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ACT No. XX OF 2012

SPECIAL ECONOMIC ZONES ACT, 2012

An Act to provide for setting up and operation of special economic zones in Pakistan

[Gazette of Pakistan, Extraordinary, Part-I, 13th September, 2012]

No. F. 22(7)/20L2-Legis.—The following Act of Majlis-e-Shoora (Parliament) received the assent of the President on the 12th August, 2012 and is hereby published for general information:

WHEREAS it is necessary and expedient to promulgate a law for the creation, development and efficient operation of special economic zones through provision of a legal and regulatory frame work to encourage domestic and international investors for promotion and establishment of industrial infrastructure and for other matters connected or ancillary thereto;

It is hereby enacted as follows:-

1.       Short title, extent and commencement.—(1) This Act may be called the Special Economic Zones Act, 2012.

(2)     It extends to the whole of Pakistan.

(3)     It shall come into force on such date as the Federal Government may, by notification in the official Gazette, appoint and different dates may be appointed for coming into effect of different provisions of this Act and any reference to commencement shall generally refer to the commencement of this Act but commencement of any provision that comes into force subsequent to the general commencement shall be treated from the date of coming into force of the respective provision and not the general commencement.

2.       Act to override other laws.—The provisions of this Act shall have force notwithstanding anything to the contrary contained in any other law for the time being in force.

3.       Definitions.—In this Act, unless there is anything repugnant in the subject or context,—

(a)     "Approvals Committee" means the committee constituted under Section 7;

(b)     "arbitration" shall include arbitration under the applicable laws of Pakistan as well as arbitration under any applicable international regime, whether selected contractually through an agreement in writing or available to a party or parties as a result of an international agreement accorded or ratified;

(c)     "BOA" means the Board of Approvals constituted under Section 5;

(d)     "BOI" means the Board of Investment established under the Board of Investment Ordinance, 2001 (XV of 2001);

(e)     "capital equipment" means plant, machinery or equipment, accessories, and component part of machinery and equipment identifiable for use in or with machinery required for economic activities and machinery includes machinery and equipment of any description, such as is used in industrial process, manufacture, production or processing of other goods and rendering services, except the goods that are consumed in the manufacturing, production of processing of goods or provision of services;

(f)      “developer" means an enterprise which has entered into a development agreement with a SEZ Authority;

(g)     "development agreement" means a duly approved agreement between SEZ authorities and agreed to and endorsed by the BOA and a developer that authorises a developer to develop, establish and operate a SEZ;

(h)     "economic zone" means a geographically defined and delimited area which has been notified and approved for economic, industrial and commercial activities;

(i)      "existing zones" means the export processing zones, industrial zones and other similar entities in existence at the time of the commencement of this Act and includes but not limited to the following, namely:-

          (i)      "export processing zones" means and economic zone which is established under the Export Processing Zones Authority Ordinance, 1980 (IV of 1980);

          (ii)     "extra-territorial zone" means an economic zone of a type that is to be deemed to be outside the customs territory of Pakistan;

          (iii)    "free trade zone" means an economic zone that shall be deemed to be outside the customs territory of Pakistan with respect to which the BOA shall approve special facilities for trade, transshipment and re-export operations in accordance with applicable legislation as for the time being in force in Pakistan;

          (iv)    "hybrid export processing zone" means an economic zone that shall be deemed to be outside the customs territory of Pakistan in which goods are manufactured and from which services are provided, both for exportation to countries other than Pakistan as well for export into Pakistan;

          (v)     "multilateral economic zone" means an economic zone in which all zone enterprises are required to be beneficially owned by national, residents or corporate entities of one or more particular countries;

          (vi)    "reconstruction opportunity zone" means an economic zone from which the exports of goods and services has been recognized by any country or jurisdiction other than Pakistan as being eligible for reduced tariff duties and other benefits;

          (vii)   "regional development zone" means an economic zone wherein economic activates are promoted so as to develop particular regions and industries; and

          (viii)  "sector development zone" means a regional development zone in which permissible economic activity shall be limited to one or more sectors as notified by the BOA;

(j)      "misconduct" means any conduct of a member or Chairperson of the Provincial SEZ Authority that is prejudicial to the good order and management of the SEZ Authority or a SEZ and includes but not limited to the following, namely :-

