FBR supports Board of Investment's relocation package

The Federal Board of Revenue (FBR) has supported the special package of the Board of Investment (BoI) for relocation of industry in Pakistan from China and other countries for which threshold level for tax breaks/exemptions would be worked out in consultation with stakeholders.
Sources told Business Recorder here Friday that the second inter-ministerial meeting was convened in Board of Investment to deliberate on the formulation pf policy package for relocation of industry into Pakistan. In this second follow-up meeting, the FBR officials showed their willingness to provide incentives/exemptions/tax holidays under the package for relocation of industries and transfer of technology to Pakistan.
Representative of the FBR stated that the government of Pakistan has already announced various incentives and exemptions with regard to customs and sales tax. He pointed out that as per policy measures, fresh exemptions are being discouraged. Rather, the existing exemptions are being phased out. However, the FBR can consider a special package as and when finalised in the light of its merit and contribution towards the economic development of Pakistan, the sources said.
According to sources, the BoI is working on devising a policy package for relocation of industry in Pakistan from China and other parts of the world with specific reference to Special Economic Zones and industrial parks being established in different parts of the country in the context of CPEC. The BoI also highlighted the importance of industrial growth through value addition and export orientation in the overall growth and socio-economic development of a country. The BoI appreciated the participants for their participation and contribution in this important national cause.
The director policy BoI gave an introductory presentation and highlighted the decisions taken in the last meeting and comprehensively convened the current situation of manufacturing sector, distribution of existing private sector investment, rising trade deficit and case studies with regard to strategies opted by Vietnam and Korea and lessons learnt for Pakistan.
Representative of Khyber Pakhtunkhwa Economic Zones Development & Management Company (KPEZDC) pointed out that local industry needs protection as it cannot compete because of the influx of cheap imports/dumping, especially from China. The BOI responded that National Tariff Commission imposes anti-dumping duty for making for the protection of local industry. Moreover, the policy to be framed would definitely take care of this aspect of distortion in the market. He appraised that KP province has huge potential of iron ore and minerals and the government of KP is working to create one window facility for all existing and potential investors. The government of KP has already announced concessions and incentives for investment in the province and the same would be shared with BOI.
Representatives of Engineering Development Board (EDB) informed that no technology has so far been transferred to Pakistan in real terms. He also highlighted that China is planning to relocate its chemical and heavy industry from Tanjin province to improve pollution and emission levels. Pakistan can get maximum benefits of this relocation especially in terms of technology transfer in the form of joint ventures. The provincial governments are required to focus on improving their HR capabilities. He also commented that relocation will not hit the certified/complaint industry in the country.
Secretary industries Sindh highlighted that no strategy can be translated into reality without having commitment and a quality human resource. He emphasised that Pakistan needs strict implementation on laws and HR strategies. There should be some structural mechanism to mitigate the risks involved in relocation. Moreover, linkages between industry and educational institutions need to be strengthened.
The chief executive officer, NIP, Ministry of Industries & Production gave a presentation highlighting the reason for relocation of labour intensive manufacturing firms from China. It was also discussed that only that industry be allowed to be relocated that is suited in the context of import substitution. The sectors highlighted were industrial raw materials, copper and aluminium intermediary and finished goods and steel related intermediary and finished goods.
Representative from Ministry of Science and Technology suggested that testing labs could be established in the industrial zones so that the standardised product may be tested at the manufacturing spot for following the international standards and certifications.
The representatives of Ministry of Industries, National Industrial Parks, and National Productivity Organisation, EPZA, Ministry of Textile Industry and representatives of provincial governments gave their viewpoints with regard to expected distortion for the local industry and transfer of obsolete technology/plants etc, ie, the technology should not lie within next four years of End of Life (EoL) and End of Service (EoS) by the principal manufacturer and suggested the proposed policy may address these aspects as well. It was brought to knowledge that Punjab government has started a demand-driven skill development programme to train the workforce.
After detailed discussions and deliberations, it was agreed that ministries/provincial governments and other relevant agencies will provide the details of sectors for value addition. It has also been decided that the incentives/exemptions/tax holidays already being given to those sectors and possible additional incentives would be pointed out for new package.
The Ministry of Commerce would prepare a negative list or a standard in every sector to avoid dumping and to encourage hi-tech industry.
The proposed policy would be prepared on the basis of certain principles/parameters entailing threshold level for tax breaks/exemptions etc; employment and training of Pakistan labour force; export from Pakistan by the relocating industry; transfer of technology and incentives needs to be linked to compliance.
The sector representative organisations may also be taken on board before giving any such incentive package for a broader cohesion and proper implementation at a later stage, sources added.