KARACHI: Five companies, including three from the auto sector, are at advanced stages of construction of industrial plants in the Bin Qasim Industrial Park (BQIP) Special Economic Zone (SEZ), but due to unavailability of utilities, they are suffering heavy losses.
According to an official of one of the five companies, combined investment of the five companies amounts to Rs35 billion at BQIP, which comes under the National Industrial Park (NIP).
The official, requesting anonymity, said the companies were incurring losses of millions of rupees due to unavailability of utilities. Things have been aggravated by the exchange rate losses as the rupee has devalued by 18% in the past nine months.
“The biggest loss is due to the fact that equipment has arrived but there is no power to install and start commercial production. Delay in plant start-up is a huge cause of stress for the investors,” the official added.
He said banks’ financial charges on loans were also taking their toll.
“However, the worst loss is that Karachi has become unviable (for business) as compared to Faisalabad and Lahore due to basic utilities and infrastructure.”
The source reiterated that companies were now moving to Punjab where they were being more welcomed.
According to the official, the BQIP has delayed provision of utilities by two years and as things stand there is nothing in sight for the next one year.
Another company’s top official said although they were not in a haste to receive utilities as their installation was in process but they were now forced to do the work, which they were not supposed to do.
“We are now directly working with K-Electric for the provision of electricity. All the utilities were supposed to be provided by BQIP but unfortunately that’s not the case,” the official commented.
Kia Lucky Motors, Techno Auto Glass, Hitech Auto Parts, Horizon Steel and Barkat Frisian have either completed work at their plants or would soon be doing so.
According to the companies, the projects will create direct job opportunities for around 3,500 skilled workers, technicians, engineers and management professionals in Karachi.
BQIP was set up in 2007 to develop a world class industrial park and commitments were made to provide one-window operations and complete infrastructure under the Special Economic Zones Act.
Based on these commitments, investors agreed to purchase BQIP’s Pakistan Steel Mill (PSM) land at almost double the land price in Port Qasim Eastern Zone, due to NIP’s commitments to deliver state-of-the-art industrial park with provision of free utilities, namely electricity, gas, water, sewerage, effluent plant. Moreover, infrastructure, namely roads, boundary walls, security and allied facilities were also promised. “Unfortunately, none of these facilities have been provided to date,” the source lamented.
“These issues have choked the implementation of above projects, resulting in time delays of almost two years and caused massive cost overruns, including impact of currency devaluation.
“Much of the investments planned in NIP, Karachi, have shifted to FIEDMEC, Faisalabad like Renault Motors and General Tyres and it will continue to keep shifting unless the above issues are addressed immediately”.
However, according to a source in NIP, Renault Motors and General Tyres have moved their facilities to Faisalabad because of very high price differential at BQIP, which has been ‘unilaterally’ jacked up by PSM. BQIP has been established at PSM land.
“Without immediate intervention, the pace of industrialisation will be seriously hampered, heavy foreign and local investments will be jeopardised, tax revenues will be lost and the government’s international image will be tarnished,” the aggrieved company official said.
The companies have also been asking to immediately reconstitute the board of directors of NIP and appoint competent industry professionals and also appoint competent CEO’s in NIP and PSM (Pakistan Steel Mills).
“There’s a need to direct the current management of NIP and PSM to execute the lease agreements along with Permission to Mortgage so that projects can achieve financial close. Moreover, the management of NIP needs to provide complete infrastructure and utilities on a war-footing basis,” the source added.
Meanwhile, NIP CEO Iqbal Tabish told The Express Tribune that NIP has now fast-tracked work to address ‘serious concerns’ of the companies.
According to Tabish, who is also CEO of Pakistan Industries Development Corporation (PIDC), he had been given the additional charge in NIP just two months back and things were now improving. “There’s progress with regard to electricity as we have got a good response from K-Electric. Land has been allotted for the grid station and hopefully the SEZ will have electricity within six to eight months,” Tabish said.
Meanwhile, Sindh Board of Investment (SBI) Chairperson Naheed Memon said there are multiple issues in BQIP. The land title and land price are undecided because of the federal government’s inability to resolve the issue with the PSM.
“In these circumstances, arranging bank loans may also be an issue for some companies like Renault Motors. The provision of electricity and gas are federal government’s responsibilities and the developer NIP has no funds or facility or ability to execute this provision adequately,” she said.
She further said that in order to ensure these industries are able to operate successfully Islamabad has to prioritise facilitation of utilities.
“Sindh Economic Zone authority and SBI are dealing with K-Electric, SSGC, NIP and all the industrialists to make stop-gap arrangements and develop a strategy for provision and implementation of these facilities. We are also providing strategic support through collaborations and outreach to buyers and sellers,” Memon stressed.
Published in The Express Tribune, September 14th, 2018.