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Thursday, February 15, 2024

Chairman PIEDMC explains: How will SEZ’s change Pakistan’s economic future?

The future of Pakistan with Special Economic Zones is discussed and explained by Nabeel Hashmi, Chairman PIEDMC

nabeel Hashmi
Syed Nabeel Hashmi, Chairman PIEDMC

Syed Nabeel Hashmi is the Chairman of Punjab Industrial Estate Development & Management Company (PIEDMC) since 2019 and has been associated with PIEDMC since its inauguration in 2004. He is a successful businessman who has set up 3 businesses himself, including Thermosole Industry Pvt. Ltd, a design and manufacturing unit of automotive plastic parts, BBN (Energy) Pvt. Ltd, a liquid petroleum gas handling company and SASA Pvt. Ltd, an import and export company.

He was also the former chairman of the Pakistan Association of Automotive Parts & Accessories Manufacturers and former chairman for Pakistan Plastics Manufacturers (Punjab). He has been a member of the Engineering Development Board of Pakistan and designed and headed its International Business Development department. He has been leading trade delegations to Germany, France, USA over a period of many years for the promotion of Pakistan’s engineering sector.

GVS: Prime Minister Imran Khan and his team are talking a lot about Pakistan needing industrial development and Special Economic Zones (SEZs) to help growth and create jobs. The Chief Minister, the Punjab Minister of Industries Mian Aslam Iqbal, are both talking about this. Can you explain what exactly is a Special Economic Zone?

Syed Nabeel Hashmi: Special Economic Zones (SEZs) are clusters within a country where facilitation to industries, or businesses, is at an optimized level, with the least intervention from the government. A typical SEZ has a One-window operation. International certification and compliance issues are taken care of by the management of the SEZs, rather than leaving them to individual businesses to handle.

The SEZs are further supplemented by emergency services, medical services, labour support services, and vocational training support. While an industrial estate, which Pakistan was earlier promoting, merely involves a piece of land with roads going in it and everything is left to the businessman or the entrepreneur to set up and run their business and technically there is no direct support from the government. So, these are the two essential differences.

PIEDMC’S Special Economic Zones

GVS: Our manufacturing base, for example, in Pakistan, is much narrower than we find in some of our regional countries. Do you see SEZs as being the magic bullet to enable more manufacturing in Pakistan?

Syed Nabeel Hashmi: First of all, I need you to understand Pakistan’s industrial policy as such, what was it, what is it, what it’s supposed to be. For a starter, the word industry is now a word of the past. Now it is called business. So, when we talk about an industrial policy, we generally relate or focus ourselves to the manufacturing sector. But the world has moved on to more knowledge-based businesses and technology-based businesses.

That is one of the reasons why when we converted the Quaid-e-Azam Apparel to Quaid-e-Azam Business Park, we particularly named it business because we understood where the world is going, and that is where we as the Punjab Industrial Estate Development and Management Company (PIEDMC) consider where it should be heading and similarly our support to our potential investors who are going to set up their businesses in our special economic zones. So, a lot of restrictions, a lot of issues related to the non-industrial sector are in existence in Pakistan, and we worked over the last year to correct those restrictions.

GVS: What kind of restrictions are you talking about?

Syed Nabeel Hashmi: I will give you an example, we had a certification which is called a completion certificate. Once an entrepreneur sets up his business, runs his business, he is required to submit to us various documentations which are based on manufacturing and until he doesn’t prove that, we don’t give him a completion certificate and we cannot transfer the title of the land to the company. While, let’s say an IT company sets up a shop or a company like Daraz or Alibaba.com, they come to me, our policies were totally 180 degrees contrary to their requirements.

So those types of policies we have modified, upgraded and updated so that as we go along and introduce the Quaid-e-Azam Business Park (QABP) to the world, we do not do it in a way where when an issue comes, we take it up. Although there is a learning curve wherever you go, we try to bring in the best world practices of special economic zones to the Quaid-e-Azam Business Park. So basically, Pakistan’s industrial policies itself needs changing to being a business policy rather than an industrial policy.

GVS: So, we should be making more policies which attract businesses that you are referring to, for example, the new IT services and knowledge-based industry, rather than still be focusing on manufacturing industry. PIEDMC has been running since 2004, and you have run several very successful industrial estates in Pakistan. Sundar being one of them. Sundar is occupied at about 100% as an industrial estate. What are the key factors which enable an industrial estate to be fully occupied in your experience?

Syed Nabeel Hashmi: First of all, I worked with PIEDMC’s founding board, and I was there for four years, then there was a gap, but cumulatively, in the life of PIEDMC’s 16 years, I have been on the board for around 12 years, and now I am the Chairman of this company. One of the reasons I accepted this portfolio was that I did have an in-depth knowledge of the company, I did have a ground situation of its rules and regulations, and I was also aware of the things that needed to be changed and upgraded. What was required for businesses one and a half decades ago was no longer the same, so there were a lot of things that needed to be done and so we did that.

