A general view of Gwadar port in Gwadar, Pakistan. REUTERS/Drazen Jorgic

Pakistan has granted a 23-year income tax holiday, exemptions of sales tax and customs duties to the Chinese operators of the strategic Gwadar Port and its free zone as the two countries stepped up their efforts to build the China-Pakistan Economic Corridor, according to a media report on Wednesday.

Pakistan President Arif Alvi on Monday promulgated two ordinances to set up the China-Pakistan Economic Corridor Authority and Tax Laws Amendment Ordinance 2019, The Express Tribune reported.

Alvi signed the ordinances as Prime Minister Imran Khan arrived in Beijing for talks with the Chinese leadership to woo investment to cash-strapped Pakistan.

Chairman of China Overseas Ports Holding Company Gwadar (COPHC)  Zhang Baozhong on Tuesday shared his plans to make the coastal city the single largest contributor to Pakistan’s GDP in seven years after the Pakistan government finally granted it a 23-year income tax holiday and other exemptions for the Chinese businesses to be set up at the Gwadar Free Zone in Balochistan province.

“It (issuing of the ordinance) is a turning point for Pakistan’s economy and now billions of dollars will be invested in Gwadar,” Zhang was quoted as saying by The Express Tribune.

Beijing and Islamabad are currently building the $60 billion China-Pakistan Economic Corridor (CPEC) linking Pakistan’s Gwadar port with Xinjiang province to improve connectivity between the two countries. India has objected to the CPEC as it passes through Pakistan-occupied-Kashmir, challenging Indian sovereignty.

The CPEC is the flagship venture under the Belt and Road Initiative (BRI), the pet project of Chinese President Xi Jinping. The BRI project, critics say, is saddling nations with debt.

Zhang was accompanied by federal minister for maritime affairs Ali Zaidi and federal minister for economic affairs Hammad Azhar at the press meet.

The COPHC and its four subsidiaries are responsible for operating the Gwadar seaport on the Arabian Sea and its economic zones for a period of 23 years.

The concessions had been guaranteed in the Gwadar Port Concession Agreement but the successive governments in Islamabad were not notifying them, the paper noted.

“I believe Gwadar will be the largest contributor to the gross domestic product (GDP) growth in seven years,” said Zhang, adding that 95 per cent of the production in the Gwadar Free Zone would be exported.

Currently, Karachi was the single largest contributor to the national economic output of Pakistan.

“We have completed the master plan of the Gwadar Free Zone that will be built in four phases over a period of seven years,” he said.

“Once the zone is fully developed in seven years, 47,000 jobs will be created for the locals, and its annual sales will be $1 billion.”

On the troubles faced in reaching this point, the COPHC chairman said, “Today is a big day and I had to struggle for seven years to secure these tax concessions, which had been promised in the Gwadar Port Concession Agreement.

“I had been running up and down for seven years and everybody made promises but nobody helped,” 23-year income tax holiday and exemptions of sales tax and customs duties,” Zhang said.

The Chinese company was lucky to get the support of the National Development Council, a joint civilian and military body upon whose directions the obstacles were removed in obtaining these concessions, the report said.

He also thanked the Pakistani military and media for their support to get these concessions notified.

Minister for maritime affairs Zaidi vowed that the SEZs’ incentive package would be finalised soon, which remained pending for the last four years to the irritation of Chinese investors.

In May 2017, Pakistan’s Cabinet approved the Special Incentive Package for the Relocation of Industries from China for bringing Chinese investment in nine SEZs to be set up under the $60 billion China-Pakistan Economic Corridor (CPEC).

The package had been developed on the demand of China that it made at the sixth meeting of the CPEC Joint Cooperation Committee (JCC) held in Beijing in December 2016.

The package was primarily aimed at those Chinese industrial units which were declared sunset industries by Beijing and had chances of being relocated to Pakistan, which might create hundreds of thousands of jobs.

However, these incentives could not be notified due to differences over who would bear the cost of the federal or the provincial governments, the report said.