The provincial government of Khyber Pakhtunkhwa is going to announce a 10-year long generous incentives loaded new industrial policy to attract investment in the industrial sector and generate employment opportunities for the youth.
The provincial government has already prepared a draft of the policy called KP Industrial Policy 2020-30 that has already been shared with the business community in a consultative seminar for inclusion of their recommendations in the proposed policy.
According to the draft of the policy, the provincial government has offered proposed fiscal, financial and non-financial incentives that would be applicable on all industrial estates, industries outside estates and on industries established in Newly Merged Districts (NMDs) of the erstwhile FATA by the local residents and principally based on indigenous resources and inputs. The proposed fiscal incentives are included exemption from Provincial Electricity Duty for new and expansion projects / industries. Initial installation and BMR (balancing, modernization and replacement) facility for one time duty and tax free import of capital goods (plant and machinery), exemption of tax on the transfer of the sick unit property (only for industrial purpose) and repatriation of profit for foreign investors subject to prevailing laws and commitments. The provincial government is also going to offer financial incentives including 25% concessions on land lease charges till break even for a period of three years whichever is earlier and in case of government land, acquisition of land in installments over a period of five years with 25% down payment (Instead of upfront payment).
It has also proposed 15% subsidy on transport cost (one time, based on import document, en route weighing document, toll receipts applicable for 20feet container and above) from Karachi/Gwadar Ports to industrial site against import of plant and machinery for setting up new units. This subsidy would be available for all new capital goods/plant and machinery reaching to industrial sites for installation.
For women entrepreneurs, the government of Khyber Pakhtunkhwa would finance 25% of the equity investments subject to maximum of Rs 3 million per investor. Similarly, non-financial incentives to be offered under the Industrial Policy 2020-30 would be included the provision of one-window facility operated jointly by the KP Board of Investment and Trade and KP Economic Zones Development and Management Company (KP-EZDMC) for special economic zone (SEZ) in facilitation for licensing, registration, regulatory awareness and compliance, simplification of documentation procedures for different purposes, encouragement to SMEs for branding of their products and innovation-based diversification by SMEs through government supported research and development (R&D).
Under the policy, the provincial government is also offering Shariah compliant credit incentives for small and medium enterprises (SMEs) on the basis of SBP Refinance scheme. Under the scheme maximum financing up to Rs 20 million to SMEs on 6% mark- up per annum (2% share of SBP and 4% share of commercial bank) for modernization of existing units or setting up of new SME units, against local purchase/import of new machinery for maximum tenure of 10 years including grace period of six months.
A refinance scheme for working capital financing of small enterprises and low-end medium enterprises that would include short-term financing facility for selected SME sector including IT, furniture, surgical goods, dates proceeding, gems and jewellery, leather industry, fruits, vegetables, food processing, packaging and printing for a maximum tenure of one year. Minimum debt equity ratio under the scheme would 70:30 while funds would be provided by the SBP and financing would be carried out through the Bank of Khyber under the SBP Prudential Regulations for SME financing.
The financing will be available to SME on 2% mark-up, rest of 4% will be borne by the provincial government e.g. against the financing of Rs 12.5 billion. The provincial government will bear Rs 500 million per annum for mark-up and for this purpose; the provincial government will have to sign a formal memorandum of understanding (MoU) with the State Bank of Pakistan (SBP) and agreement with the BoK.