The decision was taken at a recent meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Asad Umar. The sources said that BoI gave a detailed briefing on its mandate. It was stated that the Board of Investment acts as a Secretariat of the Board of Approval (BOA) and Approval Committee. According to its mandate, it overviews Special Economic Zones, scrutinizes the applications, reviews development agreements, promotes investments into SEZs process applications for additional incentives, acts as SEZ Authority for the ICT, supports and facilitates the SEZ Authorities on request.
The BoI officials highlighted the detailed procedure for the approval of SEZs. It was stated that the maximum time limit for assessment of documents of developer for SEZ in Board of Investment is 90 days. It was also pointed out that there is duplication in the mandate of Approvals Committee (AC) and Board of Approvals (BOA). Moreover, BoI takes an unnecessarily long time for scrutinizing the application of developer for development of SEZ.
In order to speed up the process for approval of SEZ, it was suggested that Approvals Committee and Board of Approvals be merged into one entity, timeframe for assessment of documents at BoI to be reduced from 90 days to 45 days, and federal and provincial governments simplify procedures.
The Board of Investment gave an overview of SEZs. It was stated that there are seven notified SEZs: (i) Khairpur SEZ, Khairpur, (ii) Bin Qasim Industrial Park, Karachi, (iii) Korangi Creek Industrial Park, Karachi (iv) Quaid-e-Azam Apparel Park, Sheikhupura, (v) Value Addition City, Faisalabad, (vi) Allama Iqbal Industrial city, Faisalabad, and (vii) Hattar SEZ, SEZ, Haripur. Nine prioritized SEZs were also included in the CPEC programme which are; (i) Rashakai Economic Zone, Nowshera, (ii)Allama Iqbal (M 3) Industrial City, Faisalabad, (iii) Dhabeji, Thatta, (iv) Port Qasim, Karachi, (v) ICT Model Industrial Zone, Islamabad, (vi) Moqpondass SEX, Gilgit Baltistan, (vii) Mirpur SEX, Azad Jammu & Kashmir, (viii) Bostan Industrial Zone, Balochistan, and (ix) Momand marbel City, Fata. Rashakai Economic Zone, Nowshera, M-3 Industrial City, Faisalabad, and Dhabeji, Thatta, have been prioritized for the first phase of SEZs under CPEC program.
The meeting was updated on the status of existing seven SEZs and three CPEC prioritized SEZs. The key issues for these SEZs were 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 left even after a lapse of almost 16 years due to non-provision of utilities. Similarly, in Quad-e-Azam Apparel Park , Sheikhupura, not a single plot has been sold out of its total 521 plots. The cost of land of SEZs in the country was highlighted, ranging from Rs 5.6 million to Rs 150 million per acre, land models (based on state owned land, public, private and lease) of China, India , Vietnam and Pakistan for establishment of SEZ were explained.
While highlighting governance of SEZ, 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 (i) no regulatory & enforcement body, (ii) misuse of SEZs. No binding law on relocation of local industry inside SEZs, (iii) non-functional layers of institutions (SEZAs and SEZs committees) and role duplication of Approvals Committee (AC) and Board of Approval (BoA).
Comparative details of incentive structure for the industries in SEZs in China India, Vetnam and Pakistan were provided in the meeting. It was stated that these countries have given tax exemption to the investors for different periods on their export of products from SEZs. It was further stated that in Pakistan income tax exemption for the developer is for five years and there is also tax exemption for the enterprise for 10 years if in production by June 30, 2020 and five years for production thereafter. It was stated that pioneer industries scheme in SEZs also enjoy corporate income holidays for five years and duty free and tax free import of capital goods. Similarly, Auto Policy 2016-2021 also provides tax incentive for auto manufacturer in SEZs.
Board of Investment stated that additional incentive package for priorities Special Economic Zones package under CPEC program for establishment/relocation of industry from abroad prepared in consultation with all the provinces, GB AJ&K and FATA was approved by the Cabinet on May 12, 2017 which was as follows;(i) provision of plots on installments (provinces are already providing plots on installments);(ii) mark-up support by provincial government;(iii) freight subsidy by federal government;(iv) one window operation by SEZA(existing SEZ law provides for this incentive);(v) bulk purchase of utilities by the developer (Nepra already allows for bulk purchase of electricity)
Board of Investment suggested that mark-up support and freight subsidy be deleted. The meeting also observed that a provision of utilities (electricity & gas) is the responsibility of the federal government. Without gas and electricity, no SEZ can be developed. Therefore, federal government must ensure provision of gas and electricity for attracting prospective investors to establish industry in the SEZs.
The ECC directed Power & Petroleum Divisions to prepare plans for provision of uninterrupted electricity and gas to SEZs in consultation with provincial governments and within 30 days brief ECC on them. The expenditure on provision of utilities like grid stations shall be met through PSDP.
The ECC also observed that the provincial governments are required to speed up the work on establishment of SEZs and provision of requisite infrastructure for establishment of industry.
It was also observed that Balochistan, despite being the largest province is also the most backward which requires special attention for establishment of SEZs to improve economy of the province and also generate employment for the local people. Only Bostan Industrial Zone had been included in the SEZs Hub and Gwadar Industrial Zones are very important for establishment of industries, therefore, they may also be included in the SEZs in order to receive incentives. It was further revealed that Free Trade Zone (FTZ) was already being established in Gwadar under CPEC program.
It was stated that Khyber Pakhtunkhwa has a number of beautiful areas and it can play a vital role in development of tourism in the country to attract foreign tourists. The ECC directed BoI to prepare framework for development of tourist destinations (Special Economic Zones) in Khyber Pakhtunkhwa in consultation with its government. The requirement of minimum land required should be reviewed as there is a trend of vertical development.
The ECC noted the position presented by the Board of Investment regarding issues faced by existing SEZs and plan for their resolution along with timelines and took the following decisions: (i) 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 devolved nature of the subject;(ii) BoI to complete the processing of SEZs' proposals within 45 days mainly focusing on confirmation of availability of gas and electricity;(iii) directed BoI to initiate requisite process for necessary amendments in SEZs Act 2012 to further empower the provincial governments to process application for SEZs;(iv) directed Power Division to prepare a comprehensive plan, in consultation with provincial governments for provision of uninterrupted electricity to existing all industrial zones and present the same to the ECC within 30 days for its consideration;(v) directed Petroleum Division to devise a plan for provision of gas to all existing industrial zones in consultation with provincial governments and Board of Investment and present the same to the ECC within 30 days for consideration;(vi) cost of provision of utilities (gas and electricity) to SEZ, will be met through PSDP;(vii) directed BoI to submit the case to Cabinet for withdrawal of the two additional incentive packages for SEZs under CPEC programme, i.e, mark-up support by provincial government, and freight subsidy by federal government;(viii) directed BoI to prepare framework for development of tourist destinations as Special Economic Zones, in Khyber Pakhtunkhwa in consultation with the provincial government and ;(ix) directed BoI to revisit the minimum land required for establishment of IT, Services and Health Industries in SEZs in consultation with provincial governments.
