PPakistan has climbed several notches in its world ranking on the Ease of Doing Business (EODB) index published by the World Bank. However, much remains to be done to facilitate investments and attract foreign investors and mobilize local investments, especially in the manufacturing sector.
The trade deficit of $ 31 billion (fiscal year 2020-21) must be reduced on a war footing. The national economy cannot prosper without increasing exports and import substitution.
Since 2016, 300 reforms have been implemented to improve the investment climate in the country. Although still far behind India, ranked 63rd, Pakistan has improved its ranking by 39 positions over the past two years and is now ranked 108th out of 190 countries.
Pakistan has been recognized as the first reformer in South Asia and the sixth in the world. Improvements include one-day Securities and Exchange Commission registration of companies and Federal Board of Revenue online tax payment and efficient customs software.
In September 2021, the EODB index was halted following the discovery of data manipulation in search of a better ranking. Rankings aside, issues of availability of low-cost land, electricity, gas, infrastructure, skilled labor and one-stop-shop operations need to be addressed to be competitive in the marketplace. global scale in the manufacturing sector, which is the lifeline of an industrial economy.
There are 11 Economic Zones (ZE), one Export Promotion Zone (EPZ) and two Special Economic Zones (ZES) managed by the Khyber Pakhtunkhwa Economic Zones Development and Management Company. The application process is fairly straightforward. A feasibility study, a one-page application form and an application fee of Rs 10,000 make an industrialist eligible for a plot. They have the choice of size.
For the Hattar and Rashakai SEZs, the request is processed on the SEZ Management Information System (MIS). Only companies registered with SECP can apply for land in SEZs. A committee made up of the CEO of KPBOIT, the director of KPSEZA, the director of the SEZ of the Federal Council of Investments, the deputy commissioner of the relevant district and the president of KPEZDMC decides on the attributions based on previous experience and the feasibility of the project. project.
Once the request is approved, a provisional award letter is issued to the manufacturer. The process can take up to six weeks for SEZs and up to three weeks for SEZs. Bifurcation of plots, change of directors, company name and nature of the activity, etc, is submitted to the SEZ committee for approval. On average, the SEZ committee meets once every two months.
These approvals should belong to the management of the area with a clear guideline. This will save investors valuable time. In economic zones, these approvals are recorded in handwriting on the files. To facilitate business, these tasks should be performed on a GIS. The approval steps should be accessible to investors and management of developers. This will increase transparency and speed up the process.
Getting land is the easiest part, getting NOCs from the Environmental Protection Agency and utility providers is harder. Once a parcel has been allocated, an EPA NOC is required to begin construction, including the perimeter wall. It usually takes months to get a notice of compliance. The construction of boundary walls should be permitted without the EPA NOC.
The EPA NOC should be abolished for non-hazardous industries. EPA rules should be incorporated into the developer’s building regulations. This will eliminate the need for a separate NOC from the EPA. A representative of the EPA should be permanently delegated in each zone to deal with the NOCs.
Electricity and gas are not available in most areas. When these are available, getting a connection is quite a challenge. The process takes three to six months and requires numerous visits to the relevant offices..
Electricity and gas are not available in many areas. When these are nominally available, getting the connection is quite a challenge. The process takes three to six months and requires numerous visits to the relevant offices. The application must be online and not require an office visit.
Non-essential documents should be abolished. A three-month advance invoice is deposited as a guarantee with PESCO and SNGPL. The deposit blocks the necessary for a new business. Utilities should have a mechanism to offer the option to purchase electricity and gas in bulk.
The officials of the Department of Excise and Labor should not contact manufacturers. Rather, all matters, including the payment of fees, should be carried out in coordination with the management of the area.
An area must be a fortress for industrialists who must have a one-stop shop and all services at their doorstep. However, they should not be allowed to shirk their responsibilities in terms of paying taxes and obeying all the rules.
Obtaining bank loans is a Herculean task at KP. Most banks are more comfortable lending to industries in Punjab and Sindh due to better security, better markets and less exposure. Banks also have a limited branch network in KP and many loans are processed in Islamabad, Lahore and Karachi. The approval authority has little knowledge of the investor or the dynamics of the area and is reluctant to take risks.
The documentation requirements are very strict. Most SMEs are not registered. Loans are thus refused on the basis of missing documents. KP’s share in industrial loans was less than 1%. The financing / deposit ratio is less than 50%.
The SBP should ensure that KP gets its share of commercial bank loans. Asking banks to process loans in Peshawar rather than at their head office can facilitate disbursements.
The one-stop-shop is a new concept in industrial facilitation. It needs legislative support. The KPEZDMC industrial animation offices assist manufacturers with requests for plots, requests for electricity and gas connections and the resolution of any other problem that the manufacturer may have.
One-stop-shop representatives visit PESCO, SNGPL, and government offices with industry to guide and ask government departments to speed things up. While this is a great help, legislation is needed to allow one-stop services.
A centralized one-stop-shop at the provincial secretariat should be established to help one-stop-shops of ministries to resolve issues with PESCO, SNGPL, Ministries of Labor and Excise, EPA and BOI. This cell is also expected to monitor the performance of one-stop-shop operations of these departments through computer systems similar to the Pakistani Citizens Portal.
The Federal Investment Council is working on a GIS, where electricity and gas demands can be processed for companies in SEZs. Constant follow-up with utility companies by the BOI will be helpful.
Small investors want cheap land, electricity, gas, road access and drainage to start an industrial establishment. Plots in SEZs and SEZs should only be opened for rental once electricity distribution and gas supply are nearing completion.
The author is Zone Director, Hattar SEZ, KP Economic Zones Development & Management Company, KP Government