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Auto, logistics and agro-processing industry set to make big gains under CPEC frame

Pakistan is one of the fastest growing economies in the region and that is a good sign for the auto industry as well. Pakistan’s automobile industry is likely to double the annual car assembling to half a million units within the next 10 years if economic policies remain consistent and interest rate continues to bolster auto financing.

The demand for four-wheel vehicles will rise from 0.28 million to 0.5 million in Pakistan within the next 12 years, according to a report by the Small and Medium Enterprises Development Authority (SMEDA). Moreover the China-Pakistan Economic Corridor (CPEC) will bring a lot of opportunities for the auto sector. This in turn will benefit the transport warehousing and freight forwarding services by further expanding the auto and logistics sector. Engineering sector particularly auto, logistics and agro-processing industry are high potential areas for collaboration between Pakistan and China. Auto is one of the fastest growing sectors in Pakistan and China is concentrating on collaboration to meet the augmenting demand of four-wheel vehicles in the country. With the changing trend of consumerism in the country, demand for agro-processing products is also increasing rapidly, adding that the requirements for processed and packaged semi-cooked food items, fruits and vegetables has also highly increased. This means improvement in quality for exploring international markets.

Pakistan expects to use the multi-billion-dollar Chinese investment to significantly enhance its industrial capacity and economic productivity backed by greater energy supply. It anticipates doing this through improved geographical linkages and upgraded road, rail and air transportation systems that facilitate a higher volume of trade flow. It is also eyeing opportunities of transfer of knowledge and technology with its Chinese counterparts. There has been significant progress in the 21 industrial, 8 infrastructure and 12 Gwadar-related projects that have commenced under the CPEC banner (with several industrial projects now being operational). 4 rail-based mass transit and 6 provincial projects are also in different stages of feasibility and beyond. In addition to this, 9 Special Economic Zones have also been proposed to be set up as part of the CPEC to boost industrial development.

The federal government will set up two SEZs, including the development of an industrial park at Port Qasim, near Karachi (with 1,500 acres of land). The second SEZ will be in the Islamabad Capital Territory; FATA, AJK, GB and the provinces will have one SEZ each, as well. Punjab aspires to set up an Economic Zone along the M-2 motorway in Sheikhupura district (5,000 acres). Sindh will establish its Special Economic Zone at Dhabeji, 80 km from the Karachi airport (1,000 acres). Khyber Pakhtunkhwa will set up Rashakai Economic Zone at Nowshera (1,000 acres) for fruit, food packaging, textile, stitching and knitting industries. Balochistan will set up an SEZ in Bostan, 23 km from Quetta airport (1,000 acres with 200 acres being developed already) for industries of fruit processing, agriculture machinery, pharmaceuticals, motorbikes assembly, cooking oil, ceramics, cold storage and electrical appliances. Gilgit-Baltistan will establish an SEZ at Moqpondass (250 acres) while AJK will establish a SEZ at Bhimber. In FATA, a boundary wall has been constructed around the Mohmand Marble City with 60 percent of the site having been developed and the remaining expected to be completed by June 2018.

In the initial phase, Pakistan should ideally focus on inherent industries where it has latent comparative advantageand where its abundant human skills are optimally capitalized such as leather, textile, food processing and marble. It would also be essential to develop the skills of labor in order to maximize on technology transfer opportunities presented by our economic collaboration with China.

Pakistan’s SEZs should be designed to amplify the productivity and trade flow of its existing industrial clusters in Sialkot, Gujranwala, and Faisalabad etc. with a focus on exportand value addition. Private investment (joint ventures/independent) should be encouraged through incentives to develop SEZs. Pakistan should prioritize putting Pakistani goods and produce on the CPEC. Also, considering the contribution of service sectors in Pakistan’s economic productivity, services specific economic zones should also be established with a focus on financial, accounting, legal and construction.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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