Lack of EPZA support to investors: country may lose exports worth $200 million from KEPZ

The government may lose its $200 million exports through Karachi Export Processing Zone (KEPZ) if the Export Processing Zone Authority (EPZA) failed to fulfil its pledge of providing protection and support to the investors. This was stated by Muhammad Siddiq Omer, Chairman of KEPZ Business Council (KEPA-BC), while sharing the problems and issues pertaining to the KEPZ's investors with Business Recorder on Tuesday.
Expressing concern over poor performance of KEPZ, Omer said that Export Processing Zones in Bangladesh were working on full capacity and earning around $2 billion annually. On the other hand, KEPZ, which once used to employ around 60,000 workers, had now created employment to only 16,000 workers with a meagre export of $200 million, he added.
He said there were certain vested interests which were creating controversies about the investors in the EPZ and latest of it was about whether to allow 3 percent duty drawback facility on the exports of garments and home textile from the Zone despite a clear notification of the Ministry of Textile Industries and decision of the Honourable Sindh High Court petition No 1770 and 1771.
Calling the recently announced duty drawback on textile facilities extension to EPZs as illegal, he said it was distortion of facts and attempt to discourage investment, besides, creating obstacles in furtherance of schemes of specialised economic Zones/EPZs.
He said that while a number of factories have already closed down at KEPZ and others were facing liquidity crunch due to international economic conditions and recession in the countries where Pakistani textiles are being exported, such attitude was difficult to understand as denying drawback facility would render the manufacturing non-competitive in the zone resulting in more closure of textile factories here and would also leave thousands of workers jobless out of which 60 percent are female.
As a result of closure of garments factories in KEPZ, the government might lose $200 million in export per year, he added. He said that government should not discriminate between manufacturers and exporters of tariff and non-tariff area as there was complete level playing field for tariff area and EPZs units. "EPZA units pay annual ground rent to EPZA, a substitute for property tax, and contribute in EPZA's medical facility as well as 1 percent income tax on all exports" he added.
Siddiq said there was serious need to induct the EPZ stakeholders on EPZ board, which currently constitutes officials and bureaucrats only, in order to ensure the representation of investors for better policies thus fulfilling the objective of EPZs. It is imperative that the Board should have investors of EPZA, the real stakeholders while selecting through free and fair elections conducted by EPZA, he added.
"The exports are considered as exports of Pakistan in the importing countries but when it comes to duty drawback, a certain quarter raises undue hue and cry and tries to create controversy", he said referring to Ministry of Finance SRO No 627(I)/2000 dated September 5, 2000 which says that EPZ units should be treated at par with bonded unit in tariff areas.
KEPA-BC's chairman said that the exporters were paying Income Tax 1 percent on their exports at the time of shipment like the tariff area while EPZ exporters have to pay 1/2 percent to EPZ. Unlike the 1/4 percent Export Development Fund being paid by exporters in tariff area.
He said it was amazing to know that factories in bond/DTRE, importing fabric from China or other parts of the world, would be eligible for 3 percent duty drawback as well as factories in the zone utilising 90 percent fabric from tariff area were being discriminated for the same.
"The exporters of EPZ do not advocate claim of double duty drawback; therefore, it is suggested that no drawback should be allowed to the suppliers located in tariff area on supplies of fabric to the units in zone. We have already written a letter to Secretary, Ministry of Textile Dr Waqar Masood regarding the claim of double duty drawback", he added.
He said that EPZ exporters were not utilising any foreign exchange of government of Pakistan but they were using their own hard-earned foreign exchange for import of fabrics and accessories even for payment of salaries. He said that like tariff area all exports were subject to issuance of NOC from Export Processing Zone authorities, which is a substitute of 'E' from system in tariff area. Siddiq said the claiming of R&D in export Processing Zone was a very detailed and foolproof system and was only paid by State Bank after receipt of export proceeds.
Expressing confidence in the findings of Zubair Motiwala, advisor to Chief Minister Sindh on Investment, who was heading a recently formed committee to solve the duty draw back issue, he hoped that the Minister of Textile would consider the findings, to be submitted to him, through analysing the whole situation impartially.