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Export Processing Zone Authority.

Export Processing Zone Authority

Export Processing Zones are expected to serve as a catalyst for Industrial growth of the country. The concept of an Export Processing Zone, has drawn attention from many developing countries for its widely known role of building up export oriented industries. During recent years the members of EPZs have increased from 200 to 350 in more than 75 countries.

The establishment of Export Processing Zone in Pakistan was decided by the Cabinet in March, 1979. However, due to resource constraints, it was decided to start work only on the Karachi Zone for the time being. The Export Processing Zones Authority (EPZA) was established through Ordinance IV of 1980 with the mandate to plan, develop and operate Export Processing Zones in Pakistan. It is an autonomous body under the Ministry of Industries. The Karachi Export Processing Zone (KEZ) is the first project of EPZA which was set up in 1981.

The objectives of the establishment of Karachi Export Processing Zone are primarily to boost industrialisation and augment country's export by creating facilities for investors to enable them to set up export oriented units which would as a consequence create job opportunities, bring in new technology and know-how and attract foreign investment.

The zone comprises an area of 300 acres out of which 200 acres have been fully developed in the first phase. The entire infrastructure has been completed and all the utilities such as land, water, power, gas, telephone and telex are readily available.

The developed area of 200 acres consists of 330 plots 1000 M2 each for the industrial sector, 70 plots of 400 M2 to 1500 M2 each for the warehousing and trading sector and 33 plots of 96 M2 each for financial sector. Development of the remaining 100 acres is also being taken up which will provide 175 more industrial plots of 1000 sq. meter each Progress

The number of approved industries as on March 31, stood at 135 with an envisaged investment of US $ 210.360 million. In addition, 62 warehousing and trading units have been sanctioned in the commercial sector. Two hundred and twenty eight industrial and 34 commercial plots have been utilised. Thirty-three industrial projects are in production, 37 units are at different stages of construction and another 32 units have paid for land. Off-shore branches of four Pakistani banks, three insurance companies and a foreign investment company has also been set up in Karachi Export Processing Zone.

Incentives

KEPZ provides all facilities and services under one window. Procedures are extremely simplified. All infrastructure facilities including land, electricity, gas telephone etc. are made available by the Zone authorities within days. Import permits and Export Authorisation are also issued by KEPZ. The import licence can be obtained within 24 hours free of charge. The one documents to be attached to the application form is proforma invoice. The import licence is initially valid for six months, extended for another six months, free of charge. In addition, the following fiscal incentives are available in the Zone:- i) Tax holiday upto the year 2000 and tax

holiday at the rate of 25 per cent in perpetuity

after 2000. ii) Any income accruing outside Pakistan

is exempt from tax. iii) Income chargeable under the head

|Capital Gains' is not taxable. iv) The losses, if any of an undertaking in

the Zone may be carried forward identity. v) Income chargeable under the head

|Salary' of foreign personnel attached

to enterprises operating in the Zone is

exempt from income tax for 5 years

from the date of arrival in Pakistan. vi) Import of all equipment, machinery and

materials is exempt from all federal and

provincial taxes duties, including

customs, excise, sales tax, and municipal

taxes.

All goods and materials entering the Zone from Pakistan tariff areas are regarded as exports from Pakistan and the Pakistani suppliers are entitled to all the facilities and concessions which are allowed for export to other countries. The normal import restrictions are not applicable to the Zone.

Repatriation of Capital and Profits

The Government of Pakistan guarantees full repatriation of capital profits and dividends for foreign investors and non-resident Pakistanis in the KEPZ. In addition, enterprises in the Zone are free to export merchandise without any obligation to repatriate their export earnings back to Pakistan.

Offshore Banking and Insurance System

Branches of Pakistani banks and insurance companies in the Zone are subject to the same regulations as are applicable to overseas branches of Pakistani banks and insurance companies. The Zone has been exempted from the provisions of Foreign Exchange Regulation Act 1947, the State Bank of Pakistan Act 1956 and Banking Companies Ordinance, 1962. The Zone is also exempt from the provisions of Insurance Act 1938 (IV of 1938) and the Pakistan Insurance Corporation Act 1962 (XXXVII of 1952). As such, the banks in the Zone are operating under complete freedom from exchange control regulations and they can carry out financial dealings in the world over with full liberty.

Industrial Schedule

The field of investment is diversified. All types of industries can be set up in the Zone; e.g. light engineering goods, electronic item, computers, leather products, watches, precision instruments, hospital equipment, fruits and vegetables processing etc. Only those industries which compete directly with traditional export oriented industries in Pakistan, the industries manufacturing alcoholic beverages, narcotics, arms and ammunition and those creating pollution of water or atmosphere are put on negative list. Investors can also set up international distribution centres in the Zone for importing, warehousing and re-export of goods.

Procedure of Investment

The procedure for granting approval of business concern for setting up industry in the Zone is very simple. We provide an application form which is to be submitted after filling up along with a scrutiny fee of $ 25.00. No detailed. Feasibility Study Reports are required to be submitted.

Normally, our Board of Directors meet after every two months to approve the projects. The land cost is $ 9.00 per sq. metre for 30 years lease which is renewable and the minimum measure of land is 1000 sq. metre. An investor is free to apply for any number of plots. The payment for land is required to be made before the execution of agreement. The annual ground rent is required to be paid in advance at the rate of US$ 1.50 per sq. metre per year on all plots. All the payments are required to be made in foreign currency.

Labour

Labour laws of Pakistan are not applicable in the Zone. However, we have laid down our own Regulations to ensure that the employees are not subjected any to ay exploitation or injustices by the employers.

Eligibility for Investment

A foreign investor and a non-resident Pakistani can invest upto 100% of the equity and a joint venture between foreign company and a non-resident Pakistani can be done in any proportion whereas resident Pakistanis can contribute to a joint venture upto a maximum of 40% of equity.

All investments in the Zone are made in convertible foreign currency. Presently more than 50% are joint ventures between foreigners (non-resident Pakistanis and resident Pakistanis). These investments have come from USA, UK, France, Germany, Middle East, Singapore, Korea and Japan etc.

Impact of New Industrial Policies of the Present Government

Liberalisation of policy to boost up industrialisation and the economy in the country is casting a positive impact on the scheme of EPZs in the country. Approval of establishment of a PZ at Lahore has already been accorded. This has come into realisation after 15 years of relentless efforts.

The Zone at Lahore: This will create job opportunities for 10,000-12,000 persons, consume local raw material of US$ 100 million and export goods worth of US$ 400 million.

Similarly, work for establishing EPZs in other regions namely NWFP, and Balochistan and Southern Punjab has been initiated. In addition, another Zone at Port Qasim area in the province of Sindh over an area of 1000 acres has been agreed to which will cater for ocean related and heavy industries requiring sea frontage.
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Article Details
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Title Annotation:Pakistan; Industry
Author:Qureshi, M.A.
Publication:Economic Review
Date:Jun 1, 1991
Words:1340
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