Read more: Tax holiday, and import duty concessions announced for Quaid-e-Azam Business Park (QABP)

PIEDMC as such now, it is I feel pretty much ready. While there are a lot of things that still need to be done to make this company ensure that SEZs come up on a fast track basis. Some are internal but a lot of things are on the external side also, and we are talking on these with our parent department and to our minister also, and to the chief minister even and the respective other departments.

GVS: What would you identify as being the key factors in making an SEZ successful?

Syed Nabeel Hashmi: The independence of the board is very critical because the decision making is a vital factor. The projects that we are doing right now are purely commercial based projects and the funding is also picked up from the market, and so the decision making and the time taken to make decisions and ensuring that we complete the projects is very critical. One of the essential factors why we were able to complete Sundar as it is right now, was that there was zero interference from the government at that time and the board was fully empowered to make its decisions, and we were able to deliver in two and a half years.

Read more: QBP investments surpass one billion mark despite a slow economy

Similarly, now also, I am pretty much happy with the current situation because the board has been allowed to make a turnaround of this Quaid-e-Azam Apparel Park, which was basically an apparel project. A lot of money had gone into it, but the board committed to the government that we will not be asking for any funds, and we will do a turnaround, and Alhamdulillah we were able to do that in one and a half year.

GVS: Are you saying that its actually the company which is the key factor for the critical success of running a successful SEZ rather than any particular government policy?

Syed Nabeel Hashmi: If I go into detail, it’s also the quality of the board, the team which I have. Right now, the team which I have are a mix of technocrats, we have technical people who specialize in the civil side, IT side, on the legal side, so it’s a host of private sector businessmen. Alhamdulillah, they are all independent businessmen, they have their own businesses, they are running very successfully and its cumulatively I would say about 700 years of experience.

GVS: You mentioned the government policy on SEZs, and you’ve referred to the fact that instead of thinking in terms of industry, we should think in terms of business. So, the SEZ law which was brought about in 2012 originally and amended in 2016, talks about various incentives on import duties and so on that are given to companies to set up in the SEZs. But, then if I think in terms of we are trying to create knowledge-based industries, what are the incentives that those industries then need for setting up in the SEZ because import duties no longer matter so much for them?

Syed Nabeel Hashmi: It does not. You are absolutely correct. The SEZ act currently does not cater to businesses. It just caters for the manufacturing, and I have been with the government, and we are working very strongly on this part also that we need to update it and upgrade it and bring it to the current requirements which are needed.

GVS: What are some of the policies that you suggest that they update it with?

Syed Nabeel Hashmi: As I said earlier, it needs to cater for the businesses rather than the industries, so currently the SEZ act just says that we can bring in manufacturing concerns into the special economic zones and if I bring in an IT multinational, they won’t be able to benefit, or even the SEZ act would restrict me even to allot them a plot which I think is not right. It needs to be changed and updated.

GVS: A lot of the policy incentives that companies were being given actually ran out towards June 2020. Is that something that the government is also looking at on how to renew those incentives now?

Syed Nabeel Hashmi: Those were renewed, and they were extended for the next few years. A clarification was issued on them, but the important point to see is whether the current incentives within the SEZs are enough. I think they are not enough; they need to be further enhanced not only on the tariff side or the fiscal side but also from the management side because the provinces come into play. For example, Quaid-e- Azam Business Park (QABP) is in Punjab and SEZ is a federal act so when this happens then, the local government system is in conflict with a lot of management practices which PIEDMC might want to adopt at QABP, or at other economic zones, for example, Vehari, Bhalwal or Rahim Yar Khan. So, these are the type of issues, and they are right now under study. We are asking the government, and we are getting a really positive re-sponse from the government to look into those changes, and I hope we will be able to bring those changes.

GVS: Now, given the fact, SEZs is a way to help the country improve its industrial development and create jobs. Are you getting special incentives in these areas such as cheap electricity or cheap gas or something like that? How is the businessman being incentivized to go into these areas from the government’s side?

Syed Nabeel Hashmi:The SEZ act does specify that zero-point electricity utilities, for example, gas and electricity are supposed to be provided by the government. As of now, there are some SEZs for which approvals have been given. But they are still to see the light. As far as the tariff concessions are concerned regarding the rate and the cost of electricity or utilities, that is not so. But having said that, let me tell you that PIEDMC itself is going to ensure that, with our own efficiencies. For example, Sundar industrial Estates, we are LESCO’s largest bulk buyer in Lahore, and we buy about 100 megawatts of electricity and the distribution within Sundar is totally managed by PIEDMC. Our internal line losses are 0.81%, whereas LESCO’s externally line losses are around 16%, so the efficiency does kick in you know when you have got the private sector handling it, and we are just banking on that. The difference in this efficiency, as soon as NEPRA allows or the law allows us, we will pass on that benefit to our investors within our estates.

GVS: Are you charging at cost to your people inside Sundar, for example, for the electricity? How are your rates being determined?

