Sources told Business Recorder Thursday that the issue of tax exemptions and concessions was discussed during the third meeting for formulating policy for relocation of industry into Pakistan. The 3rd meeting held at the Board of Investment (BOI) deliberated on the formulation of an incentive package to attract relocation of appropriate industry into Pakistan.
The representatives from FBR provided a consolidated document to the BoI containing details of incentives provided to various sectors in terms of exemptions in customs duty and sales tax. It was also pointed out that on federal level more liberal fiscal incentives should be discouraged as FBR is now phasing out concessional regimes.
The representative of Khyber Pakhtunkhawa Economic Zones Development & Management Company (KPEZDC) apprised the participants about incentives being offered by the government of KP in addition to SEZs incentives. The main incentives included 25 percent discount on the price of land, refund of electricity bill for a period of 3 years and discount on transportation cost from Karachi port and 25 percent of the equity investments for women entrepreneurs subject to maximum of Rs3 million per investor with regards to specific measures to avoid distortions in local industry and transfer of obsolete inefficient and environmentally harmful technologies. The representative of the government of KP proposed the following measures.
Firstly, the current Pakistan Legislation/PEPA is a world class law and the NEQS are comparable internationally with many developed countries.
The EIA and EIS process must be diligently followed under the provincial Environment Protection Agency (EPA). The EIS is Environmental Impact Statement (EIS) and EIA- technical tool that identifies, predicts, and analyses impacts on the physical environment.
Secondly, there is generally a capacity and capability issue regarding environmental monitoring and enforcement in Pakistan. The professional strengthening of the provincial EPAs needs to be done to meet the challenge of work during CPEC actualisation.
Thirdly, the incentivization of partnerships between Chinese local investors is the key to success. Hence the joint interest partnership route is the correct and positive approach. Restrictive checks or negative-incentivization may result in quite the opposite ie investment may not come in spite of good intentions.
Fourthly, the institutional incentives are considered and built for those companies that hire Pakistani work force and trains them.
Fifthly, strengthening of third party inspection of machinery and equipment imported into Pakistan need to be ensured. The mechanism to undertake pre-shipment inspection and certification of goods is already in place. This system can be made more reliable.
The representative of industries department AJ&K shared the sectors that could invite investment. The major focus was on minerals and gemstone industry. The incentive regime that AJ&K is currently following is their industrial policy and National Mineral Policy. The highlighted incentives were exemption of sales tax for a period of five years from the date of production and exemption of octroi and local taxes for five years.
The representatives of industries department, GB highlighted five major sectors where the joint ventures could be entered into by the local and the relocating agriculture. The chair directed that written viewpoint/proposals of government of GB may be submitted before the next meeting.
The information received from industries department Punjab were also highlighted that a relocation policy was under way in Punjab and likely to be approved shortly. The same would be shared after its formal approval by the competent forum. Their priority sectors are ceramics industry and power sector.
The representatives of Ministry of National Food Security gave a presentation on investment opportunities in the agro and farming sectors. The BOI directed that mapping done by NARC can be used by the Ministry of NFS for formulating its formal comments/proposals for the incentive package.
The representatives from FBR provided a consolidated document containing details of incentives provided to various sectors in terms of exemptions in customs duty and sales tax. It was also pointed out that on federal level more liberal fiscal incentives should be discouraged as FBR is now phasing out concessional regimes.
The president FPCCI suggested that customs duty on plant and machinery should be zero so that new industry could be encouraged. The FBR may focus on revenue collection from sales tax. He also suggested a meeting with the sector representative organisations through FPCCI before finalising the incentive package. In this context, the FPCCI shall provide a list of sector-specific associations to facilitate BOI for interaction. The president FPCCI highlighted that Pakistan''s trade deficit is widening while global environment is not supportive. He also expressed the view that the structure of industry impacts on the structure of exports as well. Pakistan can improve its exports surplus through value addition and export orientation. It was also mentioned that along with technical workers the low wage workers must also be Pakistanis in all the relocating industry.
Representatives from Ministry of Textile identified sectors having potential to attract relocation including Manmade Fibre and Filament Plant Breeders Act; investment in ginning, open end, shuttle less and processing units and dyes and chemicals.
He also shared following incentives available to textile sector, ie, duty drawback of taxes at following rates: garments 7 percent, made-ups 6 percent, processed fabric 5 percent, and yarn and greige fabric 4 percent. Textile machinery imports are subjected to zero per cent customs duty and zero per cent sales tax. Cotton imports are liable to zero percent duty and sales tax.
Other incentives available to textile sector included zero per cent sales tax regime, long-term financing facility at 5%, export refinance at 3%, import duty on manmade fibres other than polyester at 0% and technology up-gradation fund support scheme.
With regards to fiscal or financial incentives, representatives of Ministry of Textile Industry conveyed that his ministry is of the view that no further incentives are required to be provided from the Pakistani side other than the initiating training programmes and availability of developed land. Such initiatives would also encourage domestic manufacturers to invest as well.
The CEO NPO highlighted that in order to ensure the employment and transfer of technology, a Labour Deletion Programme can also be one of the options. It was also pointed out that incentives should be given only when a relocated company/enterprise/firm has entered into a joint venture with its counterpart in Pakistan.
After detailed discussions and deliberations, it was agreed upon that BoI shall devise an incentive package based on the input given by the stakeholders and in the best national interest.
Copyright Business Recorder, 2017