President Asif Ali Zardari signed the Special Economic Zones (SEZ) Bill and with the presidential approval the SEZ Bill has become Special Economic Zone (SEZ) Act 2012 today on Monday.
The incentives announced through the SEZ Bill, exemption from customs duties and taxes for all capital goods imported into Pakistan for the development, operations and maintenance of a SEZ; exemption from all taxes on income accruable in relation to the development and operations of the SEZ for a period of 10 years, starting from the date of signing of the development agreement will become affective for the investors.
The National Assembly had approved the SEZ Bill 2012 on July 13, 2012. The bill took more than three years for its processing as it involved large consultative process with the provinces stakeholders. The incentive package was approved in 2008 by the Economic Coordination Committee of the Cabinet (ECC) but it remained under discussion. The cabinet accorded approval in principle for initiation of legislation in 2010.
The Council of Common Interests (CCI) also considered this bill due to introduction of 18th Amendment. After hectic efforts, CCI approved the bill in August 2011. The bill has further undergone the microscopic examination by the Standing Committee on Law, Justice, Human Rights and Parliamentary Affairs. The Upper House (Senate) approved this bill in January 2012 and National Assembly accorded its approval on July 13, 2012.
The law has been made to meet the global challenges of competitiveness to attract foreign direct investment. The law or bill will allow creation of industrial cluster with liberal incentives, infrastructure, investor facilitation services to enhance productivity and reduce cost of doing business for economic development and poverty reduction.
The law further envisages to reduce processes through SEZ in Pakistan. The law will ensure consistency and transparency in economic policies beyond political divide and restore investor confidence. The bill will provide guaranty that incentive once granted would not be withdrawn due to conflict of interests.
Salient features of the draft SEZ Act 2012 include, extending to the whole of Pakistan and override other laws, all SEZ whether public, public-private or private-private to be governed under this act; the Board of Approval (BoA) headed by the prime minister with the minister for finance as the vice chairman shall meet as frequently as required but not less than twice a year and decisions shall be taken by a majority of the total membership present and voting; SEZs will have exemption from customs duties and taxes for all capital goods imported into Pakistan for the development, operations and maintenance of a SEZ; exemption from all taxes on income accruable in relation to the development and operations of the SEZ for a period of 10 years, starting from the date of signing of the development agreement.
Zone enterprises have exemption from custom duties, etc, on imports of capital goods; exemption from taxes on income for a period of 10 years starting from the date the development certifies that the zone enterprise has commenced commercial operations in the relevant SEZ. BoI with the approval of the BoA and after consultations with the provincial governments and concerned SEZ authorities shall frame rules and regulations necessary for implementation of this act.
The establishment of SEZs will attract both domestic as well as international investors. Some of the investor countries like Korea, China and Japan are expecting to benefit from this scheme as soon as it becomes operational. The provincial governments would be requested to start the process as soon as rules are framed.
