SEZ commitments

November 27, 2019

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THE new phase of CPEC that is set to begin, and which the government is defending vigorously as the central pillar of the crucial corridor project, has as its centrepiece the creation of Special Economic Zones that will offer critical incentives to all industries that opt for locating their plant within them. But while this commitment is repeated regularly in public remarks, those businessmen who have invested in existing SEZs are lining up to say that they regret their decision because the government has reneged on its key pledges. Only recently, we saw the government impose a 1.5pc turnover tax on all enterprises including those located in the SEZs, even though the SEZ Act of 2012 specifically exempts them from such impositions. When delegates from these SEZs met the government and tax officialdom to take up their concern, their request was denied with special objection from the FBR that invoked the strict revenue targets being chased by the government as one of the justifications. Beyond that, enterprises that have begun operations in the three main SEZs of the country — Bin Qasim Industrial Park, the Korangi Creek Industrial Park and Khairpur Special Economic Zone — have also found that the government commitment to providing infrastructure has not been met, with some of them having to run on power connections on a temporary basis, the tariff of which is far higher than what they were told it would be.

This does not make for an edifying sight. Many of those who feel short-changed by these commitments — of infrastructure provision and tax-free status — are foreign investors. If the commitments made to investors in the existing SEZs are not being met, the government cannot credibly extend the same to new investors in another round of SEZ construction. It is important that the government, whether provincial or federal, sit down and remove the concerns of investors in the three main SEZs before making further fresh commitments to SEZs under CPEC.

Published in Dawn, November 27th, 2019