Special Economic Zones in Pakistan<\/span><\/strong><\/span><\/h2>\nSpecial economic zones (SEZs) are zones created with the purpose to escalate trade, investment, job creation through effective administration and financial policies incorporating investment, taxation, trade, quotas, customs, and labor regulations.<\/span><\/p>\nHistory of SEZs:<\/u><\/strong><\/span><\/p>\n\n- According to World Bank\u2019s 2019 annual report, “by some estimates, there are approximately 5400 zones in 147 countries, more than 500 SEZs are in pipeline, which are creating jobs and direct trade-related value added in zones.\u201d<\/span><\/li>\n
- History has witnessed the role of SEZs to develop economies. The global experience suggests that Special Economic Zones SEZs are an important source for diversification of the economy, reduction in regional disparities, clustering of economic activities for complementarity generation with local industries, skill development of local labor force, transfer of technology, and dissemination of know-how, promotion of ancillary industrial activities, development of local entrepreneurship, creation of competition, the attraction of local and foreign direct investment especially towards under-privileged regions, generation of employment, promotion of exports, and ease of administration and management.<\/span><\/li>\n<\/ul>\n
Creation of SEZs in Pakistan:<\/strong><\/span><\/span><\/p>\n\n- Despite stimulating growth performance, Pakistan\u2019s economy lags behind its long-term potential growth path mainly due to inherent structural weaknesses but it possesses a favorable demographic profile, which has the ability to drive the economy into the high growth path.<\/span><\/li>\n
- In this regard, Pakistan announced to make of nine Special Economic zones (SEZs) in collaboration with China under CPEC to supplement industrial development and accelerate economic growth through export promotion and import substitution.<\/span><\/li>\n
- SEZs under CPEC will be a lifetime opportunity for Pakistani companies to work together with Chinese companies for the development of export-oriented manufacturing industries.<\/span><\/li>\n
- Pakistan has now joined the line of special economic zones with multiple countries including China and India in the region.<\/span><\/li>\n
- Pakistan offers a big market for investment in energy, automobile, textile, surgical equipment, infrastructure, engineering, agriculture, minerals, and SMEs.<\/span><\/li>\n
- Our focus is also on renewable energy sources such as solar, wind, thermal, and biogas.<\/span><\/li>\n<\/ul>\n
Objectives:<\/u><\/strong><\/span><\/p>\nIt aims to achieve various policy objectives:<\/span><\/p>\n\n- Boost Foreign Direct Investment (FDI).<\/span><\/li>\n
- Production and Trade at a lower cost.<\/span><\/li>\n
- Globally Competitive.<\/span><\/li>\n
- Expansion of Exports.<\/span><\/li>\n
- Reduce Current Account Deficit.<\/span><\/li>\n
- Support Industrialization.<\/span><\/li>\n
- Diversify Manufacturing Products.<\/span><\/li>\n<\/ul>\n
Impact of SEZs :<\/u><\/strong><\/span><\/p>\n\n- In this new phase of industrialization under CPEC, Pakistan will have a number of opportunities to capitalize on and, of course, will face challenges that it will have to effectively manage for the success of SEZs.<\/span><\/li>\n
- CPEC is not just a corridor but it\u2019s a portfolio of projects.<\/span><\/li>\n
- Turnover of Rs 1 trillion is expected with the creation of 2,000,000 jobs, through these SEZs by its completion. (DAWN, Jun 2016)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/li>\n
- Under CPEC, Gwadar SEZ is the first model based on the area of 3000 acres at the special discretion of China.<\/span><\/li>\n<\/ul>\n
