From Shahjahan’s Taj Mahal in Agra to Aurangzeb’s Badshahi Mosque, the subcontinent is laden with monuments that stand in testimony to the magnificence of the material used in their making: marble.
Newly-formed Pakistan continued the tradition when it constructed the tomb of its founder out of sang-i-marmar. Jinnah’s tomb, built in the 1960s, laid the foundation of the marble industry in Karachi. It would not have been unreasonable to expect that the nascent state would carry on the legacy of the past and prioritise marble as a commodity of prime interest. Instead of harnessing the potential of marble, which the country is generously endowed with, Pakistan’s marble industry is in the doldrums.
Pakistan’s marble resources are spread largely across three provinces: KP, Balochistan and Punjab. Some quarries also exist in Sindh and parts of Gilgit-Baltistan. A report published around 2010 by the Trade Development Authority of Pakistan (TDAP) estimates marble and onyx reserves to be more than 300 billion tonnes while granite reserves are estimated to be 1,000 billion tonnes. In comparison, marble reserves in India are estimated to be 1,931 million tonnes.
Marble and onyx reserves are found largely in Mohmand Agency, Chitral, Buner, Swat, Parachinar, Gilgit, Hunza, Swabi, Bajour, Mardan, Wazirstan, Azad Kashmir, Lasbela, Chagai and Khuzdar. The biggest onyx reserves are said to be in Chaghai District in quarries largely owned by members of the Zehri tribe. Meanwhile, the report lists Gilgit, Dir, Chitral, Swabi, Kohistan, Nagarparker, Chagai, Mansehra, Malakand and Swat as places where granite deposits exist. However, the only known sources of “workable granite” according to this official report are in Nagarparkar and Mansehra.
The most consequential impact of the export of raw marble to China is that it’s simply preventing the local industry from developing value-adding capacity.
Given the vast reserves that exist, it follows that their mining and processing would need to be formalised and have greater infrastructure. In pursuance of this goal, five marble cities were inaugurated and funds invested in them. These cities existed in Gadani, Mohmand Agency, Risalpur, Chitral and Loralai. Processing of marble, as per the TDAP report, exists in Karachi in Sindh; Mansehra, Mardan and Peshawar in Khyber-Pakhtunkhwa; Mohmand Agency, Khyber Agency and Bajur Agency in FATA; and Quetta, Loralai and Lasbela in Balochistan.
But as with many other resources in Pakistan, the marble sector too is blighted by ad-hocism and parochial policies. For instance, the Marble City in Mohmand Agency exists only on paper. It is technically supposed to be constructed over 300 acres of land while the 2010 TDAP report claims that the FATA Development Authority invested 352 million rupees to procure land and to set up a grid station and access road. Seven years into the plan, however, none of this exists on the ground.
Back in 2001, the government of General Pervez Musharraf planned a separate zone to mine and process marble in Hub City — a 300-acre site located on the outskirts of Karachi. This plan was in pursuance of Musharraf’s policy of promoting “development” in Balochistan — mining and ship-breaking were the top two sectors, apart from natural gas, that could engage the locals and provide some form of employment.
A simultaneous development came in 2006 when Pakistan and China inked a Free Trade Agreement, which came into effect a year later. The FTA turned the (export) tariff rates into “preferential” ones for China — not zero but not the lucrative sums that ought to have been charged either.
With the Chinese entering the marble sector, quarry owners began holding direct dialogue and transactions with them. Production was stemmed to meet Chinese demand — quarry owners felt that the Chinese would pay them higher rates for the marble mined. Data available with the Federal Bureau of Statistics shows that marble exports had started declining since 2005 before it went up later. Combined with low tariffs at the border, taking marble to China became simpler and arguably more lucrative too.
As a result, the Marble City in Gadani did not prove to be an instigator of “tremendous investment and growth potential for entrepreneurs … based on cutting edge stone technology, innovation and services.”
In fact, it became a monument to the ad-hocism prevalent in the country’s marble industry.
Marble City did have its heyday, along with the entire sector in the rest of the country, when demand of marble was high in the United States between 2001-2007 and then in China after the 2008 financial crash when the Chinese rescued global manufacturing by going on a construction spree unprecedented in human history.
