the grass greener on the industrial-park side?
a troubling gap
The success of small and medium entrepreneurship depends not simply on the infrastructure provided at the newly-launched Korangi Creek Industrial Park, but critically, on government support provided to the sector through its nascent period.
By Ahmed Yusuf
The marvel of the Asia Tigers - Hong Kong, South Korea, Taiwan and Singapore - inspired a global aspiration among developing and under-developed states of "becoming" these countries. The Asian Tigers fascination - small in size but heavy on profits - was hitherto without any actualisation, but the inauguration of the Korangi Creek Industrial Park (KCIP) in Karachi seeks to provide the Far Eastern giants' recipe for success to Pakistan.
Despite this promise, however, the cultivation of an enabling environment and a certain degree of protectionism are vital for small and medium industry to thrive at the industrial park. By extension, the small and medium enterprise sector would also burgeon, but ultimately, the role of the government is critical in determining the future direction and course of the industrial park.
Industrial parks: concept and criticism
The concept of an industrial park is simple, but one that has its detractors as well: a zoned area, usually situated on the outskirts of the city, that is purposely planned and built for the promotion of industrial development. A universal principle is that the park is located in proximity to a number of transport modes and facilities, including highways, railroads, air ports, sea ports and/or dry ports. By extension, access to good transportation facilities is a must for the idea to thrive.
The success of industrial parks depends on the ease of infrastructure and facilities provided to industrial units constructed in the park. Hence, the establishment of industrial parks is premised on the construction of arteries and roads connecting to the motorways, high-power electricity supply, state-of-the-art communication facilities, abundant water supply, as well as high pressure and volume gas lines. The idea is that dedicated infrastructure and facilities are provided in a controlled space to a number of industrial units, which in turn, reduces the cost of each business operating in the park.
What an industrial park offers, in return, is non-stop production of a diverse range of products. And the potential for greater profits.
Detractors of the concept argue that limited resources can be allocated more efficiently. An industrial park figure is doomed to failure if access to transportation facilities is limited and only basic utilities are available. In some cases, this even leads to the blatant violation of environmental safeguards.
The case of Karachi, however, seems to be one that is in dire need of an industrial park, given the uncertain balance of power and utilities. Industrialists, businessmen and traders have all complained of the adverse impact that persistent and often extended power loadshedding has had on the market. Lower profits, or profits lost, due to such losses translate into more people being laid off. Repeated governmental assurances to businessmen and traders about no outages have come to nought, and industry has been facing a prolonged lull.
KCIP: The Promised Land
The increasingly volatile situation of the city coupled with intermittent breakdown of utilities' services has upped the cost of industrial production in Karachi. Given the direct correlation between business activity in Karachi and the overall economic situation of the country, this situation is not a harbinger of prosperity.
In such a scenario, the KCIP promises all essential facilities for small and medium enterprise, one that is predominantly focussed on the manufacturing sector.
"The industrial park in Korangi is built on land owned by the Pakistan Industrial Development Corporation (PIDC)," National Industrial Parks (NIP) Development and Management Company Chief Executive Zubair Habib told Kolachi. "Many people are pleasantly taken aback at the cost of doing business here at the KCIP," Habib beamed. "The cost of land is affordable, and all facilities will be provided through a single-window operation. Potential investors don't have to do any running around, they just have to produce the goods."
Singapore-based firm of consultants, Jurong International, were commissioned to design the KCIP - perhaps indicative of the fact that those at the helm of affairs are now beginning to realise the significance of value-addition. "We have made a concerted effort to ensure that the big players, the big industrialists are kept away from the park. This venture is specifically aimed at small and medium-sized entrepreneurs, and the grid designs reflect this objective," described Qazi Shehryar, Projects General Manager of NIP Development and Management Company.
The 250-acre project site of the KCIP currently provides a bare landscape: the park was officially launched on March 8, 2010, and till now, only a fully functional administrative and site office is in operation. Zonal markings have also been completed, and plots have been demarcated as well. Shehryar described that over 400 applications have been collected from the NIP Development and Management Company. "Those interested in the KCIP are serious parties, as mostly the senior executive staff of these companies have visited the site," Shehryar told Kolachi.
