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SAZH-TAF Report on FDI

General

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Special Economic Zones (SEZs)

Our experts expanded at length about the benefits of SEZs. To attract FDI, the Pakistani government should recognize the sectors which are export-oriented with technology transfer. This can be done through incentivizing the export-oriented sectors and creating Special Economic Zones.


Research Facilities

An additional facility should be investor teasers including sector briefs and sectoral studies updated on half yearly or quarterly basis, which could be sourced from various avenues. Funds should be allocated for carrying out these studies. Technical assistance projects can be started in collaboration with USAID or other donor bodies.


Joint Ventures (JVs)

Another solution that was suggested to attract FDI is Joint Ventures. By promoting the concept of JVs amongst the locals we would gain two benefits: local partners taking ownership which would give confidence to foreign investors. The firms that enter into JVs should be exempted from the local indigenous laws and rules.  Our experts suggested that bureaucratic and duplicitous impediments have been introduced when registering a JV both within the SECP and FBR, which will need to be removed to incentivize the private and public sector.


SME Protection

Our members were of the view that our definition for SMEs needs to be changed. We need to incorporate ventures worth $10 million as SMEs so that they can grow into huge corporations and then contribute to taxes. We have imposed revenue-based taxes which are not imposed anywhere else globally. Furthermore, we must incentivize startups, in all fields, through various models of financing and management.

 

Some members suggested replicating a model of Luxemburg, Thailand, Singapore, or Vietnam. For the first five years the SMEs should not be taxed and for the next five the taxes imposed should be minimal. Another recommendation was to govern ways of reducing event-seeking behaviors so that existing enterprises do not have to worry about indirect taxation or costs. By gradually increasing the taxes on an SME we can generate a smooth tax regime and boost the income of the SME so that it could become a big corporation. Our members recommended that the government look to Singapore as a model of protecting SMEs so that they grow to become bigger corporations.

 

 Hence it was clear that further consultations would be necessary to take this conversation forward and devise solutions that could be implemented. For the same, it was recommended that FBR, SECP and various representatives of SMEs be engaged in Round Table consultations to allow sustainable solutions to develop from the suggested solutions.

 

 


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