{"id":23447,"date":"2025-03-12T22:47:27","date_gmt":"2025-03-12T22:47:27","guid":{"rendered":"https:\/\/www.diplomacypakistan.com\/?p=23447"},"modified":"2025-03-12T22:48:25","modified_gmt":"2025-03-12T22:48:25","slug":"exclusive-investigation-systemic-failures-plague-export-processing-zones-authority-epza-costing-pakistan-billions","status":"publish","type":"post","link":"https:\/\/www.diplomacypakistan.com\/?p=23447","title":{"rendered":"Exclusive Investigation: Systemic Failures Plague Export Processing Zones Authority (EPZA), Costing Pakistan Billions"},"content":{"rendered":"

Decades of Neglect, Billions Lost: Investigative Deep Dive into Pakistan\u2019s Collapsing Export Processing Zones Authority (EPZA).\u00a0<\/em><\/strong><\/p>\n

[by Syed Talat A. Shah . Twitter x @TalatLive]<\/strong><\/em><\/p>\n

A Decade of Mismanagement, Smuggling, and Broken Promises Uncovered.\u00a0<\/strong><\/p>\n

Red Flag Rising: An Alarming Sign for #IMF\u2019s Economic Watchdogs<\/strong><\/em><\/p>\n

An inside investigation of Pakistan\u2019s Export Processing Zones Authority (EPZA)\u00a0has exposed systemic failures, including financial mismanagement, governance collapse, and chronic inefficiency, costing the nation billions in lost revenue and squandered economic potential.\u00a0A 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:\u00a0$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\u2019s competitiveness in global markets. This investigation uncovers how institutional apathy and unaccountability turned a beacon of economic hope into a graveyard of broken promises.<\/p>\n

Governance Collapse: The Phantom Boardroom<\/strong><\/em><\/p>\n

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.<\/p>\n

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\u201315 years without facing penalties.<\/p>\n

Key Findings:
\nRule Violations: Public Sector Companies (Corporate Governance) Rules, 2013, were routinely ignored.
\nStatutory Committees Missing: Critical committees for audit, risk management, and procurement were never formed.<\/p>\n

Whistleblower Policy Absent: No mechanism existed for employees to report fraud or malpractice.<\/p>\n

Investigation revealed:
\n\u201cThe management did not comply with governance rules, showing slackness and lack of seriousness.\u201d<\/p>\n

A political economist, notes: \u201cWeak governance structures in state bodies like EPZA erode investor confidence. Without accountability, Pakistan\u2019s export ambitions will remain a pipe dream.\u201d<\/p>\n

Financial Black Holes: The Decade of Darkness<\/strong>
\nThe EPZA\u2019s financial mismanagement spans over a decade, with no audits conducted since 2011. A questionable Rs. 1.58 billion (13.5 million)investment in banks like Silk Bank lacked board approval. <\/span>U<\/span>n<\/span>p<\/span>ai<\/span>d <\/span>re<\/span>n<\/span>t<\/span>s <\/span>an<\/span>d <\/span>bi<\/span>ll<\/span>s <\/span>t<\/span>o<\/span>t<\/span>a<\/span>l<\/span>in<\/span>g <\/span><\/span><\/span><\/span>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.<\/p>\n

Data\u00a0 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 <\/span><\/span>5.8 million. Analyst condemned the situation as \u201corchestrated looting,\u201d questioning how a state entity evaded audits for a decade.<\/p>\n

Key Findings:
\nLoss-Making Units: 30 units lay dormant, causing a $92.7 million export shortfall.
\nUnrecovered Dues: $1.3 million in unpaid rents and electricity bills.
\nPenalties Unenforced: Investors avoided $27.3 million in penalties for delayed construction.<\/p>\n

Investigation revealed:
\n\u201cThe management sustained losses due to non-recovery of dues, risking bad debts.\u201d<\/p>\n

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

Smuggling Syndicates: The EPZA-Customs Pipeline<\/strong><\/p>\n

The EPZA\u2019s 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.
\nA Port Qasim customs officer revealed that EPZA\u2019s \u201cUsed Textile Clothing\u201d 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.<\/p>\n

Investigation revealed:
\n\u201cUnauthorized regularization of illegal construction allowed investors to operate with impunity.\u201d<\/p>\n

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

Land Grabs and Ghost Projects<\/strong><\/p>\n

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.<\/p>\n

Laborer R * Khan lamented the unfulfilled promise of 10,000 jobs: \u201cPhase-III is now a wasteland. My sons fled to Dubai for work.\u201d Pakistan\u2019s EPZA network managed only 12 million in exports in 2020, dwarfed by Bangladesh\u2019s Dhaka EPZ, which generated <\/span>612 <\/span>mi<\/span>ll<\/span>i<\/span>o<\/span>n in <\/span>e<\/span>x<\/span>p<\/span>or<\/span>t<\/span>s <\/span>in <\/span>2020<\/span><\/span><\/span><\/span>.<\/p>\n

Investigation revealed:
\n\u201cEPZA failed to utilize land for industrialization, undermining its core mandate.\u201d<\/p>\n

Employment Mirage: Workers Sold Lies<\/strong>
\nThe 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\u2019s football-stitching units, where minors earned $70 monthly under coercive conditions.<\/p>\n

A 24 years old female worker , described the harsh reality: \u201cWe stitch gloves for Europe. Complain, and they replace you.\u201d<\/p>\n

Investigation revealed:
\n\u201cThe Authority could not generate employment opportunities as envisaged.\u201d<\/p>\n

Silenced Whistleblowers:\u00a0<\/strong><\/p>\n

Investigators faced pressure to suppress findings, including restricted access to FIR records and warnings from bureaucrats not to \u201crock the boat.\u201d Investigation reveals 16 units illegally expanded factories, paying fines of $67,078, just 1% of market rates. Supreme Court Advocate\u00a0 urged prosecution under Section 409 of the PPC for criminal breach of trust.<\/p>\n

Global Lessons Ignored<\/strong>
\nPakistan ignored successful models like Vietnam\u2019s Shenzhen (exports of $340 billion in 2022) and India\u2019s Noida SEZ, which uses blockchain tracking. The World Bank\u2019s advice to privatize management and adopt INTOSAI auditing standards was disregarded.<\/p>\n

Pathways to Reform: From Words to Action<\/strong>
\nRecommendations 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.<\/p>\n

Accountability or Oblivion? A Wake-Up Call for Pakistan\u2019s Economic Future<\/strong>
\nKarachi\u2019s export zones symbolize Pakistan\u2019s governance crisis: $1.2 billion lost, 40,000 jobs unrealized, and global trust eroded.\u00a0Citizens 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: \u201cWill Pakistan reform, or let its future rot in an annexure?\u201d<\/p>\n

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.<\/em><\/p>\n

Syed Talat A. Shah is an Investigative Journalist & Author You may follow him on Twitter X @TalatLive<\/strong><\/pre>\n
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