The industries get exemption from property tax for five years


May 23 - 29, 2005



The MMA government of the NWFP come up with the first-ever industrial policy for the province after a span of over two years in power. The formulation of policy is more than welcome at a time when the province has cash-strapped coffers and the poverty level is in the vicinity of 50 percent.

However, it is mainly the implementation of this policy and most importantly its role in addressing the economic woes of the inhabitants of the province that would be of any significance notwithstanding its formulation.

Under the first-ever industrial policy announced by Chief Minister, Akram Durrani, industries in the NWFP have been exempted from property tax for five years. This concession is applicable to both the existing and new industries. Since heavy property tax has always been a disincentive for intending industrial investors, the province of NWFP, a tax holiday might allure a handful of investors to the industrial sector in the province. Because of the ever-increasing rates of property in the NWFP, where majority of the people, with a conservative and conventional mindset, having extra money usually prefer to invest in real estate for safe investment studded with lucrative returns.

Two other important features of the industrial policy, apparently contradictory to the MMA government approach, have been inducted in a bid to reconcile both the industrial workers and the entrepreneurs.

The policy has exempted industries from labor inspection for three years on one hand while it facilitates with a provision for social employees security on the other hand. On the back of the worst working conditions in NWFP with almost none implementation of labor laws, the exemption from labor inspections not only sounds nonsensical but might lead to a massive purge of industrial workers.

However, in the backdrop of World Trade Organization (WTO) rules with effect from January, 2005, it is seemingly likely that the major portion of industrial investment would be from foreigners in future. The government should have made the provisions regarding industrial workers very stringent in order to protect their interests. Instead this step is akin to marginalize an important factor of production in mostly the labor-intensive industries of NWFP. The aloofness of the MMA government, whose electorate mainly comprises lower and lower-middle class sections, towards apathy of industrial laborers is quite evident as there is no provision in the new policy of the minimum wage level.

Moreover, the so-called "Social Employees Security" system that is included in the industrial policy is reflective of the mediocre and 'uneconomic' approach of MMA economic managers in the provincial set-up.

Under the system it has been made obligatory upon the industrial owners to contribute 10,000 rupees per annum to workers social security if it has one to 10 employees. This amount progresses with same ratio if an industry employs more workers.

Though the NWFP industrial policy has earmarked 10 percent of the 81-megawatt electricity of the Malakand II Hydro Power project for industrial establishments yet it is the price of the electricity which really matters.

NWFP, on the back of its hydel resources was producing the cheapest electricity in the world and have the potential to attract industrial investment at a much greater level. However, contrary to the expectations, the new policy does not offer any rebates in the electricity charges to industrial consumers.

The provision that a special committee would identify certain industries for rebates of 25 percent in electricity charges for three years to be financed out of profits of Malakand II Hydropower project seems insufficient to attract investment.

This might lead to favoritism as every industrialist would be out there to get electricity rebates.

A sincere desire and revolutionary effort for developing industries calls for almost 75 percent uniform electricity rebates to all industry. It seems that the docile NWFP government is shy from taking a firm stand vis-a-vis federal government by telling the latter that it intends to provide cheaper electricity to industrial consumers in the province.



The MMA government and its ministers have every now and then been vowing that the province holds great potential for industrial investment. But in the announced industrial policy there has been no mentioning of the potential sectors for investment. Even the recently held high-profile conference organized by the NWFP government and addressed by the Prime Minister Shaukat Aziz and Federal Minister for Privatization and Investment, Hafeez A. Sheikh, could not come up with exact recommendations about potential sectors for industrial investment. Only a handful of sectors like oil and gas hydropower, mineral and tourism were identified while other sectors in which the NWFP has already either greatly contributed or has more industrial employment to the country's economy in particular textile, tobacco, food and beverages were not mentioned. The MMA government has not taken even any solid steps regarding the development of the sectors identified in the conference.

This could be ascertain from the fact that the NWFP government is not a party to any worthwhile oil and gas exploration agreement with any foreign company, whereas, it has no capacity to initiate explorations of its own. In case of hydropower the MMA government could not get even an iota of the huge sums which the NWFP has outstanding towards the centre rather it could not get the amount of eight billion which it always boast of being pledged by the federal government under its efforts. In fact, Durrani has recently said the federal government is reneging on its promise. The mineral sector is always the same. Even the province could not establish a viable gems cutting and polishing industry despite of its capital, Peshawar, being a hub of gems trade in the entire Asia. Whereas tourism could not be promoted in an areas whose government ministers themselves have been implementing Talibanization and involved in forced segregation of sexes and vowing to ban 'unIslamic' entertainment.

The industrial policy also includes setting up of three new industrial estates one each near Charsadda, Kohat and Bannu which should be admired but it is not the matter of establishing more industrial estates rather putting into gear the already stalled ones like the Gadoon Amazai Industrial Estate in which only 76 industrial units are working while 143 are closed.

Due to failure of successive provincial governments and indifference of federal government rather its anti-development policies regarding the NWFP as well as non-developmental approach and conservative mindset of the people of NWFP industrialization of the province could not be done. This could be gauged from these facts and figures. Out of the 1,848 industrial units that were established from (1947-2001) 738 closed down. Most of these units numbering 351 packed up during 1995-2000. The industrial policy has no provision for rehabilitation of such immense industrial capacity.

The industrial policy is also silent about providing a capital base for industrialization in the province while no mechanism for raising capital for industrialization like a stock exchange in Peshawar is made part of the policy. Whereas, the MMA economic managers by not pointing towards the ways and means of technology development, a sine-qua-nom, for industrialization has given a proof of their lack of economic insight.

The policy has also failed in mentioning how to capitalize upon the stupendous reconstruction process going on in Afghanistan in which the industries of the NWFP being the closest and having great comparative advantage and location advantage could play an instrumental role.

The NWFP along with FATA is considered as hub of fundamentalists and Islamic radicalism in the West and a lawless territory both in and outside the country. In the West a few people could distinguish between the MMA and the Taliban regime. In such a situation that is going to invest in the Frontier is anybody's guess. The MMA knows it and perhaps this might have been a psychological reason for its listlessness in the economic especially industrial affairs of the province. The so-called first-ever industrial policy by the MMA that is neither a complete nor an exhaustive document is the epitome of this lack of interest. But the foreign or Western governments must keep in mind that industrialization could be a panacea or a counterforce whatever Talibanization or extremism that is going on in the NWFP.