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Old Thursday, April 27, 2006
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Default Industrial Zones

The present Government assigns high priority for revitalization of the economy and create more conducive and liberal environment for foreign and local investment in the country. The announcement of economic reform package and budgetary measure for rationalization of taxes and tariff are manifestation of Government support to provide concessions and facilities for activating private sector as engine of economic growth in the country.
Translating these objectives into practical realities, calls for adoption of pragmatic policy package for development of industrial zones that could effectively energize the process of efficient industrialization and development with adequate attraction for local and foreign investment.
a. Institutional Framework
A scheme of National Industrial Zones (NIZs)" engulfing industrial estates, free industrial zone and Free trade zone and Export Oriented Units and Estates for Small and Medium Industries within the areas of its boundary will be launched at a few selected prime sites. Export-oriented units will however be allowed to be set up all over the country.
The basic criteria of selection of the site will be availability of "access-net" infrastructure and utilities to the door steps of the zone involving minimal expenditure of the Government and participation of foreign and local investors in development of infrastructure within the zone, its marketing, management and establishment of industries.
Free Industrial Zone will be multi-product zone where a variety of export products can be manufactured, traded, exported or re-exported. The zone will offer incentives package on the pattern of EPZ, allowing trading activity/acting as a hub of warehousing of imported produce and their re-export in freely convertible foreign exchange.
Free Trade Zone will serve as an effective instrument to boost up Export trading. The zone set up as an enclave separated from Domestic Tariff Area by physical barriers are intended to provide an internationally competitive duty-free environment for trading of exportable production at low costs. Trading activities, namely, imports for re-export in freely convertible foreign exchange for activities such as repacking and labelling will be permitted. Import for reconditioning, repair and re-engineering will also be permissible for export in freely convertible foreign exchange. Private bonded warehouses will be permitted to be set up in the Zone to meet the requirements of industrial units in the Free Industrial Zones or other EOUs in the country. The Free Trade Zone will be allowed similar concessions and facilities as are admissible to the free industrial zones and Export Oriented Units for value addition and export.
An Export Oriented Unit (EOU) is an industrial unit which exports its entire production excluding permitted level of Domestic Tariff Area (DTA) sales and reject.
Infrastructure within the Zone will be developed by the Private Sector Investors. Development, management and marketing of Industrial Estate/Free Industrial Zone and Free Trade Zone will be offered to local Scheme. Provision of infrastructure and utility facilities upto the Zones will be the responsibility either of relevant agencies of the Government or the Developer/Investor. As added incentive to Developer/Investor, area surrounding the zone may be offered to them for development of township including commercial and residential facilities.
Country specific zones will be allowed to be established by Developer/Investor to attract setting up of industrial units preferably export oriented industries. The developer of zone and the project investors may be allowed "bond facilities" for their community and cultural activities within the area of the zone. They may also be allowed to develop residential facilities for the personnel working in the zone.
A single National Industrial Zone Authority (NIZA) will be set-up with statutory powers to carry out the responsibility of management of the National Industrial Zone. However, the existing Export Processing Zone Authority Ordinance 1980 may continue to apply to the Free Industrial Zone (Export Processing Zone) and Free Trade Zones. The National Industrial Zone Authority (NIZA) will be established through an enactment to provide a legal frame work for management and providing necessary facilities and services to the Zones.
The development, marketing and maintenance of the Estate infrastructure facilities within the Zone will be responsibility of the Developer/Managing Company. Provision of utilities will be the responsibility of the developer of the estate/zone or the concerned departments depending on the agreement to be reached with the developer. The NIZA will deal with the regulation of public services, revenue collection and management of the affairs of the Zone for implementation of the NIZs Act and other enactment’s, and issuing of permission for projects under "One Window Facility".
The National Industrial Zone Authority (NIZA) will extend one window facility to give permission incorporating all required clearance of various departments and arrange utility facility and other related services for the investors to undertake industrial project within the zone.
The policy matters and issues will be by the Board of Investment. The implementation of the Policy of the National Industrial Zones (NIZs) will rest in the National Industrial Zone Authority (NIZA). Management Committee for the zone will run the administrative and management affairs of the Zone which will have representation of the developers, and the sponsors/investors of the projects in the Zones. The functionaries of various departments of the government working in the zone shall be under the administrative control of the Management Committee of the zone.
b. Objectives of National Industrial Zone Scheme.
Main objectives of the composite scheme of National Industrial Zone are as under:-
1. Efficient industrialization and development with export-led strategy in a contiguous, congenial investor-friendly-environment.

2. Promoting local and foreign investment through time-framed provision, access-net of utilities, infrastructure facilities and one-window-services to investors in establishment of their projects.

3. Attract foreign investment, transfer of technology and for development of value added industries.

4. Development of the "National Industrial Zones" at prime locations having marketing linkage, available land and infrastructure.

5. Help achieve concentrated growth of industries with provision and operation of services and promoting beneficial inter-firm linkage with world market.

6. To create growth pole at suitable geographical points which may combine the need of local area development and efficiency in industrialization and act as generator of economic growth.

