Industrial estates’ development in Sindh: ‘governance’ a key challenge: ADB report

KARACHI (September 08 2010): The key challenge to the development of industrial estates in Sindh is governance, according to a recent Asian Development Bank (ADB) report that examined Sindh’s public enterprises. The report concluded that there are ‘systematic problems, ranging from weak governance, poor financial performance, and operational inefficiency’.

While Sindh Industrial Estate Limited (Site) is dominated by bureaucrats, the Sindh Small Industries Corporation (SSIC) is dominated by political representatives. The report said that similar conditions existed in Punjab’s industrial estates. In 2003, however, the government of Punjab restructured its industrial estates management by establishing Punjab Industrial Estate (PIE) Company, a guarantee limited company, to establish new and upgrade existing industrial estates.

Given that PIE, SSIC and Site share a common institutional and governance background, ADB reviewed the critical governance and management reforms that enabled the government of Punjab to boast of ‘Sundar’ and other revamped industrial estates as relative successes.

Site was incorporated in 1947 as a guarantee limited company, to establish and manage industrial estates in Karachi, Hyderabad and Sukkur. It owns, and operates, eight industrial estates, holding 13,419 acres with 4,237 planned plots and 3,527 allotted plots.

The government of Sindh provides land that Site develops into industrial estates, allots the plots to industrialists, and then operates and manages the industrial estates by collecting maintenance and other charges from industrialists. As of September 2008, half of the plots in Nooriabad Site and 30 percent of planned plots at Site at Super Highway have not been allotted. After allotment at Nawabshah Site only one unis out of 12 is functioning. At Nooriabad Site, 75 units are functioning, while 34 are sick units; and at Sukkur Site, 40 percent of the units are sick.

The government of Sindh continues to invest in the physical infrastructure. For example, according to recent reports, it allocated Rs 800 million to improve water supply, road network, and drainage and sanitation of Site area at Kotri, Hyderabad, Nawabshah and Sukkur, the key challenge is governance.

Site governing body is composed of 60 members: 35 representing government of Sindh, and 25 representing tenants and industrialists nominated by government of Sindh. Secretary, Industries, is the Chairman. It is managed by a 15-member board of directors, with eight directors representing Sindh government and seven Site tenants elected by the governing body. The managing director is a salaried government civil servant appointed by Sindh government. Site website admits that it is ‘essentially a government controlled show as by its very constitution’.

As against that, the PIE, like the National Industrial Parks Development and Management Company (NIP), has moved towards professional management. The chairman, the general body and the CEO of PIE are all from private sector, bringing in professional capacity and leadership to develop and manage industrial estates.

According to ADB report, both Site an SSIC are directly responsible for the development and O & M (operation and management) of their respective industrial estates. Considerable public investment is lying unutilised because 80 percent of the allotted plots at SSIC Thatta, 60 percent at Badin, 58 percent at Mirpurkhas, 83 percent at Nawabshah, 82 percent at Gambat, 77 percent at Rohri and 47 percent at Kandhkot are lying vacant, casting aspersions on the functioning of SSIC.

ADB has strongly recommended: it is essential to ensure that there is effective capacity to manage industrial estates, which means bringing in private professionals on the governing body and/or boards of directors to lead and manage the affairs. Appropriate market-based incentives are required to attract professionals with suitable skill and experience on the governing body and board of directors. To reduce political and bureaucratic intervention, appointments, terms and conditions and termination should be determined by the board of directors in a transparent manner, and accountability should be linked to organisational performance.  -Brecorder