10-YEAR TAX HOLIDAY ANNOUNCED FOR GWADAR EXPORT PROCESSING ZONE
June 1 - 7, 2009
Present government has decided to provide ten-year tax holidays for Gwadar Export Processing Zone (GEPZ), which would be established over 46,000 acres areas where industrial units, hotels, warehouses and others would be set up. The GEPZ would enhance the country's trade with China, Russia, Middle East, Afghanistan, Iran and other regional countries. Warehousing, buildings, commercial plots, support services and other facilities would promote industrial activity in the port city.
Ministry of Ports and Shipping has already recommended that the GSEZ should be exempted from the Foreign Exchange Regulation Act of 1947 and the Protection of Economic Reforms Act of 1992. The Central Board of Revenue (CBR) has however been of the view that no area in Pakistan could be exempted from these laws except as provided in the Constitution, as in the case of the Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA). The Ministry plans to set aside the application of certain laws for the GSEZ to attract investors. It has reviewed and discussed the incentives availed by investors at Dubai, Chahbahar, Jabal Ali, Jawahar Lal Port of India and seaports of China in order to drive a positive conclusion to make the GSEZ more competitive.
The experts believe that investors need incentives in the GSEZ to flourish their business activities, which is only possible when the application of certain laws be held in abeyance i.e. relief in the federal taxes as much as possible and amendment in labor laws, supply of electricity on concessional rates. The government must provide maximum facilities to investors if it wants to make Gwadar port a successful venture.
The GEPZ has been planned for assembling plants and other industries which are to be set up by the prospective manufacturers for marketing in the Gulf region of and Central Asian Republics. Oil storage yard and refinery have also been proposed in the north of Gwadar town near the East bay for which an area of 1,000 hectares has already been identified. Initially, the government plans to build a storage tank farm and a refinery. It would help in increasing import and export of the country. With the functioning of industrial zone, Gwadar would become a hub of industrial and trade activities.
The potential business areas in Gwadar include fish processing, crabs processing, cold storage, ice factories, sea-water reverse osmosis desalination plants for profitable purpose, shrimp farming, boat building and naval architecture institute, oil storage tankers, ferry service for Karachi Ormara-Pasni-Gwadar and up to Oman and Dubai, training services in fisheries and aquaculture, port management projects, hotels and restaurants and resorts, date processing, canned food, gravel crush plant, water sports center and recreation facilities, palm oil cultivation, marine and automobile repair workshops, cluster for Internet service providers, renewable energy, wind, solar and IPPs, clearing and forwarding agencies, hospital clinics, re-rolling mills and warehouses.
Pakistan also plans to give a seven-year tax exemption to industrial and commercial establishments in the Gwadar Special Economic Zone (GSEZ) in order to attract investment particularly in fish-processing industries, real estate schemes, and tourism-related infrastructure and services.
The experts have been asking the government to contact the economic development board of Singapore and its organization Semb Corp Park Management (SPM) for speedy development of industrial estates in the port city of Gwadar. SPM has been undertaking the planning, marketing and management of industrial parks since 1990. With extensive experience and expertise, SPM is in a better position to provide solutions to global companies for their manufacturing needs through its portfolio of integrated industrial parks. The development of industrial park in Gwadar should conform to international standards like those of Batamindo Industrial Park (BIP) on the free trade island of Batam in Indonesia, the Bintan Industrial Estate (BIE), a duty free Export Processing Zone on Bintan Island in Indonesia, the Vietnam Singapore Industrial Park (VSIP) in Binh Duong Province and the Wuxi-Singapore Industrial Park (WSIP) in China.
Singapore assisted Indonesia to develop Batam Island and contributed to its infrastructure by building roads, communication, power generation etc. A large number of industries of all types are set up at Batam Island. Most of these multinational industrial projects are export-oriented and all of them are working in full swing earning huge foreign exchange for Indonesia. Pakistan can also seek the China's assistance in this regard. With nearly 35 percent of share in international trade, China is a leading country in textile production, contributing to one-fifth of the world's garment industry. The garment export in 2001 increased to $36.1 billion, nearly 50 times from 1978.
Efficient land management for industrial and commercial activity is direly needed. Land should be allotted to genuine industries on approval of their feasibility report in Gwadar. For industrial projects, foreign participants should be allotted land in industrial parks.
Conducive environment for industrialization of coastal Balochistan is direly needed to make Gwadar port economically viable project. The economic managers in Islamabad should make viable strategies, programs and policies and efficient decisions to convert Gwadar into a comprehensive and competitive project. Great efforts are certainly needed to create conducive environment for industrialization of Gwadar.
The investors should be given incentive to avail land at Gwadar's free zone for a lease period. The lease period should not exceed 30 years, and it would be renewable on the condition of successful running of the project. The initial lease should be for 3 to 5 years to make it obligatory on the part of investors to come up to their commitment as outlined in feasibility study of the project and should be ready to forsake their right if failed to implement their program on time.
Pakistan has reportedly agreed to lease out land to UAE at Gwadar for the establishment of shipping companies and other related trade activities. It is not known how much land will be allotted to UAE, but it is quite evident that the most precious land near the seaport will be asked for by UAE for shipping companies. Some experts have reservations about leasing out land to UAE. They contend that the ports in UAE are already developed and the objective of asking for land at Gwadar appears to be monopolizing shipping industries in the Gulf States, which may prove a set-back for the development of the marine and shipping industry in Pakistan.