          (i)      a failure to disclose an interest of the member or Chairperson in a transaction related to a SEZ or an interest of the member's parent, spouse, brother, sister, child, or spouse of a parent, brother, sister or child;

          (ii)     any act or omission which is ultra vires of this Act;

          (iii)    any act or omission which lacks good faith; or

          (iv)    any act or omission which is inconsistent with the fiduciary duties of such member or Chairperson;

(k)     "Provincial investment promotion authority" means an investment promotion agency, by whatever name called, formed by a Province to work as local authority to promote domestic and foreign investment in that Province such as Sindh Board of Investment established in Sindh and Punjab Board of Investment and Trade or any other similar entity;

(l)      "SEZ Authorities" mean the Provincial SEZ Authorities established under Section 10;

(m)    "SEZ Committee" means the authority chartered by the BOA at each SEZ under Section 23;

(n)     "special economic zone" or "(SEZ)" means a geographically defined and delimited area which has been notified and approved by the BOA. The SEZs shall be deemed to be outside the customs territory of Pakistan only for the purposes of this Act;

(o)     "zone admission criteria" means the criteria under this Act and to be applied by developers in deciding whether or not to admit an enterprise into a particular SEZ including thereof zone approval criteria that means the criteria to be applied by the SEZ Authority and the BOA in deciding whether to allow or not to allow a particular area to be developed as a SEZ;

(p)     "zone application" means an application submitted in accordance with the provisions of this Act by an SEZ Authority seeking the notification of an area as a special economic zone;

(q)     "zone development plan" means a business plan for developing a SEZ;

(r)      "zone enterprise" means an enterprise admitted into a SEZ by a developer; and

(s)      "zone regulations" mean regulations made under this Act.

4.       Establishment of special economic zones.—The Federal Government and Provincial Governments may establish special economic zones by themselves or in collaboration with private parties under various modes of collaboration including public-private partnership or exclusively through the private parties as provided under this Act.

5.       Board of Approvals.—(1) There shall be a Board of Approvals, hereinafter called BOA, consisting of—

(i)      the Prime Minister of Pakistan who shall be the Chairperson of the BOA;

(ii)     the Minister for Finance who shall be the Vice Chairperson of BOA;

(iii)    the Minister for Industries;

(iv)    the Minister for Production;

(v)     the Minister for Commerce;

(vi)    the Minister for States and Frontier Regions Division;

(vii)   two members of Majlis-e-Shoora (Parliament) to be nominated by the Prime Minister (one from each House);

(viii)  the Chairman of the BOI;

(ix)    the Deputy Chairman Planning Commission;

(x)     the Chief Minister of each Province;

(xi)    the Chairman of the Federal Board of Revenue;

(xii)   Governor, State Bank of Pakistan;

(xiii)  Secretary BOI;

(xiv)  executive heads of the Provincial investment boards by whatever names known or if no such board is established a nominee of the Government of such Province, having adequate relevant professional experience, the tenure of such nominees shall be three years;

(xv)   the President of the Federation of the Pakistan Chambers of Commerce and Industry;

(xvi)  the President of the Pakistan Business Council;

(xvii) the President of the Overseas Chamber of Commerce and Industry; and

(xviii)          a professional having relevant adequate experience to be nominated by the Prime Minister of Pakistan.

(2)     The meeting of the BOA shall be convened on the orders of the Chairman BOA or on the recommendations of BOI or the Provincial SEZ Authority.

(3)     The BOA shall meet as frequently as required but not less than twice a year.

(4)     Fifty percent of the members shall constitute quorum of the BOA.

(5)     Where the Chairperson is not present, the Vice-chairperson shall chair the BOA's meeting and if both are not available, a member designated by the Chairperson shall preside.

(6)     The decisions of the BOA shall be taken by majority of the total membership present and voting.

(7)     The BOA shall adopt its own rules of procedure.

(8)  Secretary BOI shall also act as Secretary of the BOA.

6.       Functions and responsibilities of the BOA.—The BOA may—

(a)     approve such regulations for the implementation of this Act as are applicable to all SEZs or to a particular group of SEZ or a particular SEZ;

(b)     approve or reject zone applications;

(c)     approve or reject development agreements;

(d)     examine and decide upon policy issues submitted to it by SEZ Authorities or by developers;

(e)     co-opt on the members of the Approvals Committee as necessary;

(f)      notify with approval of relevant authorities additional benefits under sub-section (2) of Section 34;

(g)     cancel development agreement;

(h)     review and direct actions on annual reports submitted by SEZ Authorities;

(i)      annually review the implementation of this Act with a view to improving policies relating to SEZs; and

(j)      take any other steps it deems appropriate in order to advance the objectives of this Act.

