The global economy would have never achieved its dimensions without the contribution made over the past four decades by about 2000 economic zones operating in almost all the continents.

Remarkable economic accomplishments by a number of countries, dotting the current global economic landscape, reflect the triumph stories realized in their zones, known as free-trade/foreign trade/export processing/special economic zones, bonded-warehouses, and industrial parks,or free ports, etc.

The regime of economic zones represents a framework, a set of parameters and a mechanism to enact certain policies to achieve desired results in commercial/industrial development. In China, this was realized under, ‘special economic zones’; in Mexico they named it, ‘maquiladora’ or border industrial parks, since they were set up along the border, separating the USA from Mexico. In the USA, they have foreign trade zones. In our region, we have export processing zones or free-trade zones.

In general, a free-zone is a piece of land under customs control, irrespective of its size. It has to be a free land where goods can be moved in or out—free of customs duties. Factories and various services may be installed there— free from taxation, and people may work there without any hindrance.

A free port could be the whole port of a city or the whole territory of a city, as is the case with Hong Kong. In such a zone, only trade is permitted and no processing industry is allowed. In export processing zones, production occurs under customs control and products may go to export markets or inland market (on payment of usual duties on the import components of the products). A transparent, simple and clear legal framework is the basis for the success of an economic zone to attract foreign investors.

A salient feature of such zones is their neutrality, i.e. they have been set up in socialist as well as in capitalist economies. They are part of the industrial skylines of cities in capitalistic economies as well as in socialistic, i.e. China, Vietnam etc. At its core it seeks, as a mechanism, investments leading to industrialization, as a measure of policy’s efficiency, to optimize the use and allocation of scarce resources.

Implementation of faulty economic policies can throw economic development off the track for decades. Compare Indonesia, Thailand, Myanmar, Taiwan and South Korea in terms of per capita income 40 years back, all almost at the same level. Today the difference ranges between $400 to $15000. This is the straight reflection of the efficient or inefficient economic policies of the respective economies.

The Port of Hamburg acquired the status of a free port at the turn of 19th century resulting from signing of a customs union treaty between the German Reich and the Free Hanseatic City State of Hamburg in 1881. The treaty aimed at integration of City State of Hamburg into the German Customs Union, with the exception of a part of the port which was excluded as the free port. In 1888, the new free port, covering an area of 984 hectares was opened.

As early as 1910 there was considerable extension of free port to accommodate rapid increase in shipping traffic, entre-pot trade, manufacturing and industrial processing, catapulting Hamburg to the status of a leading world port. Free Zone , attached to Barcelona Port in Spain was created in 1916. In the 1960s, Taiwan, South Korea and Singapore developed export processing zones to carry out their export-focused policies. It was the success of these zones that proved the efficiency of their export-focused policies and provided the basis and framework for their future development.

These economic zones proved to be the testing grounds for efficiency of their policies and over the last four decades they earned the fame as the fastest-growing economies of the world. The success of their zones provided model for the industrial estates of Indonesia, Philippines, Malaysia and Thailand. These industrial estates were essentially export processing zones, building the foundation for the future economic development of these countries. Prior to financial crisis of 1997 they were the fastest-growing economies like the original Asian Tigers.

Being short of capital, as developing countries, to finance investments to help develop the export base of their economies to produce for global market-place, they badly needed significant and substantial foreign investments. Their economic zones, through provision of tax incentives, infrastructure and speedy and efficient processes, could attract foreign investments. Today Singapore, Taiwan and South Korea are also leading in high-tech manufacturing, giving a tough competition to the leading world players. In People’s Republic of China, after the death of Chairman Mao, a new set of leadership emerged, equally or rather more relevant to the economic development of that most-populous country of the globe in the succeeding decades.

The Great Leap Forward of late 1950s and the Cultural Revolution of 1966-76 left deep economic scars. The situation required China to be logged in to the global economy to survive and thrive as a global power. In 1978 Deng Xiaoping rose to power and ushered in new economic policy with reforms that included stepped-up foreign trade. To this end four special economic zones (SEZ), i.e. Shenzhen, Zhuhai, (both in Guangdong Province close to Hong Kong and Macau respectively) Xiamen and Shantou, were set up on China’s eastern coast, providing a new low-wage manufacturing base , initially, for Hong Kong-based companies, later on to be joined by investors from Taiwan, segments of Chinese diaspora and multi-nationals from all over the world. Shenzhen, a sleepy fishing village of 20,000, today a cosmopolitan city of four million with a sea port handling four million TEUs (containers ), after Tokyo and along with Shanghai the 2nd biggest bourse in Asia, has become synonym for the triumph stories of economic zoning.

