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evolvemagazine > Articles > Gwadar of the north Rashakai prioritized special economic zone > Gwadar of the north Rashakai prioritized special economic zone

Gwadar of the north Rashakai prioritized special economic zone

The Government of Khyber Pakhtunkhwa has always been committed to the Delivery of Dividends to the People of Khyber Pakhtunkhwa through Sustainable Human & Economic Development Economic Zones, Industrialization, Commerce, Industrial Zones, Human Development. Hence, integrated and sustainable Human & Economic Development across all districts of the province is the Governments Primary Agenda. In line with its agenda, the Government of Khyber Pakhtunkhwa is giving special focus to industrial and infrastructural development of all regions of the province, given its untapped resource and geographical potential. For this purpose, Khyber Pakhtunkhwa Economic Zone Development and Management Company (KPEZDMC) has devised a comprehensive industrial roadmap for this region, which includes development of number of Economic Zones and Special Economic Zones along with necessary support infrastructure for provision of utilities, such as electricity and gas etc. Khyber Pakhtunkhwa Board of Investment & Trade attracted China Road & Bridge Corporation (CRBC) for the mega project and preliminary engagement between KPEZDMC and CRBC started with the signing of a Memorandum of Understanding (MoU) on 19th of January 2018, and subsequently signing of an Engagement Agreement on 20th of January 2018.

These signings aimed to develop Rashakai Prioritized Special Economic Zone (Rashakai pSEZ) as a Public Private Partnership (PPP) project under the Khyber Pakhtunkhwa PPP Act 2014 and to include it within the CPEC portfolio of projects under the Industrial Cooperation Framework. The MoU and Engagement Agreement have also been ratified by the Provincial Cabinet on 28th Feb 2018. CRBC is a state-owned enterprise of the Peoples Republic of China (PRC) designated by the Government of PRC (People Republic of China), specifically for the development of Rashakai Special Economic Zone under the CPEC framework.

KPEZDMC presented the application for Rashakai pSEZ before the Khyber Pakhtunkhwa SEZ Authority (KP SEZA). After its approval on 24th April 2018 by KP SEZA, the proposal was submitted to the Federal Board of Investment (BOI) with Rashakai as a preferred site to be designated as a SEZ on 26th April 2018, and finally with revisions on 29th Oct 2018. In a meeting held on 15th Nov 2018 at Federal BOI, status of SEZ for Rashakai was recommended by Approvals Committee of BOI.

All the required studies for Rashakai SEZ including Feasibility Study (Market Analysis and Socio-Economic Impact Studies), and Environmental Impact Assessment (EIA) study, were concluded through Independent Consultants namely Institute of Management Sciences and Asian Consultants, respectively.

KPEZDMC has actively remained engaged in negotiations with CRBC which resulted in finalization of Term Sheets for a Development Agreement, Joint Venture Agreement, and last but not the least Concession Agreement. Subsequently, through further negotiations, the Development Agreement and Joint Venture Agreements were finalized on 29th Oct 2018 and 3rd Nov 2018 respectively. The Joint Venture Agreement after approval by the BoD was subsequently approved by the PPP Committee on 1st Nov 2018. Upon obtaining all the required approvals, the Joint Venture Agreement was then signed on 3rd Nov 2018 in Beijing, China.

In the 8th Joint Cooperation Committee (JCC) meeting on CPEC held on 20th Dec 2018 in Beijing, China, RSEZ was included in the list of prioritized Special Economic Zones (pSEZ) under the Industrial Cooperation Framework of CPEC.

On 2nd April, 2019, the Provincial Cabinet of Khyber Pakhtunkhwa has approved the draft Concession Agreement for onward submission to the PPP Unit for review and subsequently PPP Committee for approval of Rashakai pSEZ as a PPP Project.

Project Objective

The main objective of the project for Government of Khyber Pakhtunkhwa and by extension KPEZDMC, is to promote industrialization through optimally priced, world-class industrial infrastructure in the province, which enables industrial invesment, job creation and economic uplift.

 

The project will provide an opportunity for the Government of Khyber Pakhtunkhwa to generate revenue through KPEZDMC. This reduces the financial burden on the exchequer, as KPEZDMC will be able to cover some of its costs, cover liabilities, etc., and plough-back the earnings into further development of industrial infrastructure.

The execution of the project is conceived in the PPP mode, whereby KPEZDMC creates an investment nest or protected envelope wherein foreign investment from CRBC and Zone Enterprises can function with reasonable security and in a conducive environment for growth. Pakistani work force including skilled and unskilled workers, professionals and engineers will be able to work in the development, management and operations of Rashakai pSEZ.

