After the fanfare of the passage of the 18th Amendment, certain sections of the media had urged the government to focus on stabilizing the economy. With a new adviser on board and possibly a renewed enthusiasm to spend the next three years improving the economy, it seems the cabinet has become serious about reforms.
Credible media reports suggest that in the coming days, the apex decision-making body in Islamabad, is about to take a number of decisions to bolster the economic engines. Highest on the list of decisions under consideration is going to be the approval of Special Economic Zones Act 2010. Special economic zones, for those aren aware, are administrative units where laws are generally more liberal than the rest of the country. The open policies are a bid to attract foreign investors to provide an environment that is worry free to carry out their enterprise.
The concept first emerged in China in 1980, under the leadership of Deng Xiaopeng. Shenzen, the first SEZ, transformed from a small village into a flourishing city of more than 10 million in less than 20 years.
Ever since, similar zones have emerged in many countries; all making efforts to liberalize their economy to pump growth. Dubais phenomenal growth in the last decade is a testament to the success of this policy.
While moving ahead with new projects that are going to provide employment as well as economic growth to the country is vital for the economy, previously launched projects must not be lost in transition. Export Processing Zone Authority Karachi, a SEZ launched in 1980, may be cited as a prime example.
Competitiveness Support Fund recently published a report stipulating that Pakistan has allowed significant incentives; including a tax holiday from the regular 35 percent in its special economic zones. In addition, machinery and raw material imports are exempt from duty, all in an effort to encourage export oriented industries.
A lack of focus on reviewing the policy for the past 30 years and a heavy handed approach of institutional managements have deterred businessmen to setup shop there. Regulatory export quotas of $1 million are imposed on EPZ units, failure to meet which has resulted in forcible shutdowns in the past.
However, when contacted, one industrialist in the packaging business, who has been running his business in the EPZA Karachi since 1993, commented on the steady availability of electricity and water in the zone, a blessing most industrialists in the country are worried about. By and large, he thought the incentives helped his export oriented business.
Even so, only about 80 of the 400 plots of industrial land are producing goods in EPZA Karachi.
The government would be well served to encourage investors to fill vacant spots in industrial parks already in existence before embarking on further projects of a similar nature.
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