Incentives in Special Economic Zones<\/b>\u00a0<\/span><\/span><\/span><\/p>\nThe SEZ incentive package that is currently in vogue is as follows:\u00a0<\/span><\/p>\n(i) Exemption from income tax for ten years for Zone Developers, Co-developers, and Zone Enterprises, under clause (126E) of Part I of the 2nd Schedule to the Income Tax Ordinance, 2001 which is reproduced as below:\u00a0<\/span><\/p>\n\u201cIncome derived by a zone enterprise as defined in the Special Economic Zones Act, 2012 (XX of 2012) for a period of ten years starting from the date the developer certifies that the zone enterprise has commenced commercial operation and for a period of ten years to a developer of zone starting from the date of signing of the development agreement in the special economic zone as announced by the Federal Government:\u00a0<\/span><\/p>\nProvided that this clause shall also apply to a co-developer as defined in Special Economic Zone Rules, 2013 subject to the condition that a certificate has been furnished\u2014\u00a0<\/span><\/p>\n\u00a0<\/span> (a) by the developer that he has not claimed exemption under this clause and has relinquished his claim in favor of the co-developer; and\u00a0<\/span><\/span><\/p>\n\u00a0<\/span> (b) by the Special Economic Zone Authority validating that the developer has not claimed exemption under this clause and has relinquished claim in favor of the co-developer.\u201d\u00a0<\/span><\/span><\/p>\n(ii) One-time exemption from all custom duties and taxes on import of capital goods to Zone Developers, Co-developers, and Zone Enterprises, vide PCT 9917(2) under Chapter 99, sub-chapter V of the First Schedule to the Customs Act 1969 which is reproduced as below:\u00a0<\/span><\/p>\n\u201cCapital goods, as defined in the preamble of Part-I of the Fifth Schedule to the Customs Act, and firefighting equipment, except the items listed under Chapter 87 of the Pakistan Customs Tariff, imported for setting up of a Special Economic Zone (SEZ) by zone developers and for installation in that zone by Zone Enterprises, on one-time basis as prescribed in the SEZ Act, 2012 and rules thereunder subject to such conditions, limitations and restrictions as the Federal Board of Revenue may impose from time to time. Co-developer as defined in Special Economic Zone Rules, 2013, shall also be entitled to avail the same incentives and exemptions for the same period as available to the Developer under the SEZ Act 2012, subject to the condition that the Developer of the SEZ relinquishes its rights to the incentives and exemptions in favor of the Co-developer; provided further that the respective Special Economic Zone Authority duly endorses such reassignment, and ensures that such reassignment shall not be misused.\u201d\u00a0<\/span><\/p>\nCPEC-SEZs:<\/u><\/strong><\/span><\/p>\n\n- Rashakai Economic Zone, M-1, Nowshera.<\/span><\/li>\n
- China Special Economic Zone Dhabeji.<\/span><\/li>\n
- Bostan Industrial Zone.<\/span><\/li>\n
- Allama Iqbal Industrial City (M3), Faisalabad.<\/span><\/li>\n
- ICT Model Industrial Zone, Islamabad.<\/span><\/li>\n
- Development of an Industrial Park on Pakistan Steel Mills Land at Port Qasim near Karachi.<\/span><\/li>\n
- Special Economic Zone at Mirpur, AJK.<\/span><\/li>\n
- Mohmand Marble City.<\/span><\/li>\n
- Moqpondass SEZ Gilgit-Baltistan.<\/span><\/li>\n<\/ol>\n
Rashakai Economic Zone, m-1, Nowshera<\/u><\/strong><\/span><\/a><\/p>\n\n- The main objective of the project for the Government of KP and by extension KPEZDMC is to promote industrialization through optimally priced, world-class industrial infrastructure in the province, which enables industrial investment, job creation, and economic uplift.<\/span>
\nThe project also provides an opportunity for the Government of KP to generate some non-tax revenue through KPEZDMC. This reduces the financial burden on the exchequer, as KPEZDMC can cover some of its costs, liabilities, etc., and plough back the earnings into further development of industrial infrastructure.\u00a0<\/span><\/li>\n- The execution of the project is conceived in the PPP mode, whereby KPEZDMC creates an investment ‘nest’ or ‘protected envelope’ wherein foreign investment from CRBC and Zone Enterprises can function with reasonable security and facility.<\/span><\/li>\n
