April 24, 2006	Monday	Rabi-ul-Awwal 25, 1427

Barring one or two stray cases where industrial projects have been set up or upgraded in the last three years, industrialisation in Karachi and other parts of Sindh remains a “halt process’ because land acquisition is extremely difficult if not impossible.

There is no primary market of industrial and commercial lands in Karachi and it is all speculative business in the secondary land market where cost, according to Amin Bandukda, chairman of the SITE Association of Industry, is one million dollar per acre.

Availability of banks loans at dirt cheap rates during 2002 and 03 have created a class of stock brokers, commodity traders and the real estate dealers in Karachi and Lahore who have taken control of most of the industrial and commercial property in Karachi and other parts.

Metro, a German retail store chain, scouted for about two years in the city for a 10 acres plot. It has been given an 11 acre plot recently to set up a warehousing, processing and packaging facility for agricultural products. It is still grappling with a number of legal and administrative issues and fear some resistance from the environmentalists who may not like a processing plant in the immediate vicinity of a big public park.

Banks are reluctant to offer project loans of over five years period and investors confront more than a dozen agencies to get their project implemented and commissioned. Water is difficult to get, and electricity connection, even after privatization of the KESC is impossible. Other utilities like gas and telephones remain a difficult task that demand speed money and time.

Some land, however will be available for commercial purpose on the main I.I. Chundrigar Road where the government has decided to auction Railway ground near the post office. The Sindh government will get 40 per cent of the proceeds while the National Logistic Cell pocket 60 per cent. Residents living in and around Haqqani Chowk will be deprived of an open space and children will miss their playground.

The much-maligned SRO culture is still there as the investors in Karachi Export Processing Zone complain of being discriminated against a new arrival who has been given a 220 acre plot near Steel Mills. It was declared as a export processing zone and allowed to market 100 per cent products in the tariff zone of Pakistan.

The 97 investors in KEPZ are allowed to market only 20 per cent of products in the zone. The Industries ministry convened a meeting of the KEPZ business council leaders on April 17 to discuss the issue. But this meeting has been put off indefinitely for no apparent reason.

More than two years ago Jehangir Tareen, soon after taking over the charge of the industries and production ministry in the federal government announced setting up of a public-private sector partnership company National Industrial Parks (NIPs).

A 240 acre plot of Pakistan Industrial Development Corporation (PIDC) near Korangi in Karachi was given to the NIPs for promoting a cluster of small and medium sized industries. Some 240 industrial plots of half and one acre were to be developed. A consultant was engaged to prepare a master plan to quantify investment for developing infrastructure facilities and fixing prices of half a acre and one acre plots. A private sector board of directors is expected to process applications from the prospective SME investors.

The NIPs was assured of a chunk of land from the 24,000 acres of land given to Pakistan Steel and for the downstream industries. The Economic Coordination Committee of the Cabinet (ECC) had taken a decision for this purpose. The NIP lined up funds from a consortium of five big banks to pay to Pakistan Steel. But at the last moment, it was found that sale of land would have some implications on the privatization of the steel mills. The acquisition of land for NIPs, therefore came to a halt.

After acknowledging that speculative trading of industrial and commercial lands in and around Karachi and even in areas like Nooriabad, Kotri, Thatta and other places went up prohibitively high, the Sindh government decided to step in. Relevant laws were amended to make provision for giving land for industry at 25 per cent of the market cost.

The Investment Cell in the Chief Minister House has identified about 900 acres of land in and around Karachi that can be converted into industrial and commercial land. There is 375 acres of marshy land which can be reclaimed at a cost which will have to be recovered from investors. There is another 340 acres of scattered land under dispute.

The Karachi Sewerage and Water Board had 465 idle land. A part of this land had already been acquired while efforts are on for other plots. The chief minister also marked 13,000 acres of area near Dhabeji as a potential industrial estate. But the area needs a lot of investment for development.

Beset with built in limitations of a political coalition, the Sindh government finds it difficult to move ahead in any direction. The Industries Minister of the province is from Muttahida Qaumi Movement. The allotment of land is the responsibility of the Board of Revenue which is controlled by the chief minister. This diarchy in decision making has put a brake on the industrialisation process in the province.

Notwithstanding this political hindering factor in Sindh, it takes an investor at least 18 months to start a business in Pakistan. A Board of Investment document says that there are 21 registration approvals required to start business. Investors have counted 15 federal agencies and nine provincial and local agencies.

“There have been a number of civil service reform efforts in recent years, the government officials are not yet in service mode’’, observes the BOI document on ‘Administrative Barriers to Investment in Pakistan’’. The document charge sheets the officials who continue to seek rent from investors and are not held accountable for their action.

Like other parts of the country, land in Sindh is mostly owned by the government. But in Karachi, the government is represented by at least 10 agencies that have conflicting interests. There are six cantonment boards, the Port Qasim Authority which has a very big chunk of industrial land, the Karachi Port Trust, Railways, and the Board of Revenue.

In most areas, the title of the land is doubtful or disputed and is under litigation. There is no data bank to inform investors on availability of industrial and commercial land or for housing, education and health, recreation and other purposes.

The BOI in its survey found lack of document centralisation with respect to land title which compels investors to visit at least five offices, which are SECP, Land Registrar, Revenue Department, Excise Department and development agency under the local government.

In most parts of the province that include old town areas of Karachi, the land is registered in a primitive system called “khatonis’’ managed by the ‘‘patwari’’. The properties are being transferred in an outdated 1882 Transfer of Property Act.

Many crimes are committed because of the opaque nature of the property registration and problems involved in transfer of property. This gives all the opportunities to the powerful people to take advantage over people who are weak.

The BOI discovered that the process of applications for site development and issuance of associated permits is complex. It requires one year as it involves 11 steps, 61 documents, various secondary approvals interfacing with over 15 authorities and “payment of Rs220,000 as bribes’’.

Karachi has seen some big investment recently. But these were actually the disinvestment of KESC and now the Pakistan Steel. The real investment in creating new production capacities has yet to come. Domestic investors too need some attention.