DISCLAIMER

The purpose and scope of this Pre Feasibility Study is to introduce the Project and
provide a general idea and information on the said Project including its marketing,
technical, locational and financial aspects. All the information included in this Pre-
Feasibility is based on data/information gathered from various secondary and primary
sources and is based on certain assumptions. Although, due care and diligence has been
taken in compiling this document, the contained information may var y due to any change
in the environment.

The Planning & Development Division, Government of Pakistan, nor Management
Advisory Center who have prepared this Pre-Feasibility or National Management
Consultants (Pvt.) Ltd. assume any liability for any financial or other loss resulting from
this Study.

The prospective user of this document is encouraged to carry out his/her own due
diligence and gather any information he/she considers necessary for making an informed
decision

i
TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................................................iii

CHAPTER 1 - INTRODUCTION...................................................................................1
1.1 OVERVIEW................................................................................................................................................1
1.2 OBJECTIVES AND SCOPEOF STUDY..............................................................................................1
1.3 METHODOLOGY.....................................................................................................................................2
1.4 STUDYTEAM...........................................................................................................................................2

CHAPTER 2 TECHNICAL EVALUATION..............................................................3
2.1 SERVICE SECTOR...................................................................................................................................3
2.2 RANGE OF FACILITIES.........................................................................................................................3
2.3 TECHNICAL KNOW-HOW...................................................................................................................4
2.4 FACILITIES/UTILITIES REQUIRED FOR PROJECT....................................................................4
2.5 LOCATIONAL ANALYSES ...................................................................................................................6
2.6 MANPOWER REQUIREMENT.............................................................................................................6
2.7 PROJECT IMPLEMENTATION SCHEDULE....................................................................................7
2.8 CORPORATE STATUS OF PROJECT.................................................................................................7
2.9 MANAGEMENT STRUCTURE/ORGANOGRAM...........................................................................8
2.10 SYSTEM S AND PROCEDURES...........................................................................................................9
2.11 TRAINING ................................................................................................................................................10

CHAPTER 3 MARKET EVALUATION..................................................................11
3.1 GLOBAL PERSPECTIVE......................................................................................................................11
3.2 REVIEW OF SELECTED HEALTH CLUBS IN DEVELOPED COUNTRIES.........................12
3.3 HEALTH CLUBS IN PAKISTAN........................................................................................................13
3.4 PROSPECTS FOR NEW FACILITIES ..............................................................................................26

CHAPTER 4 FINANCIAL APPRAISAL..................................................................28
4.1 COST OF PROJECT................................................................................................................................28
4.2 FINANCIAL PLAN................................................................................................................................. 28
4.3 EARNINGS FORECAST .......................................................................................................................29
4.4 RATES OF RETURN..............................................................................................................................29
4.5 PAYBACK PERIOD ...............................................................................................................................30
4.6 CAPITAL: OUTPUT RATIOS..............................................................................................................30
4.7 CASH FLOW............................................................................................................................................31
4.8 BALANCE SHEET.................................................................................................................................. 32

CHAPTER 5 CONCLUSIONS ..................................................................................33

LIST OF TABLES
TABLE 1 FACILITIES AT HEALTH CLUBS......................................................................................................5
TABLE 2 POPULATION OF MAJOR CITIES........................................................................... ..6
TABLE 3 MANPOWER REQUIREMENTS...................................................... ..7
TABLE 4 PROJECT IMPLEMENTATION SCHEDULE............................... ...7
TABLE 5 POPULATION OF MAJOR CITIES............................27
TABLE 6 COST OF PROJECT .......................................28
TABLE 7 FINANCIAL PLAN.......................................... .. 29
TABLE 8EARNINGS FORECAST... .............................29
TABLE 9RATES OF RETURN................................... ..30
TABLE 10- CAPITAL: OUTPUT RATIOS.............................30
ii
TABLE 11- CASH FLOW... ...............................................31
TABLE 12BALANCE SHEET..................................... ..32

ANNEXURE - 1 PAKISTAN - A PROFILE

iii
EXECUTIVE SUMMARY

INTRODUCTION
Prevention of diseases and the desire to lead a healthy, productive life is causing
people to take up walking, jogging, swimming and use of various facilities at
health clubs.

