Special Economic Zones (SEZs) under China-Pakistan Economic Corridor (CPEC) would enhance exports by $1 billion to $ 1.5 billion per annum in the short-run and boost export prospects in the long-run as well. The Board of Investment (BoI) reportedly handed over feasibility studies of nine industrial zones to Chinese delegation in the seventh ministerial-level meeting of Joint Coordination Committee (JCC) held November 21-22 this year in Islamabad.
The sources said that the Chinese delegation has accepted the proposal of Khyber Pakhtunkhwa (KP) government to establish an industrial zone at Rashakai but the Chinese did argue in favour of prioritizing Hattar Industrial Estate near Peshawar in view of available infrastructure in contrast to Rashakai; but added that it was finally agreed that the province’s priorities would be honoured in this respect.
For Rashakai, near Mardan Industrial Zone, KP government has acquired 10,000 kanals and in the first phase, three industrial zones would be established in three provinces: at Rashakai in KP, Dhabeji in Sindh and Faisalabad in Punjab. The Sindh government wants to establish industrial zone in Dhabeji and to develop Keti Bunder port project to attract Chinese investors and promote trade through sea and land routes.
According to documents available with Business Recorder, federal government is giving many incentives to the investors for establishment of industrial zones including exemptions from all taxes on (i) all imported Capital Goods for development, operation and maintenance of the Special Economic Zones (SEZs), and (ii) income accruable in relation to the development and operations of the SEZ for a period of ten years starting from the date of signing of the Development Agreement. The incentives are both for the Zone developers and Zone enterprises.
The documents further reveal that the Government may establish SEZs by itself, or in collaboration with private parties under various modes of collaboration including public-private partnership or accord recognition to the privately established economic activity zones. There will be no real estate activities in the Zone as this would result in withdrawal of the title of land and termination of the Agreement. Provincial Investment Promotion Authorities would be responsible within their province of jurisdiction for supervision of operation of the SEZ authorities and be the focal entity responsible for investment promotion
The Board of Investment (BOI) will provide one window facility within the Zone for facilitation of investors. Board of Approval (BOA) at the federal level comprising of relevant ministries, business leaders, and provincial governments and chaired by the Prime Minister has the authority to grant SEZ status.
The documents further state that the industrial zone developers may purchase land privately on ownership or lease land from federal/provincial/local governments. Maximum land that each SEZ can allocate for commercial use and other non-productive activities such as for setting up retail shops, recreational areas, hospitals, etc, would be limited to 10 percent of total land area. There would be a minimum 50-acres area to establish SEZ with no maximum limit.
According to documents, CPEC will attract $40 billion worth of investment which will directly raise investment-to-GDP ratio by 2.8 percentage points besides some indirect investment addition. The investment in hard currency will also support exchange rate stability in the country and stabilize balance of payments situation in the country.
Special Economic Zones and investment would allow economic corridors along major transport and communication networks to fully harness the physical and human resources of the country, contribute to the value chain of finished products in the region, enable relocation of industry to utilize the abundant labor at lower costs and utilize the abundant savings in the region for higher return investment in a saving deficient developing country.
The documents further reveled that financial resources flow of around $40 billion till 2020 means around Rs 800 billion per annum or 2.8 percent of current GDP every year will augment domestic inevitable resources. Investments under the Framework in regional infrastructure including transport, communications and energy are expected to benefit both Pakistan and China. Pakistan’s regional infrastructure investment needs till year 2020 are estimated to be $179 billion.