Exclusive Investigation: Systemic Failures Plague Export Processing Zones Authority (EPZA), Costing Pakistan Billions

Decades of Neglect, Billions Lost: Investigative Deep Dive into Pakistan’s Collapsing Export Processing Zones Authority (EPZA). 

[by Syed Talat A. Shah . Twitter x @TalatLive]

A Decade of Mismanagement, Smuggling, and Broken Promises Uncovered. 

Red Flag Rising: An Alarming Sign for #IMF’s Economic Watchdogs

An inside investigation of Pakistan’s Export Processing Zones Authority (EPZA) has exposed systemic failures, including financial mismanagement, governance collapse, and chronic inefficiency, costing the nation billions in lost revenue and squandered economic potential. A trove of investigative documents reveals an institution marred by corruption and dysfunction, one that was meant to attract foreign investment and turbocharge exports but instead enabled smuggling cartels, exploited loopholes, and left 94% of its allocated land underutilized or misused. For over four decades, the EPZA vowed to transform Karachi into a global trade hub. Yet today, the reality is stark: $1.2 billion in lost revenue, vast tracts of land diverted for non-industrial purposes, and a governance vacuum that allowed vested interests to thrive. With exports stagnating and investor confidence eroding, the findings raise urgent questions about Pakistan’s competitiveness in global markets. This investigation uncovers how institutional apathy and unaccountability turned a beacon of economic hope into a graveyard of broken promises.

Governance Collapse: The Phantom Boardroom

Key findings reveal a governance crisis within the EPZA. Despite legal mandates, the Board of Directors (BoD) convened only once in 2018 and ceased meetings entirely after September 2019. Critical decisions, such as the cancellation of the Rs. 1.6 billion KEPZ Phase-III project, were approved without due scrutiny. Leadership instability plagued the institution, with five acting chairmen rotating between 2018 and 2020, including Mr. Abdul Jabbar Shaheen, who authorized illegal construction for 17 industrial units. Mandatory oversight committees for risk management, procurement, and audits were found to exist only on paper, with no functional role in accountability.

A former EPZA director, speaking anonymously, disclosed that contracts were routinely approved via WhatsApp messages. When the contractor for Phase-III, M/s. Siddique & Brothers, disappeared after receiving a Rs. 125 million advance, no investigations were initiated. Documented evidence further exposes how 17 investors occupied 67,514 square meters of prime land for 2–15 years without facing penalties.

Key Findings:
Rule Violations: Public Sector Companies (Corporate Governance) Rules, 2013, were routinely ignored.
Statutory Committees Missing: Critical committees for audit, risk management, and procurement were never formed.

Whistleblower Policy Absent: No mechanism existed for employees to report fraud or malpractice.

Investigation revealed:
“The management did not comply with governance rules, showing slackness and lack of seriousness.”

A political economist, notes: “Weak governance structures in state bodies like EPZA erode investor confidence. Without accountability, Pakistan’s export ambitions will remain a pipe dream.”

Financial Black Holes: The Decade of Darkness
The EPZA’s financial mismanagement spans over a decade, with no audits conducted since 2011. A questionable Rs. 1.58 billion ($Unpaidrentsandbillstotaling$1.3 million from defunct units such as Steel Vision were ignored, while investors avoided $27.3 million in penalties for delayed projects. For instance, M/s. Chal Chal Rags, allotted land in 2016, never commenced operations.

Data  highlights systemic underperformance: 95 units achieved only 29% of their export targets. M. Mawji & Sons imported 26.8 million in materials but exported a mere 5.8 million. Analyst condemned the situation as “orchestrated looting,” questioning how a state entity evaded audits for a decade.

Key Findings:
Loss-Making Units: 30 units lay dormant, causing a $92.7 million export shortfall.
Unrecovered Dues: $1.3 million in unpaid rents and electricity bills.
Penalties Unenforced: Investors avoided $27.3 million in penalties for delayed construction.

Investigation revealed:
“The management sustained losses due to non-recovery of dues, risking bad debts.”

