Sindh – a lucrative investment destination
Sindh is the second largest province of Pakistan with a population of 42 million. Karachi, the financial hub of the country is the capital of the province. Sindh offers tremendous investment opportunities in infrastructure, energy, urban development, agriculture (livestock and fisheries, food and agro processing) and mining sectors.
The Sindh Board of Investment provides a welcome platform for public-private interaction, business partnerships and category matchmaking. The Board has identified a number of key sectors and projects as priority for investment.
Agriculture and Agro Processing projects
The agricultural economy of Sindh contributes some 23 percent to country’s GDP. Keeping in view global food security concerns, the province’s vast agricultural capacity has the potential to become the region’s food basket. Value addition through use of technology, efficient irrigation systems and modern implements can help attain this objective. Following agro related investment, projects such as the following are ready for take-off: • Mango processing plant • Guava processing plant • Date processing, paste and syrup plant • Controlled Atmospheric Cold Storage Plant (AEPZ) • Drip Irrigation Plant • E-Beam Irradiation Plant
Livestock, Dairy, Fisheries and Poultry
There is a huge potential in the Livestock, Dairy and Fisheries sector in Sindh. Pakistan ranks as the world’s 5th largest milk producer, with 38.69 billion litres annual production. Out of this, only a small portion is processed. In the context of livestock, 28 percent buffaloes, 24 percent sheep, 28 percent camels and 40 percent poultry population in Pakistan is found in Sindh. The potential of Halal meat exports and the ever-rising gap between demand and production of meat and milk makes Sindh a very lucrative investment destination. The following projects are ready for investment in the sector: • Bhambore Dairy Village • Halal Meat Park (Abattoir, Processing, Certification, Packaging, Storage) • Shrimp Aqua Culture Farms • Metro Dairy Farms • Luaripak Livestock Company (LLC) • Beef Production Units
The growing urban population in Sindh creates an ever-increasing demand for urban development and infrastructure projects. Infrastructure development possesses tremendous potential to bridge the gap between the rural and urban economy. As a large urban centre, Karachi offers attractive opportunities for commercial ventures. The construction industry has shown great progress in recent years by offering various challenging projects. The city offers further scope for the following projects: • Education City • Arfa Karim Technopolis • Bus Rapid Transit • Keenjhar Lake Resort • Khajoor Mandi, Khairpur • Sukkur Dry Port • Sindh Grain Storage
With its proven reserves of oil, gas and coal, the Gharo-Dhabji wind corridor and round the year sunshine makes Sindh the Regional Power House of the future. Only Thar with 175 billion tonnes of coal reserves would offer 200,000 MW electricity for 300 years. The sind corridor in Sindh is 60 km wide from Gharo to Keti Bandar and 180 km long up to Hyderabad with a potential of 50,000 MW. The annual radiation of 3000 hours in Sindh has an endless potential for solar energy. High return energy sector projects for foreign investors include: • Thar Coal Mining and Power Plant • Coal Mining, Washing and Bricketing
Plants • Wind Power Project • Run of the River Hydro Power Projects • Solar Street Light Initiative
- Muhammad Zubair Motiwala, Chairman, Sindh Board of Investment
What are the main issues of industry in Sindh?
Firstly, you have to segregate the province into two - urban Sindh and the rural areas of Sindh. Both have different problems, but both have acute problems. These need to be resolved for the growth of the industry, for the province itself and for Pakistan. Sindh plays a pivotal role in the Pakistan’s economy and I firmly believe that Sindh has the resources which can resolve other issues.
In the urban areas, the major hurdles to industry are in the manufacturing sector. The first is infrastructure, where mainly the non-availability of utilities, such as power, gas and water is the hurdle. The second major problem is the law and order situation. Until these two major problems are not resolved, we will not get the required growth in Sindh.
Karachi alone pays more than 62 percent
‘The textile sector should enjoy a special status in terms of infrastructure
of the total taxes in Pakistan. We export more than 60 percent of total Pakistani exports. We have three vibrant ports in Sindh, a well-defined and well-managed infrastructure in place. We have five fully organized industrial areas in Sindh, skilled labour force is available and entrepreneurship is at the highest level in Karachi. Moreover, we are putting up more industries in Sindh but lately, investments have retarded. This is, because we are not getting gas connections, without which we really cannot put up any industry. Our investment department is trying to create a one-roof solution and we are doing it as far as permissions and land development is concerned; we are also accommodating local and foreign investors but what about gas?
It is the right of the people living in Sindh, the right of entrepreneurs and investors that under the constitution we are authorized to use the gas from Sindh, and we can give the rest to other parts of Pakistan. This is not a demand, rather a constitutional right which is being denied. We have actually sacrificed 150 thousand jobs in Sindh because 350 mmcf worth of gas applications are pending. Three years ago, we never heard that Punjab industry is closed. But after that there have been so many irregularities in providing gas connections. Karachi utilizes less than 400 mmcf of gas in both the general and captive industry, which is hardly 9 percent of what the country produces, yet the city contributes more than 62 percent revenue to the national exchequer. There is a need to understand where we are headed. Why are KPK or Balochistan not asked to shut down for another day? They are
running 24/7. But we are closing down in solidarity with Punjab. Consequently, our industrialists would lose money and there would be a total chaos. The matter of bankruptcy of banks is a grave concern too.
On what basis are priority investment projects in Sindh classified?
As part of the Board of investment, I have decided to work on energy and the rural uplift of the people by introducing some sort of industrialization and setting up manufacturing units in the rural areas. We have tried to activate Thar. Earlier, we used to hear that Thar coal is no good, but today it has acquired global acceptance. Regarding the quality of Thar coal, we have a comparison from the best companies in the world. Our coal is better than Germany, Greece and other best quality places.
