ISLAMABAD: The Board of Investment (BoI) is reportedly shocked at the lack of investment interest by potential investors in Gwadar Free Zone (GFZ) despite lucrative incentive package offered by the government, well-informed sources told Business Recorder.
This scenario was painted by the BoI, in its proposal titled “assessment of investment potential of GFZ,” shared with the Prime Minister in recent months that will now will be placed before the Cabinet Committee on CPEC (CCoCPEC), which is scheduled to meet before the Prime Minister’s visit to China. Prime Minister Imran Khan is expected to visit China from 3-5 February 2022, where meetings with the Chinese leadership are envisaged.
Prime Minister Office (PMO) has rejected a proposal of BoI, regarding revision in Concession Agreement of GFZ, saying that this is a very critical proposal and decision must be well-thought out, keeping in view the overall context of CPEC and engagement with China.
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BoI also proposed to bring GFZ under SEZ Act so that GFZ may be notified to instill confidence in investors. However, PMO was of the view that GFZ has more incentives than SEZ Act 2012 offers. It added that Concessioner of GFZ has never demanded a regulatory framework of SEZ Act, 2012 as an incentive. It was rather inadequacy of incentives, available under SEZ Act, which led to the offer of special incentive package for GFZ by the GoP.
BoI, in its proposal to be placed before the CCoCPEC, stated that to determine the investment potential of Gwadar Free Zone BoI was assigned the task to present an independent assessment of investment potential of Gwadar Free Zone along with recommendations on necessary measures to unlock the potential in the form of a formal summary, a team of officers from the BoI visited Gwadar from April8-9, 2021 and held meetings with relevant quarters in order to deliberate on the issues impeding Chinese investments, particularly in Gwadar Free Zone and in Gwadar for that matter, and link the on-ground realities with the available literature and furnish a comprehensive report.
Long being marketed as the centerpiece of the China-Pakistan Economic Corridor (CPEC), Gwadar has yet to reach the heights of expected industrial development that can serve as a catalyst for domestic and foreign investment. The visit of BoI’s team focused on bringing to light the impediments in the way of industrialization and investment in Gwadar.
During the visit, separate meetings with the managements of Gwadar Free Zone Company Ltd (GFZCL), Gwadar Development Authority (GDA), Gwadar Port Authority (GPA), District Government and Gwadar Industrial Estate Development Authority (GIEDA) were held, followed by a detailed visit to Gwadar Free Zone, and proposed industrial areas of Gwadar, including Export Processing Zone (EPZ) and Gwadar Industrial Estate (GIE) - a project of Government of Balochistan aimed at promoting industrialization in Gwadar.
Furthermore, to get an insight into the prevailing security conditions in Gwadar, meetings with the officials of Army’s 44th Division and CPEC Brigade were also held.
According to the BoI, although granted a lucrative incentive package, the lack of investment interest in the Gwadar Free Zone is inexplicable. Nearby the Gwadar port, the obstacles to infrastructure development include inadequacy of transportation, poor power and water supply, difficulty in securing permits and support from local government, persistent terrorist attacks on projects and personnel, and difficulty in securing capital given those risks and continued non-performance of the port itself.
Outside the zone, the other industrial projects in Gwadar district are not only marred with infrastructural problems but other obstacles as well owing to lack of regulatory oversight and incapacities of the departments involved.
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The major impediments to investment and industrialization of Gwadar uncovered by this exercise include: (i) problems with the incentive package and regulatory oversight issues in GFZ; (ii) security situation; (iii) infrastructural impediments; (iv) lack of clarity and industrial development under new master plan; (v) issues in Gwadar industrial estate; (vi) uncoordinated efforts at Federal level; (vii) impediments of manpower & local community; (viii) limitations with third party participation; (ix) Military alignment; (x) high cost of doing business with no ease of doing business; (xi) lack of marketing strategy for Gwadar; and (xii) role of COPHCL as operator.
To remove these impediments and give way to an industrialized Gwadar, some major policy reforms are required at Federal, Provincial and Local Government level. As per decision of the CCoCPEC, a report containing certain recommendations along with a summary for the CCoCPEC was prepared and placed before the Prime Minister, being Minister In-charge of BoI, for approval before placement of the same to CCoCPEC.
Consequently, Prime Minister while granting the approval on the proposal desired that views/comments of the PM Office shall be considered while placing the assessment report before CCoCPEC for consideration. In view of foregoing, after making necessary amendments to incorporate the views/comments, the revised assessment report is being placed before the CCoCPEC for its information and directions.
BoI has submitted the following recommendations/observations for Gwadar development: (i) Federal Government may be given due role as Gwadar Port Authority (PRA) alone is unable to get Gwadar’s full economic potential;(ii) there is no clarity about 3rd party participation in the GFZ and GPA has not introduced any required regulatory framework to attract 3rd parties; (iii) uniformity in policies regarding foreign company, branch and liaison offices for registration and visa is critical; (iv) provision of requisite security and usage of smart tolls ( biometric data for discrete security checks); (v) GPA/GGA cannot provide required regulatory directions to the investors.
An attractive investment strategy is required to concert Gwadar into investment hub; (vi) need to complete the under process transport infrastructure (road, rail and air) to connect Gwadar with major markers and cities. More flights for Gwadar; (vii) there must be a comprehensive plan/strategy colonize/populate the GFZ.
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BoI has suggested replicating the Chinese model to uplift the GFZ; (viii) policy framework is required to make Gwadar the hub for the transit trade of Afghanistan and Central Asian Republics (CARs); (ix) no study has been carried out to analyze the development of Gwadar in the presence of Chabahar Port (Iran). Gwadar as a CPEC project has been under development since 2013 and no such study has been carried out; (x) Gwadar Industrial Estate Development Authority (GIEDA) has become a failed case like several other industrial estates. No strategy or direction exists; (xi) development of Special Economic Zone District by Government of Balochistan (GoB) is not supported due to inadequate civic infrastructure in Gwadar. This is just a fancy name for another housing scheme.
Real estate/housing must be discouraged in favour of industrial development; and (xii) establishment of a Federal SEZ in Gwadar to unlock Gwadar’s potential.
The PMO has not agreed with the proposal of SEZ in Gwadar, saying that the government needs to focus on colonization of already existing free zone to exploit its full potential.
The BoI team has also highlighted issues related to security, saying that political unrest and security concerns that forced PSA to sell off its stake, although minimized, are still prevalent and hampering expeditious development in Gwadar.
An overwhelming number of security check posts and deployment of Military Law Enforcement personnel, set up by Coastal Guards, Maritimes, Rangers, FC, Police, Navy and Army, portray an environment that is anything but investor friendly, and is adding to the resentment of the locals.
Such arrangements add to the worries of a foreign investor with regards to the security in Gwadar which is already facing negative criticism at the hands of western media and anti-CPEC elements. These check posts also create hurdles for local fishermen that commute daily to the fishing area. To add to the gravity of the situation all foreigners are required to get an NoC from the home department Ministry of Interior before they can enter Gwadar, making them more skeptical of the state of security.
Copyright Business Recorder, 2022
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