7.       Approvals Committee.—(1) There shall be an Approvals Committee that shall be chaired by the Chairman of the BOI and shall consist of the following, namely:-

(i)      executive heads of the Provincial investment boards or companies or agencies, and where these do not exist a representative equivalent to a Provincial Secretary designated by the concerned Province;

(ii)     representatives of the Ministries of Finance, Commerce, Industries, Production and States and Frontier Regions Division not below the level of an Additional Secretary to the Government;

(iii)    private sector representatives representing different sectors and regions to be notified and two co-opted members by special invitation with a three-year term extendable at the discretion of the BOA; and

(iv)    with approval of BOA, co-opted members from concerned Federal and Provincial Governments for specific cases.

(2)     The Approvals Committee shall exercise all such powers and responsibilities as are delegated to it by the BOA, subject to such conditions as it may deem fit.

(3)     The BOA may delegate all or any of its remaining powers and responsibilities to the Approvals Committee.

(4)     A decision taken by the Approvals Committee shall be submitted to BOA at its meetings or by circulation for approval.

(5)     The BOA may, at any time, exercise any responsibility or any power which it has delegated to the Approvals Committee.

8.  Functions of BOI.—(1) The BOI as the Secretariat of BOA and Approvals Committee shall—

(a)     be responsible for the co-ordination of all activities pertaining to SEZs, developers and zone enterprises, including the preparation of all documentation for consideration by the BOA and for ensuring the implementation of all decisions of the BOA;

(b)     process all zone applications submitted by SEZ Authorities for consideration of BOA;

(c)     process all applications for additional incentives in accordance with sub section (2) of Section 34;

(d)     review all development agreements proposed by SEZ Authorities;

(e)     be responsible for the international and domestic promotion of investments into SEZs; and

(f)      facilitate the interaction of developers and zone enterprises with all other Federal, Provincial and other Governmental authorities as well us with international financial and developmental institutions.

(2)     BOI shall act as SEZ Authority for the Islamabad Capital Territory as provided in Section 12.

(3)     BOI shall support and facilitate the SEZ Authorities, if requested.

9.  Responsibilities of Provincial investment promotion authorities.—(1) A Provincial investment promotion authority shall be responsible within its Province of jurisdiction for the following, namely:-

(a)     to assist in the operation of the Provincial SEZ Authorities;

(b)     to be the focal entity responsible for the investment promotion;

(c)     may assist the SEZ Authorities and the developers in acquisition and other land related matters including but not limited to necessary easement issues;

(d)     to ensure infrastructure development linkages between authorities within the SEZ; and outside the SEZ;

(e)     to facilitate the developers and zone enterprises in dealing with all Provincial Governmental authorities for smooth and systematic resolution of issues as and when they arise; and

(f)      to facilitate the developers and enterprises in complying with environmental regimes and social development.

10.  SEZ Authority.—(1) There shall be established for each Province, an authority to be known as the SEZ Authority of that Province.

(2)     Every SEZ Authority shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with a power, subject to the provisions of this Act and any regulations, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, be entitled to sue and to be sued.

(3)     Each SEZ Authority shall consist of—

(a)     a Chairperson, who shall be the Chief Minister of the concerned Province or a person appointed by the Chief Minister;

(b)     a Vice-Chairperson, who may be the Minister or the Advisor in charge of the investment department and where no such department exists, any member of the Provincial cabinet nominated by the Chief Minister of the concerned Province;

(c)     a Chief Executive Officer who may be appointed by the Chief Minister of the Province concerned and may be the Secretary of the SEZ Authority;

(d)     Secretary of the Provincial investment department and where no such department exists, the executive head of the Provincial investment promotion authority by whatever name it exists;

(e)     Secretaries of the Provincial industries, finance, commerce, investment, works and services, livestock, agriculture and planning and development departments;

(f)      two members to be appointed by the Chief Minister of the Province concerned and two other members to be appointed by the BOA; and

(g)     a member to be appointed by the concerned Chamber of Commerce and Industry where the SEZ is proposed. If there is no Chamber of Commerce then a member of the Chamber of Commerce of that respective area to be appointed.

