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Incentives to lift shipping sector in Pakistan

Islamabad - Minister Ali Zaidi unveils new policy that aims to curtail country's freight bill.

Federal Minister for Maritime Affairs Ali Haider Zaidi has unveiled a new shipping policy that will lift the country's maritime sector to new heights.

Addressing a Press conference in Islamabad along with adviser to the prime minister on commerce and investment Abdul Razaq Dawood, he said shipping companies can now take advantage of liberal fiscal concessions and low mark up rates offered by the State Bank under the long-term finance facility (LTFF) to acquire ships flying the Pakistan flag.

"This business-friendly policy will reduce the annual freight bill of $5 billion+ on Pakistan," the minister said. Also, the minister stated, the new policy will generate much-needed employment opportunities for Pakistani seafarers/allied sectors.

Zaidi praised the leadership of Prime Minister Imran Khan for the renewed interest in the maritime sector as well as declaring 2020 as the year of the Blue Economy.

Zaidi said that Pakistan flag vessels would be given priority berthing at all ports of the country. He said Pakistan resident ship owning company shall be defined as a company registered with the Securities and Exchange Commission of Pakistan and having its seaworthy vessels registered under the Pakistan flag.

The minister said that the shipping industry is vital to Pakistan as it operates during peace time as well as in emergencies and high-risk situations. He said the new shipping policy was introduced to expand and earn foreign exchange for Pakistan.

He said that in January 1972 the then government nationalised all industries in Pakistan, including shipping. All shipping companies at that time were merged into the state-owned Pakistan National Shipping Corporation.

"Over the years, as the nationalisation was reversed with privatisation, all industries began to recover except the shipping industry," he said.

The minister emphasised that the revival of the shipping industry in Pakistan was the need of the hour, as it had lagged way behind regional competitors like Bangladesh. He said since Pakistan relied on international shipping lines for its trade, it was losing valuable foreign exchange which can be saved if the local shipping industry was developed with an emphasis on growth due to Pakistani ports' geographic position.

He lamented that the maritime sector was ignored by past governments that failed to recognise the potential for the Blue economy.

Zaidi said that new Pakistan ship owning companies will be incentivised and pay tonnage tax of $0.75 per GRT for the first five years of the shipping operations of each vessel inducted by them subject to the cut-off period till 2030, and after five years Pakistan companies shall pay $1 per GRT annually on the said vessels' shipping operation income.

Another benefit of the policy is no federal tax shall be levied to the detriment of Pakistan resident ship owning companies during the exemption period, adding that no preference shall be given to the PNSC in private sector cargo.

"In light of the shipping industry's significance in overall economic development and foreign exchange savings, the shipping industry has been allowed by the State Bank of Pakistan to avail the Long-Term Finance Facility (LTFF) / Islamic Long-Term Finance Facility (ILTFF)," the minister added.

A shot in the arm for local shipping firms

> Imports by shipping companies of small and large ships in Pakistan will be exempted from customs duty until 2030.

> Income from these ships until that period will also be exempted from sales tax and income tax.

> Pakistan resident ship-owning companies will pay tax of $0.75 per gross register tonnage for the first five years of the operations.

> Vessels under the Pakistani flag will be given priority in berthing at all Pakistani ports.

> No preference will be given to PNSC in private sector cargo.