The objective of this pre-feasibility study is to assess the viability of setting up a
chain of health clubs and spa facilities in the country.

TECHNICAL EVALUATION
This is a service sector project allied to the leisure, entertainment and hospitality
business. There are no fixed parameters describing the facilities which a health
club should have, however, at the very least such centres contain gymnasium
equipment and the wider range of services also includes spa/jacuzzi, sauna,
swimming pool, aerobics, squash courts, tennis, yoga, physiotherapy, massage,
cosmetic treatment, etc.

Health resorts have been developed in USA, Europe, Far East, etc. where people
go for 2-3 weeks of therapeutic treatment to shed harmful habits such as drug
addiction, alcoholism, smoking and for treatment of ailments associated with
high cholesterol, high blood pressure, hypertension, insomnia, etc.

The project plans to set up seven health clubs (3 Category A clubs and 4
Category B clubs) in seven leading cities of the country. Successful operation of
this business necessitates combining professional expertise in health maintenance
and fitness, leisure/entertainment and hospitality.

The seven health clubs will be monitored and managed from the head office with
unit offices and management at each club. Client relations, maintenance of
iv
facilities & equipment and human resource management need special attention of
the companys management.

MARKET
Global trend is towards increasing use of health clubs. There are about 40 million
members of health clubs in USA at present which is expected to increase to 50
million by year 2010. Health and fitness is a US $ 14.1 billion industry serving
nearly 30 million members in the USA.

Some of the leading health clubs in USA and Europe are and the same have been
briefly discussed in Chapter 3 of this study:

- Bally Total Fitness, USA
- Reebok Sports Club, London, UK
- Golds Gym, USA
- The Sports Club, USA

Health club facilities in Pakistan are available at five star hotels, country clubs
and one specialized health club chain (M/s Shapes Private Limited). An
international chain in healthy lifestyle products/foods M/s Osim International is
planning to set up 25 outlets in Pakistan in a joint venture with M/s Bee
Enterprises, Lahore.

Country clubs in Pakistan are charging very high admission fees and some have
even stopped taking in new members for last many years. This indicates a large
potential of new members who desire membership but are unable to join due to
club policies.
v

FINANCIAL APPRAISAL
Total cost of the project is estimated at Rs. 1,268.154 million including
working capital of Rs. 20.000 million. Financial operating results for the first
five years are given below and presented in detail in Chapter 4.

EARNINGS FORECAST
(Rs. in 000)
1
st
Year 2
nd
Year 3
rd
Year 4
th
Year 5
th
Year
Revenue Receipts
(Income) 505,950 375,533 506,970

646,740 822,245
Gross Profit 406,345 272,762 400,886 537,191 709,070
Operating Profit 398,535 265,632 391,816 526,099 695,598
Net Profit 199,381 124,857 202,131 284,151 386,802

CONCLUSIONS
In conclusion it may be stated that there is large potential demand for health
clubs and spa facilities in all large cities and urban centres of the country. New
projects will find abundant clientele with financial resources and the desire to
acquire membership of such clubs.

Prospective investors, both Pakistani and foreign need to be motivated to invest
in this sector.

1



CHAPTER 1
INTRODUCTION

1.1 OVERVIEW
Physical fitness and preservation of good health has been an important concern of
humans since time immemorial. Early recorded history shows that the wealthy
and privileged class would rely on herbs and medicines as health supplements and
also visit natural springs which were famous for their health giving, therapeutic
qualities.

Urban lifestyles have given rise to a host of illnesses and diseases which are
associated with the fast-paced, high pressure lives people experience in city
living. Some developed countries, owing to high prosperity levels are now
discovering that a large percentage of the population is obese (overweight). More
than 64% of American adults are categorized as obese, with nearly 31% of adults
(over 61 million people) meeting the criteria for obesity.