7. To provide strategic production basis with globally competitive edge and encourage production of value added exportable surplus through the schemes of Free Industrial Zone, Free Trade Zones and Export-Oriented Units.

8. Consistency and long-term continuity in the policy with integrity and transparency in the implementation of the scheme.
c. Location parameters
The basic criteria for selection of National Industrial Zones (NIZs) would be availability of land of preferably 1000 acres, for each Estate/Zone preferably government land with "access-net" of infrastructure/utilities or its reach in vicinity thus involving minimal financial outlays from government resources for provision of these facilities. Zones at such prime strategic sites will be located where the consumer market, skilled manpower and socio-economic infrastructure are available in the vicinity, to develop to comprehensive industrial paradigm with short gestation period at lowest possible cost.
d. Criteria
All industries can be set up in the National Industrial Zones, except the following:-
(I) Specified Industries

(a) Arms and Ammunition.
(b) Security Printing, Currency and Mint.
(c) Explosives.
(d) Radioactive substances.
(e) Alcohol, except industrial alcohol.
(II) Competitive Industries (Free Industrial Zone/Free Trade Zone)
(a) Cotton Ginning.
(b) Sugar manufacturing (white).
(c) Flour Milling.
(d) Steel Re-rolling and furnaces.
(e) Tobacco Industry.
(f) Ghee or Vegetable Oil Industry.
(g) Plastic bags including Polypropylene & Polyethylene.
(h) Beverage excluding fruit juices.
(i) Automobile Assembly.
(j) Industries giving rise to pollution of water, land and atmosphere environment.
(k) Carpets.
Free Industrial Zone and Free Trade Zones will serve as an effective instrument to boost exports of manufactured products. The zones setup as enclaves separated from the Domestic Tariff Areas by physical barriers, are intended to provide and internationally competitive duty-free environment for export production and trade at low costs. This enable the products to be competitive both quality wise and price wise in the international market.
Criteria for projects in these zones are:
1. The unit should be 100% export-oriented;
2. Minimum value addition according to prescribed formula;
3. Improvement in industrial technology;
4. Export marketing capability;
5. Employment of skilled manpower; and
6. Process of manufacture should meet applicable environmental standards and regulations.
b. Existing Incentives/Concessions.
1. Tax holiday upto the year 2000 A.D., and there-after 25% in perpetuity.

2. "Capital gains" are exempted from taxation.

3. Total exemption from all federal, provincial and municipal taxes, no foreign exchange control, and no insurance regulations which are normally applicable in Pakistan.

4. One window service and simplified procedures for such items as, import permit and export authorizations, are also issued by EPZA itself.

5. Usual import/export restrictions enforced in Pakistan are not applicable to the Zone.

6. All goods and material entering into the Zone from Pakistan (where tariffs and taxes are to be paid) are regarded as exports from Pakistan, and, hence, Pakistanis are entitled to all the facilities and concessions allowed on exports to other countries.

7. Duty free import up to three vehicles, proportionate to the capital investment, is allowed.

8. Free employment of expatriates, with exemption of the salary income tax for five years, from the date of arrival in Pakistan.

9. Income accruing outside Pakistan exempt from taxation.

10. Losses, if any, on an undertaking setup in the Zone may be carried forward for tax assessment purposes.

11. Import of equipment, machinery and material (including components, spare-parts and packing material) for enterprises set up in the Zone, is exempted from all federal and provincial taxes and duties, including customs, excise, sales tax and municipal taxes.

12. Any income chargeable under the head "capital gain" is not taxable.

13. Full repatriation of capital, profits and dividends is allowed to the foreign investors and non-resident Pakistanis.

14. Off-shore banking and insurance facilities.

15. International distribution centers are allowed to be established.

16. Exemption from labour laws upto year 2000.
c. Additional facilities:
1. Local DFIs/Banks are allowed for project financing in Zone.

2. Sale upto 20% of exports are allowed to Domestic Tariff Area subject to payment of duties and taxes.

3. Export of waste and defective items allowed to tariff area as also to bonded manufacturing units.

4. Exporters of a zone will be treated at par with tariff area counterparts for freight subsidy on certain item.

5. Sub-contracting by zone units in tariff area is permitted. It should also be allowed the other way round to utilize idle capacity.

6. Inter-unit transfer of finished goods among exporting units may be allowed.

7. "Deemed export" benefits be allowed to supplies from DTA.
The criteria for establishment of Export-Oriented Units will be as under:-
1. The EOU shall undertake the entire production of goods for export, except sales permitted in the domestic tariff area (DTA) - (20%).

2. The unit shall achieve the minimum value addition (MVA) value addition as to be prescribed by the National Industrial Zone Authority.

3. The unit shall execute a bond/legal undertaking in prescribed form with the National Industrial Zone Authority or the agency designated by Authority.