Syed Nabeel Hashmi: Our rates are same as LESCO. So, it’s the efficiency you can see the margin. Actually, in LESCO there are B4, B3, B2, B1 tariff. We buy B4, and we have B3, B2 and B1 inside where we supply, so there is a very marginal difference in those tariffs that is where we play, but you can imagine that we have got about six hundred industries and the whole 1300 acres with a lot of underground wiring and grid stations, and the staff and the maintenance staff, and the replacement and by the way, in our industrial states in case a transformer gets faulty, the clients are not asked to pay for it. The company changes it. These are the types of very special policies that we do, and all these costs are being managed within those efficiencies that we have achieved.

GVS: What attracts an investor to a particular SEZ? If I as an investor, think about investing in Pakistan into an SEZ, why would I invest in Quaid-e Azam Business Park rather than any other business park?

Syed Nabeel Hashmi: Well for one, it’s on M-2 motorway, so logistically it’s very well located. It is near to one of the country’s largest cities, Lahore. Huge consumer base in Lahore, with a population of around 20 million-plus, also connected to Sheikhupura and on the north-east side, Gujranwala is just 30 kilometres away. Faisalabad is also very nearby, so it’s very well located. Number two, Sundar Industrial Estate if anybody has visited, I am sure they would appreciate the quality of road and network and the infrastructure that is over there, and also the board of management which works under us and keeps it up to date on a day to day level.

Read more: Punjab Govt planning early launch of Quaid-e-Azam Business Park

The responsiveness of the management to any problem, including safety or fire or whatever, is on a huge level. The Quaid-e-Azam Business Park, if I rate Sundar as a five-star industrial estate, then Quaid-e-Azam Business Park, we are ranking it as a seven-star SEZ. We are also calling it a smart SEZ. Because from day one, the whole infrastructure, including the telecommunication, the traffic management, water management, and rainwater drain management is totally going to be digitized. And we are working currently on a very advanced level of management software, and we will have a large control centre which will be managing the whole QABP. This will be not only for the facilities but also for the property management – how the properties are going to be managed, how the transfers are to be made, etc. In Pakistan, it’s a huge issue to get your property transferred. There is a cumbersome procedure and all that, but as the Prime minister is also very much focused into e-governance, so that is the direction which PIEDMC is also following very rigorously.

GVS: You have got a variety of industries within PIEDMC. You’ve got auto parts, pharmaceuticals, textiles and so on. What’s the one key industry that you are trying to attractor have attracted which you think will help to enable greater exports for Pakistan, or which excites you because of the future of that industry.

Syed Nabeel Hashmi: Well, engineering is one focus that I think we should be doing, and we should support them. One of the reasons is that globally, the engineering trade is 67%. And the textile trade is about 6%. By comparison, Pakistan’s trade, 70% is textile, and engineering is 5%. So, we are doing the opposite of what the world is doing. So, we need to work in that direction. We need to work in value-added industries, we need to work in businesses which create value. Input is low, output is high. That is where we want to do a quantum jump in the scaling of countries globally.

GVS: If there was one key government policy that you would want the government to work on, what would that be? Your dream policy that would really you think help to accelerate the development of SEZs?

Syed Nabeel Hashmi: We did a study within the board, and we calculated that if we need to cater for let’s say 2 million new job creations every year, we need at least 20 thousand acres of special economic zones every alternate year. QABP is just one-tenth of what I am talking about. That is the speed that everything needs to move ahead for Pakistan. If you really need to cater to all the new-borns coming in. Every day we have 10 thousand babies being born in Pakistan. We need to build 50 hospitals every day. Similarly, we need to build 25 schools every day.

GVS: Do we have the capacity for that? That is a lot of acres you are asking to be developed every alternative year.

Syed Nabeel Hashmi: Yes, and that acreage has to be done. See, right now we as a country are not looking at that level. We are not thinking of that level. We are just catering for small sectors and just looking into thousand acres or so. Suzhou Industrial Estate, for example, in China, one of the world’s renowned, is around 34,000 acres and it’s a vast eco-system of the human civilization. The babies born, the hospitals where they are born and then the kindergarten and then the school, and the intermediate, the secondary, and then the vocational training and then the jobs and then the kids, the whole cycle is within those special economic zones. And we are not thinking on that line.

GVS: So, is that what’s stopping us, the fact that we are not thinking about it or is it the lack of capacity which is stopping us?

Syed Nabeel Hashmi: I think the overall vision and the direction of the government was not there in the past. Now, when we talk and sit with the prime minister and our CM and minister, they are looking into such sizes now. But the issue remains that is Pakistan ready for that?

Read more: PIEDMC Speeds up Plot Allocation for faster operationalization of SEZ’s

Let’s say if I want to enhance my exports from $24 billion currently to $100 billion, do I have the road network to ensure that my goods from the North reach the ports? Do my ports have the capacity to handle such type of containers to move in and out? Even at the current level, when there is a little heat in the economy, that is, I mean that the businesses right now are busy and we are witnessing congestion at all our ports. So, we really need to do a quantum jump. It’s enormous management. My special economic zone is just one part of it, which will handle it, but the infrastructure to bring in the raw materials, to take out the finished goods, then the training and the skilled manpower. All these need to be catered for, and it’s not just if I say that you correct the SEZ act, the whole governance system needs to be upgraded and systemized so that it can supplement each other. Then we can move ahead.