China's exploitative special economic zones in Pakistan fuel unrest

By Zarak Khan

A Pakistani currency dealer waits for a customer in Quetta on January 3, 2018, in front of an oversize Chinese yuan. [Banaras Khan/AFP]

A Pakistani currency dealer waits for a customer in Quetta on January 3, 2018, in front of an oversize Chinese yuan. [Banaras Khan/AFP]

ISLAMABAD -- Pakistan's China-backed special economic zones (SEZs) have long amounted to economic burdens on the country and have fueled local protests and unrest, experts say.

Under the China-Pakistan Economic Corridor (CPEC), a Pakistani component of China's Belt and Road Initiative (BRI), also known as One Belt One Road (OBOR), Beijing has been investing in the development of nine SEZs in Pakistan.

Each SEZ offers more lenient economic and tax policies than other regions within Pakistan as part of an effort to promote industrial growth.

But among the nine proposed SEZs, only four -- the Rashakai Economic Zone in Nowshera (Khyber Pakhtunkhwa); the China Special Economic Zone, Dhabeji (Sindh); the Bostan Industrial Zone, Quetta (Balochistan); and Allama Iqbal Industrial City, Faisalabad (Punjab) -- have witnessed any meaningful progress.

"The terms of support extended by Beijing in the majority of these [SEZ] projects have either been highly conditional or overly exploitative," Valerio Fabbri, a geo-strategic analyst focusing on China, said in August on, an Italian think-tank.

"Playing according to Beijing's policy of ensuring maximum profit at the cost of natural resources and interest of labour in Pakistan, the Chinese companies involved in the development of SEZs ... regularly face local protests," he said.

"The disillusionment of ordinary Pakistanis regarding Chinese investment in industrial sector of their country can be attributed to lack of employment opportunities or other tangible benefits to them," he added.

"Local workers and business owners are also wary of Chinese style of functioning which rarely involves forming partnerships or joint ventures with local businesses."

"Chinese investors' preference is mostly towards establishing fully-controlled businesses which would mean further erosion in local businesses and jobs," Fabbri wrote.

Exploitative practices

Despite the lack of progress, Chinese companies have asked the Pakistani government to offer a 20-year tax exemption in China-backed SEZs in the country.

"Only flexible policies can form certain advantages and attract more investors to choose Pakistan instead of other potential countries," Yang Jianguo, Chairman of the All Pakistan Chinese Enterprise Association (APCEA), told Daily Times, a Pakistan newspaper, in August.

Such a move could be a trap, economists warn.

"On one side, they are asking for tax exemption, and on the other hand, there have been private complaints of CPEC undercutting the labour market by hiring Chinese workers instead, despite employment promises," said Shakoor Ali, a Karachi-based researcher focusing on Pakistan's labour market.

"China's project to develop SEZs by providing loan money will harm Pakistan's economy and enables Beijing to leverage 'debt trap diplomacy' in the country," he said.

"Labour support groups are worried that Chinese firms will also exploit rights abuses in the China-backed SEZs in Pakistan," said Abdul Jabbar, a Karachi-based labour rights activist.

Chinese companies do not invest in education, health or infrastructure in the areas where they operate, Jabbar said.

Pakistani labour groups have long accused Chinese companies in Pakistan of violating the rights of workers and ignoring safety precautions at sites that are part of the CPEC.

Such abuses in Chinese-funded projects have sparked protests across the country.

The SEZs have also been bogged down in other issues, including the forceful and secretive acquisition of land from locals.

In Gilgit Baltistan, a region that shares a border with China's Muslim-majority Xinjiang Uighur Autonomous Region and is a gateway to the BRI, the federal government has allocated about 250 acres of land for the Moqpondass SEZ in the region.

Civil society groups and rights activists in the area have opposed the acquisition of the additional land by Chinese companies.

Creating unrest

"The development and implementation of SEZs will further worsen the law and order situation in the country," a Quetta-based security official said on the condition of anonymity because he is not authorised to speak to the media.

The Chinese Communist Party has inked deals with Pakistan for several multi-billion-dollar infrastructure projects, raising concerns over Chinese influence in the country.

The exponential growth of Chinese influence in Balochistan province -- with Chinese companies exploiting local resources without care or concern for the impact on locals -- is driving serious unrest in the province, say lawmakers and observers.

Anger over growing Chinese influence in Balochistan has spurred Baloch and Sindhi militant organisations to ally with each other, fuelling concern that the combined group will step up violent activities in the region.

In late April, the Balochistan Liberation Army (BLA), a component of the Baloch Raji Aajoi Saangar (BRAS), claimed responsibility for killing four people, including three Chinese teachers, in a suicide attack inside a state-run university in Karachi.

BLA militants in February also staged twin assaults on army posts in Noshki and Panjgur districts, Balochistan.

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