One of our UK-based investors, Oracle, which has taken a block in Thar, actually faced difficulty in getting the finances. Instead of going to the banks and IMF, they went to the London Stock Exchange and floated their shares. They declared their plan of going into Thar and mentioned the profit lines, because we are giving 20 percent IRR which is unprecedented in the world, 20 percent return and 30 years’ tax exemption. I was surprised about what they were doing, but they were oversubscribed by 26 percent. That’s how we have changed the thinking pattern of the world - that Thar is a reality where you can make money.
Then, we have worked in wind, having queues of investors today. Also, for the first time in Pakistan, we are taking bank guarantees. Now we are selecting people and giving them land. We have also started working on solar energy, which will most likely start next year. We have achieved great successes in the energy sector, as evident by the agreements we are signing.
As for the rural areas, we believe that people there are living miserable lives, especially the women of Sindh. To address this issue, we have created SEDF (Sindh Entrepreneur Development Fund). We have obtained Rs. 750 million from the Government of Sindh, through which we are trying to add value to the agricultural produce. We are trying to create a community culture where everybody has equal access and learning about hygiene. If one is in the dairy business one can put up a milking parlour, a hygienic way of extracting milk and a computerized system to look after the well being of the animals. Out of SEDF, we bear the bank charges on the loan for the milking parlour for three years, which can be extended to five years, depending on the size of the plant.
We are now working on rice, with rehabilitation of old machinery. In every field, namely aquaculture, horticulture, livestock, and fish farming, we are letting people make money. Our mango growers are getting GAP certification and we are trying to bring modern technology to agriculture. Overall, we are changing lives of the people of Sindh by letting them make more money.
Is the textile sector a priority area?
Unfortunately, that is not the case, but it should be receiving priority. Textile is 42 percent of urban employment and more than 60 percent of exports. Also, in terms of adding value to the agro-product of cotton, it should be placed as the top priority. Bangladesh, without growing a single kg of cotton, has reached $19 billion in exports. On the priority chart of gas allocation, textile is placed at No. 2 after domestic and at No. 3 and 4 in terms of industry.
The textile sector should enjoy special status in terms of infrastructure and utilities. It is the responsibility of the government to modernize the textile units by providing them more services, utilities and space, but we are not doing so. This sector can alone wipe off our current account deficit and expand the trade account.
What investment advantages does Sindh offer compared to other provinces?
Nearly 72 percent of gas comes out of Sindh. More than 40 percent of dairy products are again from Sindh. The wind corridor that can produce 50,000 MW is again in Sindh. Thar coal, the second largest in the world, offering 175 thousand tonnes is also in Sindh. Thus, for power production, I believe that Sindh does not only have the potential to be the hub of the country, but for the entire region as well. We have the capability to produce 100,000 MW of power, only through Thar coal for 200 years and we are not utilizing it.
What would be a fair utilization of resources in Sindh?
Since I am here for more than 3 years, industries have been coming in and there has been no discrimination against anybody. In Sindh everybody is welcome. The policy is not biased or unjustly tilted. But in terms of distribution of national resources, Sindh is at a disadvantageous position. We contribute about 72 percent of gas but get so little. If Article 158 is implemented in letter and spirit, Sindh would get much more. If the industry is utilizing more than 400 mmcf gas, you can very well understand that there are pending applications of more than 300 mmcf. If Sindh generates more than 60 percent of exports and taxation, then what scale of market and job opportunities we are talking about?
We are a democratically elected government. It is the prime responsibility of the government to provide food and shelter, but it can provide employment to maximum 25,000 people. The role of private sector is important in providing jobs and filling the gap. We have the best entrepreneurs in Karachi, who know the viabilities of projects. Unfortunately, we do not abide by the constitution and this creates hindrances. There was a time when people were flocking to Karachi, but now we are limiting it. We need to understand that alternatives to hydel power projects in KPK and Balochistan are long-term. These should have been started ten years ago. The focus should be on short-term projects in Karachi. Fundamental mistakes were made by the people in power and if these mistakes continue, the next generation would pay for it.
What is the significance of agreements between SBI and investor countries?
We have conducted road shows in China, Malaysia, Korea, the UAE, Russia and many other places. Everywhere, we have signed MoUs and they all have been converted into agreements. We have signed agreements with Three Gorges and United Energy. A huge country consortium is coming from Malaysia; we have signed agreements in Halal sector with this country. In Russia, we signed agreements between St.Petersberg and Karachi and have been successful with every country.
Is there an integrated plan in place to develop required infrastructure?
One governmental policy I like is that they have floated LOIs to convert the old thermal power based plants into coal. When Thar comes in and we have transportable coal, we can possibly transfer it to these places. We have already imported about 6 million tonnes of coal which is of course cheaper than furnace oil. This will be replaced with our indigenous coal. It is not an ad hoc policy and will resolve problems over a longer period. Then, the federal government is supporting Thar and wind power, which is a wonderful thing. In terms of tariff too, I am thankful that they have accepted our suggestions. In Thar, they have given 20 percent IRR, which is huge. There is also 30 years’ tax exemption and relaxation on custom duties for bringing in the machinery. Whatever the life of the democratic government, their policies are long-term oriented and based on long term solutions.
Will SBI provide relief to the business community?
Whatever we do is for the business community. We are attracting local as well as foreign investment. My doors are always open and I am accessible very easily. We will continue to serve the business community for resolution of their problems.