ISLAMABAD, June 16: Finance Minister Shaukat Aziz said on Sunday that despite various difficulties the new budget would attract considerable local and foreign investment because many irritants had been removed and duty structure rationalized.

Speaking at a news conference, the minister defended the budget and said it was an investment-friendly budget and would create business activities.

Gwadar, he said, would be made a free port on the pattern of Jable Ali port in Dubai or other such ports in Saudi Arabia and China. “We have been promised by the UAE authorities to have all possible technical support for building a duty-free port at Gwadar,” he said. Dredging work, he said, had already started at Gwadar where three berths would be built to complete the project in 30 months.

The minister said that the new National Finance Commission Award would shortly be constituted with a view to addressing the concerns of the smaller provinces in the distribution of resources.

“At this moment we cannot change the existing NFC Award because it was worked out for five years. But I assure you that the new award will be finalized in such a manner that it would provide more resources to the provinces,” he replied when asked why Sindh was being offered only 2pc of the resources though in proportion it gave the Centre 65pc of overall taxes annually.

Mr Aziz said that 5pc corporate tax had been reduced in the budget and added that it would be further reduced by 2pc to 3pc every year.

He pointed out that reduction of maximum tariff to 25pc was part of the tariff reform programme and said the new duty slabs of 25pc, 20pc, 10pc and 5pc would help import cheap raw materials. “And there will be no further reduction in slabs as the rationalization process has been completed.”

He said the duty drawback problem in customs would be removed by favouring the concerned people to collect duty drawback from the banks instead of the Central Board of Revenue where the element of bribe could not be “fully eliminated”.

The minister told a reporter that the coverage of General Sales Tax, being a new tax, was increasing and added that ultimately it would be the main tax of the country.

In reply to a question, he said fiscal deficit stood at 7pc against the underlined target of 4.9pc. “This 7pc fiscal deficit is due to Rs80 billion new expenditure incurred in 2001-02 which includes an additional Rs17bn given for defence, Rs22bn paid to banks in shape of refunds, Rs30 billion injected into the KESC and Rs9bn provided to the Khushal-i-Pakistan Programme.”

Mr Aziz revealed that a ‘fiscal responsibility law’ would shortly be promulgated to discourage unnecessary local and foreign borrowing by the government. “This law will prohibit lending for meeting current expenditure,” he said, adding that loans for development, however, would not be disallowed. He said the issue would later be sent to the new parliament for approval.

He said that Rs146 billion would be provided for defence in the new budget. “But,” he added, “we will keep monitoring the situation and if there will be a requirement, armed forces budget will be increased.”

India, he said, had increased its defence budget in 2000-01, 2001-02 and 2002-03 by 28pc, 14pc, and 7pc, respectively, while Pakistan’s defence budget had remained static during this period. “In fact, in nominal terms our defence budget has reduced during the last few years,” he added.

The minister did not agree with a reporter that the restructuring of the CBR was being delayed due to resistance within the department as had been pointed out at a news conference held by the local chief of the Asian Development Bank.

The minister said that the restructuring was a detailed process which cannot be completed overnight. However, he added, five new members had been inducted into the CBR and efforts were being made to get the department fully restructured to increase revenues.

Answering a question, he said that Rs4.9 billion was still to be collected from the United States on account of non-delivery of F-16s.