Despite the barren landscape, much of the infrastructural work at KCIP has already been completed. The water distribution network for the park has been laid, complete with underground and overhead reservoirs. The construction of a pumping station and a generator house has also concluded, as has an underground sewerage network. The boundary wall of the facility has been erected, while a gigantic gate - shaped in arches - is under construction. The laying of an electrical distribution network and sub-stations is still in progress, and is expected to reach fruition by the end of the year.
"The idea is that construction of infrastructure will be completed well before any industrial units are built here. If someone were to start building their industrial unit today, and were to complete construction within a year, all utilities will be made available to them before they open shop," Habib asserted.
Yet, the NIP Development and Management Company has placed several safeguards to ensure that no one is able to simply buy property and put off construction till a more opportune time. "Prospective investors can start applying to the NIP Development and Management Company, but the property is not transferred in their name till the construction of their set-up is completed," Shehryar said.
"The property is leased to them in the first stage, and following approval of construction plans etc from the authorities concerned, construction is supposed to be completed within two years Failure to adhere to these rules triggers a clause in our agreement with the prospective investors, whereby we can wrest control of that particular property, and the investor's money is returned to them - albeit with a certain deduction made in lieu of a penalty," he explained.
Need for protectionism
The role of the government in critical in nurturing the park, and by extension, the manufacturing industry that will be set up at the KCIP, believed both the executives of the KCIP. "The creation of an enabling environment is necessary, and this is where the role of the government comes in," Habib said.
While General Ayub Khan's policies of rapid industrialisation in the decade of the 1960s was premised on support from organisations such as the Pakistan Industrial Credit and Investment Corporation (PICIC), the KCIP chief executive said that manufacturing industry may not need such financing, as evidenced by the number of applicants, but there is a need to revisit economic and financial policies to ensure that the venture of the industrial park are not doomed to failure before they even start.
"Lower interest rates are necessary to promote industrial activity," Habib said. "Look at the United States today. Despite the global economic climate, the Feds have continued with their policy of zero interest rates. In Pakistan, the biggest borrower is the government. This means that there is less money for others to borrow from banks, and as a result, the cost of money is high. This translates into higher interest rates," Habib explained.
Tax rates also have to be lowered, he said, adding that at the same time, the government has to ensure that those in the tax net pay their due amounts in full and on time. If not, there should be a punitive system in place that deals with these defaulters. "In Egypt, corporate taxation rates were lowered from 40 per cent to 22 per cent, and this cut resulted in an increase in collection by 1,000 per cent. There is no reason for us not to achieve such success," he said.
Similarly, industry cannot adjust to fluctuating utility prices, Habib said. "The cost of production increases with every hike in utility prices, and one can't even make proper commitments with clients. Imagine, one day you have agreed upon a transaction of one million rupees, but the next day, you are forced to call your client and tell him that the rates have been revised due to a rise in one of the utilities' prices, and that he'd have to pay another two hundred thousand rupees. You client is bound to call you crazy, and if this happens with a lot of traders, you know that your industry is in trouble," he argued.
Both KCIP executives agreed that monetary and fiscal policies have to be stable, and the stability of the US dollar has to be ensured. The price of the dollar affects the price of almost everything, and as with utilities, this in turn affects the price of products.
"Of course, the government must ensure greater market access to the European Union and the United States," Habib said. "Bangladesh and Jordan have progressed largely because of the access to different markets that their governments managed to secure. Export success depends on high-quality products, but the role of the industrialists is limited to producing; the rest depends on the government."
While such policy review may be the need of the hour for the KCIP, free trade agreements signed by the Asian Tigers aided in their development. By 2009, Singapore had signed 16 bilateral and multilateral trade agreements with 24 trading partners, including United States, China, Korea, Japan, Australia, New Zealand, India, Japan, Jordan, Panama, Peru, Switzerland, Liechtenstein, Norway and Iceland (through the European Free Trade Association), and Brunei, and Chile(through the Trans-Pacific Strategic Economic Partnership Agreement.
Till now, Pakistan has is signatory to only nine free trade agreements, according to the Commerce Ministry's website, and with only China, Malaysia, Sri Lanka, Iran and Mauritius acting as partners.
"All such corrections have to be gradual, and nothing is irreversible," Habib said. "Ultimately, some industries need to be protected by the government, till such time that they can stand on their own. Protectionism can then be weaned out, and competition can be further encouraged
Social benefits & responsibility
According to Habib, about 10 acres have been set aside for vocational centres, with one currently operating adjacent to the site of the KCIP.
