Free trade zone of Pakistan and Xinjiang

Free trade zone of Pakistan and Xinjiang

Xinjiang is undergoing transformation. President Xi Jinping attaches great importance to and prioritizes the rapid development of Xinjiang. In an effort to achieve President Xi’s vision, China is allocating huge resources to modernize and develop Xinjiang. China is actively building modern infrastructure, improving supply chain systems, and fostering livelihood opportunities. Due to the government’s commitment and continued support, Xinjiang’s economy is growing. According to statistics, Xinjiang’s total GDP will reach 1.92 trillion RMB in 2023, with a growth rate of 6.8%. The growth rate for the year 2024 is predicted to be 6.6%.

It is worth noting that China is focusing on green development in the region, promoting new types of energy such as wind and solar energy. The latest statistics show that Xinjiang has installed 35.68 million kW of wind power and 34.35 million kW of solar power, totaling 70 million kW, equivalent to half of the total installed electricity capacity. The government aims to reach the target of 89 million kW by the end of 2025. China is working to create a new type of energy model that can be replicated in the BRI and other Western countries.

Recently, China launched a Free Trade Zone (FTZ) specifically to diversify and further strengthen the economy. The Xinjiang Pilot FTZ was announced on November 1, 2023, with the government issuing licenses for three sub-zones in Urumqi, Horgos and Kashgar under the FTZ. It is stated that half of the 129 pilot reforms planned for 2024 will be implemented in this sub-zone. FTZ attracts companies and investments, promotes modern technology, and has established one of the most advanced factories for semiconductor production. According to the data, in the first three months of the FTZ, 86 companies registered with the FTZ, and it attracted $1.75 billion in investment.

Covering 180 square kilometers, the FTZ has been given more autonomy to implement reforms and attract investment. China considers it necessary to contribute to building a gold channel between Asia and the West, with the prediction that the FTZ will create opportunities for Central Asia, West Asia and South Asia.

Pakistan, as home to the China-Pakistan Economic Corridor (CPEC) and a close ally of China, is uniquely positioned to reap the benefits of the FTZ and Xinjiang. A well-designed policy and implementation framework can help Pakistan fully exploit the potential of the FTZ and Xinjiang, especially in increasing trade. Streamlining policy mechanisms to promote and facilitate transit trade through the CPEC route is essential. A study has also suggested that trade through the CPEC route could be a win-win proposition.

A study published in the Advanced Journal of Transportation in 2019, analyzed the possible impact of Gwadar on China’s competitiveness and trade with six countries, namely, Oman, the Kingdom of Saudi Arabia, France, Kuwait, Germany, and the Netherlands. The findings suggest that travel time will be reduced by 20 days for Oman, 21 days for KSA, 24 days for Kuwait, and 21 days for the Netherlands, Germany and France by trading through the CPEC route. Further, the results of the study underline that trade through CPEC route will help trading partners in saving $1,857 for Oman, $1,457 for KSA, $1,457 for Kuwait and $1,357 for Netherlands, Germany and France per container. It will increase the competitiveness of each trading partner in foreign markets. Trade through CPEC will also create economic opportunities for Pakistan. It has been predicted that Pakistan can earn from $7-8 Billion to $10-12 billion annually in services and fees. Local industry and service sectors along the route will also benefit, with job creation as an added benefit.

Second, Pakistan’s business and industrial community can benefit from the Xinjiang FTZ. Investment in FTZ will open new doors and provide various opportunities. First, it will open access to the Chinese market. Second, it is easier to reach Central Asian and European markets. Third, the product will be more competitive because FTZ offers cheap services such as electricity. In addition, the Chinese government provides many incentives to investors. Fourth, China has a large pool of skilled labor, a fundamental element in business development. In addition, in recent years, China has implemented a special program for skill development in Xinjiang, helping in improving the skill level of the local community and creating new livelihood opportunities. Thus, the local market is expected to generate a large number of skilled workers. Fifth, the supply chain will be another advantage.

Third, China has focused on modernizing the agricultural sector in Xinjiang province for many years. Smart and green agriculture is one of the main areas of work. China has also invested in mechani singing farming by introducing new technology. Pakistan can develop ties with Xinjiang and learn modern, smart and green agricultural practices. Xinjiang province has shown a keen interest in developing agricultural cooperation with Pakistan. In recent months, delegations from Xinjiang have visited Pakistan to explore areas of cooperation, and Pakistani delegations have also visited Xinjiang. Moreover, agriculture is one of the main areas of cooperation under CPEC, making it easier to strengthen agricultural cooperation.

Fourth, Pakistan can also learn the art of developing rapid skill development from Xinjiang. It is notable that in recent years, Xinjiang has revolutionized the concept of skill development. The government has established several educational and skill development institutions in Xinjiang, helping the region produce human capital, which helps in attracting investment. Therefore, it is suggested that Pakistan should establish linkages with skilling institutions based in Xinjiang and seek opportunities under the Luban program.

Fifth, Pakistan can also develop cooperation to promote high-quality development in Pakistan, as Xinjiang aggressively follows the vision of high-quality development. It will help implement the climate agenda and meet international obligations on the climate front.

In conclusion, it is well known that Pakistan is desperately looking for economic opportunities to reverse its economic decline. The analysis shows that Xinjiang has the potential to provide many economic opportunities. Therefore, Pakistan should start engaging with Xinjiang officials, and CPEC provides us with an excellent platform to build on. It will be a win-win proposition for both countries.