Gymnasia (exercise and body building centres) are the fore-runners of the present
day health clubs and Spa centres. More modern, versatile and efficient exercising
equipments are being designed for use which enable more parts of the body to be
exercised at one time, and which burn higher level of calories (thereby reducing
weight and providing all round fitness). Equipment has also been designed for
cardiovascular disease prevention and specific therapeutic effects.

1.2 OBJECTIVES AND SCOPE OF STUDY
The objective of this pre-feasibility study is to assess the viability of setting up a
chain of health clubs and spa facilities in the country. Selected cities have been
chosen for establishment of such facilities in the first phase, followed by
additional clubs as necessitated by increasing user demand.


2



1.3 METHODOLOGY
Data collection methodology adopted for this study is described below:-
- Data from secondary sources was collected and analyzed. Government
publications were consulted and relevant data compiled.
- Primary sources of data were identified and contacted for collection of
unpublished information.
- Data was collected on costing inputs, admission fees, monthly subscription/fees,
etc. of existing health clubs alongwith cost of operations to evaluate financial
viability of the project.

The consultants have adopted project appraisal techniques followed by
development financing institutions (DFIs) in the country which will facilitate
procurement of financial assistance.

1.4 STUDY TEAM
The study team consisted of a market analyst, technical expert and financial
analyst who contributed their inputs, coordinated by the team leader. Support staff
consisted of field surveyors, data tabulator and computer operator.





3



CHAPTER 2
TECHNICAL EVALUATION

2.1 SERVICE SECTOR
Health club and Spa centres are service sector projects which need to be evaluated
differently from conventional project appraisal techniques/methodology applied
to manufacturing industries. Such projects assist in reducing the need for health
care and substantially reduces the cost of health care for both Governments and
medical/health insurance companies.

The service sector in national economies is growing rapidly both in developed
countries as well as developing nations. Pakistans Gross Domestic Product of US
$ 103 billion in 2004-2005 consisted of a 52.2 % share from the service sector
(equivalent to US $ 53.77 billion). The USAs GDP of US $ 10,600 billion in
2004 had a 65 % share from the service sector (US $ 6,890 billion).

2.2 RANGE OF FACILITIES
There are no fixed parameters describing the range of facilities which a health
club should have, however, at the very least such centres contain weight control
equipment (which traditionally was found in gymnasia). The larger health clubs
offer a much wider range of facilities and services, such as: Weight control
equipment, Spa (J acuzzi), Sauna (Dry and Wet), Swimming Pool, Squash Courts,
Tennis, Table Tennis, Aerobics, Yoga, Physio therapy, Massage therapy,
Nutrition Courses and Health supplements

Some health centres and Spa facilities in USA and European countries are
comprised of large health resorts with natural springs and health care/therapeutic
facilities including horse riding, indoor /outdoor games, etc. Such facilities are
usually frequented by the wealthy who spend 2-3 weeks under health supervisors
in an attempt to shed harmful habits such as drug addiction, alcoholism, smoking,

4



etc. It has resort quality residential accommodation which is also used by people
coming for treatment of ailments such as high cholesterol, high blood pressure,
hypertension, insomnia, etc.

Some resort facilities in Europe offer the following range of services: Cosmetic
Treatment, Therapies, Acupuncture, Counselling, Physiotherapy, Podiatry,
Shiatsu Massage, Sports Massage and Teeth Whitening

Some natural springs, geysers in Pakistan are suitable for developing such health
resorts, however, at present no such facility exists in the country. Potential spots
for health resorts are located at Garam Chashma in Chitral Valley. Located at a
distance of 45 km from Chitral town at an elevation of 1,859 metres (6,100 feet)
above sea level, its name translates to Hot Springs. The natural geyser contains
minerals and other ingredients which have curative and healing properties.

