The current government’s experiment to attract FDI specifically in technology sectors (with an eye on boosting export competitiveness) received a boost last week when the National-Assembly-approved the Special Technology Zones Authority (STZA) Bill (2021) was also passed by the Senate. This development should help the investment promotion efforts of the STZA team, which has been making preparations to set up their first special technology zone (STZ) in Islamabad.
For background, STZA provides technology firms with a number of incentives, including tax exemptions on income, profits, capital gains, and dividends; zero taxes on property; tax exemption on custom duties and sales tax relating to capital goods import; and tax exemption on dividend income received by venture capital funds. These benefits apply to both zone developers as well as zone entities. After Islamabad Technopolis, other STZs are also planned to be set up across Pakistan.
It was important to protect those concessions via an Act of Parliament so this initiative could outlast political transitions and short-term-ism. It remains to be seen how effective those incentives will be in pulling global tech majors, or their suppliers, to Pakistan. Such concessions can highlight investment opportunities, but a sound business case for an investor depends on non-fiscal factors, too, such as regulatory ease, sectoral preference, skills availability, and legal recourse when things go wrong.
In that regard, firstly, it...
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