Pakistan has gone up several notches in its global ranking on Ease of Doing Business (EODB) index published by the World Bank. However, much needs to be done to facilitate investments and attract foreign investors and mobilise local investment, especially in the manufacturing sector.

The $31 billion trade deficit (FY 2020-21) needs to be reduced on a war-footing. The national economy cannot flourish without increasing exports and import substitution.

Since 2016, 300 reforms have been implemented to improve the investment climate in the country. While still much behind India, ranked 63rd, Pakistan has improved its ranking by 39 positions over the last two years and is now ranked 108th out of 190 countries.

Pakistan has been recognised as the top reformer in South Asia and sixth best in the world. The improvements include company registration by the Securities and Exchange Commission in one day and the Federal Board of Revenue’s online tax payment and efficient customs software.

In September 2021, the EODB index was discontinued following discovery of data manipulations in pursuit of better rankings. Rankings aside, issues of availability of low-cost land, electricity, gas, infrastructure, skilled labour and one-window operations need to be resolved to compete globally in the manufacturing sector, which is the lifeline of an industrial economy.

There are 11 economic zones (EZ), an export promotion zone (EPZ) and two special economic zones (SEZ) managed by Khyber Pakhtunkhwa Economic Zones Development and Management Company. The application process is quite simple. A feasibility study, a one-page application form and Rs 10,000 application fee make an industrialist eligible for a plot. They have a choice of size.

For Hattar and Rashakai SEZs, the application is processed on SEZ management information system (MIS). Only SECP-registered companies can apply for a plot in SEZs. A committee comprising the KPBOIT CEO, KPSEZA director, SEZs director of Federal Board of Investment, deputy commissioner of the relevant district and the KPEZDMC chairman decides the allotments based on previous experience and project feasibility.

Once an application is approved, a provisional allocation letter is issued to the industrialist. The process can take up to six weeks for SEZs and up to three weeks for EZs. Bifurcation of plots, change of directors, company name and business nature, etc, is taken to the SEZ committee for approval. On average, the SEZ committee meets once in two months.

These approvals should rest with the zone management with a clear guideline. This will save investors valuable time. In economic zones, these approvals are recorded in handwritten noting on the files. For ease of business, such tasks should be carried out on an MIS. The approval stages should be accessible to the investors and management of the developers. This will increase transparency and expediate the process.

Getting land is the easy part, getting NOCs from the Environment Protection Agency and utility providers is harder. Once a plot has been allocated, an NOC from the EPA is required to start construction, including the boundary wall. It typically takes months to get an NOC. Boundary wall construction should be allowed without the EPA NOC.

The EPA NOC should be abolished for non-hazardous industries. The EPA rules should be incorporated into developer’s building bye-laws. This will eliminate the need for a separate NOC from the EPA. A representative of the EPA should be deputed permanently at each zone to process NOCs.

Electricity and gas are not available in most zones. Where these are available, getting a connection is quite a challenge. The process takes three to six months and requires many visits to the concerned offices.

Electricity and gas are not available at several zones. Where these are nominally available, getting the connection is quite a challenge. The process takes three to six months and requires many visits to the concerned offices. The application should be online ad not require a visit to the offices.

Non-essential documenting should be abolished. A three-month advance bill is deposited as security to the PESCO and the SNGPL. The deposit blocks the much-needed for a new business. The utility companies should have a mechanism to provide the option of bulk purchase of electricity and gas.

The Excise and Labour Department officials should not contact industrialists. All matters, including fee payments, should instead be conducted in coordination with the zone management.

A zone should be a fortress for industrialists who should get one-window operation and all services at their doorstep. However, they should not be allowed to evade their responsibilities in terms of paying taxes and following all rules.

Obtaining bank loans is a herculean task in KP. Most of the banks are more comfortable lending to industries in the Punjab and Sindh due to better security, better markets and less exposure. The banks also have a limited network of branches in KP and many loans are processed in Islamabad, Lahore and Karachi. The approving authority has little knowledge of the investor or dynamics of the area and is averse to taking risk.

The documentation requirements are very stringent. Mostly, the SMEs are not registered. Loans are thus refused based on missing documents. KP’s share of industrial loans has been less than 1 percent. The finance to deposit ratio is under 50 percent.

The SBP should ensure that KP gets its share of loans from commercial banks. Directing the banks to process loans in Peshawar rather than in their head offices can make disbursement easier.

One-window operation is a new concept in industrial facilitation. It needs legislative support. Industrial facilitation offices of the KPEZDMC assist industrialists with plot applications, electricity and gas connection applications and solving any other issue which the industrialist may have.

The one-window representatives visit PESCO, SNGPL and government offices with the industrialists to guide and request government departments to expedite the tasks. Though this is of a great help, legislation is required to empower one-window services.

A centralised one-window cell at the provincial secretariat should be established to assist one-window offices of government departments in resolving issues with the PESCO, the SNGPL, Labour and Excise Departments, the EPA and the BOI. This cell should also monitor the performance of one-window operations of these departments through IT-based systems similar to the Pakistan Citizens Portal.

The Federal Board of Investment is working on an MIS, where application for electricity and gas can be processed for enterprises 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 EZs should open for lease only after electricity distribution and gas supply are in the completion stage.

The writer is Zone Manager, Hattar SEZ, KP Economic Zones Development &   Management     Company, Government of KP