Second auto assembler abandons plans for plant in Karachi in favour of Faisalabad

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KARACHI: Al-Futtaim on Tuesday announced the acquisition of an industrial plot of land in M-3 industrial city, Faisalabad, to set up a brand new automotive plant for the exclusive assembly of Renault vehicles.

The park is the country’s third largest Special Economic Zone (SEZ).

The investment was originally coming to Karachi, but persistent delays in critical government approvals forced them to relocate.

Prolonged delays by federal govt in critical approvals led to this decision

The investment was finalised in the third week of November 2017, when Group Renault and Al-Futtaim signed definitive agreements for the exclusive assembly and distribution of Renault vehicles in Pakistan.

Both the parties expected that the plant would be erected in Karachi in the first quarter of 2018 as per Group Renault standards and car sales were planned to start in 2019, ramping up in 2020.

Sources said Al-Futtaim Motors was also allotted 50 acres at Bin Qasim Investment Plant (BQIP) for the plant. However, repeated delays by the Board of Directors of National Investment Park (NIP) forced the company to abandon its site in Karachi and change the plant’s location to Faisalabad. NIP is a federal government entity, and various people familiar with the issues at BQIP squarely blamed it for the delays.

Hyundai had also planned to set up a plant at BQIP. However, the same bureaucratic hurdles at NIP forced the Korean auto giant to also shift their investment to the Faisalabad SEZ.

On June 12, Al-Futtaim and Renault announced that the design and pre-engineering work of the project are well underway while on-site activities will commence shortly. The formal launch of construction will be in held in the fourth quarter of the year. Once construction work is completed, the plant will have a total installed capacity of over 50,000 units per annum. Al-Futtaim and Renault expect that the factory will commence production in 2020.

Investors at BQIP have been facing prolonged delays for over a year now. In December 2017 they took serious notice of these delays by the Sindh government in granting the status of SEZ to BQIP, which was necessary so investors could avail tax exemptions and other incentives under SEZs. In response to their complaints, the Sindh government simply said that Chief Minister Syed Murad Ali Shah had a busy schedule, and would get around to the issue in due course.

That happened in January, when the Sindh government approved SEZ status for nine new business enterprises which would be set up in the province’s three SEZs at Korangi, Bin Qasim and Khairpur.

The delays include infrastructure building for the zone — water, power, sewage, roads, boundary wall — all remain works in progress despite some investors having paid billions of rupees to acquire industrial size plots in the zone.

One source in the auto sector also pointed towards massive cost differences between land in BQIP and Faisalabad, saying costs in the former can be as high as Rs35 million per acre compared with Rs7m in the latter. Faisalabad SEZ also has fully operative infrastructure facilities.

These units would now need to get further approvals from the Board of Investment and Federal Board of Revenue to get tax exemptions and other incentives that come with the SEZ status.

On May 16, Sindh Special Economic Zone Authority (SEZA) CEO Abdul Azeem Uqaili said that ongoing industrial projects in Pakistan’s second SEZ – BQIP – under the SEZ Act 2012, with more than Rs 30 billion, will be facilitated fully by Sindh government.

NIP had also assured the Sindh government to fulfil their commitment as the developer of BQIP SEZ. The representatives of K-Electric and Sui Southern Gas Company had assured the provision of electricity and gas to all ongoing projects in BQIP.

All people involved in the matter that Dawn spoke to said the Sind Board of Investment is trying its best to advance the issues, but the delays are coming from the federal government which is the zone’s developer.

On June 6, Sindh Board of Investment Chairperson Ms Naheed Memon said that the establishment of Barkat Frisian Pastuerised egg plant in collaboration with a Dutch company at BQIP is a sign of trust of international companies in country’s economy. Yet 18 months after acquiring the land, with construction almost complete and production planned to begin in a few months, the plant remains without electricity, water and sewage connections, nor are there any roads.

Categories: Business

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