Special Economic Zones Bill 2011
Following the rapid economic growth rationale of India and China in terms of creating special economic zones, the Special Economic Zones (SEZS) Bill 2011, passed by the Senate Standing Committee on Law, Justice, Human Rights and Parliamentary Affairs, lays down a policy framework for encouraging the establishment of SEZS to attract both domestic and foreign investors in Pakistan. The new law will bring about consistency in government policies, allowing investors to work without any apprehensions of sudden changes or withdrawal of incentives given to them in the SEZS.
Now SEZS can be set up by the federal government or any provincial government or by a private developer. The federal and provincial governments can also set up SEZS in collaboration with private developers. The existing industrial estates and zones in the country can also qualify for SEZ status subject to fulfillment of criteria mentioned in the law.
SEZS are expected to reduce the rising cost of doing business in the country and provide one-window facility to entrepreneurs. The purpose is to improve efficiency and competitiveness of the industry in question by creating industrial clusters of big projects where the government is committed to providing infrastructures at the doorstep of the SEZS.
The law requires the formation of a Board of Approvals (BOA) to be chaired by the prime minister and an Approvals Committee to be headed by the BOI chairman for final approval of the development agreements for setting up SEZS. The provinces will be required to set up SEZ authorities to approve and select zone developers for consideration of the BOA. The BOI will be the secretariat for the BOA and will extend full support and facilitation to provincial SEZ authorities, including FATA SEZ Authority.
The bill allows setting up of SEZS anywhere in the country over a minimum area of 50 acres. There are several incentives for the developers of SEZS and entrepreneurs setting up industries in the zones. Developers will get a one-time exemption from customs duties and taxes for all capital goods imported into Pakistan for the development and operation of SEZS. A 10-year tax exemption for both SEZ developers and entrepreneurs will also be provided under the law. Areas to be Addressed The following are the sections that must be fully developed for a complete set of SEZ Rules and Regulations.
1. Organization and rules of procedure of Board of Approvals
The membership and key rules for meetings and quorum are provided by the SEZ Act.
2. Organization and rules of procedure for other SEZ bodies
The SEZ Act provides for the creation of additional governing bodies of the Approvals Committee and Provincial SEZ Authorities. 3. Definitions of SEZS The “Definitions” section of the SEZ Act mention classifications of zones such as Export Processing Zones, Free Trade Zones, Reconstruction Opportunity Zones, and Regional Development Zones and give them loose definitions. The only classification that has any existing legal framework is the EPZ (EPZ Authority Ordinance 1980). 4. Qualifications for SEZ status For the basic SEZ, the SEZ Act outlines requirements that each must meet to qualify. These requirements include minimum land area, maximum proportion of non-processing area, and land allocation policy. Additional criteria that the Board should include in the SEZ Rules and Regulations would be specific infrastructure standards, measurements for feasibility, and governance standards. 5. Approvals Process for SEZS The approvals process needs to be defined in the following ways: • Who may apply • Prerequisites for applying • Required contents of zone applications – these should mirror the zone criteria so that applications clearly address the issues that they will be evaluated under o Forms/ templates for applications
• Evaluation criteria to be used by Authority and Board – these should be as quantitative as possible, most likely with a scoring and weighting methodology that is standardized
• Process for receiving and disseminating proposals in the Provincial SEZ Authorities
• Process for the Provincial SEZ Authorities to review the applications o Timing for review and decision Process for forwarding decision to Board • Process for Board of Approvals to review applications o Timing for review and decision
Delegation of responsibilities between members • Public comment period (if required) • Process for notification of approval • Process for giving conditional approvals and requests for modifications • Process for rejecting applications 6. Developer Agreements The SEZ Act specifies that each SEZ must have a Developer Agreement that would be signed between the Board and the developer