POLITICAL ECONOMY OF SPECIAL ECONOMIC ZONES UNDER CPEC IN PAKISTAN: PROSPECTS AND CHALLENGES

Abstract

The political economy of Special Economic Zones (SEZs) under the China-Pakistan Economic Corridor (CPEC) represents a significant component of Pakistan's economic strategy, aiming to stimulate industrial growth, enhance trade connectivity, and alleviate poverty (Samad, 2025) . Established as part of China's One Belt and One Road initiative, the CPEC was launched in 2013 to improve bilateral economic relations between Pakistan and China, with SEZs playing a central role in attracting foreign direct investment (FDI) and creating job opportunities in various regions of the country, particularly in underdeveloped areas such as Khyber Pakhtunkhwa and Balochistan. (S. Khan et al., 2025), (Noor, 2025).

SEZs are designed to operate under favorable regulatory conditions, offering incentives such as tax holidays and streamlined processes to encourage both domestic and international businesses to invest. The initiative aims to enhance Pakistan's export capacity and facilitate the country's integration into global supply chains by leveraging its strategic geographic location, which connects western China to Gwadar port and broader international markets (M. S. Ahmad, 2023), (Wikipedia, 2025). However, the establishment of these zones is not without controversy, as various political, economic, and social challenges threaten their effectiveness, including governance issues, regulatory inefficiencies, and security concerns that undermine investor confidence and local support. (Shabbir et al., 2021), (Beg, 2020), (Nigar & Qayyum, 2021).

Critics argue that the ambitious framework for SEZs may lead to economic enclaves that do not effectively address the needs of local communities, risking increased inequality and social unrest. Moreover, questions regarding the equitable distribution of benefits and the potential displacement of local businesses have prompted concerns over the sustainability of these initiatives (Nigar & Qayyum, 2021), (Faisal et al., 2025), (Agha, 2020). As the political landscape continues to evolve, the long-term success of SEZs under CPEC will depend on the ability of policymakers to navigate these complex challenges while fostering a conducive environment for investment and sustainable development. (I. Ahmad & Taidong, 2020), (Zahoor et al., 2024)