Today, Marble City looks done and dusted. Partly, it’s due to the slowdown of the Chinese economy but, more importantly, the Pakistani marble sector is in dire straits due to the structural weaknesses of the country’s own economic policies, not just due to the boom and bust nature of the global market.
The politics of mining
Despite the poverty of the industry, it is the exports to China that have proven to the main boon for the Pakistani marble industry. During the peak years of exports to Pakistan’s neighbour to the north, however, the outflow of marble only served to weaken the country’s industry further. Even today, despite the changes in Chinese policies, Beijing remains the world’s, and Pakistan’s, top buyer of marble.
The irony, however, is that the Pakistani marble sector continues to suffer as a result.
What explains this decline is the intertwined factors of the export orientation of the industry, the absence of regulation, and lack of focus on value addition.
“There was a rise of demand in China after the 2008 recession,” says Hameed Shehra, CEO of Marine Industries, a processor of marble and granite. “These exports might have brought in some extra foreign currency earnings for the national exchequer, but the truth is that, in doing so, the country was allowing itself to be blindly robbed of its natural resource.”
“Because the sector lacks regulation, everyone and their grandmother got in on it,” laments Amin Hashwani, an Executive Director of the Hashwani Group, which is also involved in mining.
“It weren’t the established factories who were exporting,” continues Shehra.
“Any quarry owner would go to China, find a buyer, the Chinese would come, load up the blocks and go. This has got nothing to do with the mining sector — anyone can do it, you can do it too if you know how to blast rocks and know a Chinese buyer,” explains Haroon Rashid, former Chairman of All Pakistan Marble Industries Association.
Some in the sector, however, explain that when the Chinese came in, they brought with them equipment that could measure the cracks in the quarries before any blasting could take place. Quarries with greater cracks were deemed unfit for business but those that weren’t were exploited.
This test ensured that any marble that was mined was extracted in larger slabs and not smaller pieces.
“With blasting, what we tend to end up with is smaller pieces that have little worth to larger buyers,” explains one local exporter and retailer. “The smaller pieces tend to end up for handicrafts, for example, or tiles.”
But not all actors followed the same process. In true Pakistani fashion, getting it done was the mantra.
“Many local exporters didn’t follow the international standard,” complains Shehra. “We put our marble through 20 processes before it’s ready. These guys, on the other hand, sell it after the first process.”
En masse dumping of marble in the international market meant that the prices came down. And with prices driven downwards, Pakistani exporters began competing amongst themselves. As negative as the impact of this competition was, it’s not this anarchy that hurt the sector the most.
What “ruined the industry” — a recurring phrase in almost all interviews conducted — and continues to do is the wholesale exports of marble blocks (raw marble mined out of quarries in the shape of square blocks) to China to feed its construction appetite.
“About 75 percent of the raw marble goes to China,” claims Tariq Anis, owner of an exporting company named SMB Marble.
And then there is the pricing dynamic.
“If we sell it at $175, the other person is selling at $165, the one next to him is selling at $155,” says Hashwani. “We compete with each other based on pricing and obviously from a buyer’s point of view, they will always exploit the best deal possible.”
“Those who had invested heavily in standardised factories and proper processing methods couldn’t compete with these low prices,” Shehra points out.
This dynamic had larger repercussions.
“We have a marble known as Black and Gold, which sells a lot in China. Five years ago, it was selling at 375 US dollars. An equivalent Italian marble called Portoro was selling at more than 1,000 US dollars. Today the price of Black and Gold is down to 125 US dollars while Portoro has gone from 1,000 to 2,500 US dollars.”
Is the Italian marble far superior in quality to the Pakistani one?
“Not quite,” argues Hashwani. “Marble has a novelty factor, it is a high-end product. Italian marble has the image of being a lavish, luxurious product attached to it. That is not the case with Pakistan.”
