KARACHI: Around 10 projects in the fields of automobile,
auto parts, pharma and steel carrying an investment of Rs25 billion have
been waiting for months to get tax exemptions and other incentives
allowed in the Special Economic Zones (SEZs).
The
government had announced the establishment of SEZs across Pakistan to
invite foreign and local investors to set up industrial plants against
one-time waiver of custom duties on plant and machinery as well as a
10-year income tax holiday – provided the units came into commercial
production before June 2020.
In October, the UAE-based
Al-Futtaim Group announced to set up a plant to roll out 30,000 Renault
vehicles per year. This was to be a first serious entry of European cars
into Pakistan, with a total foreign investment of $120 million.
Al-Futtaim
selected Bin Qasim Industrial Park (BQIP) for setting up the plant and
got approval from the National Industrial Park (NIP) Allotment Committee
for 50 acres land for the project.
Auto vendors, who
asked not to be named, said, it has now been three months that the NIP
Board of Directors, for unknown reasons, has not given formal approval
of land allotment to Al-Futtaim Motors. The sponsors, who had proceeded
for the formation of Al-Futtaim Motors in Pakistan based on NIP’s
commitment, have held back transfer of $120m equity and may even roll
back investment if the delays continue.
Another major
issue that is deterring investment in the provincial SEZs is the delay
in approval of SEZ Enterprises by the Sindh government, they said.
To
avail incentives under the SEZ Amendment Act 2016, the first step is
the classification of a project as an SEZ Enterprise by the respective
provincial government. So far, it seems the Sindh government has lost
all interest in industrialisation as it has not held a meeting of the
SEZ Board for the last six months, vendors said.
Resultantly,
around 10 projects are stuck, with the sponsors being forced to pay
custom duties and incur heavy demurrages at port, they added.
Lucky
Group had announced to set up a plant to produce world renowned KIA
compact vehicles at BQIP. They were allotted 130 acres land by NIP.
However, they are unable to claim incentives allowed under the SEZ
Amendment Act 2016 since their case for classification as SEZ Enterprise
is lying in CM Sindh’s office for the last several months.
Other
companies whose cases are held up at Sindh government include Barkat
Frisian, Tecno Auto Glass, Universal Packaging, Young’s Food, Sci Life
Pharmaceuticals, Mehran Commercial Enterprises and Pinnacle Pharma.
It
must be noted that BQIP and KCIP have been setup over 1,200 acres of
land in the Pakistan Steel Downstream area and in Korangi Industrial
Area respectively. They are expected to become the biggest cluster of
automobile, steel and pharmaceutical manufacturers in the country.
The
companies that are in the process of setting up plants in BQIP include
KIA-Lucky Motor Co., Al-Futtaim Renault Motors, General Tyre, Hi-Tech
Auto Parts, Tecno Auto Glass, Ahmed Glass, Horizon Steel, International
Steel, Tayyab Steel etc. Total investment in these two SEZs is expected
to touch Rs50bn in next two years.
Interestingly,
vendors said Sindh is the only province that is meting out such
treatment to long-term investment. On the contrary, Punjab government
takes no more than two weeks to receive SEZ Enterprise status for
projects being established in Quaid-e-Azam Apparel Park (QAAP), M3
Industrial City and Value Addition City, they added.
Meanwhile,
talking to Dawn, Chairperson of Sindh Board of Investment (SBI) and
Vice Chairperson of SEZ Authority Sindh, Naheed Memon said that there
was no serious issue in giving the status of SEZ Enterprise to
investment projects.
The reason for delay, she said, is
that the SEZ status to industries approval agenda has been put in a
meeting which will be chaired by Chief Minister Sindh, Mr Murad Ali
Shah, who is also chairman of SEZ Authority Sindh. “Since there are
other agenda items related to developing and building the capacity of
this authority, this meeting needs to be held,” she said.
Due to some pressing issues, this meeting has been delayed thus resulting in delay in SEZ status approval,” she added.
“I am trying my best to give approval of SEZ status to the investors as soon as possible,” the SBI chief added.
Auto
vendors said Pakistan is passing through a critical period of twin
deficits. On one hand, there is a huge fiscal deficit due to gap in
government expenditure versus tax collection while, on the other hand,
the country is going through a serious current account deficit due to
gap in imports and exports.
The only way to come out of
the current account deficit is to attract Foreign Direct Investment
(FDI), especially in long-term industrial ventures. Not only would such
FDI bring valuable foreign exchange to Pakistan but this would also
result in employment generation for over three million Pakistanis
entering the workforce every year, they added.
