Appraisal of Industrial Policy
Asad, S. Hasan, Economic Review
Industrial policies have been announced by the government from time to time, the first being in 1948, having the objective of accelerating the pace of industrial investment in order to promote manufacturing sector as a vehicle of economic growth, employment generation, economic diversification and export acceleration. Attempt is made here to appraise the industrial policy and the handicaps the manufacturing sector is facing.
The incentives presently available for the promotion of industrial development are as follows:
a) Three years income tax holiday is available for industries established between 1st December 1990 to 30th June 1995 throughout the country.
b) Five years holiday is available for industries established between 1st December 1990 to 30th June 1995 in the defined rural areas and Hub Chowki Area of Balochistan.
c) Eight years income tax holiday is available to all industries established between 1st December 1990 to 30th June 1995 in the backward areas of the country which include the whole of NWFP, whole of Balochistan excluding the Hub Chowki Area, Federally Administered Tribal Area, Northern Areas, Azad Kashmir, Divisions of Dera Ghazi Khan and Bahawalpur in Punjab and the Divisions of Sukkur and Larkana in Sindh.
d) All industries established between 1st December 1990 to 30th June 1995 in the aforementioned backward areas or rural areas have been exempted from the payment of customs duty, sales tax and import surcharge provided the machinery so imported is not manufactured locally.
e) The machinery installed in the defined rural areas will be charged license fee at the rate of 2 per cent instead of 6 per cent if the same is not manufactured locally. Moreover, this concession will also be available to industries set up in Balochistan. This facility is also available in Hub Chowki area for processing of fish, minerals, fruits, vegetables, flowers and mineral sector.
f) All industries set up in NWFP between 1st July 1991 to 30th June 1996 in Balochistan except Hub Chowki areas have been exempted from the payment of sales tax on local produce for a period of five years from the date the industry is set up.
Twelve special industrial zones have been formally launched early this year in January with tremendous incentives to attract domestic as well as foreign investment in a big way. Industrial units to be set up in these zones will enjoy tax holiday for ten years, exemption from import duty on machinery, equipment or plants, 25 per cent exemption in import of raw material and 25 per cent exemption of central excise on production of such units. Three industrial zones are situated in Punjab (Rahim Yar Khan, Dera Ghazi Khan, Liyyah), three in Sindh (Port Qasim, Nawabshah, Larkana), two in NWFP (Akora Khattak and a place between Bannu and Dera Ismail Khan) and two in Balochistan (Quetta, Lasbela district) while one each in Azad Kashmir (Mirpur) and Northern Areas (Gilgit).
Special industries have been given to the pioneer industries (not identified) which are exempted from customs duties for ten years and exemption on sales tax and central excise for eight years. The capital structure for the units will also be easy with debt equity ratio of 70:30. Five years exemption has been granted to industrial units on capital gains tax. The expatriates and other employees of the units will be entitled to import vehicles, food and other facilities for their personal use.
Land will be leased out to the investors for 50 years which will be renewable for 50 years more. Investors will be exempted from the condition of export of their products. Each zone will be of about 250 acres of land. Private sector will be involved for the development of industrial zones. The zones and the industrial units therein are expected to be in operational conditions by June 1999.
In order to make available infrastructure facilities, the project director of each zone will work in close coordination with members of different utility departments such as WAPDA, Gas Company PTC, Water Boards, etc. …