Project Overview

KPEZDMC has planned to establish Rashakai pSEZ in Central Khyber Pakhtunkhwa. Under this flagship project, KPEZDMC will undertake development of Rashakai pSEZ under the Industrial Cooperation of CPEC Framework, in Partnership with China Road and Bridge Corporation Ltd (CRBC). The combined geographical, economic and commercial significance of Rashakai makes this project the Gwadar of the North a spring board for investment, trade and logistic activities in the region involving Khyber Pakhtunkhwa, WesternPunjab, Azad Jammu & Kashmir, Gilgit Baltistan, Afghanistan, Western China and Central Asia (Market of 112M). The exciting potential offered has been appreciated by both the Federal Government of Pakistan and the Government of China. Due to its pivotal location on CPEC route, the key stakeholders foresee Rashakai pSEZ to be one of the key economic, financial and manufacturing centers of Central Khyber Pakhtunkhwa. KPEZDMC understands that the Rashakai pSEZ project will help to develop a dynamic internationally competitive business sector which will encourage investment in Khyber Pakhtunkhwa, accelerate sales, increase exports, produce higher value-added products and provide employment for both skilled labor and un-skilled labor and youth of Khyber Pakhtunkhwa along with its new districts. Rashakai pSEZ is essentially structured for setting up industries that utilize the natural resources and other geographical strengths available in the close vicinity i.e. large Agriculture base, diverse mineral reserves, large pool of skilled labor, and proximity to CPEC trade corridor etc. This Economic Zone would be open to investment by the private sector desiring to set up different industries.

Facilities inside the SEZ

Strategic Industrial Clustering

Partnership Structure

Since the development of RSEZ will be done by a Special Purpose Vehicle (SPV), therefore, the shareholding structure has been finalized and ratified through the signing of the Joint Venture Agreement between KPEZDMC and CRBC on 3rd November 2018 in Beijing, China.

Key features of Rashakai pSEZ arising from Joint Venture, Development Agreement, and the draft Concession Agreement are that:

  1. a) According to the shareholding structure, KPEZDMC will have 9% shares in the SPV while CRBC will have 91% shares.
  2. b) The title of land will remain with KPEZDMC while only the right of use of land will be given to the SPV through the Concession Agreement for a period of 30 years.
  3. c) KPEZDMC upon the recommendation of SPV will grant lease to Zone Enterprises for a period up to 99 years.

d)CRBC will solely be responsible to arrange financing for the project and will not expose KPEZDMC to any liabilities arising from its arrangement with the lenders regarding project financing.

  1. e) CRBC is also solely responsible for the marketing of RSEZ.
  2. f) According to the draft Concession Agreement, a minimum of 80% jobs, will be given to the local populace, preferably to the residents of Khyber Pakhtunkhwa while up to a maximum of 20% of jobs may be available for foreign nationals.
  3. g) The entire 1000 Acres RSEZ will be developed in three Phases in a period of up to 6 years.
  4. h) The finally agreed upon developed plot price, per acre, is such that it shall be set in the range of USD 150,000 15% for Phase I. For Phase II and Phase III, the plot price per acre of developed plots shall be priced based on market conditions as approved by the Board of Directors of Concessionaire (SPV) and acceptable to the prospective Zone Enterprises.
  5. i) KPEZDMC shall be responsible for the timely provision of offsite infrastructure including the Access Road from Karnal Sher Khan and Wali Interchanges to the entrance of Rashakai pSEZ, as well as Electricity and Gas at the door step of Zone. The latter two utilities (Electricity and Gas) fall under the domain of Federal Government as per SEZ Act 2012 and as per the decision of Federal Cabinet taken on 12th May 2017.
  6. j) The Zone Developer (SPV) and the Zone Enterprises will be entitled to certain incentives which are provided by the Federal Government as per the SEZ Act 2012, SEZ Rules 2013 and those that are applicable to prioritized SEZs as and when decided by the Federal Government.

The concession agreement has been signed between KPEZDMC and CRBC on 28th April, 2019 during visit of Mr. Imran Khan, Prime Minister of Pakistan to the belt and Road Show in Beijing.

In finalization of concession agreement excellent contribution made by Mr. Mehmood Khan, Chief Minister, Khyber Pakhtunkhwa, Mr. Abdul Karim Khan, Special Assistant to Chief Minister for Industries, Mr. Faisal Saleem Rahman, Vice Chairman, KP-BOIT, Mr. Saleem Khan, Chief Secretary, Dr. Shehzad Bangash, Additional Chief Secretary, Mr. Aamir Lateef, Secretary Industries, Mr. Saeed Ahmad Khan, CEO, KPEZDMC & his team has been acknowledged by all stake holders specially CRBC.