Pakistan and Xinjiang’s free trade zone

Xinjiang is undergoing transformation. President Xi Jinping attaches great importance and priority to the rapid development of Xinjiang. In pursuit of President Xi’s vision, China is allocating significant resources to modernise and develop Xinjiang. China is actively constructing modern infrastructure, enhancing the supply chain system, and fostering livelihood opportunities. Due to the government’s commitment and continuous support, the economy of Xinjiang is expanding. According to statistics, Xinjiang’s total GDP reached 1.92 trillion RMB in 2023, with a growth rate of 6.8%. It is predicted that the growth rate for 2024 will be 6.6%.

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

Recently, China launched a specialised Free Trade Zone (FTZ) to further diversify and strengthen the economy. The Xinjiang Pilot FTZ was unveiled on November 1, 2023, with the government issuing licenses for three sub-zones in Urumqi, Horgos, and Kashgar under the FTZ. It was stated that half of the 129 pilot reforms planned for the 2024 year will be implemented in these sub-zones. The FTZ is attracting companies and investment, promoting modern technologies, and has established one of the state-of-the-art factories for semiconductor production. According to data, during the first three months of FTZ, 86 companies registered with the FTZ, and it attracted $1.75 billion in investment.

Covering 180 square kilometres, the FTZ has been granted more autonomy to implement reform and attract investment. China deems it necessary to contribute to building a golden channel between Asia and the West, with predictions that the FTZ will create opportunities for Central Asia, West Asia, and South Asia.

Pakistan, as the home of 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-crafted policy and implementation framework can help Pakistan fully exploit the potential of the FTZ and Xinjiang, particularly in boosting trade. Streamlining policy mechanisms to promote and facilitate transit trade through the CPEC route is crucial. A study has even suggested that trade through the CPEC route could be a win-win proposition.

The study, published in the Advanced Journal of Transportation in 2019, analysed the possible impact of Gwadar on the competitiveness and trade of China with six countries, namely, Oman, the Kingdom of Saudi Arabia, France, Kuwait, Germany, and the Netherlands. The findings of the study suggested that travel time would 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 underlined that trading through the CPEC route would assist trading partners in saving $1,857 for Oman, $1,457 for KSA, $1,457 for Kuwait, and $1,357 for Holland, Germany, and France per container. It will enhance the competitiveness of each trading partner in external markets. Trade through CPEC will also create economic opportunities for Pakistan. It has been predicted that Pakistan can earn revenue from $7-8 Billion to $10-12 billion annually in the form of services and fees. Local industry and service sectors along the route will also benefit, with job creation being an additional benefit.

Secondly, the Pakistani business community and industrialists can benefit from the FTZ of Xinjiang. Investment in the FTZ will open new doors and provide multiple opportunities. Firstly, it will open access to the Chinese market. Secondly, it will be easier to reach the Central Asian and European markets. Thirdly, products will become more competitive as the FTZ offers inexpensive services like electricity. Moreover, the Chinese government provides many incentives to investors. Fourthly, China has a large pool of skilled labourers, a fundamental element in business development. Moreover, in recent years, China has implemented a special program for skill development in Xinjiang, assisting in increasing the skill level of the local community and creating new livelihood opportunities. Thus, the local market is expected to generate skilled labour in abundance. Fifthly, the supply chain would be another advantage.

Thirdly, China has been focusing on modernising the agriculture sector of the Xinjiang region for many years. Smart and green agriculture is one of the key areas of work. China has also invested in mechanising farming by introducing new technologies. Pakistan can develop linkages with Xinjiang and learn modern, smart, green agriculture practices. The Xinjiang region has already shown 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 key areas of cooperation under CPEC, making it easier to strengthen agricultural cooperation.

Fourthly, Pakistan can also learn the art of developing rapid skill development from Xinjiang. It is notable that in recent years, Xinjiang has revolutionised the concept of skill development. The government has established a number of educational and skill development institutions in Xinjiang, helping the region produce human capital, which is assisting in attracting investment. Thus, it is suggested that Pakistan should establish linkages with Xinjiang-based skill institutions and search for opportunities under the Luban programme.

Fifthly, Pakistan can also develop cooperation to promote high-quality development in Pakistan, as Xinjiang is aggressively following a high-quality development vision. It will help implement the climate agenda and fulfil international obligations on the climate front.

In conclusion, it is common knowledge that Pakistan is desperately looking for economic opportunities to reverse its economic deterioration. The analysis indicates that Xinjiang has the potential to provide many economic opportunities. Thus, 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.

THE WRITER IS A POLITICAL ECONOMIST AND A VISITING RESEARCH FELLOW AT HEBEI UNIVERSITY, CHINA

Published in The Express Tribune, April 29^th, 2024.

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