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102
CHAPTER 11

Industrial
Development
 I
ndustrial development is not just limited to the
manufacturing and service sectors. Agriculture, fisheries,
and natural and mineral resources are also key
components of industry in any developing economy.
Pakistan»s main industry relies on the production of
agricultural outputs such as wheat, rice, and cotton.
This is complemented by a number of textile, pharmaceutical, and
consumer goods industries that make use of Pakistan»s multifarious
resource base.

BACKGROUND
Sindh»s process of industrialization began with the creation of planned industrial estates and the
development of an engineering base. The Sindh Industrial Trading Estate (SITE) was the first
industrial estate to be established in Karachi in 1947 and it was meant to serve as the industrial
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hub of the country. Today it contains about 3 000 industries and provides employment to over 550
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000 people. Agricultural and mineral resources form the backbone of the formal industrial sector
in Sindh with agro-industries and industries in the oil and gas sector. The informal sector is led by
small-scale manufacturing units based on indigenous or indigenized technologies, which produce 103
consumer products; these account for 50 percent of the industrial production in Sindh.

Sindh»s industries encompass agricultural, horticultural, and livestock production and processing
of products; textiles; tanning; pharmaceuticals; minerals; cement; salt; sugar; cotton; coal; china
clay; oil and gas production as well as the steel and automobile industries. However, inadequate
infrastructures have stifled the growth of the industrial sector in Sindh over the past few
decades. Industrial production in the province peaked in the mid-1990s, but has since declined
indicating a reduction in industrial activity.
 Maannuuffaacctt uurriinn gg:: IInndduussttrriiaall PPrroodduucctt iioo nn aanndd EEm
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COVVEE RREE DD ((iinn nnooss ..))
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VEGETABLE GHEE «‘0
00000 M MTT 24 176 1 586
SUGAR -- ddoo-- 30 922 15 351
CEMENT -- ddoo-- 9 1 903 1 875
FERTILIZER (UREA) -- ddoo-- 3 1 624 1 588
PETROLEUM
PRODUCTS ML
M L 2 4 727 1 271
COTTON YARN ‘«000000 M MTT 82 265 36 683
COTTON CLOTH m2
m 2(( mmiilllliioonn)) 117
CIGARETTES N ooss.. (( m
N miilllliioonn)) 2 12 789 769

2000022-- 0033
2
VEGETABLE GHEE «‘0
00000 M MTT 28 168 1 553
SUGAR -- ddoo-- 30 1 170 14 979
CEMENT -- ddoo-- 9 1 742 1 702
FERTILIZER (UREA) -- ddoo-- 3 2 009 1 692
PETROLEUM
PRODUCTS M
ML L 2 5 281 1 261
COTTON YARN «‘0
00000 M MT T 82 274 36 236
COTTON CLOTH m22 (( m
m miilllliioonn)) 100
CIGARETTES N ooss.. (( m
N miilllliioonn)) 2 11 934 742

IIN N DDEE XX O OFF IINNDD U USSTTRRII AALL PPRRO

ODDU
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2 2000011-- 0022
2 2000022-- 0033
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((BBaass ee:: 11998800--8811 == 110000)) 174.83 178.12 194.28

VV AALLU
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TO
TOTTAALL 1 776688
1 53311.. 6666
5 25599..2277
2

TEXTILE 417 102.91 92.22

CEMENT 7 7.02 3.35
FERTILIZER 3 7.07 1.35
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GHEE 15 8.51 1.00

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REFINED SUGAR 28 24.20 17.25

TOBACCO (cigarettes) 2 6.10 1.18
104 AUTOMOBILES 39 38.84 7.96
PETROLEUM REFINING 2 61.15 1.96
INDUSTRIAL CHEMICALS 37 32.90 4.38
OTHER CHEMICAL PRODUCTS 55 10.08 4.20
PHARMACEUTICALS 66 33.65 13.18
OTHERS 1 097 199.23 111.24

