PAKISTAN Industry Conference 2005 is planned to be held at Karachi on December 2-3, 2005. According to an announcement, the conference will cover topics such as: (i) meeting energy demand of the growing industry; (ii) capacity-building of SMEs to back up large scale manufacturers; (iii) bridging the human resource gap; (iv) building communications network to support the industrial growth; (v) monetary and fiscal policy for industrial growth; and (vi) investing in the next generation of industries.

However, the deliberations might also include the ways and means for making existing industries more competitive internationally while in full compliance with WTO requirements.

The speakers will represent the major stakeholders and one should expect very useful discussions. What is no less important is that the exchange of ideas should be followed by concrete measures to create a better environment for setting up of new industry and for the enhanced efficiency and profitability of existing industrial units.

Like a child, industry needs nourishing at the initial stage. A proper nurturing promotes a flourishing industry. However, this would be possible only when the government at federal, provincial and local levels, allied departments and institutions including utilities and financiers, accord requisite approvals and support on timely basis.

All these agencies can first ascertain industry compliance with applicable norms before extending their support. But it is also expected that at no stage their actions or in certain cases inactions would unjustifiably stifle the industry. The industry should always welcome across the board application of laws, rules and regulations in a transparent manner and without discrimination. The conference can discuss shortcomings in existing system for remedial measures.

Institutions like the Board of Investment, SMEDA, Investment Advisory Centre, etc are playing a useful role for industrial promotion. However, it is felt that industry still needs reliable data on variety of subjects. The promoters of industry want easy and cheap availability of up-dated data regarding production capacities, sick and closed units, problem projects, exports, imports of manufactured products, etc.

It is also important to know the requirements to be fulfilled for starting a new industry, such as conditions for purchase of plot of land in the industrial estates and getting connected to all the utilities. Continuous availability of reliable data and authentic details about regulatory and tax requirements would make a big difference for promotion of industry.

Competitive industry normally makes profit. Capital cost of an industry is important in determining the competitiveness. This point is elaborated through an example. ‘Zaiyd’ sets up, within a year, a plant for producing x million units of a given product at a capital cost of $10 million. ‘Bakar’ took two years to establish an identical capacity plant at capital cost of $15 million. Of the two entrepreneurs, ‘ Zaiyd’ is comparatively better placed. Apart from entrepreneurial capabilities, there could be uncontrollable reasons due to which ‘ Bakar’ spent more time and cost.

Delays and cost over-runs due to any reason kill industrial competitiveness. Public sector institutions including port authorities, financiers, utilities, etc on the one hand and the entrepreneurs can substantially improve the time and cost actually used up for establishment of industry.

Profit is important for survival of industry. Profitable operations should be possible if the industry can produce quality goods competitively and supply to the consumers when and where they need these goods. Production and marketing will be at comparatively lower rates if input costs are reasonably priced, tax burden is lower, utility services are reliable and cheap, civic and other infrastructure is adequate for production and transport purposes, labour is positively motivated to quality output, existing of reasonable law and order situation, absence of legal or regulatory obstacles and the owners having more time to manage production and sales.

Absence of any one or more of the factors mentioned earlier will add to the cost of production, erode the competitiveness and with that the profitability and sustainability of the industry. The international financial institutions often say our country has high cost of doing business. The participants of the Conference might consider how the cost-of-doing-business can be lowered?

Working capital of an industry is important like blood for a human being. Industries operating with inadequate working capital gradually lose their edge and go into red. Despite that shortage of working capital to our industry is not uncommon. It could be that working capital requirements of an industry were originally under-estimated purposely or otherwise. Some of the sponsors indulge in such practices to keep their own contribution to the paid-up capital at lower level. It could also be due to use of working capital funds to finance over-runs in the capital cost of the project.

Long lead time for import of raw materials, components and spares also oblige the industry to maintain high level of inventories and thus the need for higher working capital. Port congestion or difficulty in custom clearance may possibly be the reason for long lead time. Further, delays in the refund of duties on exported products also block industry funds for extended period and thus adversely affect the level of working capital. Without substantial improvement in these areas, it will be difficult to sustain industrial competitiveness.

Electricity provides motive power to the industry. Nine DISCOs (carved out of Wapda) and KESC supply power throughout Pakistan. Some industrial units use nominal power per unit of output whereas power is extensively used by other industries. One can say that cost of electricity is one of the important determinants of industrial competitiveness. The electricity tariff charged by the power distribution companies is said to be relatively high. Moreover, there are voltage fluctuations and frequent power break-downs. Due to this, industry suffers badly but process industries suffer the most and become uncompetitive.

Product quality deteriorates and delivery schedules are badly disturbed. In the circumstances, apprehensions of losing valuable customers are not unfounded. To be able to maintain regular production and to meet delivery schedules, some of the industrial units have added captive power generation facilities at substantial capital cost. However, self-generation is not a long- term economic solution for the industry. Ensuring reliable power supply at reasonable rates might be of particular interest to the participants of the conference.

Most of the industrial estates have poor civic and road infrastructure and leave a poor impression with the foreign buyers. Of particular concern is the non-compliance by industry with environment and labour welfare regulations. Untreated industrial effluents / chemical waste are released due to lack or inadequacy of effluent treatment facilities. The government is taking measures for setting up of collective effluent treatment plants. However, much more needs to be done by the government. The World Bank and the ADB can be particularly helpful in this. Early operationalization of the Infrastructure Window of South Asian Development Fund has the potential to ease infrastructure availability situation.

The Nazim of Karachi is taking keen interest for improving infrastructure in the industrial estates. The industrialist of Sialkot have improved roads network and are establishing an airport in collaboration with the government. Similar initiatives by the industry in Karachi and other areas might improve the complexion of industrial estates. Apart from building road and other civic infrastructure, different Chambers of Commerce and Industry might consider adding quality hotel, conference halls, recreation facilities and a hospital within each industrial estate.

Industrial units operating within populated areas of some cities and towns of Pakistan are currently being asked by the city government to relocate outside the city or town limits. Industrial pollution is said to be the main reason. The situation is not that serious in Karachi where a number of industrial estates exist, surrounded by populated areas.

It is suggested that before initiating any coercive measures for relocation, all the stakeholders jointly study the problem with all its ramifications and then devise a viable and equitable strategy, with clear priority and time-frame for the relocation of different categories of industries.

The relocation will bear fruit if it is financially supported by the government as well as all the utilities. If the relocation issue is handled with less care, industry might relocate away from the This would be a real loss particularly to the people or institutions, directly or indirectly benefiting from such industries.