Assessing Special Economic Zones (SEZs) in Context of Job Creation: A Comparative Analysis for CPEC SEZs in Pakistan

Muhammad Muzammil Zia, Beenash Afzal Malik

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Abstract

Special economic zones (SEZs) around the world are normally established with the aim of achieving various policy objectives: to attract foreign direct investment (FDI), to generate employment, and to experimental with economic reforms via zone-exclusive trade policies.[i] Pakistan has already signed Memorandums of Understanding (MOUs) for an upwards of nine SEZs spread throughout the country’s provinces in collaboration with China under the China-Pakistan Economic Corridor (CPEC) program, which further falls under the One Belt One Road initiative (OBOR). The purpose of this study was the assessment of the socio-economic impacts of various SEZs in diverse regions via comparative analysis. We chose to identify SEZs that are similar to Pakistan in regards to the economic profiles of the respective states. We then observed the literature on this particular FDI phenomenon to assess the extent to which the SEZs have helped improve the socio-economic outcomes in the vicinity of the local communities surrounding such zones and thus brought about broad-based economic development there. SEZs that have fared poorly in regards to export volume, ameliorating of the domestic labour force’s technical skills and overall inefficiency (such as those in Africa) were stacked up against those that have performed with high levels of productivity and viable economic gains such as those found within China, Bangladesh, and the ASEAN member states in order to decipher the common features of SEZs that enable them to be effective in the long-term.

The comparison between non-Pakistani SEZs then further allowed for a second comparative analysis with Pakistani SEZs themselves so as to identify the economic implications of the SEZs being rendered under CPEC, which in turn allowed for the development of a basic framework that Pakistani SEZs should adhere to in order to avoid the meagre gains seen in failed zones such as those in Africa. Additionally, we focused primarily on the employment-related social effects of zones. Our results showed that overall, African SEZs have not led to significant job creation or poverty reduction because of failures in implementing regulations and providing adequate resources for program management, infrastructure, and promotion. Poor trade policy coordination and a failure to establish a policy environment that offers investors’ confidence in transparency and predictability were found to be compounding factors. Asian SEZs, however, have shown many socio-economic benefits. We thus concluded that we can co-opt African experiences with SEZs in order to improve on the Asian frameworks for the same zone-type setup in order for Pakistan to attain maximum socioeconomic benefits from its own CPEC-oriented SEZs. This is also in line with literature that a low to middle-income country looking for development models often turns to the experience of Asian development and repurpose it to their needs. This paper aimed to provide input to the question of whether CPEC SEZs can make a significant contribution to job creation, diversification, and sustainable growth in Pakistan, and if so, how.

[i] Farole, T., & Akinci, G. (Eds.). (2011). Special economic zones: progress, emerging challenges, and future directions. World Bank Publications.

Presented at: International Conference titled: CHINA-PAKISTAN ECONOMIC CORRIDOR:  Political, Economic and Social perspectives. held at Department of History & Pakistan Studies, University of the Punjab, Lahore, Pakistan on September 11th – 13th, 2017.

Accepted for Publication at: Social Science Journal Y Category Punjab University. Expected to be published by Mid 2018.

Keywords

ASEAN, CPEC, SEZ, FDI, OBOR

Author Information

Muhammad Muzammil Zia is Research Associate and is Acting Head of Policy-Job Growth and Human Resource Development, Centre of Excellence-China Pakistan Economic Corridor, Planning Commission of Pakistan, Islamabad, Pakistan, Email: muzammil.zia@cpec-centre.pk, Website: www.cpec-centre.pk.

Beenash Afzal Malik is Research Assistant of Policy-Job Growth and Human Resource Development, Centre of Excellence for China Pakistan Economic Corridor, Planning Commission of Pakistan, Islamabad, Pakistan, Email: beenash.malik@cpec-centre.pk, Website: www.cpec-centre.pk.

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