Hashwani explains that while some Pakistani marble has the same characteristics as Italian marble, the difference stems from no official oversight on extraction, supply and marketing. In recent times, for example, the Canalgrande quarries in Italy have been featured on the international media as the place from where some 65,000 tonnes of marble are extracted every year. In comparison, the medieval technology of blasting is all that Pakistan has to show at its mines.
“The Italians built that image, they know how to market their product,” argues Hashwani. “Unfortunately in Pakistan, most stakeholders started competing against each other.”
Poverty of exports
The consequences of the unhindered outflow of marble blocks are manifold. The immediate impact is the “unavailability of raw materials” for the local market, according to Shehra. Even if the raw material is available, Pakistani buyers have to compete with Chinese buyers for their own natural resources, which most cannot afford given the rise in prices due to Chinese demand.
Local buyers are left with “second and third-rate categories of marble,” says Saifullah Naqvi, Vice Chairman of All Karachi Marble Industries Association.
Tariq explains: “We get blocks that are potato-shaped that need more work to cut. About 80 percent or so is just useless. After cutting it from six sides to turn it into a square block, we are only left with a small amount that’s usable.”
“China is the biggest importer of marble from Pakistan, however, the marble exported to China also includes semi-processed marble, which is then re-exported from China after value addition, which is hurting Pakistan’s marble industry to a significant extent,” cites a research report compiled by the State Bank of Pakistan titled Marble and Marble By-products.
“What adds to this loss of marble in production is the fact that a majority of our mining is done through blasting,” says Hashwani of this primitive method of mining. “About 80 percent of the marble is wasted.”
“China, on the other hand, gets to have square blocks,” continues Tariq. “It also pays no export duty to Pakistan, and the freight the Chinese pay to transport the material on ship is just 50 dollars per container.”
While Pakistan has given an open hand to the Chinese companies (who also enjoy the largess of their own government), local investors receive no support from the Pakistani government, putting them at further disadvantage against the Chinese.
“We pay 30.5 percent in taxes,” says Badar Iqbal, Chairman of All Karachi Marble Industries Association. “We want modern machinery to come to Pakistan and for the government to provide it on lease,” he demands. There is also an import duty on the import of latest machinery, which Tariq insists needs to end. The low value of the Pakistani rupee doesn’t help either when it comes to importing the required equipment.
Rashid says that his association tried its best to get other supporting industries to change their policies. “We went to Heavy Tools Industry Taxila and told them that all these machines being made by Italians and Chinese, it’s not rocket science. We asked them to reengineer these machines locally for us, but they didn’t do it.”
“We asked the State Bank but the financial models they’ve made is not for small or medium enterprises because they ask for collateral that we can’t provide. There are no soft loans.” As for the private financial sector, “they don’t even know how to make a financial and insurance model for our industry,” he tells.
The most consequential impact of the export of raw marble to China is that it’s simply preventing the local industry from developing value-adding capacity. As it stands, the marble industry is basically a trading industry,” in the words of Rashid, which is “not helping the country at all.”
This type of trading is called indenting. In the textile sector, indenting’s share is the lowest but in the marble sector, the share of indenting is the largest and manufacturing, the smallest. The sector can never grow in this way.
“The biggest disadvantage of exporting raw materials is that — yes, there was ‘growth’ — but it had no contribution in creating jobs or in the development of the sector,” argues Rashid. “You don’t need many people to dig up mines. When you set up a factory, you employ people; but if you just mine, you don’t need to set up a factory.”
“We want our raw materials to stop going to China,” demands Saifullah. “Value adding needs to be done here,” insists Tariq, which means that “automatically there will be factories set up, there will be more quarries that will open up, and jobs will be created for the local labour,” adds Shehra. “How can our industry develop otherwise?” asks Tariq.
“I’m not saying that there shouldn’t be exports,” he says, “but there’s a way to do it.” Rashid recommends that there should be an export quota: only 30 percent of the exports should be of marble blocks whereas 70 percent of the exports should only be of added-value materials produced locally. Such proposals have been submitted to the government, but to no avail.
