Fresh flight of capital poses serious challenge to KP

PESHAWAR: After fresh wave of terrorism in Khyber Pakhtunkhwa coupled with the government’s dismissive attitude towards the manufacturing sector, fresh flight of capital to neighbouring Afghanistan is posing new challenges for the militancy-hit province and its adjacent Federally Administered Tribal Areas (Fata).
In the wake of the recent flight of capital and relocation of some industries to Afghanistan as a result of the latter’s business-friendly economic policy, the export of some Pakistani goods to that country has come to a complete halt.
During a survey and background interviews with the industrialists, it was observed that the industrial sector remained worst-hit due to the recent incidents of violence, lack of incentives by the provincial and federal governments, and absence of the provincial industrial policy.
Most of the match industries have closed down and the remaining have cut their production to single shift. Additionally, there has been decrease in the output of production by 40 percent in the 8-10 hours shift.
A leading industrialist, who wished not to be identified, said that only the closure and cut in production by the match industry recently rendered around 4,000 workers jobless. He said that three match industries are being offered for sale.
Plastic printing industry has also been hit hard and some plastic units are being offered for sale privately, the industrialist said. He added that no advertisement is being placed in the print media out of fear of extortionists and kidnappers.
And those offering their units for sale have already started to shift their families abroad and in some cases to Islamabad or Rawalpindi.The PVC pipe industry has been undergoing major relocation after the increase of 25 percent customs duty by the Afghan government. Major PVC pipe units have started to relocate from Peshawar Industrial Estates to Afghanistan and most of the machinery of these units has been shifted to the neighbouring country.
“In recent days, particularly after the 16/12 attack on the Army Public School and College, some five units of locally-produced juices have relocated to Afghanistan. As many as 10 manufacturing units of potato chips have also shifted their machineries to Afghanistan,” he maintained.
Senior vice-president of the Pakistan Afghanistan Joint Chamber of Commerce and Industry (PAJCCI) Zahid Shinwari painted even a bleaker picture of the industrial sector, claiming that only in the PVC sector, 150 units have shifted to Afghanistan.
However, the reason he cited for such a huge flight of capital and relocation of industrial units was more due to the tariff management by the Afghan government and the attitude of the provincial and federal government rather than the recent wave of terror incidents.
He said that Afghanistan has increased duties on the imports of PVC by 200 percent. “At the same time it doled out incentives to lure investors who are now rushing to set up industry in Afghanistan,” he said.
Zahid Shinwari disclosed that exports of plastic wares such as plastic utensils, disposable syringes, chipboard and local brands of juices to Afghanistan have stopped and a number of industrialists in Peshawar have established units in Afghanistan as well. He said at least five PVC units owners have relocated their units to Afghanistan.
He said the plastic industry was facing even more severe challenges within the country as massive smuggling of Iranian plastic goods into all parts of the country, particularly Punjab, continued unabated.
Chairman Peshawar Industrial Estate Hayatabad, Malik Niaz Muhammad, however, attributed the recent relocation of “specific” industrial units to Afghanistan to the over-capacity of these units.
He said that demand for these items was higher in Afghanistan and the investors look for better incentives and more profit that Afghanistan definitely offers these days.However, he admitted that there is no data available on the ongoing flight of capital and shifting of industry to Afghanistan or any other country for that matter.