Evaluating the Contribution of

Entrepreneurship in Special Economic

Zones under CPEC: A Case Study of
Rashakai Economic Zone (Nowshera)

Presented by: Taimoor Khan

Supervised by: Prof. Dr. Usman Mustafa
Date: 25th January, 2019
2 Introduction
 The role of (China-Pakistan Economic Corridor) CPEC in the renovation
and inventiveness of SME sector of Pakistan cannot be neglected.

 A greater economic and industrial development through (CPEC) will not

only open new avenues for trading routes through Pakistan and can attract
huge investments aimed to gain and sustain the economic growth of SMEs
sector of Pakistan.

 It is always seen that the industrial development contributes to the

development of the area, where more specifically the entrepreneurship
activities are the consequence of these industrializations.

 Development of the Entrepreneurs or SMEs sector will be promoted,

necessary for equitable and inclusive economic growth of the economy
(Haq, & Farooq, 2017).
 Introduction……

3  Entrepreneurship is defined as, ″the capacity and willingness to

develop, organize and manage a business venture along with any of
its risks in order to make a profit″.

 Special Economic Zone (SEZ) includes an area in which business and

trade laws are different from the rest of the country.

 SEZ is a specifically delineated duty free enclave that is deemed to be

foreign territory for the purposes of trade operations, duties and tariffs.

 Chinese investments in Entrepreneurship through CPEC can ensure

 The utilization of the unemployed section of the economy

 Good resource for transferring technology to enhance the
productivity
 To create surplus production with higher profitability and
employment generation capacity (Haq, & Farooq, 2017).
4 Rashakai Economic Zone (REZ)
 Rashakai Economic zone (REZ) is the proposed project of Khyber
Pakhtunkhwa Economic Zone Development and management Company
(spread over 1000 acres).

 The REZ is strategically located at M1 Motorway intersection and it is

linked to the CPEC through Burhan interchange.

 Based on the strengths of the connected districts and resource pool, REZ
has a predominant investment feasibility for different industries.

 REZ will have infrastructure of international standards including the facility

of one window operation to support the industrialists.
 4 5

Rashakai Economic zone

 Rashakai Economic Zone……

6
 Rashakai Economic Zone……

7
8 Research Questions

 What is the contribution of REZ in developing entrepreneurship under

CPEC?

 What is the perception of society about the future role of REZ, in

entrepreneurship and business creation?

 Do people have intentions of starting or developing entrepreneurship in

REZ, due to CPEC as an opportunity?
9
Objectives

The main objectives of the study includes:

 To investigate the society’s perceptions about the future role of REZ, in

Entrepreneurship and business creation.

 To examine the effect of incentives and loans facility on the intentions of

a local community for starting Entrepreneurship.
10 Research gap
 Number of studies have been conducted on CPEC and SEZ however,
the people perceptions about small business due to SEZ and incentives
from government has not been focused. So far, as per knowledge this
part of these economic activities has not been studied and reported in
literature.

 This is the baseline study for government to rethink on incentives for

small businesses SEZ and related areas.
11 Review of Literature
Authors and year Findings
published

Tang, and Koveos (2004) The development and growth of existing entrepreneurship
is a process with many societal benefits including job and
wealth creation and the advancement of innovation.
Shane (2009) Some entrepreneurs are pleased to be self-employed in a
small scale only, but others have growth aspirations for
their ventures.
Sadler–Smith (2003) Growth intention is an essential characteristic of
entrepreneurial behavior and a key ingredient in
understanding venture development and growth.
Qureshi & Herani (2011) SME sector in Pakistan thrived due to effective
entrepreneurial, managerial and skill labor, one window
customer services, and innovative services and product as
well and enhanced ability to meet customer satisfaction.
Nuri (2016) CPEC will have greater positive implications for the
country’s financial prosperity as SMEs will get a
maximum edge of profits through regional connectivity.
12 Sample Description

 Cluster sampling technique is used to collect the data.

 The selected population for our study area is 379635 household, which
represents the total population.

 Sample size 400 is obtained from proportionate sample calculator, with

95% confidence level and 5 % significance level.
13
Estimation Methodology

 Logit regression is used to analyze the data, using binary data for the
dependent variable.

 Logit (p)=log(p/(1-p))
=ß0+ß1(AG)+ß2(EXP)+ß3(INC)+ß4(GND)+ß5(EDU)+ß6(SV)+ß7(
TOB)+ß8(LOC)
14
Variable Construction

 Dependent variable: Entrepreneurship, If the person is intended

to start a new business as an entrepreneur.

