PUNJAB INDUSTRIAL POLICY 2003
Review and suggestions
By PROF. DR. KHAWAJA AMJAD SAEED
July 21 - 27 , 2003
The Chief Minister of Punjab, on 24th June 2003 unveiled Punjab Industrial Policy 2003 (PIP-2003), which according to him marked the first step on the road to industrial progress and economic prosperity through close interaction of the government and private sector, entrepreneurs and the industrial workers. The policy has been well received by some of the stakeholders. However, some other stakeholders have expressed certain reservations. Overall this policy initiative is a positive step as it aims to create a conducive and business-friendly environment where the existing and prospective entrepreneurs are able to focus their creative energies on maximizing business opportunities, without having to spend more than the bare minimum time in dealing with government laws, rules and regulations. PIP-2003 measure are said to be the first steps on the road to creating the kind of environment in which government and businessmen are partners; who grow hand in hand, striving together for the ultimate purpose of creating jobs for the unemployed and fostering economic growth in the province. The main thrust of the policy is in the areas as under:
Inspection of business units and labour welfare: Considering regular inspections as one of the major irritants of business community, the Government of Punjab has replaced this system by a new system of self-declaration. The inspection forms have been simplified and reduced to fewer pages. All industrial units with 10 or more workers will fill this form, which will be a declaration of requirements under the law and submit to Labour Department within the month of July each year. Urdu version of this form will be displayed at entry points of each industrial unit so that the employees are aware of the declaration. Labour Department will computerize the returns and each year inspects only 5% of registered units thrown up by computerized random process. List of the business units chosen will be made public and communicated to these units in advance. These inspections will be conducted in association with District Human Resource Boards in which the Private Sector is said to be well represented.
A new concept of integrated labour services is being designed where the Government of Punjab has planned to provide a residential labour colony, schools for their children as well as a social security hospital, at the same location. In addition to this, Technical Education & Vocational Training Authority (TEVTA) will link this colony with its technical training institutes. A sum of Rs 2.5 billion has been said to be embarked for this purpose and work has already been initiated
SOCIAL SECURITY TAXES:
a. Smaller Units: Government of Punjab believes that the levy of social security taxes as a means of providing medical and disability benefits has developed into an irritant for business units and at the same time, the level of healthcare delivered is inadequate. Therefore, the social security rules have been amended. The old system has been replaced with a new business-friendly regime, wherein the discretionary powers of the authorities have been completely removed. Fixed slab system for units employing up to 49 employees within the purview of Social Security have been introduced. Units with 01-10 employees to pay Rs 10,000/- per annum, units with 11-20 employees to pay Rs 25,000/- per annum and units with 21-49 employees to pay Rs 50,000/- per annum. This system will be mandatory and such units will be exempted from inspections for three years as long as they keep paying the annual fixed contribution.
b. Larger Units: For units employing 50 or more persons falling within the purview of Social Security, a simple declaration will be required on a monthly basis and contribution due for that month will be sent, along with this declaration, to the local Social Security office. All such units will be exempted from retrospective penalties. The lists of units and their declaration will be widely circulated. No inspection shall be carried out during the first six months of the year. The system will then be evaluated by a steering committee with strong private sector representation.
DELIVERY OF SOCIAL SECURITY SERVICES:
A comprehensive programme for expansion of health facilities is being undertaken which will increase the number of hospital beds in the system from the current 1,400 to 3,500 in a phased programme. Twenty new/upgraded 100 bed Hospitals will be constructed. An amount of Rs 2.5 billion has been allocated for benefit of labourers. A steering committee comprising Private Sector Doctors and Health Management Professionals has been created. The committee will plan improvements in health delivery and additional capacity creation. In addition to this, the steering committee will develop criteria for matching location of labour concentrations, with provision of healthcare. The committee has also been tasked with developing standards for the type and quality of healthcare facilities actually required by industrial labour.
It has been said to be a classic case of "too much pain for very little gain", the Government of Punjab decided to abolish Education Cess entirely. The entire current expenditure under this head will be made a regular part of the Punjab Education Budget. Technical training facilities will be enhanced to counter the issue of 3.5 million dropouts from schools every year.
