USAID/Pakistan: Trade Project | ROZ Legal and Regulatory Framework

The framework is designed to follow international best practices and lessons learned from successful Special Economic Zones (SEZs) globally. SEZs offer investors a comprehensive and simple environment to do business, allowing them to undertake all economic activities and access benefits while minimizing red tape. The ROZ program will encompass a broad regulatory scope, covering various issues currently under the purview of national and local government bodies. These matters include business registration and licensing, investment policy and guarantees, taxation and investment incentives, trade facilitation, customs, and origin certification, investment promotion and facilitation, labor and immigration, ICT regulation, privatization, public health and hygiene, transportation, utilities provision and regulation, land use, property development, and associated environmental protection, security and policing, and municipal services. To ensure the effectiveness of the ROZ regime, the Government should assess existing laws and regulations to determine whether they accord with international best practices or whether new policies should be introduced within the ROZs. Broad consultation with all parts of government and the private sector should also be undertaken. The institutional framework to oversee the ROZ regime should be designed to administer the regime by an autonomous, powerful government authority, known as the ROZ Authority. The ROZ Authority would regulate economic activities within ROZs, control land use and development, and act as the principal interface with private ROZ developers and operators. Internationally, these types of agencies are typically vested with exclusive powers, such as internal planning, land use, and environmental matters, business registration and licensing, procurement, origin certification, and promotion and marketing. Shared powers include labor, health, security and law enforcement, utilities regulation, trade facilitation, and tax and customs administration. To ensure its effectiveness, the ROZ Authority should be characterized by broad powers and authority, reporting access to the highest government levels, autonomy on a decision-making and budgetary level, flexibility by exempting it from civil service rules, autonomous income streams, and private sector representation on its Board. The Government of Pakistan has demonstrated its commitment to economic reform, with economy-wide improvements and deep reforms in the trade environment underpinning an impressive turnaround in economic performance from 2002-2007. The ROZ Legal and Regulatory Framework is a critical component of the ROZ program, aiming to create a favorable business environment that attracts investment and promotes economic growth. The framework should be designed to be flexible, efficient, and effective in promoting economic activities within the ROZs. The ROZ Authority should be empowered to regulate economic activities, control land use and development, and act as the principal interface with private ROZ developers and operators. The ROZ program has the potential to spearhead broad policy reforms in the national economy through a significant demonstration effect. Successful SEZs can create a favorable business environment that attracts investment and promotes economic growth. The ROZ Legal and Regulatory Framework should be designed to be consistent with international best practices and lessons learned from successful SEZs globally.