In recent years, Pakistan has accelerated its industrial growth agenda through the establishment of Special Economic Zones (“SEZs”), which form a cornerstone of the country’s investment-promotion framework. Governed by specialized legal and regulatory regimes, SEZs are structured to expedite industrial development, provide fiscal incentives, foster exports, lower the cost of operations, and provide a facilitative environment for manufacturing and production-focused businesses.
SEZs in Pakistan are geographically designated areas earmarked for economic, industrial, and commercial activities and are governed by the Special Economic Zones Act, 2012 (“2012 Act”). The 2012 Act provides various fiscal incentives to zone enterprises (“Enterprises”) including:
- a one-time exemption from customs duties and taxes on the import of plant and machinery into an SEZ, except for items listed under Chapter 87 of the Pakistan Customs Tariff; and
- an income tax holiday up to 30th June 2035.
Enterprises (both local and foreign) seeking to establish operations within an SEZ and avail the associated fiscal incentives must apply to the SEZ Committee of the relevant zone - established under the 2012 Act - through a zone enterprise entry application (“Application”). The Application must demonstrate compliance with the zone admission criteria prescribed under the 2012 Act, the Special Economic Zones Rules, 2013 (“2013 Rules”), and the SEZ Zone Enterprise Admission and Sale, Lease and Sub-Lease of Plot Regulations, 2021 (“2021 Regulations”). Required documents for the Application typically include a business plan, production forecast, preliminary architectural drawings, and details of land and utility requirements of the proposed business.
Following approval of the Application, the Enterprise is allotted land in accordance with the requirements specified therein, which the Enterprise must acquire through lease or sale. The Enterprise is further required to achieve the following mandatory milestones:
- commence construction within six months; and
- begin commercial operations within twenty-four months of the Application’s approval date.
During this period, the Enterprise is required to submit its building and infrastructure plans to the SEZ developer for approval and obtain all necessary licenses, permits, and regulatory clearances from the relevant authorities for its proposed business activities.
Once the Enterprise has commenced operations within twenty-four months of the approval of its Application and has satisfied the requirements under the 2012 Act including compliance with all SEZ building codes, and applicable environmental and labor laws, the SEZ Committee issues a certificate in its favor which shall entitle the Enterprise to the fiscal benefits outlined above.
Beyond fiscal incentives, SEZs also provide state-of-the-art infrastructure, including internal road networks, utilities, and labor colonies, designed to meet the needs of businesses operating at both local and international levels. Notable examples include Rashakai SEZ in Khyber Pakhtunkhwa (a CPEC-linked zone), Quaid-e-Azam Business Park located on the Lahore–Islamabad Motorway, and Bin Qasim Industrial Park in Karachi.
Conclusion
In conclusion, businesses and investors (local and international) seeking to establish or expand manufacturing operations should give serious consideration to investing in Pakistan’s SEZs which offer a compelling combination of attractive fiscal incentives, a dedicated and investor-friendly legal and regulatory framework, and streamlined administrative processes that significantly reduce the cost and complexity of doing business.
In addition, Pakistan benefits from the availability of a large, cost-effective, and sufficiently skilled workforce, which provides manufacturers with a sustainable operational advantage. As Pakistan continues to strengthen its industrial base and export capacity, investment in SEZs offers businesses not only immediate operational benefits but also the opportunity to participate in the country’s broader economic growth and industrial transformation.
This article is written for information purposes only and does not constitute legal advice. For more information you may contact Mian Tariq Hassan ([email protected]) and Ammar Waseem ([email protected]).