Pakistan’s Strategic Economic Move: The Special Economic Zone on PSM Land
The federal government of Pakistan has unveiled plans to establish a Special Economic Zone (SEZ) on the Pakistan Steel Mills (PSM) land, aiming to attract industrial investment and revitalize underutilized land. This significant initiative will be carried out in two phases, with the first phase focusing on Karachi Industrial Park (KIP) and the second phase covering the PSM land itself. The development of the Karachi Industrial Park Federal SEZ is expected to encourage growth in key sectors such as manufacturing, steel production, and clean energy.
The Scope of the SEZ Project
The SEZ project will span approximately 6,409 acres of land, combining 4,875 acres from PSM and 1,534 acres from KIP. The land repurposing initiative, approved by the Sindh provincial cabinet in September 2024, is part of a broader strategy to create a structured environment that attracts industrialists and investors. The development will benefit from federal funding, with the first phase slated for completion by December 2025 and the second phase by June 2027.
The project’s foundation is built on a flexible land lease model, offering investors options to either purchase or lease land for industrial use. This model is tailored to accommodate varying investor preferences, with a proposed cost of $10,000 per acre per year, excluding additional costs or security deposits, to foster the growth of industrial activities in Pakistan.
Phased Development: The Roadmap
The development of the Karachi Industrial Park (Federal SEZ) will be carried out in two distinct phases. The first phase will cover 1,534 acres of land from Karachi Industrial Park (KIP). This phase is scheduled for completion by December 2025, with federal funding estimated at Rs30 billion (subject to PC-1 approval). The construction process is set to begin on February 15, 2025, with private investment proposals evaluated before committing public funds.
The second phase, focusing on the PSM land, will be significantly larger, covering 4,875 acres. This phase is planned for completion by June 2027. The Ministry of Industries and Production is responsible for submitting the PC-1 for Phase 1 development for immediate approval. The project is a priority, with the Ministry of Planning and the Ministry of Finance instructed to allocate necessary funds.
Government-to-Government Development Model
A key component of the project’s development strategy is the exploration of a Government-to-Government (G2G) development model. This would involve partnering with a private developer while utilizing Public Sector Development Programme (PSDP) funding. The Board of Investment (BoI), in collaboration with the Special Investment Facilitation Council (SIFC) and provincial authorities, will work to finalize the land lease and licensing framework by February 2025. The framework will establish clear guidelines for land sale, leasing, and licensing for industrial investments.
The proposed lease model is designed to be investor-friendly, offering an initial lease period of 30 years or more, with the option for renewal. The flexible nature of the lease terms is aimed at providing long-term stability for investors and creating a conducive environment for industrial development.
Impact on Pakistan’s Industrial Landscape
The Karachi Industrial Park (Federal SEZ) will be a pivotal project for Pakistan’s industrial growth, especially in areas such as steel production, manufacturing, and clean energy. By repurposing land previously owned by the Pakistan Steel Mills, the government is breathing new life into an underutilized asset, driving economic growth and providing the foundation for a modern, competitive industrial zone.
The establishment of this Special Economic Zone is expected to generate job opportunities, foster workforce development, and improve the global competitiveness of Pakistan’s products. The government’s focus on attracting industrial investors will likely spur local and international business interests, furthering Pakistan’s role as a key player in regional and global markets.
Strategic Focus on Industrial Development
This initiative is aligned with Pakistan’s broader economic strategy, which aims to strengthen its industrial base, promote sustainable development, and attract foreign direct investment (FDI). The SEZ model is a proven tool for driving industrial growth in other countries, and Pakistan hopes to replicate this success. Additionally, the flexible leasing options will ensure that both large corporations and smaller investors can participate in the development, fostering a diversified industrial base.
By transforming the land previously occupied by the Pakistan Steel Mills into a thriving industrial hub, the government aims to enhance its manufacturing capacity, reduce reliance on imports, and position the country for long-term economic stability.
The creation of the Karachi Industrial Park (Federal SEZ) represents a bold move to reinvigorate Pakistan’s industrial sector and attract both local and international investments. Through its two-phase development strategy and innovative land lease model, the project is poised to become a cornerstone of Pakistan’s future industrial landscape.