When the government has taken steps, in true Pakistani fashion, all the measures have been rife with nepotism, allowing powerful players to milk money from a faulty system. For example, the Pakistan Stone Development Company (PASDEC), which was founded to promote the sector, only “developed the mines of the big names, to no benefit of anyone else,” alleges Tariq. “Those who were in position make decisions got leases for their own mines and the machinery that the government procured was used at only those mines as well,” he continues. “If you look at the leases given in Sindh, they were given on political grounds rather than on merit,” corroborates Hashwani.
Pride of Pakistan
Open-ended policies mean that just as there is no control over exports, there’s no check on what’s being imported either. Whereas the outflow is that of prime raw marble, the inflow is that of top-end finished products. Since the local industry’s growth is stunted and there’s no local value-addition, the import of value-added is a double-whammy. Forget foreign markets, Pakistani producers can’t even compete in their own country thanks to the influx of Spanish and Italian products.
This means that local producers are missing out on construction projects such as Bahria Town and DHA City. “Almost all of the marble being used in these projects is imported,” says Tariq. “Because any big project wants steady quality and consistency, they have a problem getting that here in Pakistan,” explains Hashwani.
Tariq demands a change in the import policy, in line with the demand of change on the export policy, namely that which allows the local industry to move from trading marble to processing it. “There should be duty on finished products,” he says.
“An amount high enough for people to think 10 times before importing,” says Saifullah.
“Duty on raw marble should not be as high because its cutting and polishing is done here,” contends Tariq. “This means local labour will be used and jobs will be created.”
In what seems totally scandalous, the steady stream of raw marble to China and the non-existence of local value-adding capacities means that it’s actually “China that buys our raw materials, processes it, and sells it as ‘Made in China’ in the rest of the world,” says Saifullah.
“China has modern technology which they build on their own. They process it at low cost and sell it at a cheaper price than us,” explains Tariq. “Even if it’s Pakistani marble that’s being processed and sold in China, buyers prefer to go to China to buy it rather than come here. If people look at how our machines are and how we work, they don’t’ even want to place orders here.”
Hashwani, on the other hand, says that Pakistani marble is not sold by the Chinese as ‘Made in China.’ But there is no denying that China does export processed marble from Pakistan. “They say imported marble — some call it Black and Gold, some call it Afghani — they’re not shy about these things,” he says.
“Our exporters, when they go and compete in the international market with China, they are competing with their own products. And we can’t even compete with it since we don’t have the capacity to process our own raw materials,” laments Tariq.
How much of the Pakistani marble is sold by China is difficult to verify since the figures are hard to come by. The volume might be less than what’s consumed locally in China, but what’s for sure is that “whoever buys raw material, the value-added benefit goes to them,” admits Rashid, and it looks like China is definitely reaping the rewards. “If the marble stays here and it is processed here, Pakistan’s name will also stay,” says Saifullah.
Any hopes of Pakistan exerting control over its marble deposits in the near future — or ever — would appear to be wishful thinking, thanks to CPEC.
“The local industry will suffer a lot,” insists Tariq. The main anxiety is that “CPEC will allow the Chinese to develop warehouses in Pakistan, which means that they won’t even have to technically ‘import’ since all the material would then be already there. They will penetrate even more; China will be on your head. What more could they want?” he continues.
Heralded as a ‘game changer’, another fear is that CPEC-related development will proliferate nepotism further. Tariq says that CPEC is “for those who want to muzzle money, for those who will get contracts.”
Seemingly resigned to the fact that China will increase its hold, Badar says that “China should work on joint-ventures instead of taking our raw materials. They are taking our things from here to China and then to international markets. Why can’t they be made to set up factories here with us? We want that somehow they should work with us in partnerships, especially in Karachi.”
Tariq also agrees: The government “should compel the Chinese that they can’t run businesses on their own. There should be Pakistani partnership, so that we can develop.”
As the details about the specificities of CPEC remain out of public view, one has the right to demand the Pakistani government reveal the terms of agreements with Chinese businesses that are and will be set up under CPEC. If the example of the marble industry is anything to go by, there is a fog of opacity under the CPEC that must be waded through before any deals are inked on paper.
The writer is Blogs Editor at dawn.com.
He tweets @hussainjahanzeb
Published in Dawn, EOS, November 12th, 2017
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