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Free trade zone in Gwadar

A lease agreement is being processed to hand over 2,281 acres of land to the China Overseas Port Holding Company for the establishment of a ‘free trade zone’ in Gwadar.

According to a senior official of the ministry of ports and shipping, the lease agreement is currently being reviewed by the law division. After the government’s formal approval, the land will be leased out to the Chinese company for 40 years. The ministry has paid over Rs6.69bn to acquire the land through the deputy commissioner of Gwadar.

The free trade zone is seen indispensable for the success of the Gwadar port, as they are an integral part of all modern ports. The zone is expected to ensure optimal use of the deep sea port. In Gwadar port’s master plan, prepared by foreign consultants, the mouza Dor Gatti area had been earmarked for the free trade zone.

A free trade zone is a designated area that eliminates traditional trade barriers such as tariffs, and minimises bureaucratic regulations. Its goal is to enhance global market presence by attracting new businesses and foreign investment.

The Chinese company has been incorporated as the ‘Gwadar Free Zone Company’. It will finance infrastructure development of the zone area, with the exception of access roads, which will be financed by the Gwadar Port Authority. The company will bring local and foreign investment to establish the manufacturing assembly and processing plants.

The zone will be located immediately west and adjacent to the planned container terminal. Out of 2,281 acres, 654 acres are naval and coast-guard land, for which the owners will compensate with 1,000 acres under a deal approved by the Senate Standing Committee on Ports and Shipping.

In the customs-free zone, all imports would be subject to the applicable duties and charges if and when they are taken out of the free zone, except for the purpose of export. The area will be used exclusively for port-related business and industry.

A 20-year tax holiday will apply to businesses in the free trade zone. Under the agreement, 15pc of gross revenue from the free zone will be paid to the Gwadar Port Authority by the Chinese company. It is expected that the development of the zone will help create job opportunities, and lead to transfer of technology and business activities.

Plans are also afoot to link the Gwadar deep sea port with the hinterland through rail to fully realise the port’s potential.

The chief engineer of Pakistan Railways who is dealing with the project, Basharat Waheed, said out of the total cost of around Rs1.3bn for the 285 acres of land, Pakistan Railways has paid Rs450m for the acquisition of the land required by it through the Board of Revenue of Balochistan’s secretary. The remaining amount of Rs700m is expected to be approved by the Central Development Working Party of the planning commission at its next meeting.

Initially, Pakistan Railways had planned to acquire 373 acres of land, but due to the escalation in the market price in the wake of the port’s construction, the area was reduced to 285 acres.

The land will be used for the construction of a railway container yard, station and other operational facilities and a 30-metre-wide corridor to the deep sea port on one end, and a point outside Gwadar’s limits, at a distance of 25km on the Gwadar-Turbat-Hushab-Besima-Mastung rail link on the other side.

The proposed container yard will have the capacity to handle about 500 railway freight wagons, including marshalling of freight trains. The laying of a double-track from the container yard to the deep sea port has also been proposed.

Published in Dawn, Economic & Business, February 2nd, 2015

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