Source: Sindh at a Glance, Bureau of Statistics, GoS

IUCN Pakistan
Sindh hosts 70 percent of Pakistan»s industry
The GoS is currently considering an exemption
on property taxes for newly developed
industries in order to boost the industrialization
process. Also, it has announced a grant of
Rs.500 million for development work in the SITE
area, which will be spent on construction, repair
of roads, improvement of sewers and other civic
facilities. In order to respond to rising inflation,
the government recently decided to allow the
industrial sector to produce its own power,
which should reduce the cost of inputs as well
as ease pressure on power utilities. To deal with
the problem of bureaucracy, the Department of
Industries, GoS has notified only six agencies to
be responsible for inspection instead of the
previous 22 agencies.
The Government has adopted a very liberal
policy for industrialization in the province and
no NOC/Permission is required for setting up
an industrial unit except for the following:-
Federal/Provincial
● Arms and Ammunition
● Security Printing, Currency and Mint
● High Explosives
● Radio Active Substances and
● Alcoholic Beverages
An extensive industrial infrastructure has been
set-up through-out the province. There are
seven large size and 18 small industrial
estates in nearly each District of the province.
Four small industrial estates namely Small and
Cottage Industrial estate super highway by
pass Karachi, small and cottage industrial
estate Hawksbay, Karachi, small and cottage
industrial estate Bin Qasim, Karachi and SIE
for power looms, Hyderabad
During the current financial year 2005-2006,
an amount of Rs.572 million has been
allocated for the development schemes
related to the industries sector:-
Investment Climate
Investment facilitation boards at provincial and
federal government levels have been set-up to
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monitor, facilitate and assist foreign investors
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for their investment initiatives. For overseas
Pakistanis and international investors,
schemes are being chalked out to help and 105
facilitate investment from abroad to set-up
new industrial ventures and preference will be
given to foreign investors for allotment of land
in and outside the industrial estates.
PCOI has been established with the main
purpose of accelerating the processes
attracting over-seas investment from abroad
 SSRR..N NO O.. // NAAM
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1/84 Small Industrial Estate, Karachi 25.222
2/85 Extension of S.I.E., Hyderabad 7.000
3/86 Extension of S.I.E., Sukkur 3.000
4/87 Small Industrial Estate, Ghotki 2.000
5/88 Small Industrial Estate, Mithi 3.000
6/89 Small Handicrafts Display Centre, Islamabad 24.778

N EEW
N W SSC
CH
H EEM
MEE SS
7/90 Small Industrial Estate, Naushero Feroz 2.000
8/91 Up-gradation of 9 S.I.Es., (Thatta, Sanghar 5.000
Dadu, Hala, Badin, Nawabshah, Rohri and
I.P. Sehwan, Mirpurkhas)

Toottaall::
T 722.. 000000
7

S..II ..TT.. EE.. LLiim

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9/92 Improvement of infrastructure facilities 500.000

In 5 estates SITE Limited (Karachi,
Nooriabad, kotri, Hyderabad and Sukkur)

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T 50000..000000
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by identifying feasible projects in potential North Karachi, Federal B Area and Korangi
sectors and these steps have shows marked with the support of respective trade
improvement in the over-all flow of investment associations.
that has come into the province of Sindh.
ISSUES
On account of problems of multiplicity of
taxes and unorganized inspections by various Industrialization has had to face many
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government departments/agencies, the challenges, including the entry of smuggled

