Govt likely to set up ‘Nidra’ to supervise SEZs

ISLAMABAD: The government is likely to establish National Industrial Development and Regulatory Authority (Nidra) to supervise Special Economic Zones (SEZs) across the country aimed at facilitating investors and ensuring accountability of service delivery, well-informed sources in Privatisation Commission told Business Recorder.

Sharing the details, sources said that caretaker Minister for Privatisation Fawad Hasan Fawad has held a detailed meeting with concerned Ministries and provincial governments on the proposed model.

The minister explained that any SEZ framework(s) created so far had dispersed authorities amongst the three tiers of government with different incentive structures. This has not only resulted in distortions but has created confusion amongst the investors also.

While industries are a devolved subject 90% of the incentives are related to the Federal Government: taxation, customs duties, etc. On the other hand local fees, levies, charges, etc. have never been considered as a part of any incentive schemes for such industrial/economic zones.

SIFC panel for single authority to manage all SEZs

It was also highlighted that the concept of “One Window”, wherever introduced, failed to achieve its intended target/ goal of facilitation because the three tiers continue to function under one roof but with dispersed authority. This is not only time-consuming but also breeds corruption at different tiers and extraction continues even after its establishment.

The Minister pointed out that the aim of any such framework is two-fold, i.e., investor facilitation, as well as, government’s regulatory role in the sense that service delivery of government’s agency not only improves but the services are delivered with responsibility and accountability.

He suggested that a framework, which takes care of such problems, which is in accordance with the Constitutional scheme needs to be introduced. The framework shall be robust enough to fulfil the aim while addressing the concerns of provinces that primarily are concerned about the loss of revenue stream if the authority and functions, at various tiers, are converged. Thus, one of the key features of any such framework would be the protection of revenue interests of the provincial and local governments.

The Minister explained that the arrangements to avoid the problem of dispersed authority, are provided in Articles 144, 146, and 147 of the Constitution whereby the provincial assemblies can either pass resolutions to the effect that any devolved matter can be legislated by the Federation (Article 144) or the federal government, with the consent of provincial government(s), entrust either conditionally or unconditionally to that government, or to its officers, functions in relation to any matter to which the executive authority of the Federation extends Article 146) or provincial governments may, with the consent of the federal government, entrust, either conditionally or unconditionally, to the federal government, or to its officers, functions in relation to any matter to which the executive authority of the province extends (Article 147).

It was also highlighted that the scheme, under Article 144, has been exercised in the past starting from 1976 (e.g. the Seeds Act, 1976 and the Drug Regulatory Authority Act, 2012) but with the provincial assemblies not in place, the arrangement cannot be put in place immediately.

Further, the incentives provided by the Federation revolved around taxation and custom duties while the capacities of the provinces, in such areas, are limited and could be a hindrance in exercising the option under Article 146. Thus, the most feasible option available was under Article 147 of the Constitution.

The Minister then introduced the model, based on the Constitutional arrangement provided in Article 147, for discussion by the participants including the provinces.

Salient features of the proposed model were as follows: (i) National Industrial Development and Regulatory Authority would be created through a Legislation after consultations with the provinces and keeping in view the requirements of Article 147; (ii) the Authority shall exercise all executive powers, in such fields as is being exercised by the provinces/ local governments in already functioning SEZs, in its area of jurisdiction; (iii) the Authority shall establish a company structure in each SEZ/ Zone, or for a group of zones in proximity with the respective Chief Executive exercising powers in performance of all functions with complete authority, responsibility and accountability; (iv) legislation shall do away with all distortions created by formation of various models in the shape of Economic Zones, Technology Zones, Industrial Zones, etc. on lease; (v) the legislation shall bar the sale of land in any zone and land shall only be provided; and (vi) the legislation shall protect the revenue interests of provinces and any revenue collected by the Authority, in connection with any of the function related to the Provincial and/ or Local Government function, shall be transferred to the provinces while also providing for any change in the rates, by the Provincial Governments, to be applicable immediately.

The caretaker Privatisation Minister also requested the participants to provide feedback/ comments/ input on the proposed model.

Secretary, Board of Investment stated that such a model provided an ideal situation and endorsed the proposed model. He agreed with the existing dichotomies and supported their removal which would create efficiency and make it viable. He said that, however, the practicability of this model will depend on agreement by the provincial governments and their complete support.

Secretary, Power Division supported the model proposed under Article 147 but suggested Article 146, for certain type of SEZs, can also be employed in certain cases.

The Secretary SIFC endorsed the proposal. Representative of Petroleum Division supported the proposal but proposed that Section 10 of the SEZ Act, 2012 would need amendment. The representative of Industries and Production Division supported the proposed model.

The representative of the Khyber Pakhtunkhwa government supported the proposal based on single authority and unity of command with the principle of consistency introduced for all types of zones. The representative of Punjab endorsed the proposal while highlighting that the government of Punjab has also created a Business Facilitation Centre for resolving issues of local and foreign investors. The representative of Sindh government supported the proposal while enquiring about the enforcement mechanism.

It was clarified that the enforcement will be done by the proposed authority with complete responsibility and accountability. The representative of Balochistan government supported the proposal that the one window facilitation should be established with all stakeholders’ representation.

Copyright Business Recorder, 2023