Govt to tackle impediments in development of SEZs under CPEC

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–Board of Investment directed to review approval process of special economic zones

–ECC tells BoI to complete processing of SEZs’ proposals within 45 days; focus on confirmation of availability of gas, electricity

–Calls for special attention for establishment of SEZs in Balochistan to improve economy, generate employment for locals

ISLAMABAD: The federal government has decided to tackle the impediments in development of Special Economic Zones (SEZs) which are not only discouraging foreign investment in the country, but are also obstructing the China-Pakistan Economic Corridor (CPEC) implementation plan.

According to an official privy to the decisions taken during the recently held meetings of the federal cabinet and the Economic Coordination Committee (ECC), the government has directed the Board of Investment (BoI) to review the approval process of SEZs.

The ECC, during its recent meeting, also noted that no investment could come to the SEZs in the present state of development where even the prioritised zones lack infrastructure and utility services.

Apart from other steps suggested by ECC, BoI has also been directed to revamp its processes with a view to reducing the role of the federal government in the approval process of SEZs.

ECC of the cabinet noted the position presented by the BoI regarding issues faced by existing special economic zones and plan for their resolution alongside timelines besides directing the BoI to revamp its processes with a view to reduce the role of the federal government in the approval process of SEZs in line with the developed nature of the subject.

The meeting also asked the BoI to complete the processing of SEZs’ proposals within 45 days while mainly focusing on confirmation of availability of gas and electricity.

It also directed the BoI to initiate a requisite process for necessary amendments in SEZs Act 2012 to further empower the provincial governments to process applications for SEZs.

The BoI was directed to ask the Power Division to prepare a comprehensive plan in consultation with provincial governments for the provision of uninterrupted electricity to all existing industrial zones and present the same to the ECC within 30 days for its consideration.

It was also decided in the meeting that the cost of provision of utilities (gas and electricity) to the special economic zone will be met through PSDP.

The BoI was also directed to submit the case to the cabinet for withdrawal of the markup support by provincial government and freight subsidy by the government of Pakistan for SEZs under CPEC.

The BoI was asked to prepare a framework for the development of tourist destinations as SEZs in Khyber Pakhtunkhwa (KP) in consultation with the provincial government. It also directed BoI to revisit the minimum land required for establishment of IT, service and health industries in SEZs in consultation with provincial governments.

The meeting was updated on the status of existing SEZs and three CPEC prioritised SEZs. The key issues for these SEZs were the provision of requisite infrastructure, power, gas, and security. It was pointed out that Hattar Economic Zone was approved in 2003, however, out of its 318 plots, only 274 plots were sold and 44 plots are still vacant even after the lapse of almost 16 years, due to non-provision of facilities.

Similarly, in Quaid-e-Azam Apparel Park Sheikhupura, not a single plot has been sold out of its total 521 plots. The cost of land of SECs in the country was highlighted which were ranging from Rs5.6 million to Rs150 million per acre. Land modules based on state-owned land, public, private and lease of China, India, Vietnam and Pakistan for the establishment of SEZs were explained.

While highlighting governance for SEZs, the meeting was apprised about the role of federal and provincial governments in China, India, Vietnam and Pakistan for regulating SEZs, it was stated that key issues of governance of SEZs in Pakistan were no regulatory and enforcement body, misuse of SEZs.

No law binds relocation of local industry inside the SEZs, non-functional layers of institutions (SEZAS and SEZs committees) and role duplication of approval committees and board of approvals. Comparative details of incentives structure for the industry in SEZs in Pakistan and other countries were also discussed. It was stated that these countries have given tax exemptions to the investors for different periods on their export of products from SEZs.

It was told that in Pakistan income tax exemption for the developer is for five years, and there is a tax exemption for the enterprise for 10 years if in production by June 2020 and five years for production thereafter. It was stated that pioneer industry schemes in SEZs also enjoyed corporate income holidays for five years and duty-free and tax-free import of capital goods. Similarly, Auto Policy 2016-2021 also provide a tax incentive for auto manufacturers in the SEZs.

The BoI stated that additional incentive package for SEZs package under CPEC for establishment/relocation of industry from abroad prepared in consultation with all the provinces, GB, AJK, and FATA was approved by the cabinet on May 12, 2017, which included provision of plots on installments, mark-up support by provincial governments, freight subsidy by federal government, one-window operation by SEZA, bulk purchase of utilities by the developer and rent out sheds for industrial use.

However, it suggested that points pertaining to mark-up support by provincial governments and freight subsidy by the federal government be deleted.

The meeting also observed that provision of utilities i.e. electricity and gas is the responsibility of the federal government. Without gas and electricity, no SEZ can be developed.

The ECC directed the power and petroleum divisions to prepare plans for uninterrupted electricity and gas supplies to the SEZs in consultation with the provincial governments and brief the ECC within 30 days.

The expenditure on the provision of utilities like grid stations shall be met through PSDP. The ECC also observed that the provincial governments are required to speed up work on the establishment of SEZs and provision of requisite infrastructure for the establishment of industry.

It was also observed that Balochistan is the most backward province which requires special attention for the establishment of the SEZs to improve the economy and generate employment for the locals.

Only Bostan Industrial Zone has been included in the SEZs from Balochistan while Hub and Gwadar industrial zones are also very important and therefore they need to be included in the SEZs in order to have incentives for the locals. It was also informed that the Free Trade Zone (FTA) was also being established in Gwadar under CPEC.

It was stated that KP has a number of beautiful areas and it can play a vital role in the development of tourism in the country to attract foreign tourists. The ECC directed BoI to prepare a framework for the development of tourist destinations in KP in consultation with its government.

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