- Pakistani professionals and engineers will be able to work in the SPV Company, resulting in capacity building in the development, management, and operations of industrial parks and infrastructure.<\/span><\/li>\n<\/ul>\n
PROJECT LOCATION: <\/strong><\/span><\/span><\/p>\nThe RSEZ is situated centrally in the China-Pakistan Economic Corridor at the junction of the Karakoram Corridor and ML-1 development corridor, at 34.070714 East Longitude and 72.184269 North Latitude. It is nested in the center of major urban centers of the region, which will act as support to RSEZ and the platform for economic growth. Its location provides ideal and convenient connectivity at Karnal Sher Khan Interchange on the M-l Motorway. The location is within about a one-hour drive from the new Islamabad International Airport and is within a similar distance from Peshawar & the M-l \/ N55 Indus Highway Interchange. Hakla Interchange of M-l \/ CPEC Western Route is about 30 minutes drive, while Karnal Sher Khan Interchange of M-l \/ CPEC Second Northern Route is about 10 minutes drive. In addition to being a key part of the Belt & Road Initiative, RSEZ will be ideally located to utilize the resource base, and serve the markets of, central\/north-eastern K-P, north \/ western Punjab, AJ&K, Gilgit-Baltistan, and eastern Afghanistan.<\/span><\/p>\nRSEZ is set to become and will be designed, to be the Key Trade & Logistics Hub connecting Kashgar, Kabul and Gwadar on the Belt and Road, and be a high-end host of international commercial, technological, and manufacturing hubs. It will house a modern training base, modern technology transfer center, ‘utilization’ type modern manufacturing center, finance center, and hi-tech innovation center.<\/span><\/p>\nRSEZ is proposed to be a classic example of cooperation between two countries in industrial modernization & urbanization.<\/span><\/p>\n\u00a0<\/strong>PROJECT SCOPE AND DESCRIPTION:<\/strong><\/span><\/span><\/p>\nA detailed Economic and Financial feasibility study was conducted by the venturing parties, which is currently under review by the K-P Department of Industries, Commerce & Technical Education, and Department of Planning and Development and in-depth discussions are being held.<\/span><\/p>\nUnder the rolling development strategy of the project in the draft Concession Agreement, the 1000 acres of land of RSEZ will be developed in three phases over the next 5. The total area designated for Industrial use is 702 acres – as per Federal SEZA Regulations, of which 159 acres will be developed in Phase I, 279 acres in phase II, and subsequently 264 acres in Phase III. For commercial use, an area of 76 acres has been allocated.<\/span><\/p>\nIndustrial clustering for the project has been established, following the modern concept for ensuring the long-term viability of industrial and commercial economic zones.<\/span><\/p>\nRSEZ will house the following industrial clusters.<\/span><\/p>\n(i) Garment and Textile Products<\/strong><\/span><\/p>\n(ii) Home Building Materials,<\/strong><\/span><\/p>\n(iii) General Merchandize<\/strong><\/span><\/p>\n(iv) Electronics and Electrical Appliances<\/strong><\/span><\/p>\n(v) Automobile and Mechanical Equipment.<\/strong><\/span><\/p>\nRSEZ will also house K-P IT Board’s 100 Acre Technology City (incorporating an Electronic Manufacturing Centre).<\/span><\/p>\n\u00a0<\/strong>China Special Economic Zone Dhabeji<\/u><\/strong><\/span><\/p>\nThe Government of Sindh has earmarked 1530 acres of land to be developed as the Dhabeji Special Economic Zone<\/a> (DSEZ) in Thatta, a Priority Project under the China-Pakistan Economic Corridor (CPEC), which will facilitate the potential investors of China and other countries to either start new enterprises or transfer their facilities to Pakistan.<\/span><\/p>\n