Manufacturers mutate into realtors as production cost bites

LAHORE: Pakistan’s veteran entrepreneurs are turning their industrial lands into lucrative real estate businesses as the gradually dying manufacturing sector on escalating production cost compel them to tap into alternative income sources.

Manufacturers said they find it impossible to continue production as the power rates in the country are higher than the regional average. They said at least five percent of the production cost goes to grease the palms of bureaucracy. It is impossible to transparently operate as whether or not they follow the rules they have to please the regulatory officials. Both compliant and noncompliant with the environmental laws have to please the regulatory officials. The businessmen said labour inspectors harass them on one or other pretext regardless of compliance. 

Pakistan’s labour force has exceeded 60 million, but the number of workers registered with the labour departments of all the four provinces for social security benefits stand hardly at one million. Even some manufacturers in the formal sector pay their workers between Rs8,000 and 10,000 a month against the national minimum wage average of Rs14,000. 

Two years back, a textile factory in Sundar Industrial estate collapsed and more than 140 workers lost their lives. The surviving workers told the media that they were paid Rs8,000/month against the government fixed minimum wage of Rs13,000. Child labour is common at factories in connivance with labour department’s officials.

The larger manufacturing units, which were set up at the periphery of urban centres two to three decades back, are now within the city boundary due to unplanned urbanisation. They are now turning these units into residential colonies and making huge money.

Some of them rent their abandoned factories for warehousing. A few lucky manufacturers that acted quite early were able to dispose their machines at reasonable price. But, since manufacturing sector is in turmoil, machineries are getting scrapped. 

Textile machines that were bought one to two decades ago have now turned obsolete as the new technology is highly energy-efficient and productive.  Some businessmen accumulated huge funds for expansion. But, the declining profits due to high cost forced them to shelve their investment plans. They utilised the reserves to buy large chunks of agriculture land at the periphery of the cities.

The acreage is converted into residential colonies with the approval of municipal authorities. Subsequent profit margins are astonishing. Now, they are reinvesting revenue from housing societies into new real estate projects.

Over the past decade, there has been a mushroom growth of enormous shopping malls, usually financed by the richest industrial families of the country. A shopping mall was opened in Lahore two months back. This mall was built after a huge paper mill was shifted to the Sunder Industrial Estate. Another much bigger is upcoming and expected to be opened for consumers from next January. 

The two giant industrialists in Faisalabad established ultramodern shopping malls in the city. One of them is also building housing complex around the Punjab. In Karachi, a most successful business family is building the country’s largest shopping mall to supplement numerous top class malls already operating in the city.

Economic experts warned the government to take notice of this trend and rescue the manufacturing sector to rev up exports and help domestic economy grow.