Pakistan Approves Foreign Currency Incentive for Chinese Companies in Gwadar Free Zone
In a move aimed at boosting foreign investment and trade activity in the Gwadar Free Zone, Pakistan has approved a major incentive allowing Chinese companies to retain 50% of their export earnings in special foreign currency accounts.
According to a report by the Express Tribune, these funds can now be used for current account transactions abroad without prior approval from the State Bank of Pakistan (SBP). This change is expected to ease financial operations for investors operating under the China-Pakistan Economic Corridor (CPEC) framework.
For this policy to be implemented long-term, the SBP has advised that the Gwadar Port Authority Act be amended. This would align the law with regulations governing Export Processing Zones and require certain waivers from the 1947 Foreign Exchange Regulation Act.
The announcement comes ahead of Prime Minister Shehbaz Sharif’s scheduled visit to China for the Shanghai Cooperation Organisation (SCO) summit in late August, signaling renewed efforts to strengthen bilateral economic cooperation.
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A high-level committee comprising Planning Minister Ahsan Iqbal, Commerce Minister Jam Kamal Khan, and Special Assistant to the Prime Minister Haroon Akhtar has been meeting regularly to address challenges faced by Chinese investors. Pakistan’s ambassador to China, Khalil Hashmi, has proposed hosting a Business Conference in Tianjin on September 2, although some officials remain skeptical due to the limited follow-through from previous events.
The committee is also working to resolve critical infrastructure issues in Gwadar, including temporary electricity supply for a desalination plant and faster grid connections for the Rashakai Special Economic Zone.
Despite growing efforts, several barriers to investment remain, such as policy inconsistencies, delays in profit repatriation, exchange rate volatility, and security concerns.
To attract targeted investment, authorities are finalizing a sector-specific pitch book focusing on key industries such as chemicals, steel, copper, electric vehicles, solar technology, ICT, and food processing.