"We recognise our responsibility to the people of the vicinity," Shehryar said. "That is the reason why we decided that the people of the nearby settlement, Bhittai Colony, will have top priority for employment as labour. We know that there is a paucity of skilled and unskilled labour in the market, and so, we planned vocational centres to ensure that a more skilled workforce is employed at the park.
"We envisage an investment of about Rs20 billion, and an overall contribution to the Gross Domestic Product (GDP) of about Rs40 billion. Direct investment will create about 30,000 jobs, while the opportunities created in indirect terms is six-fold," Habib said.
He added that the KCIP had undergone an environmental impact assessment, which was conducted by the Sindh Environmental Protection Agency (Sepa). A public hearing was held, and criticisms from Shehri-CBE representative Roland de Souza also taken on board.
"This is a model for the rest to follow. If this is successful, such parks can be built across the city, and existing infrastructure also upgraded in the same way," Habib concluded.
Korangi Creek Industrial Park
Industrial clusters Light engineering, food processing, consumer and pharmaceutical products, garments, printing and packaging.
Commercial and business centres, information technology, gems and jewellery.
Plot sizes Low-density zone (G + 4 allowed) 0.5 to 1 acre
High-density zone (G + 19 allowed) 1 to 1.5 acres.
Industrial land rates Low-density zone (per square yard) Rs 5,062
High-density zone (per square yard) Rs17,562
Water supply Karachi Water and Sewerage Board.
Power supply Captive power plant and power from Karachi Electric Supply Company
Telecommunication Telephone lines with broadband wireless internet connectivity.
Gas supply Sui-Southern Gas Company
Roads Major and minor arterial roads; Utility corridors and sidewalks; Green belts and median for street lighting.
Other features Effluent treatment plant; Solid waste management;
Transport hub; Weigh bridge; Vocational training centre; One-stop service.
Services building Banks, insurance offices, post office, auditorium, exhibition hall, food court, emergency medical facility, recreational centre, etc.
Security Secured wall with controlled entry and exit; and internal patrolling.
The Karachi Tools, Dyes and Moulds Centre (KTDMC), built adjacent to the KCIP, seeks to overcome the severe paucity of skilled professionals to make tools, dyes and moulds, and thus enable small-scale industries to keep pace with modern manufacturing technology
By Rabia Ali
Dyes and moulds are the main tools for mass-producing plastic, automobile and non-ferrous parts (aluminium and other alloys), as well as pressure die-casting moulds, with consistent precision, accuracy, shape and size. A shortage of skilled workers to produce tools, dyes and moulds, however, is decreasing productivity, quality, and investments at hundreds of small-scale industries which have cropped up all over the city.
"In our part of the world, the importance of tools and moulds is completely neglected, and not given much thought. It is necessary to create a mould for a part in order to ensure quality and productivity. The situation in the country, however, is saddening, because the total export of tools, dyes and moulds is at zero per cent," said Karachi Tools, Dyes and Moulds Centre (KTDMC) Managing Director Sardar Akhtar Khan. The KTDMC is a vocational centre, which trains people to make tools, dyes and moulds.
The import percentage, meanwhile, is about nine percent, because moulds and dyes are bought from China and Japan. "The current estimated demand of industries requiring tools and moulds is US$380 million but we are importing US$350 million," Khan told Kolachi.
He hesitated before sharing other disappointing figures. According to him, there are some 2,788 companies which are in need of 82,785 skilled professionals and around 44,340 dyes and moulds. These companies include automotives, surgical, cutlery, fans and accessories, electrical and electronics, sanitary ware, ceramics, packing and others. "From these alarming figures, you can see that we are lagging. We have only 200 to 300 experienced professionals in this field," he said.
Khan believes, however, that the establishment of the KTDMC, which is situated within the under-construction Korangi Creek Industrial Park, has breathed some hope and life into this gloomy picture.
The project was conceived by the ministries of industries, production and special initiatives, in coordination with the state-owned Pakistan Industrial Development Corporation. While the centre was inaugurated in 2005, it became operational in 2007.
