KARACHI: Within five months of its establishment in January this year, the Special Economic Zone Management Information System (SEZMIS) has facilitated speedy grant of the active zone status to 70 enterprises by the Board of Approvals (BOA) compared to 200 in the last eight years, said the State Bank’s report on Special Economic Zones in Pakistan.

SEZMIS is a digital solution for registering zones for BOA’s approval, and allocating plots and zone enterprise status to enterprises within the zone through an application made to the SEZ Committee. It has increased the efficiency of the filing system and contributes towards creating an enabling business environment.

As per the latest regulations, potential zone enterprises have to submit an online application to purchase land from the developer and apply for zone enterprise status through SEZMIS maintained by the Board of Investment (BoI).

In the last eight years the foreign direct investment (FDI) committed was $1,081.7 million while in first five months (January-May 2021) of SEZMIS establishment the FDI commitments rose to $646.6m.

Central bank report says FDI commitments rise to $646m in 5MCY21

However, the State Bank analysed the current SEZs situation in Pakistan with comparative study of the region as well as global trend.

The two main rationales and conceptions of SEZs around the world are islands of excellence and laboratories for policy reforms.” In both these conceptions, the SEZs in Pakistan have room for improvement,” said the SBP.

The current SEZ framework and the ensuing government decisions have envisioned SEZs as designated areas that offer a business friendly environment as per international best practices. “There have been some positive developments recently, such as the passing of the SEZMIS regulations, which prevent real estate speculation,” said the report.

However, that vision is yet to be fully implemented; the one stop shop has not been set up, whereas overlapping coordination functions have led to delays in provision of infrastructure and utilities.

“In addition, policy frameworks to ensure business friendly climate in SEZs with respect to skilled labour and facilitative legal environment have not been announced,” said the report.

As far as policy reforms are concerned, the current SEZ framework does not envision SEZs in Pakistan as areas that offer special policy and regulatory environment to businesses, said the report.

Under current SEZ framework, all the SEZ authorities, organisations and persons engaged in the creation, development, operations and management of a SEZ are required to follow respective applicable laws and standards of Pakistan including vis-à-vis environment, employment, procurement, and building code, unless specifically exempted, relaxed or otherwise provided in the SEZ Act, it added.

“However, the current SEZ framework does not offer exemptions, with the exception of building codes,” said the report.

Here, Bangladesh’s SEZ Act offers some useful insights. Not only does it exempt the SEZs in Bangladesh from various national and local government laws, it also allows the government to modify any other Act or do any other thing necessary to remove difficulties for growth and development of SEZs.

“A concerted effort is required to address the challenges to the growth of SEZs in Pakistan, by graduating the SEZ framework from one that focuses on first-time colonisation to one that also provides direction on operation and maintenance, financing, sustainability, monitoring and operation, and so forth,” said the report.

This necessitates deliberations over the creation of a separate centralised autonomous SEZ authority that would perform several functions. In addition to approving zones and developers, these functions include providing and updating regulatory guidelines; coordinating with relevant government departments across different levels on SEZ related matters; continuously monitoring zone performance aimed at providing best infrastructure and facilities within the SEZs; and assessing the impact of various policy reforms on the business climate within the SEZs.

Published in Dawn, November 26th, 2021