The Tuwairqi Steel Mills EPZ imported $153 million more than it exported, leaving workers jobless and raising questions about duty exemptions.

Smuggling Syndicates: The EPZA-Customs Pipeline

The EPZA’s lax oversight enabled smuggling networks. Twenty-one units imported $28.4 million in goods but exported nothing, with evidence suggesting diversion to local markets. Customs complicity is detailed in 12 FIRs, including cases involving counterfeit cigarette paper, steel, and textiles. In 2019, M/s. Sun Graavure smuggled Rs. 1.7 billion worth of illicit goods.
A Port Qasim customs officer revealed that EPZA’s “Used Textile Clothing” units operate as fronts, importing rags for repackaging and domestic sales. Investigations shows $19.6 million in illegal domestic sales by EPZA units, violating the 80:20 export rule.

Investigation revealed:
“Unauthorized regularization of illegal construction allowed investors to operate with impunity.”

Point to be noted:
-Gujranwala EPZ: Operational since 2013, it generated only $4.1 million in exports against $3.2 million in imports.

Land Grabs and Ghost Projects

The KEPZ Phase-III project collapsed after costs ballooned from Rs. 640 million to Rs. 1.6 billion, with contractor M/s. Naqvi & Siddiqui Associates pocketing Rs. 6.5 million for nonexistent consultancy. Prime industrial land totaling 271,915 square meters (67 acres) was allocated to non-productive sectors, including used clothing traders.

Laborer R * Khan lamented the unfulfilled promise of 10,000 jobs: “Phase-III is now a wasteland. My sons fled to Dubai for work.” Pakistan’s EPZA network managed only $612million\; inexportsin2020$.

Investigation revealed:
“EPZA failed to utilize land for industrialization, undermining its core mandate.”

Employment Mirage: Workers Sold Lies
The EPZA delivered only 6% of its employment targets, creating 1,807 jobs against a pledged 30,196. Tuwairqi Steel Mills, a Saudi joint venture, employed just 100 workers instead of 1,000. NGOs reported child labor in Sialkot EPZ’s football-stitching units, where minors earned $70 monthly under coercive conditions.

A 24 years old female worker , described the harsh reality: “We stitch gloves for Europe. Complain, and they replace you.”

Investigation revealed:
“The Authority could not generate employment opportunities as envisaged.”

Silenced Whistleblowers: 

Investigators faced pressure to suppress findings, including restricted access to FIR records and warnings from bureaucrats not to “rock the boat.” Investigation reveals 16 units illegally expanded factories, paying fines of $67,078, just 1% of market rates. Supreme Court Advocate  urged prosecution under Section 409 of the PPC for criminal breach of trust.

Global Lessons Ignored
Pakistan ignored successful models like Vietnam’s Shenzhen (exports of $340 billion in 2022) and India’s Noida SEZ, which uses blockchain tracking. The World Bank’s advice to privatize management and adopt INTOSAI auditing standards was disregarded.

Pathways to Reform: From Words to Action
Recommendations include prosecuting officials behind the Rs. 1.6 billion KEPZ scam, recovering $27.3 million from dormant units, and implementing real-time customs tracking. An ex-World Bank employee proposed merging EPZA with BOI, while Transparency International demanded parliamentary public hearings.

Accountability or Oblivion? A Wake-Up Call for Pakistan’s Economic Future
Karachi’s export zones symbolize Pakistan’s governance crisis: $1.2 billion lost, 40,000 jobs unrealized, and global trust eroded. Citizens are urged to demand parliamentary scrutiny under Article 171, media to pursue RTI requests, and investors to require third-party audits. The final question remains: “Will Pakistan reform, or let its future rot in an annexure?”

Civil society groups demand parliamentary scrutiny and criminal probes into mismanagement. For Pakistan to regain investor trust, EPZA must transition from a symbol of failure to a model of reform.

Syed Talat A. Shah is an Investigative Journalist & Author You may follow him on Twitter X @TalatLive