The industrial policy and an international investment conference were designed to highlight investment potential in the province.. Under the policy, old and the new industries in industrial estates have been exempted from property tax for a period of five years.
Similarly, the procedure of labour inspections has been simplified and industrial organisations observing labour laws have been exempted from labour inspection for a period of three years. All industrial estates have also been exempted from education cess apart from certain incentives under the Social Employees Security system. And a rebate of 25 per cent in electricity bills for a period of three years has been given for industrial units producing non-traditional items.
While unveiling the present policy in 2005, the Chief Minister Akram Khan Durrani anticipated that the policy would create jobs and alleviate poverty and would prove to be the first step in the rapid industrialisation of the province Howeve, the policy measures have so far not yielded positive outcome..
The official statistics indicates a dismal picture of even the main four industrial estates- Industrial Estate Hayatabad ( Peshawar), Hattar, Gadoon and Nowshera. In these estates, out of 1138 only 439 units are operational, 356 closed, 238 under construction. No less than 105 proposed units are those for which plots were allotted but construction work has yet to start.
Official data shows that since announcement of the industrial policy only a few local firms have acquired plots at various estates for setting up industries, but not a single foreign investor has come forward. During the last two years only 29 plots have been allotted to different local firms in these four industrial estates.
The total investment involved in these units is around Rs1.491 billion which is supposed to generate 1601 new jobs. None of these industrial units have started their production so far. However, some 30 units of different types have been set up outside the estates including 15 each in year 2005 and 2006.
The provincial industries department puts total investment involved in such units at Rs19.422 billion with 4207 new employments. Even though, the statistics reflect these units as newer ones, it cannot be put into the new units' category because most of them are expansion of the existing units.
Achieving a sustainable industrial growth in NWFP is difficult because of its locational disadvantage and this cannot be removed through short-term measures, says Zahidullah Shinwari, former vice-president Sarhad Chamber of Commerce and Industry (SCCI). He says: "NWFP, being away from seaport could not become a destination for the industries that solely depend on imported raw material because the distance from Karachi makes them unfeasible. This disadvantage can be removed only, if the centre gives subsidy in freight and electricity for the industrial sector of the province."
A senior official at the industries department also said that Gadoon Industrial Estate which has become a graveyard of industrial units could attract investment only if the government was to announce 50 per cent exemption in import of raw material. The exemptions under sales tax, income tax and concessions in electricity bills are intact.
"It means that only those industrial units can survive here which operate on locally available raw material because due to higher transportation cost they cannot compete with the industries of Punjab and Sindh," the official said. But the geographical location of NWFP offers the province numerous advantages because of its proximity with Afghanistan and the Central Asian Republics (CARs), where huge consumer markets are available. Manufacturing based on indigenous materials offer potential for significant industrial growth. These include marble, granite, construction materials and matches that can be exported to the neighbouring countries.
The huge reserves of marble could form the basis of a booming industry. However, the development of this industry remains constrained by a number of factors including the ambiguous ownership rights, no access to finance, inefficient technological practices, scarcity of skills to finish and polishing of stone, etc.
Situation in construction industry is no different where frequent problems of collusion, cost overruns, low quality and corruption hamper the development of a competitive private sector. Match industry is also confronted with numerous problems, mainly smuggling of poplar to Afghanistan which escalates its prices.
Hydropower potential of the province can also be utilised for industrial growth by feeding the industry with cheap electricity. But the policies of both federal and provincial governments towards independent power generation are ambiguous which prevents the province from taking advantage of this potential.
NWFP is also bearing the burnt of US-led war on terror going on its adjoining tribal areas and inside Afghanistan. This post-9/11 war has impacted the economy of the province, particularly the industrial sector, as not only the foreign but even the domestic investors are reluctant to enter the field.
Yet another senior official at Sarhad Development Authority informs that the provincial government was in contact with China for setting up economic zones in Risalpur and Hattar industrial areas. But the other side seems to be concerned about the security situation here.