4. The National unit shall have marketing/buy-back arrangement and track record of the promoters.

5. Raising of funds through external commercial borrowing shall be preferred where outflow capital goods tie-etc., involved.

a. Framework of operation
The above criteria for approval of a scheme would be subject to the basic condition that the unit shall undertake to manufacture the goods in bonded warehouse under Custom control and to export its entire production for a period of 10 years ordinarily and 5 years in the case of products having high degree of technological change. The Customs Authorities are to provide bond facilities to such units wherever located which is got to be revalidated on yearly basis depending on export performance of the unit and the place is declared as ware housing station. The fiscal concessions and facilities of Export Processing and Free Trade Zone will be admissible to Export Oriented Units (EOU).
In order to attract domestic and foreign investors for the development of National Industrial Zones (NIZs), concept of IDP - Investor, Developer and Promoter will be adopted. Under this scheme, private developer/investor would be offered the tracts of land earmarked for development of attractive National Industrial Zones.
Financing of the projects of the National Industrial Zones, in addition to the following shall be covered through normal rules applicable to the type of industry being set up under the project:-
1. Foreign investors shall bring their own foreign exchange for financing their projects.

2. Local DFIs, Commercial Banks etc. may, however, consider for financing local currency cost of the projects, subject to their normal terms and conditions and laid down procedure. Government of Pakistan, however, will not guarantee payment of foreign loans.

3. The units can procure capital goods from local/domestic leasing companies which on behalf of the units can import the goods (not manufactured in Pakistan), with permissible concessions.
Special bonding facility for duty free raw materials will be provided by the customs on the pattern of Export Processing Unit (EPU) scheme for Exports.
Provision of utilities will be the responsibility of the developer of the estate/zone or the concerned departments of the government depending on the agreement to be reached with the developer.
Banks and Finance Institutions may set up their authorized offices in all NIZs.
Same labour laws will apply in the National Industrial Zones as are applicable in the existing Export Processing Zone.
The application of following laws will be vested in the National Industrial Zone Authority (NIZA):

• The Provincial Employee’s Social Security, Ordinance 1965 (W.P. Ordinance No. X of 1965). (not to be exempted from payment or contributions).
• The Employee’s Old Age Benefits Act, 1976 (XIV of 1976) (not to be exempted from payment of contributions).
• The units NIZs will pay 12% of wages of employees towards old age benefits and Social Security to the Project Director of the NIZs who will act as One Window Operation and will deposit it with relevant agencies.
• Municipal Corporation Act.
• Following rules shall be applicable:
• No employee shall refuse to work or go slow or go on strike; or
• No employee shall commence, continue, instigate incite or compel other to take part in or support "go slow" or strike.
• The service of an employee shall be governed by the terms and conditions as laid down in his letter of appointment, issued by the employer.
• The services of an employee may be terminated by an employer in accordance with the terms and conditions contained in his letter of appointment.
• All other matters/issues relating to control of employment will be governed by the orders of managing authorities of the National Industrial Zones.
Period of lease of land in National Industrial Estates/Zones would be 50 years, extendible further on mutually agreed terms. The rates of lease premium, annual rent and maintenance charges and their periodical increases will be mutually agreed between lessee and the Authority handling the management of the respective National Industrial Estates / Zones. Annual increase in the rent and maintenance charges will be linked with the cost of development and inflation. However, lease will be deemed as canceled, if, the project is not operative within two years from the date of allotment. Similarly, the title of lease/Virgin land is not transferable, this however, is not withstanding the change of title due to inheritance and mortgages, merger national and international.
The Government or the developer of the NIZ will be responsible for provision of infrastructure facilities such as electricity, telecommunication services, gas, water, sewerage, roads link upto the door step of Industrial Zones. The coast thereof will be treated as development cost and would be recovered as part of the price (down payment) of the industrial plots in the industrial area.
The public facilities such as fire station, police station, health center, customs office, post office, school, park and social facilities will be provided by the developer of the NIZ at their own cost. However, such facilities will be staffed by the personnel of the concerned agencies of the government.

• Companies having units in the National Industrial Estates will be eligible for listing in the local as well as international stock exchanges, subject to fulfillment of their listing requirement.
• The units of National Industrial Estates will be treated at par with other units of the country for allocation or purchase of textile quota according to laid down procedure.
• The facility of re-investment of local earnings in Pakistan to the extent of foreign equity as "foreign investment" will be available.
• The units in National Industrial Estates will have free access to local raw material under the prevalent market conditions.
• Each unit will be allowed to import one car, one van and one bus for 100 workers each, duty free, provided the foreign equipment participation exceeds US$ 10.00 million.
• Expatriate employees of all investors will be allowed to import foodstuff and other consumable items equivalent to US$ 5,000 per person per year in Pakistan, against their own foreign-exchange.
• The installation and operation of anti-pollution facilities/measures pertaining to the respective units will be responsibility of the units sponsors concerned.
• Plant, equipment machinery and process installed in Unit shall be in conformity to local and international environment laws/regulations.

plz pray,
God is dead! God remains dead! And we have killed him! How shall we console ourselves, the most murderous of all murderers? The holiest and the mightiest that the world has hitherto possessed, has bled to death under our knife....
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