Businesses going down like dominoes

[Naveed Yaseen]

Fifty per cent of the tanneries have been shut down in a short span of time

Friday, December 12, 2008
By Qadeer Tanoli

Karachi: Several tanneries, cottage industries, and textile and leather manufacturing units have been shut down due to the ongoing energy crisis, the deteriorating law and order situation and the present business environment.

Local investors have complained that the current business environment has not provided them with many incentives to invest. According to research conducted by The News, tanneries and leather manufacturing units have been the worst victims of the crisis. “Fifty per cent of the tanneries have been shut down in a short span of time,” revealed a source.

Two big tanneries, Zahoor Sancho and S Muhammad Deen, which employed close to 1,200 workers, closed down almost a year ago. Recent years have also seen the demise of the Kamran Corporation, Naveed Brothers Tannery, National Modarba Tannery, Barrech Tannery, Afghan Tannery, Khastan, and the tannery section of Hyderi Garments.

Many of those involved in the business blame the law and order situation, which has compelled at least one owner of a tannery to shift business to Dubai. Two months ago, for example, the owner of another tannery was kidnapped for ransom. “The owner of Kamran Corporation was murdered a few years ago, which ultimately led to his industry being shut down,” said sources.

In Karachi, most of the tanneries are located in Korangi Industrial Area. Besides handling the hides of sacrificial animals on Eid-ul-Azha and the hides of animals slaughtered daily, sources disclosed that approximately 50,000 hides are imported everyday from Africa, Afghanistan, Iran, and the Gulf region.

It is mostly smaller tannery units that are being closed, but many of these processed hides are handled in mega units. Despite the fact that business can still function, well-informed sources estimated that just twenty per cent of the processed hides are used in value addition. The rest are exported to Turkey, South Korea and China.

Abdul Haq, a tanner and former exporter of leather garments, said that the businesses of tanneries and the leather garments industry began to slide when China started to export leather goods. “Thousands of people associated with tanneries and leather garments manufacturing have been rendered jobless,” he said.

Haq added that earlier, the government would award a 30 per cent rebate on leather export. This has now shrunk to a mere four per cent, further disturbing the industry. “We are not going towards value addition the way China is,” said Haq. “A major part of the exported processed leather is without manufacturing leather garments. Our quality stretches far below China’s.”

According to a list available to The News, 28 textile units have been shut down in SITE, three units in Korangi Industrial Area, and two each at Chakiwara Road and Usmanabad. Likewise a spinning unit at I I Chundrigar Road has stopped functioning, as have textile units on Shara e Faisal, Nazimabad, MA Jinnah Road, North Karachi, and Malir.

“The industries had to shut down because of the high energy cost involved,” said Zubair Motiwala, former president of Karachi Chamber of Commerce and Industries. He pointed out that in July the cost of gas was raised 31 per cent, while the discount rate was raised for the fifth time in two years, leading many industries with no choice but to close. “After the textile industries closed down, 10,000 people became jobless.”

Pakistan Small Chamber of Commerce and Cottage Industries Chairman, Bashir Miandad added that the current economic and energy crisis had hit the cottage industry as well, leading to nearly 50 per cent of the ones in Karachi being forced to close. In light of the crisis, he highlighted the importance of cottage industries.

“Cottage industries provide raw material for some mega industrial units and to the automobile sector, among others,” said Miandad, and added that the manufacturing cost of items provided by cottage industries is far below those produced by multinational companies.

“Let us assume that paint from a noted industry costs a consumer Rs800. If manufactured by a cottage industry, it would cost him just half that,” he said, and concluded, “This is an unorganised sector.

The exact number of cottage industries in Karachi is not known, but in my opinion, two years ago, their number was 150,000, and half of these no longer function.”

http://www.thenews.com.pk/daily_detail.asp?id=151412