THE skyrocketing prices of energy, the worst-ever power outages and the law and order situation may prove fatal to the fragile manufacturing sector of the Frontier Province.
The industrial sector of NWFP, situated at a disadvantageous location, is in no position to absorb these shocks, says industrialist Zahidullah Shinwari, former vice-president of the Sarhad Chamber of Commerce and Industry (SCCI). He believes that the cost of doing business in NWFP, already higher than in any other provinces, will go up further.
According to SCCI estimates of last year, the industrial sector of NWFP suffers a cost difference of 23 per cent over the industries in Sindh and Punjab, for being away from seaport. Most of the industries in the NWFP depend on imported raw material and they have to bear an extra transportation cost which makes their products costlier and less competitive.
Mr Shinwari belives that the growth rate which the government has projected at 5.3 per cent for the current fiscal year will be much lower because of higher energy cost.
The manufacturing sector mainly comprise small industrial units, as according to official statistics it is host to 18 per cent to the country’s small and medium enterprises (SMEs). Almost 50 per cent of the SMEs are not operating, making an investment of Rs13.055 billion redundant, with a loss of 18,618 jobs.
The poor industrial growth is hindering creation of new jobs. According to latest statistics, unemployment in the province is at higher than at the national level.
Mohsin Aziz, former industries minister of NWFP and an industrialist says, industrial sector here is paying more than industries of Punjab for electricity charges, while power outage has further hit production.
Terming the 68 per cent increase in gas tariff for captive power plants (CPPs) irrational, he says the decision will close down all textile units of the province as the cost of electricity will be doubled that of Wapda rate. Now the gas tariff is being reviewed by the government.
Run by natural gas, CPPs are producing approximately 1500MW electricity, mostly consumed by around 350 industrial units across the country. Of the total industrial units, being run on CPPs, 10 are located in NWFP, which, according to industrialists, are passing through a critical phase.
According to Mr Aziz. the government had promoted CPPs because Wapda did not have the capacity to cater to the increasing demand of industries. “But, now with 68 per cent increase in gas prices, this is no more a viable option,” says Mr Aziz.
Currently out of 1,964 industrial units, only 1,227 are in operation while 737 are either closed or non-operative.
Besides, the ongoing military operation in the Khyber tribal region, which is located on the fringes of NWFP’s largest Hayatabad Industrial Estate (HIE), is seriously affecting the industrial base of the province. HIE is NWFP’s largest industrial zone employing 28,000 workers with more than 300 units.
“Gone are the days, when we were talking about incentives for promoting new investments in the province, now our major worry is how to protect our existing investment,” says Mr Shinwari.
The ANP-led coalition government has accorded a high priority to law and order in terms of budgetary allocation in the current financial year. According to the budget estimates, the government had earmarked Rs6.559 billion for the Police Department, mainly to be utilised for recruitments and purchasing weapons and equipment.
But, keeping in view the situation at the HIE, it seems the government’s interventions may not make any big difference.
Numan Wazir, president of the Industrialists Association Peshawar (IAP), says: “The government seems unable to protect the lives and property of the people so in this situation we have to take precautionary measures on our own.” The IAP has recently put in place its own security system. It generated an initial fund of Rs2.5 million from its members, which has been utilised for purchasing vehicles and hiring private security guards. The security guards patrol the industrial zone round-the-clock.
The industrialists are, however, worried about the security cost sustained on voluntary contribution.
They were expecting that the government would allocate funds for beefing up security at the HIE in the new budget, but that did not happen. It means they have to bear the cost of security on their own, said Mr Wazir. Interestingly, the government authorities still believe that the situation is not that discouraging as made out by the industrialists.
The provincial government has allocated Rs1.114 billion for development of new industries in the current financial year. A handsome amount has also been earmarked for the establishment of new industrial zones in the province.
Mukarm Khan, Director Investment Facilitation Centre, says they have received a number of applications for allotment of industrial plots, which shows that they want to make investment.