MEASURES FOR PLANNED AND RAPID INDUSTRIALIZATION:
a. The GOPb aims to achieve an orderly, planned and rapid industrialization of Punjab by developing a chain of industrial estates which will provide turnkey solutions to the problems faced by prospective entrepreneurs. Being cognizant of the history of industrial estates developed through state institutions, it has been decided that industrial estates will be developed through a new institution, namely the Punjab Industrial Estate Development and Management Company (PIEDMC). This company is Government of Punjab funded, private sector led, flexible, able to respond to changing environment and designed to be financially sustainable.
b. The new estates will provide facilities such as fully developed plots, sheds and constructed areas for Small and Medium Enterprise on ownership basis; Sewerage, Solid Waste Disposal; Roads & Footpaths; adequate lighting & landscaping; public transport facilities; Electricity, Gas and Telephone connections will be provided on site and investors will not have to run from door to door for these facilities; arrangement for related common commercial facilities; link with TEVTA training centres and Social Security Healthcare facilities including injury treatment centre. The PIEDMC will be mandated to provide quality maintenance on sustainable basis. It is envisaged that once an estate is populated, a board of management comprising of estate residents will manage their own affairs. This will ensure that the PIEDMC remains a lean and decentralized organization.
c. The Government of Punjab has decided to immediately re-construct drainage, sewerage and roads of Multan and Kot Lakhpat Industrial Estates to bring them to international standards. The PIEDMC has been assigned the task of implementing this programme in collaboration with the Associations of the respective industrial estates. As soon as these first up-gradations are completed, Government of Punjab will endeavour to fulfill the requirements for up-gradation of other existing Industrial Estates in the Punjab as well, on a need and demand basis.
It has been mentioned that PIP-2003 has been developed pursuant to a detailed analysis of existing provincial laws, rules and regulations and their impact on the business environment. The Government of Punjab has introduced a number of improvements in certain critical areas. However, it is not clear if all the stakeholders were consulted in this exercise and their views suitably reflected in the final document. Some of the comments on the policy from different stakeholders as reported in the press are summarized below:
a. The LCCI Labour Committee Convener reportedly suggested that the government should constitute a Vigilance Committee with major participation of private sector to achieve the desired results of this policy. He said it was a good policy and would ensure promotion of industries, besides creating more job opportunities. Increase in medical treatment and other facilities to workers would help in boosting the productivity.
b. The leader of the opposition and some of his other colleagues in the provincial assembly reportedly said that labour inspectors were responsible for monitoring the implementation of labours laws and maintaining the record of workers in industrial units. By abolishing labour inspectors, the government has given free hand to industrialists to hire and fire employees and violate labour laws.
c. The Chairman of Site Association of Industry (SAI) has reportedly urged the Government of Sindh to adopt the same industrial policy as has been adopted by the Government of Punjab, by amending the existing labour policy and related rules and regulations applicable in the labour employed in the factories in Sindh.
d. The Working Women Organization (WWO) reportedly flayed PIP-2003 saying the rights of labour and working class have been totally ignored. Further, that until and unless the problems faced by the working women at their work places continue to exist, the dream of industrial development could not be achieved.
Many areas in industry need improvement. Some of the irritants to the industry fall in the purview of the provincial governments and the utilities controlled by the provincial or the district governments. The irritants with the major financial impact, however, are in the purview of the federal government and its agencies. For real economic development, all irritants need to be removed or neutralized. The government is urged to consider the following suggestions:
a. The provincial governments can improve the areas under their own control and that of the agencies controlled by them. Fairness, transparency, simplified procedures and accountability are the panacea to rid the irritants from the industry. For the remaining irritants, the provincial government can study different dimensions of each irritant properly and then approach the federal government with its recommendations for resolution. Without such a pragmatic approach it would not be possible to create conducive environment for internationally competitive industrial activities.
b. The government might associate the labour and other stakeholders while considering future amendments in laws and rules concerning industry and/or the industrial workers. It would be also worthwhile if, based on the feedback about PIP-2003, the rules and procedures are further amended. The labour inspectors and other government functionaries need to be motivated to perform their duties in the best interest of the workers and the industries. They should also be trained and provided other facilities commensurate with their job assignments.
c. It is well to first tackle the problems of two industrial estates at Lahore and Multan. However, action may also be considered for resolution of the urgent problems of other industrial areas in the province. Rawalpindi Industrial Area is reportedly facing water shortage. Law and order need to be improved in all the industrial areas. The labour should be protected while coming to work as well as after work while going to their homes. As many mills operate two or three shifts in a day, the labour come and go at odd hours and they must not be harassed.
d. Labour is the key to industrial development and for the production of quality products at competitive costs. The workers need to be looked after well. The government might ask the industrialists to improve the working conditions in the industrial units as required by the relevant laws. Pakistani labour laws might be compared with the laws in the developed countries and on that basis our laws might also be improved for the real betterment of the workers. The government may implement projects in all areas for welfare of the labour to allay genuine or perceived apprehensions that PIP-2003 is heavily tilted towards the industrialists.
e. WTO rules pertaining to exports emphasize compliance in areas particularly labour welfare and working conditions for them, pollution control and environment, quality assurances and removal of subsidies in product prices. These requirements might not be fully complied with if labour is not properly motivated and their welfare at the workplace is not ensured.