US
balks at Pakistan war-zone factories
By Syed Fazl-e-Haider
QUETTA, Pakistan - In Washington, a bill seeking to establish reconstruction
opportunity zones (ROZs) along the war-torn Pakistan-Afghanistan border and
elsewhere in Pakistan is stalled due to feuding over labor standards and
duty-free provisions.
While the United States Senate and the House of Representatives have accepted
the Kerry-Lugar bill, which triples non-military assistance to Pakistan to
US$1.5 billion annually for five years, they are at an impasse on the ROZs,
intended to be sites for factories producing goods for duty-free export.
The Pakistani business community has urged the US government to implement the
ROZ program immediately, but critics say the zones could be used to warehouse,
label or package textiles
made elsewhere in Pakistan, such as Faisalabad and Karachi, or lead to
trans-shipment from China.
American manufacturers and unions also worry that US jobs are at stake, with
labor in Pakistan as low as the equivalent of 35 US cents an hour.
The ROZs would be set up in North-West Frontier Province, Pakistan-administered
Kashmir as well as along the Pakistan-Afghan border.
United States President Barack Obama had asked Congress to give him two key
tools to fight religious extremism in the region - aid and trade. Under the
proposed legislation, the US has imposed no production cap and the proposed
bill would authorize Obama to give Islamabad the go-ahead for duty-free exports
from the ROZs.
Pakistan plans to encourage investors to establish industries in the ROZs.
China has already pledged to make various investments in Pakistan through the
Pak-China Investment Co (PCIC). Some analysts believe that the Chinese will
invest in the ROZs directly or through the PCIC to take advantage of the
zero-tariff policy.
Islamabad also expects American investment in the zones. Iftikhar Ali Malik,
founder chairman of the Pakistan-US Business Council, argues that "once
Pakistanis are provided with the right access to the US market, the country
will not be in need of any aid as trade is the best substitute for aid",
according to a Business Recorder report.
Debate over the ROZ proposals come as poverty in Pakistan has risen to 40% amid
persistent high inflation and the withdrawal of foreign investment due to the
poor security environment.
The country's trade deficit jumped to US$2.2 billion in July and August, the
first two months of the present fiscal year, with exports and imports both
declining, according to the Federal Bureau of Statistics.
Poverty may worsen, say local critics, as dependence on support from the
International Monetary Fund (IMF) increases. Pakistan was forced to turn to the
IMF for a $7.6 billion emergency loan package last November to avert a balance
of payments crisis. The amount was subsequently raised to $11.2 billion. The
support comes with cost-cutting and other measures which critics say will cause
job losses.
Syed Fazl-e-Haider, sfazlehaider05@yahoo.com, is a Quetta-based
development analyst in Pakistan. He is the author of six books, including
The Economic Development of Balochistan (2004).
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