SLOW-MOVING DEVELOPMENTS OF INDUSTRIAL ZONES

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Oct 19 - 25, 2009

Federal government has taken on board an effective strategy of building infrastructure and frontal base of the three spacious industrial zones of areas under Port Qasim Authority. The strategy of build-operate-transfer has been recognized as one of the most effective mode of investment world over, which lessens the capital risks of single stakeholder and promotes public-private partnership. While for areas marked for specialized industrial area (single industry) the authority puts on auction industrial lands and lessee thereof takes costs of infrastructure building, it contracts out roads-construction companies to develop road network in some areas of zones. For example, lands allotted for textile city are managed and sold by public-private owned entity, which would be responsible for provision of basic infrastructure facilities.

BOT investment strategy would mitigate the direct cost to the government. When investments on BOT pour in establishment of terminals, jetties, and navigational channels, it would be a financial relief to a country with consistent budgetary deficits. However, there are skeptics who think that public-private partnership culture requires a long time to take roots in Pakistan where bureaucracy dislikes intermingling with agents operating outside the government. Referring to delayed takeoff of various development projects within the ambit of Port Qasim Authority, a private stakeholder close to the developments says there appears procedural halt in the starting of infrastructure and industrial setups, as "we have to bend over backward to get through a tiresome and lengthy process of taking permissions from different government departments". Therefore, even with availability of preliminary capital flows an investor cannot wait a long while keeping his money out of financial mainstream.

Public-private partnership is a real productive concept but it cannot succeed until an atmosphere of unconditioned cooperation is designed. It was said that a huge investment is required to build and develop industrial base and capacity enhancement projects across the port to make it at par with international standards.

Port Qasim Authority's industrial zones have enormous tracts of lands spreading over 12,220 acres in northwestern, eastern, and southwestern industrial zones. It has already allotted 8,700 acres of lands out of the total area. These industrial zones have operational bases of leading manufacturing companies such as Engro and Fuji Fertilizers. The eastern industrial zone has been neglected for years while developments in other zones continued, though slowly. Completion of over Rs8 billion contract PQA assigned to NLC and FWO for roads construction would prove a breakthrough in expanding access to eastern zones. This is one of the reasons that now foreign companies are taking keen interest in setting up their plants in the zones.

Protector and Gamble is setting up its modern diapers-manufacturing plant in one of the zones. The plant would churn out productions to supply its flagship brand of pampers in local market and perhaps in international market. Making exportable outputs is possible because of location of these zones purposively carved out in the suburbs of Karachi and near one of the three deep-sea ports. Increasing production capacity for exports would become a support to the growth of the exporting industry of the country and increase government taxes. This would also be an industrious addition to fast moving consumers' goods industry.

Chinese investors who have shown their interests in managing these zones to the government can substantiate the latent magnetism of PQA's industrial zones. It was leant Chinese investors had expressed their desire to buy out half of the industrial zones. Chinese businesspersons are very sagacious decision makers and avoid going in to deal that does not favor them. They had once put before Punjab government the same proposal, but the provincial government had perhaps rejected it because of lands in demand were agriculture and might be suitable for purpose other than industrial estate. The undetermined market value of demanded lands may have obstructed success of the proposal. In addition, provincial government might restrict itself to lease out lands as per selection of the investors. However, Punjab government has offered industrial lands for Chinese special economic zone in Sundar Industrial Estate.

Foreign investors are taking interest in investing industrial estates across Pakistan. If proper infrastructure is established, this interest can be multiplied. The problem is of requirement of substantial capital without which such development projects cannot survive. Government's apathy seen in delayed takeoff of road and rail linkages originates in shortage of funds or uncertainty about future of industrial sites. Government has allocated considerable funds for the construction of road networks in PQA's zones, but such works do not suffice to attract investments from companies across the board. Parts of zones in which the authority laid down road networks and provided basic facilities have made only few companies operational. Rest is under the process of developments or without water, gas, and electricity lines altogether. Partnering with private stakeholders has not turned out to be a real success so far since private investors seek monetary benefits of investment in projects. When there appear delays beyond completion timeframe, private parties either opt for divesting shares or stop further injection of monies. Until there are aggressive marketing campaigns through local and international media about incentives government award to companies for establishing companies in industrial zones or relatively inexpensive right of ways, operational industrial zones would sluggishly become a reality.

Besides, some criticizes limited scope of infrastructure buildings government carry forward, asking for broad-based industrial development plans. It is said that companies, which are operating within PQA's zones, have to confront with electricity and gas problems and some of them need to generate their own power to meet the shortfall. Electricity shortage is a national issue, however, broad based infrastructure building plan must include making of sources of energy with addition of each new manufacturing plant. Reason of unnecessary delays too lies in commercial motives of realtors who sneak in to transaction of industrial lands and manipulate market value by holding plots.