Package of incentives for Gwadar EPZ blocked by Cabinet

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (April 21 2009): The Federal Cabinet has reportedly blocked a package of incentives for Gwadar Export Processing Zone (EPZ), secretly prepared by the Industries Ministry to "facilitate" one private entity, well-informed sources told Business Recorder on Monday.

"The Gwadar EZP comprised land owned by a private entity, which would derive undue benefit from the proposed package. Lessons learnt from the past must be kept in sight so as to obviate the painful reversal of special packages, the sources quoted the Federal Cabinet as saying in its arguments. It is not known, which entity owns land in the EPZ.

The sources said that the Federal Cabinet was informed on April 8, 2009 that a package of incentives, available to the Export Processing Zones (EPZs), had been developed and considered by the Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting on September 23, 2008.

A committee, constituted by the ECC, had recommended that the proposed incentive package for Gwadar EPZ, should be extended to the entire master plan area of Gwadar. The Industries Ministry explained the details of the package to the Cabinet with the indication that the Finance Division and Revenue Division had certain reservations and wanted rationalisation of the proposal, the sources added.

Prime Minister Syed Yousuf Raza Gilani, who was presiding over the meeting, observed that the government was fully supportive to the development of Balochistan. However, notwithstanding, the other dimensions of Gwadar, it would be advisable to develop a package of incentives for the under-developed and deserving areas, including Balochistan.

The sources said the Cabinet also observed that a few provisions of the proposed package were contrary to the existing EPZ policy and tariff regime. The Industries Ministry, in its summary seen by this correspondent, revealed that the ECC in its September 23, 2008 meeting considered the summary and decided to constitute a committee under the chairmanship of the then Advisor to the Prime Minister on Industries (now the Industries Minister) to thoroughly examine the issue.

The committee, in its second meeting held on January 14, decided that proposed incentive package for Gwadar EPZ should be extended to the entire master plan area of Gwadar. The committee also decided that following package of incentives for Gwadar EPZ, in addition to the existing incentives available to EPZs, might be approved by the Cabinet.

-- Tax holiday for 20 years from the commencement of commercial operation of the project.

-- Permission to export up to 80 percent of the production from zone to tariff area of the country on payment of usual duties.

-- Incentives for exports available to projects established anywhere in the country shall be applicable to exports from the projects in the zone.

-- The plots to be provided to investors on lease (as per existing EPZ's procedure) at a reasonable rate be determined in consultation with the Balochistan government, keeping in view the size of investment.

-- Zero-rating of sales tax on supply of construction materials to EPZs investors as well as to EPZ, Gwadar, for development of zone infrastructure.

-- Exemption from stamps duty. After detailed discussion, the Cabinet constituted a committee, under the chairmanship of Industries Minister Mian Manzoor Wattoo and comprising Ministers for Commerce, Ports and Shipping and Prime Minister's Advisor on Finance Shaukat Tarin to revisit the matters and finalise a practical and viable proposal.

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