Purpose of Special Technology Zones in Pakistan
What is the Special Technology Zones Authority?
Special Technology Zones and FBR
First Special Technology Zone in Pakistan
Update (Jan. 21, 2022): In a recent development, Prime Minister Imran Khan visited the city of Haripur in Khyber Pakhtunkhwa to launch the country’s very first digital city. It was a high-profile inauguration ceremony where the prime minister was accompanied by key government officials including Mahmood Khan, the Chief Minister of KPK, among other federal and provincial ministers.
This newly-launched Special Technology Zone in Haripur is a flagship project of the KPK government. With a total cost of PKR 1.3 billion, Pakistan Digital City is a mega-scale development spanning 86 kanals. It is being developed as a state-of-the-art facility to benefit software houses, technology incubators, and many other key sectors of the IT industry by offering cutting-edge solutions.
Update (Jan 21, 2021): According to a report recently published by the Overseas Investors Chamber of Commerce and Industry (OICCI), Pakistan is a country with great potential to significantly boost its IT Exports.
“By digitizing most, if not all, key segments of the economy could boost IT exports to $10 billion annually, provide a significant growth to gross domestic product (GDP), attract billions of dollars in foreign direct investment (FDI), and create new jobs within a short period,” the report stated.
This statement came in a report bearing the title “OICCI Recommendations for Digital Economy”. Acknowledging the initiative of the development of Special Technology Zones (STZs), OICCI has recommended Pakistan to further expand its portfolio in terms of the provision of ease of doing business with the help of public-private partnership and introduction of digital mechanism.
According to the OICCI report, to steer the ship of the digital economy in the right direction, Pakistan is in need of pushing a “fiberization drive,” which will enhance the current telecommunication infrastructure. This will uplift the standards of connectivity and could result in the accelerated growth of the network of digital financial services in the country.
The cutting-edge technologies that have been introduced in the 21st century so far have evidently impacted our lifestyle and work habits. This on-going wave of digitisation has brought everything to our fingertips. We can now easily book a cab, order food, do online shopping and even reserve airline tickets with just a few taps on our smartphone screens.
Taking into consideration the impactful role that technology plays in our day-to-day lives, the government of Pakistan has also shifted its focus towards the improvement of the current technological infrastructure in the country to keep up with the ever-evolving digital world.
The introduction of the nationwide Digital Pakistan campaign is among the best examples in this regard. Also, the recent digitisation of the entire database of the National Database Regulatory Authority (NADRA) has taken the convenience of people to a whole new level. With the help of this NADRA e-portal, users can now easily track and verify their CNIC records online.
Pakistan Software Exchange Board (PSEB), which is also a government-funded institution, is also playing a very significant role in the field of digital technology. It has recently initiated the development work on Pakistan’s first fully-equipped Information Technology park in Islamabad.
The announcement of the development of Special Technology Zones in Pakistan is yet another revolutionary move and a strong indicator of the government’s commitment towards the technological development and sustainability of the country’s digital landscape. So, let’s find out how the authorities are going to execute this game-changing initiative in order to benefit the tech-industry across the nation.
The Purpose of Developing Special Technology Zones in Pakistan
The very first announcement about the development of Special Economic Zones (STZs) was made by the Ministry of Information and Telecommunications in a webinar conducted in the latter half of 2020. According to the Ministry, such initiatives will help Pakistan widen the scope of its tech industry by bringing special tax exemptions and incentives benefiting foreign investors and other entities serving in the field of technology.
Formation of Special Technology Zones Authority (STZA)
Another noteworthy development in this regard is the formation of the Special Technology Zones Authority (STZA) by the government of Pakistan. The ultimate goal of the ordinance promulgating the Special Technology Zones Authority (STZA) is to facilitate developers, stakeholders and enterprises in the zone with a 10-year exemption of tax. Furthermore, the government will also subsidise the tech developers in Special Technology Zones by paying custom duties on their behalf for the same period.
Enterprises and developers in the STZs will be treated equally and provided with the same legislative and institutional support. According to the latest updates, the Special Technology Zone Authority Ordinance 2020 has been put in effect since December 2020. On presidential orders, all the incentives to the eligible enterprises and developers have already been granted.
Special Technology Zone Authority and FBR
The Federal Board of Revenue (FBR) has a very crucial role to play in terms of the development of Special Technology Zones in Pakistan. According to this key financial institution of the country, amendments are required to be made in the existing tax laws to legally recognise the tax and duty exemptions given to the entities in STZs.
According to the FBR, tax exemption isn’t a new phenomenon. Exemptions from taxes and duties had also been granted to facilitate the establishment of green field industries, special economic zones and other government-run incentives-based programmes including the construction relief package for the COVID-19 pandemic.
However, as per the legal experts, the Special Technology Zone Authority (STZA) Ordinance 2020 is itself a special law and can possibly override the current tax laws. The ordinance also gives leverage to the investors of Special Economic Zones in Pakistan as they will not be required to file declarations regarding their assets and sources of income.
Also, no sales tax will be applied on any production items that are being consumed within the zones for the next 10 years. From raw materials to machinery, this clause of STZA Ordinance 2020 covers tonnes of goods and services.
Work on Pakistan’s First Special Technology Zone Begins in Islamabad
In a recent development, the Special Technology Zone Authority (STZA) has started working on its flagship and the country’s very first Special Technology Zone (STZ) in Islamabad, known as “Islamabad Technopolis”.
According to the official details, it will be developed and maintained in collaboration with the private sector. Once operational, this Special Technology Zone is expected to significantly boost the country’s Information Technology (IT) sector, making Pakistan an attractive destination for tech giants from all over the world.
“Islamabad Special Technology Zone is based on 150 acres of land in the Islamabad Capital Territory. The land has been identified and approved by the Capital Development Authority (CDA) and the land has been earmarked for the establishment of the Islamabad Special Technology Zone,” said the Chairman of STZA Amer Hashmi while addressing a high-profile event.
Islamabad Technopolis will also feature a world-class technology park. The project will be based on multiple mid-rise buildings, spanning over 250,000 sq ft. With an initial investment of $2 million, this STZ in the capital city has the potential to create thousands of employment opportunities for IT professionals and generate over $100 million investment within the next few years.
It is going to be the first state-of-the-art destination in the country having an ecosystem driven by technology and innovation. STZA is planning to develop more such projects. The authority is currently working on a goal to establish 14 Special Technology Zones (STZs) across the country to benefit the country’s economy and IT industry.
These were all the latest updates on Special Technology Zones in Pakistan. We hope this blog has provided you with all the useful information in this regard. For your feedback and suggestions, feel free to reach out to us at blog@zameen.com.
On a side note, we have also written a couple of detailed pieces on different Special Economic Zones in Pakistan including Dhabeji Special Economic Zone and Rashakai Economic Zone. Both of these Special Economic Zones are among many other noteworthy developments taking place in Pakistan under the banner of China Pakistan Economic Corridor (CPEC) Projects.
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