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Business opportunities through SEZs under CPEC

Pakistan’s Vision 2025 emphasises the private and entrepreneurship led growth where the main purpose is to “rank Pakistan in the top 50 countries on the World Bank’s Ease of Doing Business Rankings” and to “increase Diaspora investment (via remittances) in the private sector to the tune of $40 billion”.

Remittances in the form of foreign capital inflows act as a stabiliser for Pakistan’s external sector. It provides a cushion to finance import bill and support to reduce the balance of payments deficit. Moreover, remittances also play important role in stabilizing the exchange rate and increasing foreign exchange earnings. According to World’s Bank Migration and Remittances Factbook (2016) report Pakistan is the sixth largest remittances recipient economy followed by Bangladesh and China whereas India ranks top on the list. The country experienced a huge influx of remittances after 2000 following the pursuance of liberalized foreign exchange regime that eases the transfer of these inflows. By 2007 remittances were the second major source of foreign exchange earnings after exports of manufactured goods (IMF, 2011). In Pakistan, remittances are mostly utilized in consumption, real estate and consumer durables with no significant contribution to investment. However, remittances from Gulf countries, which have historically accounted for the largest share annually, dropped drastically due to a sharp decline in crude oil prices that hurt the region’s economies and stringent economic policies for immigrants by the host countries. The remittances declined from US$ 14.38 to US$ 14.1 billion in early months of 2017, recording a 2.3 percent negative growth rate as compared to previous year (Pakistan Economic Survey, 2017).

Saudi Arabia and Gulf Cooperation Council (GCC) remained the major destinations for Pakistani diaspora. In the 70s and 80s remittances from the Middle East paved the way for a second economic revolution in Pakistan which helped the middle class to emerge as significant economic and political entity. The major part of remittances comes from Saudi Arabia (29.01 %), UAE (22.23%), USA (12.3 %), other Gulf Cooperation Council (GCC) countries (12.14 %), UK (11.77%) and EU (2.37 %). Remittances from Saudi Arabia and GCC recorded higher growth fairly owing to 9/11 incident and increased migration to that region.

Nevertheless, from 2014 there has been a decline in manpower export to Saudi Arabia and UAE as the region is subjected to rapid economic and political changes and lower crude oil prices. Along with economic policies, curtailment in mega projects and construction activities following economic slowdown has reduced the demand for labour. Pakistan received $409.5 million in November 2017 from Saudi Arabia as compared to $465 million in 2016.

In 2017, the number of Pakistani Diasporas to Saudi Arabia has shrunk considerably, accounting for 25 percent less than of what was in the previous year due to the economic policies of Saudi Arabia. The kingdom is pursuing the policies of “Saudi First” and Nitaqat (or Saudisation) scheme in job sector which aims to replace migrant workers with Saudi citizens. These policies are the part of a greater plan called Vision 2030 that restricts visa policy to reduce dependency on foreign employees from September 2017. These measures will severely affect Pakistani as well as Indian diaspora which constitutes the majority of migrant workers. Manpower export to UAE is also on declining trend but relatively less intense than Saudi Arabia’s case. The scaling down of remittances and flowing out of the Pakistani diaspora from these regions can impact country’s remittances in future. The situation could have been worse but CPEC (1+4 portfolio) encompassing energy, infrastructure, Gwadar development and industrial Cooperation brings great opportunities for all the Pakistanis including diaspora to capitalise on their skills, management expertise, and finance in Special Economic Zones (SEZs) under CPEC.

Pakistan’s Vision 2025 emphasises the private and entrepreneurship led growth where the main purpose is to “rank Pakistan in the top 50 countries on the World Bank’s Ease of Doing Business Rankings” and to “increase Diaspora investment (via remittances) in the private sector to the tune of $40 billion”. Through CPEC, Pakistan is potentially entering into a new era of industrialization with the objective of establishing resilient and competitive industries specifically locate in SEZs, joint ventures (JVs) and industrial parks. In this regard, 9 special economic zones have been prioritized in industrial cooperation of CPEC. These SEZs can be a great platform for diaspora where they can invest their finance and contribute in terms of their skills and expertise by taking the advantage of possible JVs with Chinese and foreign companies in these 9 prioritized SEZs.

The 9 Prioritised SEZs under CPEC offers possible business opportunities to the diaspora in multiple industries. Such as Rashakai Economic Zone, M-1, Nowshera offers the business prospects in Fruit/Food/Packaging industry, Allama Iqbal Industrial City (M3), Faisalabad specifically in textile/Sugar/Cement and Fertilizer Industry, ICT Model Industrial Zone, Islamabad invites businesses to invest in high tech and knowledge-based industries and Computer manufacturing/ Cellular phones manufacturing and Mohmand Marble City, FATA particularly in Marble industry/dimensional stone industry.

Sonia Plaza, the co-author of World Bank’s Fact book, emphasizes that “diaspora of developing countries and return migration can be a source of capital, trade, investment, knowledge, and technology transfers”. Diaspora carries multiple expertise and experience after sharing working space with foreign workers and multinationals. This well-equipped workforce can play a decisive role in providing expertise, know-how and investable funds in these economic zones. To increases diaspora representation and participation in new industrial order, the government may announce more incentives and technical support to diaspora to invest in SEZs. Moreover, Pakistani Embassies and Consulates in abroad may launch awareness program regarding business opportunities for diaspora in Pakistan with help of Board of Investment. They should be encouraged to emerge as entrepreneurs rather than service sellers.

There can be made a proper match-mapping between skills and resources. The financial support and expertise may come from the diaspora and institutional support can be provided by the government to “invest in Pakistan”.

 

n          The authors are Research Assistant and Senior Research Fellow respectively at Centre of Excellence for CPEC, PIDE, Islamabad.

Pakistan’s Vision 2025 emphasises the private and entrepreneurship led growth where the main purpose is to “rank Pakistan in the top 50 countries on the World Bank’s Ease of Doing Business Rankings” and to “increase Diaspora investment (via remittances) in the private sector to the tune of $40 billion”.

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