2.3 TECHNICAL KNOW-HOW
This type of project combines professionalism and expertise from various areas,
such as health maintenance and fitness, leisure/entertainment and hospitality
businesses. Clients normally come to such centres for both physical fitness and
leisure/entertainment aspects.

Modern day urban life is hectic, high pressure and very demanding on a persons
physique. Such health centres enable people to shed the stress and strains of daily
life, maintain health and physical fitness and feel mentally and physically
rejuvenated. Professional expertise combining the above disciplines is essential
for successful operation of this business.

2.4 FACILITIES / UTILITIES REQUIRED
This project is part of the larger health/leisure business and is service oriented.
There is a need for exercise, weight control and fitness equipment which
constitutes substantial investment. Facilities and utilities needed for the health

5



club and Spa facilities and the head office and its estimated investment are given
in Chapter 4.

The project will purchase land in leading commercial areas of the seven cities and
construct the facilities. specially designed for the health club and spa facilities.

The project will operate two categories of health clubs and spa facilities as
described in Table 1 below.

TABLE - 1
FACILITIES AT HEALTH CLUBS
Category A Club Category B Club
Built-up
Area:
Facilities:

10,000 square feet
Swimming Pool
J acuzzi (Spa)
Sauna
Weight Control
Fitness Centre
Aerobics
Physiotherapy
Massage therapy
Nutritional Courses
Cosmetic Treatment
6,000 square feet
-
J acuzzi (Spa)
Sauna
Weight Control
Fitness Centre
Aerobics
Physiotherapy
Massage therapy Nutritional Courses
in Cosmetic Treatment

Cost of constructing swimming pool, Spa/J acuzzi, sauna, etc. is given in Chapter 4.
Weight control and fitness equipment for Category A club will cost Rs. 6,236,000
for one club, and for Category B club will cost Rs. 3,159,000 per club. Details are
given in Chapter 4.

Commercial power connection from the electric distribution company in each city
is proposed to be obtained to operate the various equipment and for general

6



lighting purposes. Category A club will need a connected load of 100 KW, whilst
Category B club will require 70 KW.

Clean water is needed for the swimming pool, Spa (J acuzzi), sauna and human
consumption and cleaning purposes. Estimated expenses are given in the Earnings
Forecast (Annex 5 and 5.1).

2.5 LOCATIONAL ANALYSES
The largest seven urban centres have been selected for initial location of Category
A and Category B clubs. The literacy rates and average income levels (individual
and family incomes) are relatively higher in these urban centres, hence a larger
clientele is expected from these cities. Analyses of each of the seven cities is
given in Chapter 3.

TABLE - 2
POPULATION OF MAJOR CITIES
Population
(000)
S.
No.
City
1998 2005

Category of Health
Club to be Established

1
2
3
4
5
6
7

Karachi
Lahore
Faisalabad
Multan
Hyderabad
Peshawar
Islamabad
9,269
5,143
2,009
1,197
1,167
988
529
13,943
7,236
2,653
1,484
1,456
1,304
645

A
A
B
B
B
B
A
Source: Population data for 1998 based on Census 1998. Estimated for year 2005

2.6 MANPOWER REQUIREMENTS
The health club project will need to employ experts with experience in the
operation of health clubs, Spas, swimming pool maintenance, etc. In addition
skilled and unskilled workers will also need to be employed.


7



TABLE - 3
MANPOWER REQUIREMENTS
No. of
Clubs
Staff at
each Club
Total No.
of Staff
Category A Club 3 37 111
Category B Club 4 27 108
Head Office Staff 1 26 26
TOTAL 245

2.7 PROJECT IMPLEMENTATION SCHEDULE
The project needs a team of professionals who will be associated with the initial
planning of the various health clubs, site selection activities and undertake related
commencement tasks. Setting up of 7 health clubs simultaneously is not practical
and will have to be phased over a period of time. The seventh facility could be
established in 24 months time from date of opening of the first club. Complete
project is expected to be implemented in 48 months as estimated below by main
activities.

