Prospects for industrialisation in KP

August 1, 2021

Khyber Pakhtunkhwa will have a good opportunity to reach its potential provided the government comes up with adequate incentives for the industrialists

Prospects for  industrialisation in KP

Khyber Pakhtunkhwa has long been marred by terrorism and mismanagement, hindering investment in the industrial sector. With locational disadvantages in terms of proximity to major markets and ports, infrastructure inadequacy and lack of incentives to investors, the KP has only 3,903 operational industries in the province and 505 sick units.

The figures are worrying. A lot of work needs to be done to absorb a huge labour force, create import substitution and bring economic prosperity. The present government has realised that without industrialisation, the fortunes of the province cannot be changed.

In 2015, the Sarhad Development Authority (SDA), the body entrusted with bringing and managing investments in the manufacturing sector, was abolished over alleged corruption and incompetence. The authority had failed to attract foreign investment and could not provide customer services necessary to satisfy the industrialists.

The SDA was merged into the newly formed Khyber Pakhtunkhwa Economic Zones Development and Management Company. The new company followed the pattern of the Punjab Industrial Estates Development and Management Company. A CEO from the Punjab, who had worked in the industrial sector was hired and a group of highly qualified individuals were brought on the board of directors to navigate the company towards changing the industrial landscape of the province.

The board of management was headed by a young and dynamic industrialist with access to power corridors. The then chief minister, Pervez Khattak, was supportive and provided billions of rupees to the company to establish new economic zones and bring billions of dollars in investment. He allocated an office at the CM’s Secretariat to the KPEZDMC so that the necessary approvals were accorded promptly.

The environment was right as law and order improved and the CPEC projects commenced. Many Chinese investors visited Pakistan to look for investment opportunities in the industrial sector. In December 2015, Hattar Special Economic Zone was launched to attract Rs 40 billion local as well as foreign investment and create employment opportunities for 25,000 people.

The Rashakai Special Economic Zone was brought under the umbrella of the CPEC and fast tracked. 200,000 jobs and over $2.1 billion investment were expected at the zone. More than Rs 1.5 billion was spent on rehabilitating the Hattar, Hayatabad and Gadoon Economic Zones. However, within two years the CEO was arrested by the National Accountability Bureau over alleged corruption in his previous job.

The KPEZDMC, which had not even started functioning, nosedived. The board was dissolved and its chairman removed unceremoniously. From there on the pace of work at the KPEZDMC slowed down. Eventually, a new board was formed with the Industries Department secretary as its acting chairman and a new CEO was hired. Saeed Khan, the new CEO, was an engineer who had been working in Canada before heading the KPEZDMC. He was unable to take the pressure of the job and resigned from his post via email from Canada within a year and a half of his 3-year tenure. This came as a shock to all stakeholders, further damaging the image of KPEZDMC and lowering the moral of the employees.

In March 2020, Javed Khattak, formerly the SMEDA general manager, was hired by the board to take KPEZDMC forward. All eyes were on the KPEZDMC and there was immense pressure from the government and industrialists.

The KPEZDMC has evolved and come a long way. During the last year, it held the ground-breaking for Rashakai SEZ (1,000 acres), Nowshera EZ Extension (76 acres), Ghazi EZ (89 acres), Jalozai EZ (257 acres) and DI Khan EZ (189 acres).

After initial problems, the KPEZDMC evolved and has come a long way. During the last year, it has held the ground-breaking for Rashakai SEZ (1,000 acres), Nowshera EZ Extension (76 acres), Ghazi EZ (89 acres), Jalozai EZ (257 acres) and D.I Khan EZ (189 acres). Projects in the pipeline include: Chitral EZ (40 acres), Mohmand EZ (350 acres), Buner (126 acres), Bannu (408 acres), Karak (100 acres), Manshera (78 acres), Swat (50 acres) and Daraband EZ (3,000 acres).

The KPEZDMC has improved customer services to industrialists and all zone offices are called industrial facilitation office, providing one window services. During a recent visit to Hattar SEZ, Chief Minister Mahmood Khan assured his full support to overcome the hurdles.

The existing economic zones include: Hayatabad EZ (868 acres), Nowshera EZ (108 acres), Hattar EZ (1,443 acres), Gadoon EZ (1,116 acres) and Nowshera EPZ (92 acres). To promote and expediate industrialisation in the province the government needs to improve efficiency of utility providers, the PESCO and the SNGPL.

Getting electricity and gas for the zone has been a difficult task. The zones should be launched when electricity has already been provided at the doorstep. Also many government departments directly contact the industrialists for taxes and fees. This creates resentment among industrialists.

Taxation and fee collections should be done only through the Industrial Facilitation Offices of the relevant Zone. Many acres of land have not been utilised in the existing zones and are being used for real estate development. Such plots should be immediately cancelled and handed over to genuine industrialists for setting up industrial units.

The KPEZDMC has sent notices to such plot owners to either start construction of an industrial unit or face cancellation. This should be enforced in letter and spirit, across the board.

With infrastructure like the CPEC, the KPEC and the CAREC, vast opportunities for trade through KP will arise. The KPEC is a $482 million, 48-kilometre, 4-lane expressway project between Peshawar and Torkham. It is to be completed in 2024.

A 265-kilometre Peshawar-Kabul motorway will connect Peshawar to Kabul via Jalalabad, making access to the Afghanistan markets easier. The Central Asia Regional Economic Cooperation (CAREC) will provide the shortest trade route from Uzbekistan, Tajikistan, Afghanistan to Pakistan, linking the Central Asian states to the Arabian Sea.

Khyber Pakhtunkhwa has the opportunity to reach its potential provided the government provides adequate incentives to industrialists. These should include cheap electricity being produced in the Malakand and Hazara divisions and ensuring that trade with Afghanistan runs smoothly.

Prospects for industrialisation in KP