 Independent variables: Age, Experiences. Income level,

Gender, Education, Saving, Loans, Incentives, Awareness about
CPEC, Regional market competitiveness.
15 Results and Discussions
Socioeconomic characteristics of Nowshera KP respondents
Socio-Economic Characteristics N Minim. Max. Mean Std. Deviation

Age 200 21.00 56.00 39.885 7.78103

Experience 200 .00 35.00 6.2600 7.15811

Monthly Income 200 10000 100000 49500 26826

Education in Years 200 .00 21.00 13.430 6.81449

Intention to Extend the Existing Business

Choice of respondents Frequency Valid Percent Cumulative Percent

Do Not want to Extend the Existing Business 131 65.5 65.5

Extend the Existing Business 69 34.5 100.0

Total 200 100.0

 Results and Discussions……

16
Intended to Start Business on Given Incentives from Government
(KPEZDMC)
Binary choice Frequency Valid Percent Cumulative Percent

No 39 19.5 19.5

Yes 161 80.5 100.0

Total 200 100.0

Opportunities to the KP Business Community

Response Frequency Valid Percent Cumulative Percent

No 23 11.5 11.5

Yes 177 88.5 100.0

Total 200 100.0

 Results and Discussions……

17
Socioeconomic characteristics of Mardan KPK respondents

Socioeconomic N Minimum Maximum Mean Std.

characteristics Deviation

Age of Respondent 200 20.00 59.00 40.13 8.37279

Experience of Business 200 .00 30.00 8.400 7.57343

Monthly Income 200 10000PKR 12,0000 64650 29311

Education 200 .00 21.00 10.58 6.32795

Intention to Extend the existing Business

Response Frequency Valid Percent Cumulative Percent

Not intended 162 81.4 81.4

Intended 38 18.6 100.0

Total 200 100.0

 Results and Discussions……

18
Intended to start a business on given incentives from a government
(KPEZDMC)
Response of respondents Frequency Valid Percent Cumulative Percent

Not willing 100 50 49.5

willing to start a business on Incentives 100 50 100

Total 200 100.0

Do you know KPEZDMC provided economic incentives under REZ

Response Frequency Valid Percent Cumulative Percent

No 48 24.0 24.0

Yes 151 75.5 99.5

Total 200 100.0

 Results and Discussions……

19
Empirical Results: Influencing Factors of Intention to Start
Entrepreneurship in Nowshera
Dependent Variable: Entrepreneurship

Variable Coefficient Std. Error Z-statistic Prob.

Age -0.183267 0.031552 -5.808392 0.0000

Income 0.491399 0.120831 4.066841 0.0000
Household-size 0.005655 0.011669 0.484577 0.6280
Experience 0.074267 0.037242 1.994180 0.0461
Loan 8.791230 1.293855 6.794601 0.0000
Incentives 0.441144 0.758283 0.581766 0.5607
Mean dependent var 0.580000 S.D. dependent var 0.494797
S.E. of regression 0.127142 Akaike info criterion 0.218660
Sum squared reside 3.136040 Schwarz criterion 0.317610
Log-likelihood -15.86602 Hannan-Quinn criter. 0.258704
Deviance 31.73203 Restr. Deviance 272.1168
Avg. log likelihood -0.079330
 20 Influencing Factors of Intention to Start
Entrepreneurship at Mardan
Dependent Variable: Entrepreneurship

Variable Coefficient Std. Error Z-Statistic Prob.

C -0.075417 0.040877 -2.844978 0.0666

Age 0.000301 0.000862 0.349627 0.7270
Saving 0.597767 0.035270 16.94825 0.0000
Loan 0.400172 0.035099 11.40120 0.0000
Household_size 0.000516 0.000693 0.744734 0.4574
Income 0.006789 0.002718 2.497784 0.0133

awareness about cpec sez 0.004041 0.007561 0.534418 0.5937

Education 0.007009 0.004068 1.723239 0.0865
Incentives 0.088797 0.013757 2.857935 0.0539
Rez_irmc 0.000995 0.016966 0.058656 0.9533
S.E. of regression 0.077125 Mean dependent var 0.580000
sum squared reside 1.130159 S.D. dependent var 0.494797
log likelihood 233.8082 Akaike info criterion -2.23802
deviance 95.291 Schwarz criterion -2.07316
Hannan-Quinn criter. -2.17133
Avg. log likelihood 88.9673 Restr. Deviance 111.914
21 Conclusions

 The results of this study infers that people of Mardan and Nowshera are
willing to invest their resources in REZ under CPEC; provided they get
financial assistance.

 Experience and Education are important factors in promoting

entrepreneurship among the people of Mardan and Nowshera as both
these variables play a vital role in information extraction.

 Study revealed that SEZ is successful if Loans are provided to the

entrepreneurs, which will increase the income level in the locality.
22 Significance and Recommendations

 The study recommends, to provide incentives to locals to ensure new

business and entrepreneurs inflow in the market.

 The incentives should also be also to nearby population for promoting

SEZs, these special economic zones are promoted through tax-free policies
and training for sustainable entrepreneurship.

 Loans on a lower rate of interest should be provided to intended business

activities. Upon successful profit these entrepreneurs will support
community strengthening and creating employment opportunities.
23