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following steps have been taken for the goods from other provinces, the production of
establishment of: low quality products by an increasingly
106 aggressive informal sector, and the growth of
One Window Facility the underground economy. In an effort to
promote development in Sindh, 24 large and
Three taxes, property tax, professional tax and small industrial complexes were established in
cotton fee are being collected by the Excise different parts of the province. However, this
and Taxation Department from the policy failed as the infrastructure facilities in
industrialists. Betterment tax, surcharge and these areas were insufficient and substandard,
additional surcharge, however, were abolished and could not cater to the demands of
in 1.7.2001. This facility is to be introduced in the industry.
 Inadequate Infrastructure
The federal government has failed to provide
adequate infrastructure such as the
establishment of an internationally competitive
engineering industry to develop technology
locally to build plants and equipment. This
would help to decrease establishment costs
as well as costs related to operation and
maintenance. As the province had no capacity
to build capital and intermediary goods, it has
had to import them to keep industrial units
functional. For industries to adopt
technological innovations, they require large
financial inputs, which have been obtained
through foreign loans in the past. This practice
has increased the debt burden as well and
has led to the unsustainable nature of
industrialization. The road density in Sindh is
also inadequate to support the transportation
of farm produce to industrial units or to
facilitate the transportation of minerals from
their sites to the processing destinations.
High Costs of Production
High import duties, high cargo handling
charges at the ports, increased red tape,
IUCN Pakistan
Principals of industrial ecology need to be promoted
lengthy delays in shipment release, and
increasing costs of imported items are
discouraging industrial development. Karachi
Port, for example, has one of the highest
shipping and handling charges in the region.
Similarly, excessive charges are also levied on
the import of raw materials and machinery in
certain industries like packaging, food
production, and plastics manufacturing. This
ultimately leads to high consumer and market
prices, contributes to rapid inflation and
overpricing of products, and affects the
quality of life of low-income groups.
Surveys of the quality of industrial wastewater,
gaseous emissions, and solid waste discharged
into the environment, have indicated that there
is a dire need to implement pollution-control
technologies in the industrial sector. This issue
has been sidelined because industrialists argue
that this would raise the cost of production,
affecting output, which is already
uncompetitive. This is a particularly pressing
issue for industries like the textile, tanning, and
chemical processing units in SITE, because
they discharge liquid effluents that exceed
allowable limits, leading to environmental
degradation of land and water resources.
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 Political and Economic
Instability
The political instability within the country and
the ensuing inconsistency of government
policies are fundamental factors that
discourage industrialization. This is a major
problem in Sindh as it currently plays host to
almost 70 percent of Pakistan»s industry. Of
late however, industrialists have moved from
Sindh to Punjab because better incentives are
provided in terms of lower land prices, taxes,
and tariffs. The cost of registering companies
is also higher in Sindh so industrialists prefer
to set up new industries in Punjab. There is
also less interference from the bureaucracy in
Punjab. Hence people in Sindh are opting for
trading, real estate businesses, and the capital
market as opposed to establishing industries.
PROPOSED
INTERVENTIONS
Infrastructural Development
The government needs to review its support
to industries through increased support for the
development of an engineering base, greater
incentives in the establishment of industries
as well as a review of the high cargo handling
charges at Karachi port as they increase the
industrial cost of production and discourage
exports. There must be more effort to add
value to local products by making technology
available and accessible. Devolving the power
of governing the affairs of industrial estates to
either an autonomous industrial estate
authority or an industrial estate association
must also be explored. This association
should then be responsible for providing all
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forms of industrial infrastructure, including
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those related to pollution control.
108 Supporting Actions
● Reinvesting the revenue collected in
upgrading the infrastructure of the
industrial estate concerned.
● Developing an engineering base so that
equipment can be manufactured in
Pakistan rather than imported from
abroad.
● Ensuring that the cost of power remains
feasible, such as the cement industry,
which is deteriorating due to the
excessively high price of furnace oil and
increased power costs.
● Establishing separate industrial estates
for Small and Medium Enterprises
(SMEs).
● Establishing industrial estates and new
businesses outside urban areas to quell
the influx of people to urban areas.
Environmental Protection
There is a need to focus on environmental
issues such as pollution, hazardous waste,
and health and safety of workers. More
studies in this field could help contribute to
greater enforceable legislation to ensure
industry compliance, particularly with
environmental regulations. Principles of
industrial ecology must be understood and
applied in new industries, and should be
promoted within existing industries. The
siting of hazardous industries should not be
allowed in residential areas and the existing
ones should be relocated from these areas.
≈High tech∆ industries as well as those which
produce less pollution and are more
environmentally friendly should be promoted.
Undertaking analysis of energy production
processes and application of stricter
environmental codes of conduct are also
necessary requirements in addition to
developing hazardous waste management
and disposal systems. Combined Effluent
Treatment Plants (CETP) must be installed in
all industrial estates in Sindh. Industrial
associations (e.g. SITE) and the various
Chambers of Commerce and Industry should
be engaged in the initiative.
Supporting Actions
● Promoting greater interaction of
industrialists with the Sindh Small
Industries Corporation (SSIC). Finance,
pollution control, and infrastructure
 development should also be incorporated
within the SSIC»s mandate.
● Developing incentive mechanisms to
promote less polluting industries.
● Promoting industrial units that are related
to the local ecology, such as consumer
items and agro-based industries in
rural areas.
● Educating industrialists on environmental
and social compliances for audits that are
now required by most foreign companies.
Annual environmental and social reporting
should be made mandatory. Social and
environmental compliance should be
made mandatory with the granting of
licenses and permission for new industry.
● Providing greater support to the Cleaner
Production Program (CPP) in Sindh. The
CPP focuses on ways to apply cleaner
production technologies to the industrial
sector in a cost-effective manner.
● Including pollution charges in the cost of
products.
● Environmental baseline surveys of all
major industrial sites should essentially be
carried out on a priority basis to obtain
authentic information on various pollution
levels, waste disposal practices, air
emissions, generation of hazardous waste
etc. This would assist in the preparation of
environmental management plans for the
implementation of NEQS.
● A No-Objection Certificate (NOC) from the
relevant EPA, approving the EIA of the
project, should be a mandatory
requirement for all new projects. Provision
of utilities or the approval of construction
plans of new industries should be subject
to this NOC.
Business Incentives
Political will and stability are imperative for
sustainable industrial development. Provincial
infrastructure should be developed and
incentives should be provided. The sales tax
generated from this sector should be given to
the respective provincial governments for re-
investment. Industries should also be
facilitated to focus on cheapest production
and export ƒ and enhancing the economies
of scale. In this regard a Facilitation Centre for
export-based industries may be established.
The one-window operation should not only
apply to establishing an industry, but should
be a continuous process that facilitates the
operation of the industry. Since the quota
regime has ended, international business can
be lost if operations are not made more
efficient.
Supporting Actions
● Upgrading the informal sector; relocate its
productive units into planned estates and
finance their advancement through SME
development schemes.
● Ensuring quality assurance by making ISO
certification mandatory for all units,
including those in the informal sector.
● Ensuring quality assurance by providing
financial incentives (e.g. tax relief) to
industry for getting their businesses ISO
14000 certified.
External Alliances
In order to capitalize on the growing interest in
foreign investment, the industrial sector in the
province must create linkages with
international private sector firms. These
linkages do not only have to be in the areas of
production and manufacturing but should also
focus on the provision of infrastructure, the
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import of machinery, and the acquisition of
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technology i.e. education and training for
higher productivity levels.
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