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Industrial revival in Karachi

Updated February 11, 2019

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The prime minister chaired a meeting of the Joint Cooperation Committee (JCC) of the China-Pakistan Economic Corridor (CPEC) a few weeks ago to review the progress in developing special economic zones (SEZs).

The prime minister advised the quarters concerned to speed up work on three SEZs: Rashakai in Khyber Pakhtunkhwa, one on M-3 Motorway near Faisalabad and another one in Dhabeji near Karachi.

SEZs are a tried and tested tool for achieving rapid industrial development with a specific focus on export-oriented production.

China, our strategic partner in the CPEC, has benefitted from SEZs immensely. The country possesses more than 1,800 SEZs with a net contribution of over 20 per cent to the GDP. They account for over 45pc of foreign direct investment (FDI) in China and 60pc of Chinese exports. But China has drastically transformed its production regime, land regulations and labour management procedures to create an all-enabling environment for investors.

As for Pakistan, many issues need a thorough review given the skewed history of industrial development. A high cost of energy, unpredictable gas and power supply regimes, threatening security conditions, sliding value of the rupee and poor governance are some of the core concerns that have affected the Pakistani industrial sector for a long time.

Studies show more than half of the entire land allocated for industrial purposes has been lying unoccupied in Karachi

Many actors in the industrial sector come on board only to benefit from the subsidised land supply that often comes their way through public industrial ventures. The case of Karachi can serve as a useful case study to equate the feasibility of setting up SEZs in the milieu of the existing industrial locations in the metropolis.

The industrial land use in Karachi was earmarked through various allocation exercises. There are two categories of such land use that are obvious from the city’s development pattern: formally categorised land for the industrial use and informally converted land that is used for industrial purposes.

The former category includes major industrial locations, like Sindh Industrial Trading Estate (SITE), Landhi and Korangi industrial areas, West Wharf, industrial areas in Federal B Area, and the newly emerging Pipri/Bin Qasim industrial zone.

Most of these areas have existed historically and accommodated exclusive land use for extensive industrial and partial warehousing development. Traditionally, the designated industrial locations have been the storehouse of large industrial establishments. It is for this reason that large-scale manufacturing, processing and assembling industries mostly exist along the major industrial locations.

The other type of industrial space is rampant throughout the cityscape. They are the locations of small and medium industrial enterprises. Key locations include Lyari, Nishtar Road, I.I. Chundrigar Road, Saddar, Preddy Quarters, Shershah/Manghopir, M.A. Jinnah Road, Liaquatabad, Naziamabad, Old Town/Juna Market, Garden/Jamshed Road and Soldier Bazar, Jehangir Road/PIB Colony, Societies Area, Clifton, Frere Town, Orangi Town and Baldia Town.

A wide range of industrial functions are being housed in these locations in converted properties of varied plot sizes, densities, building types and dimensions. This pattern has existed ever since Karachi gained momentum as an industrial and commercial centre. Some of these establishments have existed since pre-partition days.

The nature of non-hazardous industrial activities also makes it logical to have a mixed land use since most industries do not require any exclusive locational arrangement.

For instance, Banarsi weavers and cloth makers have extensive presence in Orangi. It is feasible to manufacture the cloth/product in a residential location because the labourers live in the vicinity or even undertake manufacturing in their own houses. Tailoring shops, which deal with the vending orders of garments, are spread in Nazimabad and many other locations where such jobs are undertaken. Skilled workers find it convenient to complete their jobs at their respective residential locations.

Similarly, computerised embroidery works have spread in New Karachi, North Karachi, Orangi and parts of Nazimabad as a key small- and medium-scale enterprise.

Only those enterprises that are environmentally damaging, socially incoherent and operationally problematic need to be located according to the respective zoning criteria.

Tanneries, packaging industries, chemical warehouses, metal works, flour and grain mills/warehouses and oil mills are the kind of enterprises that require proper consideration for their placement. The historic quarters of Karachi house chemical and metal markets, which are highly hazardous to nearby residents.

Similarly, the grain market and allied wholesale activities coupled with haywire warehousing have created a dilapidated environment that is degrading continuously. These activities await proper relocation.

It must, however, be remembered that industrial land is lying vacant in very large proportions in Karachi. This factor alone raises questions about the logic of promoting any further industrial location. Studies undertaken for the various city plans show more than half of the entire land allocated for industrial purposes has been lying unoccupied.

Industrialists or developers own that land for real estate gains. A non-utilisation fee has been imposed on unutilised parcels of land. But the owners of such plots find it feasible to keep the land open/unutilised as the price escalation is higher than the non-utilisation charges. It shows there is a need for examining the status of land already supplied for industrial development, its current utilisation and the possibility of fresh requirements.

The relationship between industrial production activity and the infrastructural provisions is vital. Water, sewerage, electricity, gas and digital infrastructure are key components. As there is no valid master plan in force that could lay down the zoning guidelines, infrastructure agencies do not exercise any restraint while providing connections under industrial activity anywhere in the city.

In the case of water, the bulk water connection is normally provided by the concerned agency after the completion of administrative formalities and internal infrastructure. Similarly, industrial electrical connections can be provided anywhere in the city on the completion of formalities and payment of prescribed charges. Thus, there is no restriction on the establishment of small and medium enterprises anywhere in the city.

For determining and allocating locational choices for industrial development, several aspects need to be considered with specific reference to small and medium enterprises. A scientific comparison has to be made whether such enterprises should be promoted in the context of a mixed land use or exclusive locations.

It may not be inappropriate to revisit the locational choice of the SEZ at Dhabeji. Options can be explored to find suitable land in the vicinity of an existing industrial estate to help the SEZ benefit from the developed infrastructure and labour force availability.

Similarly, the provision and allocation of land should be in line with actual needs. Efforts should be made to control the unwanted speculation of industrial land, which affects the overall outlay of capital costs for genuine industrialists.

Local entrepreneurs and their representative institutions must lead such drives. It has been proved time and again that whenever such planning decisions are imposed from the top, their effectiveness remains constrained to a great extent.

The writer is dean of the faculty of architecture and management sciences at NED University, Karachi

Published in Dawn, The Business and Finance Weekly, February 11th, 2019