(4)     Each SEZ Authority may acquire land in its respective Province in accordance with the Land Acquisition Act, 1894 (I of 1894).

(5)     Each SEZ Authority shall, subject to the approval of BOA, establish its rules and procedures.

(6)     Where the Chairperson is not present, the Vice Chairperson shall chair the SEZ Authority's meeting.

11.  Requirements for all zone applications.—(1) Every zone application submitted for approval to the BOA shall identify the type of SEZ proposed and include—

(a)     a basic business concept or model for the proposed SEZ to be submitted;

(b)     parameters for zone admission criteria; and

(c)     a preliminary zone development plan which shall—

          (i)      define the geographic boundaries of the proposed SEZ;

          (ii)     set out the basic infrastructure development requirements, both inside and outside the proposed SEZ, necessary for the proper functioning of the proposed SEZ;

(iii)    set out the land requirements of the proposed SEZ;

(iv)    set out the manner in which land required shall be procured, including specifically whether land will need to be acquired under the Land Acquisition Act, 1894 (I of 1894); and

(v)     set out what criteria shall be applicable to the admission of zone enterprises into that SEZ.

(2)  The zone application shall be submitted along with a proposed development agreement under Section 14 and the criteria on which a developer shall be selected for that SEZ.

12.     Approval of zone applications.—(1) All zone applications shall be submitted to the BOA by the SEZ Authority of the Province in which the proposed SEZ shall be located.

(2)  The BOA shall review every zone application submitted to it by the SEZ Authority to ensure that the proposal is in conformity with the provisions of this Act, any applicable regulations made under this Act and other applicable provisions of law.

13.     Approval of development agreements.—(1) If a zone application is approved by the BOA, the concerned SEZ Authority shall select a developer in accordance with any applicable zone regulations except as provided in Section 4. Such zone regulations shall require that envisaged development agreements be notified for competitive bidding.

(2)     After negotiating a development agreement, the concerned SEZ Authority shall submit a final agreement for approval to the BOA.

(3)     There shall be a provisional approval by the concerned SEZ Authority subject to fulfillment of all such conditions necessary for final approval according to laid down criteria.

(4)     The BOA may condition its approval of a development agreement on the fulfillment of such conditions as it deems fit and according to the laid down criteria.

(5)     After final approval, the development agreement shall be signed jointly by the Secretary of the BOA on behalf of the Federation of Pakistan and by the chief executive officer of the concerned SEZ Authority on behalf of the respective Provincial Government.

(6)  If the BOA does not approve a development agreement submitted to it, the concerned SEZ Authority, that submitted the development agreement, may resubmit the development agreement after either renegotiating the terms of the proposed development agreement with the developer concerned or after reaching agreement with a different developer selected in accordance with the applicable zone regulations.

(7)     In case of any grievances, a developer may approach BOA directly or through the SEZ Authority and BOA shall have the authority to consider, modify or set aside any decision.

14.     Simultaneous approval of zone application and development agreement.—The SEZ Authority may simultaneously submit both a zone application and a development agreement lo the BOA for provisional approval, provided that—

(a)     the developer in question either owns all immovable property in the proposed SEZ or holds leasehold rights; and

(b)     no additional incentives shall be granted by the SEZ Authority under sub-section (2) of Section 34.

15.     Approval of existing zones.—(1) Any existing zone may apply to the SEZ Authority in which it is located for submission of a zone application on its behalf.

(2)     Subject to applicable zone regulations, the SEZ Authority may choose to submit a zone application with respect to an existing zone.

(3)     The BOA may approve a zone application with respect to an existing zone on such terms and conditions as it deems appropriate, provided that all zone enterprises in existing zones before the commencement of this Act exercises the option of availing the benefits already enjoying or the benefits to be offered by this Act.

(4)     The existing zones shall not avail the two benefits simultaneously.

(5)     Notwithstanding anything contained in sub-section (3) only the new entrants and new industries that have never availed any such benefits in the past are eligible for the benefits of SEZ under this Act.

16.  Zone approval criteria.—(1) The BOA shall issue general and particular zone approval criteria for SBZ compatible with Pakistan's obligations under its multilateral and bilateral trade agreements which shall cover–

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