KP's industry struggling to survive with over 200 units shut down

Across Khyber Pakhtunkhwa's once-bustling industrial zones, locked factory gates and idle machinery tell a troubling story of economic decline.

The towering Frontier Foundry (FF) Steels unit in Peshawar’s Hayatabad was once alive with activity — furnaces roaring, workers moving briskly between shifts. Now, its gates are chained shut, machinery lies dormant, and a thick layer of dust blankets idle equipment, a stark reminder of its faded glory.

Feroz Khan, Head of Admin at FF Steels, confirmed to Nukta that monthly output of 9,000-10,000 tons has stopped entirely, forcing mass layoffs across all levels of the workforce. “The shutdown has affected everyone from daily wage laborers to highly trained engineers," Khan disclosed, noting at least 500 employees — including 20 engineers — have been terminated since operations ceased 10 months ago.

Zarak Khan Khattak, Chief Executive Officer (CEO) of FF Steels, has dismissed the possibility of reviving the plant.

Speaking to Nukta, Khattak explained that KP’s geographical disadvantage — being far from Pakistan’s main ports and commercial hubs like Karachi and Lahore — has hurt the company’s competitiveness. "KP is at the tail-end of Pakistan, which pushes you away from ports and major markets," he said, adding that the region’s once-competitive edge in energy costs had been "put in the national basket", with gas and electricity prices averaged out across provinces, leading to higher costs.

Khattak also pointed to missed opportunities in regional trade, noting that KP’s proximity to Afghanistan could have been a gateway to Central Asia. However, he lamented that Pakistan failed to capitalize on this potential.

218 units closed

The story of FF Steels is far from an isolated incident. Across Khyber Pakhtunkhwa, once-thriving factories are falling silent, leaving behind desolate industrial estates where production has ground to a halt.

According to data from the KP Economic Zones Development and Management Company (KP-EZDMC) obtained by Nukta, of the 1,755 industrial units set up across 14 economic zones in the province, 218 have permanently closed, while work on another 336 has stalled midway. The shuttered units span a range of sectors, including steel, beverages, plastics, food processing, textiles, marble, and pharmaceuticals.

While officials claim around 218 industrial units have shut down, the Industrial Association of KP insists the actual number exceeds 500, with many closures going unreported due to financial pressures and lingering hopes of revival.

Ayub Zakori, President of the Industrial Association, told Nukta that numerous factory owners facing bank liabilities avoid formally announcing closures, fearing legal repercussions or losing future revival prospects. “Many industrialists remain silent, clinging to the hope of better conditions and eventual reopening,” Zakori said. “This is why the official records don’t reflect the true scale of the crisis.”

According to the Finance Department, Khyber Pakhtunkhwa’s annual tax collection stands at up to Rs100 billion — a figure that could dip by 10 to 15% amid a growing wave of industrial shutdowns. “KP contributes nearly 10% to Pakistan’s GDP,” noted Zakori. “With around 30% of its industries now closed, the province is staring at an annual loss of $300 to $500 million in industrial output.”

Impact on livelihood

The shuttering of industrial units has led to widespread unemployment, with conservative estimates suggesting tens of thousands have lost their livelihoods — though the actual toll may be far higher, industry leaders warn.

Zakori said even if only 218 units have officially closed — as per government records — the job losses would exceed 21,800, assuming an average of 100 workers per factory. However, he stressed that the real impact is much worse.

“Many units employed over 500 workers running day and night shifts,” Zakori told Nukta. “The actual number of unemployed is far greater than what official statistics suggest.”

A five-year-old survey of 612 industrial units in Peshawar alone revealed an employment capacity of 18,000 workers. Today, Zakori estimates half those jobs have vanished — either due to permanent shutdowns or drastic production cuts forcing layoffs.

“Units that haven’t closed completely have slashed production and downsized their workforce,” he explained. “The domino effect on families and the local economy is devastating.”

Taxes deepen the crisis

Abdul Jalil Jan, Senior Vice President of the Sarhad Chamber of Commerce and Industries (SCCI), has attributed the collapse of industries to excessive taxation, bureaucratic hurdles, and government apathy — compounding the challenges already posed by years of terrorism.

Speaking to Nukta, Jan said industries were already struggling due to security concerns, but the burden of overlapping taxes has pushed many to the brink. “Despite federal levies, the provincial government has imposed professional tax, property tax, and Infrastructure Development Cess, further squeezing businesses,” he said. “This multi-layered taxation has accelerated factory closures.”

Jan questioned the rationale behind provincial property taxes, particularly when industrial land is leased from the government. He also criticized the fragmented tax collection system, where the Excise Department, municipal authorities, and the KP Revenue Authority (KPRA) all demand separate payments, creating an unsustainable burden.

Government promises ‘revival’

KP government claims to have revived 100 out of 321 previously closed industrial units through targeted interventions, and says efforts are underway to restore more by tackling persistent challenges.

Speaking to Nukta, Abdul Karim Tordher, Special Assistant to the Chief Minister on Industries, acknowledged that while federal policies on gas and electricity pricing remain a significant hurdle, the provincial government is actively working to ease the crisis.

“The closure of factories was primarily driven by soaring utility costs, which fall under the federal domain,” Tordher explained. “However, several units also shut down due to internal partnership disputes or issues related to incentives — areas where we are pursuing viable solutions.”

He added that the KP government is focusing on indigenous resource-based manufacturing to bring down production costs. New economic zones are also being developed near PEDO hydropower projects, where electricity will be provided at PKR 20 per unit — a marked reduction from prevailing rates. “Cheaper energy will serve as a key driver for industrial revival and help attract new investments,” Tordher said.