Muhammad Omar
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Power transmission lines hang from electricity pylons at the Bin Qasim Power Station II plant, operated by K-Electric Ltd, Karachi. The Chinese are making the initial investment of $33 billion in energy alone so that the new projects, as well as the existing ones, and the country at large faces no energy shortage.
(Bloomberg)
Foreign and Pakistan investors invited to build several Special Economic Zones at $46 billion CPEC project
Pakistan takes a giant step forward and made lucrative offers to foreign and Pakistani investors to build several Special Economic Zones, or SEZs including banks, industries and businesses.
The bonanza is to ensure a fast track building of China-Pakistan Economic Zone (CPEC) - stretching from the shores of the Sea of Japan to Iran, and down south from the UAE to Central Asian Republics. The up-tick in the Pakistani economy on the back of two years of pro-business Prime Minister Nawaz Sharif's government, and the continued strength of the Chinese economy - which holds vast foreign investment funds and policy to spread out - to build a big new business zone. The new, and strong, resolve to go ahead with the project was the highlight of recent contacts between President Xi Jinping and Sharif.
"In view of the large number of potential investors, particularly from UAE-Saudi Arabia-Middle East as well as US and EU, and the interest they have shown, the government has laid down 'The eligibility criteria.' Out of the applicants, the government will pick up financially the strongest, most innovative, and the state-of-art corporations to grant land and other key facilities," a minister told this writer.
Nearly half a dozen ministers, heading ministries of finance to planning, petroleum to industries to commerce and electricity, are tasked by Sharif with speeding up the CPEC and the SEZs' projects.
"The Chinese are making the initial investment of $46 billion in the CPEC project. It includes an investment of $33 billion in energy alone so that the new projects, as well as the existing ones, and the country at large faces no energy shortage. But, the overall investment will be much larger, as the projects move ahead, production pattern expands, and their input requirements get bigger and bigger. A big push is also expected from the private Chinese corporations and the banks," Ahsan Iqbal, minister for planning told this scribe.
He said Pakistan and China will establish a joint investment and industrial cooperation working group to establish industrial zones and SEZs under China Pakistan Economic Corridor.
"It will identify the location to establish SEZs, industrial zones and industrial parks under CPEC." Major General (retired) Dr Zahir Shah has been named as its project director.Commerce Minister Khurrum Dasgir, at the same time, informed this writer, "within months of the startup of even some of the industrial units, planned to be located in the CPEZ, or the proposed individual SEZ's, we project that our exports outside the country will see a quick jump. We have already made provisions to help these units to manufacture all types of products which we can be exported, and have a big global demand. These products range from processed and 'Halal' food to chemicals. Necessary arrangements are part of our new three-year export strategy policy which will cover the period from 2015 to 2018."
"The criteria" comprises 12 conditions for grant of land, related development and construction requirements for the individual SEZ projects to ensure their viability, productivity and financial and business success for the investors and Pakistan. The investor's proposal will be approved on the basis of the following conditions: A special economic zone (SEZ) will have a minimum size of 50 acres of land.
On its completion and development, the zone should generate economic activity in terms of exports, employment and other performance indicators at least equal, or more than the total overall capital cost, incurred over a period of five years. On completion, it will provide import substitution and generate direct and indirect exports.
The SEZ will not target any industry or product which is banned in the world. It will not target an industry or product which is being protected by the other countries in the larger national interest.
The Federal, or one of the four provincial, governments in whose territorial jurisdiction any zone is located, will ensure completion of its development and related work, and will stand committed to provide corresponding resources on the time line to materialize the SEZ.
The application to build a zone will be made in conformity with he provisions of the Industrial Act, any applicable regulations issued under the act and other applicable provision of the law. Seventy percent of the Zone land area will be used for the purpose of the operation of the zone enterprises.
The developer of the zone will be under obligation to undertake to comply with all the governmental, labour and other applicable legislation in force in Pakistan.
The developer of the zone will have to take all the necessary approvals to start the construction activities within six months of signing of the development agreement.The developer to be engaged for a particular SEZ shall be a body incorporated under the laws of Pakistan. Articles of Association of the developer shall be approved by the provincial government or administration of the Islamabad Capital SEZ Authority.
The developer should ensure that the Zone enterprises start construction facilities within six months, and start regular production within 24 months after receipt of all the required licenses and permits.
The developer shall be obliged to undertake that the title of the land shall only be registered in the name of zone enterprises after they have performed business operations in the SEZ for at least six months.
There will be no real estate activities in the zone.
The sponsors of the proposed zones will also have to provide relevant documents with their application for grant of permission to establish SEZs. These details are listed in the policy document containing the eligibility criteria.
Ministry of planning and the Board of Investment, Government of Pakistan, Islamabad, will oversee this work. As soon as the policy gets circulated, and the foreign and Pakistani investors study the offer, one will quickly know their reaction, and size up the investment prospects for SEZs.
