Pakistan gears up for industrial boom with tax break for Gwadar operators

This file photo shows the construction site at Gwadar port in the Arabian Sea on Feb. 12, 2013. (AFP)
Updated 18 November 2019

Pakistan gears up for industrial boom with tax break for Gwadar operators

  • Chinese firms exempted from sales levies on local purchases for 23 years
  • Ordinance issued in response to a long-standing demand by Beijing

KARACHI: Pakistan’s 23-year income tax holiday and exemptions of sales tax and customs duties to Chinese operators in Gwadar Port and its free zone is expected to create an environment that’s conducive for industrialization in the country, officials said on Monday.
“The tax holiday is for 23 years. After the exemption, the area is expected to witness an industrial boom. Earlier, there were only talks of exemptions sans any material progress. This is the continuation of the vision of government to set up a special economic zone in the country,” Kauda Babar, member of Pakistan’s Senate Standing Committee on the China Pakistan Economic Corridor (CPEC) told Arab News.
The move, he added, could be a major boost for Chinese companies who could “either set up new factories or relocate their units.”
Last month, Pakistan promulgated the ‘Tax Laws Ordinance, 2019’ to amend certain laws, including the Customs Act, 1969 (Act IV of 1969) and the Sales Tax Act, 1990. 
The ordinance was issued in response to a long-standing demand by Chinese companies to be exempted from the sales tax in order to expedite their operations. 
Pakistan has also decided to extend exemptions on equipments and material purchased locally for industrial units located in the Gwadar Free Zone (GFZ). 
The initiative, proposed by the Ministry of Maritime Affairs, was initially resisted by tax authorities who later agreed to an offer of concession through a money bill which is expected to be presented in the parliament soon.
Last week, Chinese Ambassador to Pakistan, Yao Jing, had said that China is setting up 19 factories in Gwadar.
In a tangible development, the Sino-Pak Tire Manufacturing Joint Venture also signed an agreement to invest $600 million to set up a tire manufacturing facility in Gwadar to cater to the growing needs of the market.
The GFZ is being managed by the Chinese but tax concession can be availed by any company operating in the free zone. “Pakistani manufacturers can purchase or rent space in free zone. They will be charged only $8 per square meter per year on lease up to 99 years”, the senator who hails from Gwadar said.
He added that all relevant infrastructure is ready and “if they (investors) want to start setting up factories tomorrow they can. There is no water and power issues in Gwadar.”
Senator Babar further implored the local business communities to take full advantage of the emerging opportunities in Gwadar and its strategic location. “I have talked to many businessmen and they say that the 8/square meter per year is not the big amount,” he added.
However, Pakistani businessmen say they are also investing in other active special economic zones located in the four provinces of the country with a 10-year tax relaxation.
“Government has given an incentive of a one-time duty free import of machinery and many investors have gone for other zones such as Karachi, Lahore and Peshawar and in Punjab, mainly due to proximity,” Syed Mazhar Ali Nasir, Patron in Chief of the Pakistan China business council of FPCCI, told Arab News.
“The advantage of Gwadar is that the imported material will come into the zone without duty and would be reprocessed to export. Joint ventures are preferring Gwadar,” he added.
Senator Babar, for his part, said that he has been requesting the government to declare the the complete area of Gwadar as tax free. “That will benefit the locals as well be a major part of mega developments.”


PMLN awaits full court ruling before moving on legislation for army chief extension

Updated 08 December 2019

PMLN awaits full court ruling before moving on legislation for army chief extension

  • In short order last month, Supreme Court gave the government six months to legally justify a three-year extension
  • Ruling has given rise to debate about whether the government needs to pass an act of parliament or a constitutional amendment

KARACHI: A senior member of Pakistan’s main opposition party said on Sunday the party would wait for a detailed court ruling before deciding on its plan of action with regards to legislation that would allow the government of Prime Minister Imran Khan to grant another term of office to the army chief.
Khan had said in August that he needed General Qamar Javed Bajwa to stay on for another three years because of ongoing security concerns, including heightened tensions with India over the disputed Kashmir region.
But last month, Pakistan’s Supreme Court suspended the extension, citing a series of irregularities and ordering the government and the army to produce legal provisions to support the reasoning behind the move.
After days of legal wrangling, the top court conditionally extended the army chief’s term on November 28 but ruled that the government had six months to justify why it granted the controversial extension and to clarify the section of Pakistan’s constitution governing the armed forces.
The ruling came as a short order. A full verdict is still awaited and has given rise to debate about whether the government would be able to grant the extension by passing an act of parliament or be required to push through a constitutional amendment, which requires a two-thirds majority in parliament. 
On Saturday, a group of Pakistan Muslim League-Nawaz (PMLN) leaders held a meeting with party president Shehbaz Sharif in London to discuss the party’s plan of action following the Supreme court’s order.
“The PML-N leadership [has] decided to wait for [the] detailed judgment of the Supreme Court and to consult other opposition parties for a joint opposition position on this issue,” PML-N Secretary General Ahsan Iqbal, who was part of the huddle, told Arab News.
PML-N senator Mushahidullah Khan said he believed the Supreme Court’s detailed judgment would make it clear that the Pakistan Tehreek-e-Insaf (PTI) government was required to pass a constitutional amendment rather than simply an act of parliament.
“In the case of the constitutional amendment, the PTI will not be in a position to pass the bill as it requires two-thirds majority from both houses of the parliament,” Khan said. Even in the case of an act, he said the ruling party lacked simple majority in the upper house, or Senate.
Hassaan Sabir, a Karachi based constitutional lawyer, also said the PTI government lacked the required strength to amend the constitution without the support of the opposition.
“If the government fails to get a two-thirds majority in any of the houses... the amendment will fail,” he said, adding that opposition support in the Senate would be necessary even to pass a simple act.
Meanwhile, participants of the London meeting also paid a visit to PML-N party supremo Nawaz Sharif at his London apartment. 
Sharif is in the UK for medical treatment after getting bail in a corruption conviction for which he was serving seven years in a Pakistani jail. 
PML-N party chairman Raja Zafrul Haq said it was highly likely that Sharif would have to be taken to the US for treatment.