These SEZs were the economic laboratories to test the economic policies of PRC on export-focused industrialization . Spurred by the success of the SEZs, China sought to extend the lessons learnt in these SEZs to other regions and areas to accelerate their economic development. The PRC government, late 1984, announced the opening of 14 coastal cities as economic development zones(EDZ), such as Dalian, Guangzhou, Shanghai , Tianjin. etc.

Tianjin Economic Development Area (TEDA) is considered as the most successful EDZ in China, attracting about $15 billion in investment in the first 12 years since establishment, involving many international well-known companies such as Motorola, Coca Cola, NEC, Hitachi, Volkswagen, Samsung, Daewoo, Shell, Nestle etc. With a population of over 9 million, Tianjin is a major sea port and is the economic, financial and international trade centre of North China.. Chinese have used these zones as the most effective mechanism for its development and diversity.

With substantial contribution of economic zones, China’s imports and exports, during time period of 1980-1995 increased from $38 billion to $280 billion with an annual growth of 16 per cent. The experience and expertise in economic development and diversity acquired in the economic zones in PRC so far would have their further application in China’s ambitious “Go West “ programme, designed to boost development of the country’s vast interior.

Its centrepiece will be Chongqing, sitting astride the Yangtze River, 1,500 km inland from Shanghai, known as Chungking in the 1940s and was the wartime capital for Chiang Kai-Shek’s Koumintang government. Over the next decade, the central government is planning for investment of up to $200 billion, primarily to pay for roads, railways, airports and other infrastructure projects. As per Chongqing’s vice-mayor “In 10 years, Chongqing will catch up to where Shanghai is today “by pumping up to $20 billion a year into the economy over the next decade, Beijing is hoping to turbo-charge local economic development.

Mexico is another outstanding example of how economic zoning can be put to use as a policy framework and mechanism to achieve macro-economic development. In the 2nd half of 1960s the growth model of export-based border industrialization, “Maquiladora”, was initiated. This was a turning point for the “Mexican Miracle” that began in 1946, based on the model of import substitutions. This was preceded by a feasibility study by Arthur D. Little and visits to the industrial zones of Taiwan and South Korea by the Federal Ministers of Mexico. Maquiladoras were set up on Mexican locations along the border between Mexico and the USA.

The model provided for setting up a 100 per cent foreign-owned and foreign-managed company that may import under bond or free of Mexican import duties all the machinery, equipment, tools and spare parts required for its production, and use them to assemble and produce or manufacture, totally or partially, any product, article or component and export it from Mexico to any country in the world. In 1980s Maquiladoras made spectacular growth and drew national recognition when in 1985 President of Mexico, Miguel de la Madrid, declared Maquiladora a national priority because of its high foreign exchange earning capacity. That year it surpassed tourism as the 2nd largest foreign exchange generator in Mexico, outperformed only by petroleum sector to date. During thirty years since inception Maquiladora industry reached high stage of development, with 3200 plants that employed more than 900,000 direct workers.

The Mexican private sector played a pre-eminent role in this development. Bermudez Group of Mexico, a private enterprise, operates 10 industrial parks, Mexican EPZs, in the state of Chihuahua, north central Mexico on the border with USA, and a US foreign trade zone in El Paso, Texas. The border cities were given dignity through location and operation of industrial parks. Its early successes in 1960s led other private investors to build 90 Mexican industrial parks which account for about 70 per cent of Maquiladora exports and employment. It was the economic zoning under Maquiladora that proved to be the biggest blessing for the Mexican economy when North American Trade Agreement -NAFTA - went into effect in January 1994. These industrial parks have so far, since 1993, created almost 800,000 jobs in Mexico; they provided both infra- and supra-structure to absorb the full range of benefits emanating from NAFTA for Mexico. The combined impact of economic zoning and NAFTA is the underlying factor that Mexican exports to the USA account for about 25 per cent of Mexico’s economy, up from 13 per cent in 1993.

