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ISLAMABAD: Special Economic Zones (SEZs) can play an important role in the development of the country as implementation of a clear SEZ policy can create job opportunities for youth, increase productivity, bring new investment, and enhance exports.

This was the crux of a, “Special Economic Zones in South Asia (Structural Change, Competitiveness and Growth)” organised by the Pakistan Institute of Development Economics (PIDE), here on Tuesday.

Delivering a special lecture on the subject, Professor Dr Aradhna Aggarwal, the head of Copenhagen Business School, Denmark, said that economic growth can come through various channels like apparel, information technology, services, mining, tourism, and others. She added “in South Asia India, Bangladesh and Sri Lanka have successfully implemented SEZs policies, while results in Bhutan and Nepal are mixed and Pakistan and Afghanistan have failed to achieve the desired results owing to political and external dynamics.”

However, Professor Dr Aggarwal stressed the need for understanding the potential of SEZs and let them be special with focusing regional and cross-border value chains, digitalization of SEZs, introduction of new forms of SEZs such as cross border E-commerce zones and digital free trade zones. To have successful SEZs a strong political will with a strong development focus and leadership, local and global collaborations and continuous evaluation and learning are a must.

She said that in five major sectors of the economy including agriculture, construction, manufacturing, mining and services in South Asia major part of the labour force is engaged in the agriculture sector. She said that over the years, productivity in India and Bangladesh has increased in various sectors while in Pakistan productivity has not increased. She said that rest of the countries in South Asia need serious structural reforms.

The regional countries diversified their exports managed to increase their exports manifold while those failed to do so couldn’t get the desired results. She said that empirically after 2000 it is proved that countries such as India seriously implemented SEZs policies with diversification managed increase their exports while Pakistan failed to do so.

Bangladesh, India, and Sri Lanka have a long tradition of operating export processing zones. The favourable fiscal, infrastructure, and regulatory conditions under which firms in these zones operate have made it possible to attract substantial foreign direct investment and thereby bring new economic activities and employment opportunities to the countries.

While it is challenging to evaluate the institutional characteristics and trade performance across zones and countries due to data limitations, the comparative assessment attempted in this study yields several lessons. In particular, diversity in operating conditions and export performance is more pronounced across different zones within a single country than across country-averages.

This finding is mainly based on the importance of good access to transport infrastructure (air and seaports), and zones established to help develop backward regions are more likely to under-perform than those in prime industrial locations.

Moreover, the effect of EPZs on diversification varies by sector or type of activity. In some sectors, EPZ activity adds to already existing exports in the countries, in others it absorbs production and exports previously performed in the mainland economy, and in a third set it brings entirely new production processes to the country.

Copyright Business Recorder, 2024

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