The Board of Investment (BoI) has approved and notified seven special economic zones (SEZs) at specific locations and each SEZ has been further earmarked for specific industries. In Sindh, three have been approved and notified - (i) Khairpur (140 acres) for agro-based industry and data processing units; (ii) Bin Qasim (930 acres) for light engineering, auto vendors, steel fabricating units, chemical and food, pharmaceuticals and electrical and consumer goods; and (iii) Korangi Creek (140 acres) for value-added garments, textiles, packaging and printing, warehouses and logistics, consumer goods, food and pharmaceuticals. Another three SEZs have been notified in Punjab that will serve textile and cotton, engineering and construction, pharmaceuticals, electronics, food and beverages and information technology: (i) Quaid-e-Azam Apparel Park (1536 acres) located at M2 at the Sheikhupura Interchange (Lahore-Islamabad motorway); (ii) M3 (4356 acres) located near Sahinwala Interchange; and (iii) Value-Addition City (225 acres) located 20 kilometres from Islamabad. And finally one SEZ has been approved and notified in Khyber Pakhtunkhwa (KPK) at Hattar Phase VII (424 acres) to be dedicated for mining, marble and fruit processing units.
While the location of the SEZs in Punjab and KPK reflects the advantage of the road network under the aegis of the China Pakistan Economic Corridor (CPEC) that would no doubt attract Chinese companies, the SEZs' location in Sindh is focused on taking advantage of an existing asset namely the port. Be that as it may, the BoI reportedly did engage with the provinces prior to identifying the location of SEZs though KPK expressed a desire to locate SEZs in backward areas as a means to encourage productivity there - an objective that is difficult to achieve as new industry would be attracted to where there is infrastructure and skilled labour rather than to an area where neither is readily available.
However, it is disturbing that the BoI has limited the use of SEZs to specific industries. Thus to limit Hattar SEZ to mining, marble and fruit processing plants is to limit productivity to the province's existing output and that in itself cannot be supported.
Successive Pakistani governments have been enamoured by the idea of setting up SEZs with the overarching objective of fuelling economic activity through facilitating the provision of infrastructure as well as fiscal incentives. It is quite inexplicable as to why our successive administrations have not focused on eliminating red-tapism that remains a serious impediment to setting up industrial units in this country in spite of widespread acknowledgment that bureaucratic bottlenecks are a major hindrance to prospective investors. In addition, Pakistan's tax system remains unfair, inequitable and anomalous and this again has been acknowledged in all relevant quarters backed by recommendations made by several research studies (local and international) that are gathering dust in relevant ministries. Unfortunately, however, the tax system is not even rationalized on many counts, including the failure of the Federal Board of Revenue to rationalize the input/output tax adjustment of sales tax on services between the centre and the provinces - an issue that erupted as far back as in 2013.
To conclude, one would hope that the identification of industrial units that can be set up in any SEZ must be left to the industrialists and at the same time the impediments to increased output must be removed nationwide especially as regards the prevailing lack of rationalization with respect to the input/output tax adjustment.