The power of SEZs

Published July 4, 2022

Imagine a visiting foreigner is taken on a handful of day trips through Karachi, Faisalabad, Lahore and other Pakistani cities, including the industrial areas within and around them. On his flight back to Dubai or Singapore, he might just pen the following remark in his notebook: “A highly reproductive but not very productive general population; well-meaning but not regionally-informed or well-incentivised industrialization efforts; and a rapid clustering of people and industries around the cities without a unified programme to integrate industry, skills and community.”

We urgently require holistic integration of urbanisation and industrialisation phenomena. Prime case in point: Punjab, our most populous and prosperous province, where I happen to live, holds 5.36 persons per sq km, which is more than twice the countrywide average and is experiencing staggering urbanisation rates. The urban population has absolutely soared 20x between the 2017 and 1951 censuses, which trounces the province’s overall population growth of 5.5x.

Even if these statistics are imperfect and calculation methods vary, we still get the basic picture and it clearly hasn’t emerged as a pretty one, because neither were the towns expanded and tailored to suit growing numbers with rising aspirations nor were the citizens empowered with competitive skill sets in harmony with industrial trends.

Transformative change necessarily involves the grassroots levels of society. In the Pakistani Punjabi context, that is the mohalla level — and Punjab — indeed all Pakistani provinces — can emerge from multi-decade mediocrity by integrating export-led, skill-driven industrialisation with long-term community planning.

Transformative change can empower and employ local communities through a unified programme within the ambit of the zones

The Special Economic Zones (SEZ) underway — most notably those under the China-Pakistan Economic Corridor (CPEC) umbrella — can serve as the engines around which this industrial community-building takes shape.

Opportunity and aims

The SEZs, surrounding areas and communities can become models for learning lessons and replicating success. Firstly, within the greater aim of industrialisation in general, we must aim specifically for skill orientation. And secondly, we exploit the SEZs to build empowered communities.

We can start with the in-progress zones and build up “model” integrated communities under a three to five-year plan that includes housing and skill-building centres so that ordinary skilled workers can bring, house, feed and educate their families in the same locality where they earn.

All this activity will attract businessmen and women seeking to serve the transport, retail, clothing and other vital needs of these budding localities, along with hundreds of thousands of labourers.

Before we move on to tangible actions, here is a quick overview of the SEZs of both China and Pakistan: China has itself enjoyed a phenomenal experience with SEZs with a focus on foreign capital and exporting goods from roughly 1978-80.

Chinese SEZs by 2007 contributed a whopping 22 per cent of GDP, 46pc of FDI, and a staggering 60pc of exports; in addition, an astonishing 92pc of municipalities house some kind of economic zone!

Pakistan meanwhile has over a hundred estates of all stripes and sizes including several dozen in Punjab alone, mainly under the Punjab Small Industries Corporation. CPEC SEZs number over two dozen as well, of which nine have been officially sanctioned by all the top-level federal bodies like the Board of Investment and Planning Commission and three zones are already at or near completion.

Actionable Steps

Moving onto the steps proposed. let’s begin by thinking spatially and specifically in terms of small regions with the provinces. Here, the Spatial Strategy 2047 is an ideal starting point.

It’s great to see that as early as 2016, the Urban Unit at Punjab’s Department of Planning and Development was advocating “an integrated approach bringing together economic and industrial development, land use and connectivity.” The official strategy document from 2017 advocates regional competitive advantage as the centrepiece for spatially and socially informed industrialisation.

Examples recommended by the strategy include an industrial, urban and connectivity plan that complements and enhances the existing strengths of the Gujrat-Gujranwala-Sialkot “Golden Triangle” in surgical instruments, sportswear and appliances, or Multan’s endowment in mangoes or Sargodha’s in oranges.

In the vital realm of skill development,we need unity among the main players, which are the Enablers — government departments, the Educators — Technical Education and Vocational Training Authority (TEVTA) and private players in the future, and the Employers — corporations and small and medium enterprise associations (SMEs).

The Enabler ie the government is the strongest player and its most relevant branch is the Department of Industries, Commerce, Investment and Skill Development (“Industries”), which oversees the TEVTA and other bodies mentioned, and has recently minted a dedicated Punjab Skills Development Authority.

The Enabler should build skill training clusters within or near the SEZs. The foreign and local investors should receive exceptional long-term incentives and in return must be asked to contribute a reasonable number of man-hours for the training of local residents and their children, while also offering a minimum number of meaningful internship opportunities and job placements.

The $6 million Cluster Development Initiative (CDI), partially funded by the World Bank and with United Nations Industrial Development Organisation as a project partner, has a stated goal to help SMEs “overcome constraints associated with their small size by promoting their technological development and enhancing their ability to compete in the local and global markets.” Here, too, the work has begun and the primary missing link is integration with industry and community building.

Finally, our people need and deserve new and better housing programmes — residential neighbourhoods designed in harmony with places of learning and earning — in order to feel included and be productive. The Special Economic Zones are a golden opportunity to do precisely that.

The Department of Housing, Urban Development and Public Health operates through its constituent housing authorities eg Lahore Development Authority, Multan Development Authority and so on, as well as the Punjab Housing and Town Planning Agency whose functions already include the provision of low-cost housing developments and checking of slum overgrowth.

The way forward

A five to seven member team consisting of private sector professionals from the domains of business, academia and law, along with a couple of officers of the Urban Unit and Cluster Development Initiative, should formulate three-year integrated development plans. This team would work directly with the Ministers for Industry and Planning and the prime minister’s office, as well as the CPEC Authority and the regiments/divisions of the Pakistan Armed Forces tasked with CPEC’s security.

The private sector council members, being gainfully employed in private practice and working on comfortable timelines for this initiative, would receive only modest additional compensation at the public sector level in the spirit of the greater good. Fortunately, their operating expenses would be modest, at most consisting of some office space and utilities and perhaps a couple of clerical and custodial staff.

The gains of such an integrated programme would bear early fruit in a year and come into bloom well within a decade. They will then last for generations.

The author is working as a senior researcher at the Center for Chinese Legal Studies at the Lahore University of Management Sciences

Published in Dawn, The Business and Finance Weekly, July 4th, 2022

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