Special Economic Zones: Complicated procedure causing delay in new investment: PIAF

LAHORE: The Pakistan Industrial and Traders Association Front (PIAF) has asked the government to make the regulations and procedures of Special Economic Zones (SEZs) easy and simple, removing all irrelevant and unnecessary clauses, as they cause hurdles and delay the new investment in the country.

PIAF chairman Mian Nauman Kabir and vice chairman Javed Siddiqi, in a joint statement issued here on Sunday, observed that policies and procedures in SEZs are very complicated and approach is so bureaucratic that an ordinary businessman is reluctant to shift his unit there.

"To establish industrial units at SEZs the irrelevant documents are demanded by the authorities, which, actually, have no relevance, he said and added that such kind of approach, should be changed, making it business-friendly rather."

Javed Siddiqi underscored the importance of expediting the establishment of special economic zones for creating investment and employment opportunities. The CPEC has ushered in a new era of economic prosperity and is of utmost importance for Pakistan, as it will generate abundant employment and investment opportunities in Pakistan and beyond, he said.

With a view to make SEZs attractive for national and foreign investors, the government will have to update 2016 amended SEZs policy to re-examine the policy and fiscal incentives. Moreover, the management and governing boards of the zones also need to be empowered to be able to make their decisions at their SEZ level, which is very necessary.

Mian Nauman Kabir said that the manufacturers are desperately waiting for the government to initiate measures, as they believe special economic zones can play a catalytic role in attracting investment, creating jobs, boosting exports and enhancing growth.

For SEZs to deliver, the relevant law will have to be reconsidered to make it simple and more responsive to investors' needs. The SEZ Act of 2012, amended in 2016, limits the scope and access of special zones to certain categories and is ambiguous on the mode of development in zone locations. He said that the businessmen also find the current pace of progress on SEZs too slow and the direction far from clear.

PIAF vice chairman said that Special Economic Zones (SEZ) are set up around the world as a strategy to industrialize, accelerate economic growth and fast track development. The SEZs are established as a separate area with its fiscal regime different from the one prevailing in the country, also backed by the quality infrastructure, regional connectivity, uninterrupted power supply and other facilitation services to boost the economic growth.

Unfortunately, the attractiveness of the incentives in Pakistan has been exaggerated, in view of energy cost, lack of skilled labor and the inconsistency of the government policies. Javed Siddiqi said that the successful SEZs in the world are operated locally by the independent administrations and boards, which organize affordable utilities and one-window operations. In Pakistan, Pakistan's Board of Investment is supposed to work as a one-stop window for the new investors but it is not working properly in its true spirit.

The SEZ law does not offer any meaningful policy and fiscal concessions to investors. For example, the one-time exemption from custom duties and taxes on import of plant and machinery discourages future modernization and replacement expansions needed by companies. Besides, many of these exemptions are currently already available for many companies importing from China under the Pakistan-China Free Trade Agreement. Similarly, import of plant and equipment needs to be exempted from the payment of 17% sales tax as well as withholding tax to reduce the capital cost of establishing units, particularly for small and medium-sized companies.

"The investors should be welcomed in SEZs, fulfilling government commitment of ease of doing business there. Instead of imposing hosts of restrictions on the investors there should be very simple and one-point formula that the production should be started within 36 months so that the genuine manufacturers should come here instead of property developers or real estate investors," he suggested and added that except this condition, all other rules and restrictions are unnecessary and irrelevant which should be removed, as they create hurdles and delays the new investment.

Copyright Business Recorder, 2021