained technical manpower with different levels of expertise.
Dr. Hussein enshrined six areas of policy where the government has to get serious. They include energy, industry, trade, foreign exchange regime, financial policy and skill development.
He says The Special Economic Zones (SEZs), industrial parks, etc to be set up along CPEC should be open to Pakistani firms on the same terms as to the Chinese. Land should be allotted on long-term lease rather than outright purchase and the leases auctioned only to genuine, pre ualified bidders to eliminate land grabbers and speculators. In Balochistan, some portion should be reserved for local investors wherever feasible. The lease should incorporate a provision that the allotment would be cancelled if the project is not operational within three years. All infrastructure works — power, gas, water, roads, effluent plants, amenities — should be in place before the possession is passed on.
Pre-feasibility studies should be carried out by SEZ authorities through expert consultancy firms or universities, to provide baseline data and information about the kind of projects that can be established in different zones.
He says exports must grow at least 15 per cent annually to meet these new obligations, and remittances have to increase at their historical level. The exchange rate has to be managed deftly to stimulate new export products, new firms and penetration into new markets, while ensuring that prices of imports of capital goods, machinery and equipment are not hiked up, which would make new investments unattractive. Pakistani and other foreign companies winning competitive bidding should have a level playing field.
Also, free trade Agreements have to be renegotiated to preserve the comparative advantage of Pakistani exports and tariff quotas introduced to safeguard against material injury to Pakistani manufacturers. Import tariff rates must be gradually reduced to enable Pakistani companies to participate in the global supply chain.
In Balochistan, southern KP and Gilgit-Baltistan, urban and rural infrastructure projects that link the main highways and motorways under CPEC with the communities should be given priority by their respective set-ups in allocation of development budgets.
In addition to this formal training, internships and attachments with Chinese companies working on the projects should be made an integral part of the curriculum. If there is one lasting legacy for which CPEC should be remembered, it is investment in producing skilled and trained technical manpower with different levels of expertise. – MD