The objective of the vocational training is to improve the skills of engineers and designers, through state-of-the-art technology and machinery, including computer-aided design and manufacturing (CAD/CAM) and computer-aided engineering (CAE). Another major objective is to enable the local industry to produce tools-, dyes- and moulds-based finished products of international quality, and to assist small industries in producing high quality tools.
"Every year, around 550 people are trained at the centre. This will benefit both, the local industries and skilled workers. More workers will get employment with increased pay rates and higher standards of living," Khan said, adding that the centre has trained workers in theory as well as hands-on practical work; many of them are now working with local industries and foreign companies.
"Internationally, modern technology and skilled and professional workers have led to high competition and higher expectations from products," Khan maintained. "We need to be prepared for the future where high-speeding moulding, high-precision dyes and moulds, highly qualified manpower, and high standards will rule the industry."
The demand for higher quality tools, dyes and moulds is increasing with the growth in the automotive industry.
It is therefore important to strengthen the local engineering industry by raising its standards in designing and manufacturing tools, dyes and moulds.
With around Rs515 million invested in the project, the institute was formed through public-private partnership. Short courses from one to three months are offered in CAD, CAM, sheet metal design, die-casting moulds and other fields. A one-year diploma is also offered to fulfil the requirements of the tools, dyes and moulds industry.
Meanwhile, the minimum requirement for admission is matriculation and a basic knowledge of science and mathematics, Khan said. Apart from regular students, young people who are part of the Benazir Bhutto Shaheed Youth Development Programme are also enrolled at the institute; around 25 of them have already graduated. "We encourage students here to gradually learn and earn, and we are becoming successful. In 2009, the students were able to produce around 30 dyes and moulds, which we later sold to local industries," Khan told Kolachi.
Students in dark blue uniforms scribbled in their handbooks while attentively listening to lecturers in the spotless classrooms of the institute. In another room, students were busy designing mould structures on computers; these pictorial designs will eventually take physical shape in the form of a mould.
The practical work takes place at the workshop, located near to the academic block, where gigantic moulding and dyes machines are set up. Working on these computerised machines, this is the place where trainees gear up in safety equipment, and watch their designs come to life.
"We have an experienced faculty comprising of professionals working in industries. Also, the environment is thoroughly professional and care is taken to provide a secure environment to trainees. People who used to spend months upgrading their equipment now work at the computerised machines," Khan said. "The concept here is to enable people to get out of the traditional methods of dyes and moulds."
Though the institute has state-of-the-art technology for students to get hands-on training, including training on the unique vacuum heat treatment facilities in the country, Khan admitted that industries should have equipment and machinery which can utilise the workers' skills to the fullest. "Industries here cannot afford modern machinery. For this purpose, we are pushing for investment from the government. Machinery and modern technology should be brought to these companies so that the skills which are being taught to the people at this centre are not wasted," he maintained.
'Factory university' provides level playing field to owners and workers
The Karachi Tools, Dyes and Moulds Centre (KTDMC) caters to two categories of students, according to Head of Training Zia Mustafa. "One category of students at the 'factory university' comprises owners of businesses and industries -- people who want to set up industries. The other type comprises engineering 'leftovers' -- engineering students who want to increase their knowledge in the field," Mustafa told Kolachi.
While there are more men at the institute than women, a female graduate student of mechanical engineering at the NED University of Engineering and Technology, who is now enrolled at the KTDMC, said that she had always been interested in this field. She encouraged more women to join the institute. "I hope that more women will explore this field, and see for themselves how beneficial and interesting it is," she said.
Another student, Nawab Basheer, who owns a mechanic's workshop in Orangi, feels blessed to learn specialised techniques and the art of making moulds at the KTDMC. He is studying for a one-year diploma in designing, developing and manufacturing dyes and moulds.
The programme is cheap and high quality, and is not time-consuming. "Before coming to this centre, I used to take two months to make a single mould for automobile parts. Now, however, with the use of these machines, I can make a mould in around 15 to 20 days," he said gleefully.
Basheer pays a fee of Rs2,000 per month at the centre, but feels that it is "nothing" compared to the skills and training which he and his fellow students are acquiring. "We are paying only a minimal price for a technology is which very advanced," he maintained.
Another student, Waqas Jamal, piped in at this point. "Training is extremely important in order to be a skilled worker. Here, we are getting world-class training that we could otherwise only have dreamt of," he told Kolachi. – RA