Economic zone awaiting activation

Haier

In recent years, perhaps one of the greatest economic developments between Pakistan and China has been that of the Haier & Ruba Economic Zone, established in November 2006 as a joint project.

To understand the importance of this project, it is crucial to consider all aspects of the matter at hand. As it stands, the Haier & Ruba Economic Zone has two stages: the first stage of the project is operational in Haier Industrial Park in Lahore. This area spans over 330,000 square metres, and include start up companies dealing with automobile unit Shiffing and packing solutions facility EPS. The second stage is planned for northwest Lahore, covering 2 square kilometers. All in all, the project investment was estimated at a sizeable 140 million RMB. However, despite its groundbreaking nature, very little headway has been made on the project so far.

Why won’t the project take off? There are many problems working in tandem to obstruct this process. The main problems faced by the Zone are related to tax and property – namely, the privilege policy and the land prices. The former makes profit earning difficult by limiting tax exempt periods for the first five years of operation, whereas the latter is a private asset with astronomically high prices in the country. For reference, the prices were drastically raised after the announcement of the project – from the original 17 USD to 140 USD per square meter.

The bureaucratic issues surrounding Haier and Ruba’s project make it difficult for investors to proceed with business. During initial investment promotions in China, over one hundred companies showed interest in the project. Out of these, 36 companies signed memorandums of understanding with the Haier and Ruba Groups. However, many of these names withdrew their investments as the risk of loss became clearer, making the second stage of the project more difficult to execute.

In an effort to negotiate their way around red tape and policy issues, the Haier Group last visited Pakistan in August 2009 to meet with their partners and the government. So far, the status quo remains intact: the first stage of the zone is operational, whereas the second remains tied up in policy. At this point in time, the way forward seems clear: it is a must to prioritize smooth operations at the Haier Industrial Park, while negotiating with the government over land acquisition issues faced by the second stage of the project. Haier Group has also announced plans to consider new investors at this time, while maintaining their efforts to negotiate lower prices and taxes.

Although it may seem like an uphill battle, the returns are immense: it improves both countries’ relationships with each other, while ensuring a sustainable economic future for Pakistan. Haier and Ruba Groups have invested manpower and money into this project, and are confident that their venture will be successful. All they need now is a disentangling of phase II from the red tape it is currently mired in for them to move forward and make this dream a reality.

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