The Karachi Export Processing Zone (KEPZ) was
established some 24 years back in 1980 with the hope that it will become
the focus of the foreign investors because of strategic location with a
backup of attractive incentives and tax exemptions.
At the time when this project was conceived by the
then government, 200 acre of land in the close vicinity of Port Qasim
was earmarked. In the first phase of the project, 100 acres of land was
developed and alloted to the interested investors mainly overseas
Pakistan and to some extent some foreign investors.
According to insiders of the zone, the lose, corrupt
and inefficient supervisory management instead of making endeavors to
develop a national assets, made efforts for their personal gains by
misusing the incentives and allowing the duty free imports to sneak into
the tariff areas. Even recently there were reports that while the import
of second hand vehicles was banned, some of the zone investors imported
chases of the trucks and buses under the cover of dumpers and succeeded
to take them to the tarrif area in Karachi and other parts of the
country to make huge margins, the insiders said.
In the backdrop of this situation, the foreign
investors in particular and the overseas Pakistanis in general lost
their interest in the zone and gradually started deserting their units.
Today, according to inside sources, not a single unit is being run by a
foreign investor at KEPZ.
The gravity of the situation is reflected in the
decision of the EPZA authorities to form a committee to look into the
possibilities of taking over about 70 closed or sick units at the KEPZ
after fulfilling the legal requirements.
It is, however, disgusting to see that the Karachi's
zone failed to take off despite a much better package offered by the
government to the investors.
As against the stale story of the KEPZ, free zones in
Sharjah and Dubai become the center of attraction of the investors from
all over the world and today they have no more space in the zone to
offer to the new investors.
Why such a discernible difference between Karachi and
other zones in the Middle East? this is something which should be given
a serious thought by the people sitting at the helm of the affairs.
Some of the opinion leaders in the business community
were of the view that since the government was on its way to privatise
public entities, the KEPZ should also be handed over to the private
sector through their representatives either in the Federation of
Pakistan Chamber of Commerce and Industry (FPCCI) or the Associations of
Industrial Areas to make the zone a purposeful and meaningful business.
The present government which has given a kick off to
the national economy through professional handling of the economy has
decided to set up textile city and a garment city near Port Qasim. Since
these cities would be given the similar tax exemptions and incentives,
it may be a better option to allow the KEPZ, house the textile or
garment city over its 100 acres of land still lying undeveloped in the
With this background, the EPZA has decided to
handover over 70 closed or sick units which are inoperative for last
many years in the Karachi Export Processing Zone (KEPZ). The decision
was made by the EPZA Committee constituted by the government on sick
units of KEPZ.
It may be mentioned that about 70 units in the
different sectors remained closed for several years with the land rent
and other dues continued to accumulate with the passage of time causing
loss to the authority.
At present around 50 units are operative in the zone
area. Among the 50 operative units most of them are garment units while
12-15 units are involved in different types of trading.
The Zone Authorities, it may be mentioned, were
chasing the owners of the closed units with repeated reminders to resume
production at the closed units, however, most of the owners of the
closed units even did not bother to reply to the communications made by
the Zone Authorities. According to informed sources, most of the owners
of the closed units were non-resident Pakistanis and currently either
doing business or employment abroad in the United States, the Western
Countries and the Middle Eastern countries.
The committee, however, unanimously decided that all
legal requirements would be completed before taking over the closed
units and their transfer to the new owners. In this respect, a joint
team of the EPZA and Customs would be formed for correct evaluation of
the value of the closed and sick units and the financial liabities owed
to the EPZA by the former units. The inventory compilers would also take
into account the value of the assets, machinery and stock present in the
The change of hands of the closed or sick units would
take place through open bidding after making a clean slate of the
It is said that there was a great demand for land in
the zone and the EPZA is considering to develop the second phase of the
zone to accommodate the new investors.
The committee was of the opinion that the units in
the zone enjoyed unprecedented incentives in the form of duty free
imports and exemption from sales tax. The provisions of imports policy
only applied on supplies made to the tariff area outside the zone.
The committee said that foreign exchange
regularations did not apply on foreign currency account maintained by
the investors in the zone. When the foreign currency accounts were
freezed after the nuclear test, the investors in zone continued to enjoy
their foreign currency accounts with the banks.
Despite all these incentives, the zone could not
contribute significantly in the growth of the national economy, neither
it generated enough employment opportunities to combat the menace of
unemployment in the country.
The existence of hardly 50 units at a zone came on
the ground some 24 years ago speaks in volumes about the state of
affairs at KEPZ. Although the present management at the KEPZ is
endeavoring to make the zone result-oriented and according to reports
the exports for the current financial year was estimated at $200
million, yet it does not translate the real potential, time and efforts
consumed over the development of the Karachi Export Processing zone.
The present government has an economic agenda to take
up our exports from the current level of $12 billion to $20 billion
during next couple of years, the agenda also speaks about poverty
reduction through job creation for the unemployed, despite getting
relaxation in debt servicing the nation has to pay off a foreign debt of
over $34 billion. All these figures are big challenges before the entire
nation. Pakistan can achieve these targets if the entire nation was
given a direction and all ill economic ventures are cured to make them
productive in the real sense.