Vietnam established Tan Thuan export processing zone, one of the first zones established in Vietnam, outside Ho Chi Minh City on an area of 300 hectares in February 1992 and by 1996 it had all infrastructure facilities completed and attracted 130 investors and entrepreneurs from all over the world with total investment volume of more than $300 million; most of the products are sold to America, Europe and Asia.

Bangladesh established its first EPZ in 1983 in Chitagong and the 2nd one in Dhaka in 1993. The third EPZ was developed in recent years at Comilla; 20 per cent of Bangladesh’s exports emanate from its EPZs. Jabel Ali in UAE has established its credentials as the most successful economic zone in the Middle East.About 2000 economic zones all over the world, viable and vibrant, are contributing to the respective economies in general and international trade in particular. Now India is embarking on a mega economic zone on the pattern of Shenzehn and Jebel Ali under the name of special economic zone Navi Mumbai in Maharashtra that will span an area of 4377 hectares. It will be exempt from all taxes, levies, charges and customs and excise duties on the import of capital goods, raw materials and spares. It will enjoy a corporate tax holiday till 2010.

The question is , has Pakistan been able to derive benefits from this model that is in practice in dozens of countries and with what success. EPZ model of industrial investments and production was initiated in Pakistan some 20 years back. The only operative EPZ at Karachi, when viewed in terms of investments so far made,—the annual gross exports from the zone, the value-added volume accomplished and the degree of integration with the national economy spurred over the past two decades—, conveys a dismal picture. The question begging answer is why this mechanism and strategy of investment and export promotion that has been so successful in other countries, has failed so miserably in this country. The annual gross exports, i.e. inclusive of imports from abroad and the national customs territory, has yet to reach the level of $100 million. What a proportion to our annual $9 billion exports! An embarrassment of great magnitude for our economic leadership during the period under review, scion of an industrial dynasty that has great contribution to the industrial development of this country to its credit, being the federal commerce minister for the last past three years notwithstanding. This calls for recasting and redefining the role, structure, institutional arrangements and human resource input of EPZ in the changed and changing economic landscape nationally and internationally - in anticipation of WTO rules and regulations becoming operative from 2005 onwards.

The most disturbing and painful part of the legacy to be taken over by the next political government would be the state of economy. The rising poverty line, unemployment, socio-economic polarization and depressing economic prospects for the common man demand that economic matters are given a serious consideration and necessary actions are initiated with no loss of time. This calls for fast-track projects in agricultural as well as industrial sectors. Let us adopt economic zoning as a nation-wide strategy for export-focused industrialization.The EPZA - the organization entrusted with the establishment and management of EPZs in Pakistan - has plans to set up 16 more EPZs at different locations of Pakistan in near future. Under a revised and new scheme of things , committed to transparency, efficiency, integrity and global outlook, inspiring reliability and confidence among the potential investors from home and abroad, the planned EPZs can form part of the industrialization programme where the private sector must play a pre-eminent role as is the case with the industrial parks in economies that have become famous for success in economic zones.

But to make a real impact the political government must go for some mega projects, as recently initiated under Navi Mumbai in Mahrashtra, India. Since reliability, ease, speed and efficiency of logistics is integral to the success of any scheme of export-focused industrialization , it would be right to locate future EPZs adjoining to seaports, airports or railways-heads.

While the government has planned to develop a free zone at Gawadar, Port Qasim with a total area of 12,000 acres, above high-water mark, undisturbed access to water-front, international port infrastructure, transport corridors and utilities offers ideal conditions to undertake such a mega project within the framework of economic zoning. A number of big plants are already operating at Port Qasim. Application of EPZ regime in Port Qasim’s area can prove a great magnet for multi-nationals in the quest of lowest-cost manufacturing centres world-wide. Karachi Port has the potential to develop western back-waters as distri-centre-cum Free trade/processing zone for regional entre-pot trade and high-tech processing. On the same pattern areas close to air ports at different locations could be considered for economic zoning.

What lends sense and success to the concept of economic zoning is the pro-active role and involvement of the national power structure at the highest level. From common man’s perspective, economic conditions were never so bad as now. Let the top power elite rise to the occasion,and start putting things on the right track, before it is too late. Economic zoning is a tested and effective development and diversity strategy that has borne fruit world-wide. Let us give it a serious and a sincere trial.