TABLE - 4
PROJECT IMPLEMENTATION SCHEDULE
Activity / Stage
Time Required
(months)
Preparatory activities (preparation of feasibility
study, application for financial assistance, etc.)

2.0
Sanctioning of financial assistance 3.0
Fulfillment of post-sanction formalities, allocation
of funds, legal documentation, etc.

3.0
Opening of first health club 24.0
Opening of the 7
th
health club 48.0

2.8 CORPORATE STATUS OF PROJECT
The sponsors of the project may find it preferable to own and operate the business
through a private limited company (to be incorporated in Pakistan under the
Companies Ord. 1984). Although the option of incorporating a public limited
company is also available to them, investors are not accustomed to this type of

8



company being listed on the stock exchange and proper response may not be
received on flotation of shares.

2.9 MANAGEMENT STRUCTURE / ORGANOGRAM
The project involves substantial investment in setting up a network of health clubs
and Spa facilities and a corporate head office. Professional management in all
spheres and at all levels is essential to ensure corporate profitability. The
proposed management structure is described below and depicted in the form of an
organogram (see Figure1).

The Board of Directors will be the highest level of policy making and supervisory
body, presided over by the Chairman of the Board of Directors. It is elected by the
shareholders at the Annual General Meeting, and performs various functions as
laid down in the Companies Ord. 1984 in conjunction with the Memorandum of
Association and Articles of Association of the Company.

The Managing Director performs his functions in accordance with the MA/AA of
the company and as per policy guidelines laid down by the Board, to which he is
accountable. The Managing Director must be a qualified, experienced
professional in the field of health clubs/resorts, leisure and entertainment
business.

Director Operations is a senior level executive position which needs to be filled
by a professionally competent person. Director Operations will perform a crucial
role in the successful running of the health clubs all over the country.

9



FIGURE -1
PROPOSED ORGANOGRAM OF A HEALTH CLUB















2.10 SYSTEMS AND PROCEDURES
The organizations success is largely dependant upon the construction and
installation of high quality facilities and equipment and effective marketing. In
addition to these, appropriate organizational systems and procedures are also
vitally important, such as:-

Marketing and Outreach
Client Relations
Maintenance of Facilities and Equipment
Human Resource Management
Finance and Accounts
ORGANOGRAM
Baord of Directors
Managing Director

Director Operations
General Manager
Finance &
Administration
Chief
Accountant
Manager
Admin
Accounts
Officer
Health Club Health Club Health Club
Health Club

10



Due importance needs to be given to the management aspect by the board of
directors and senior executives in order to ensure organizational efficiency and
profitability.

2.11 TRAINING
The human resource aspect is of primary importance since privileged clients, who
pay high fees/charges, expect efficient and courteous service from the clubs staff.
Newly hired staff needs to be given training on client relations, prompt handling
of problems, etc. to ensure satisfaction of clients.

Health Club and spa Project will need highly skilled and properly trained
manpower in the facilities proposed in this study, in specialised areas e.g. J acuzzi,
Sauna, Aerobics, Physiotherapy, Nutrition, Cosmetology, etc. and in all aspects of
the hospitality industry.

For this propose, it is emphasised that specialists in these fields are engaged to
operate the club facilities. The selected manpower may be obtained from the
various government and private sectors run training centers such as Pakistan
Hotel and Tourism Management Institute in Karachi and even from physical
education departments of public universities.

11



CHAPTER 3
MARKET EVALUATION

3.1 GLOBAL PERSPECTIVE
There is an increasing focus on the importance of physical fitness both as a
measure to prevent common diseases associated with urban lifestyles, such as
cardiovascular diseases, hypertension, insomnia, etc. and to improve ones level
of physical fitness.

One form of exercise is jogging/walking which does not need any equipment.
However, a range of equipment, devices and facilities have been progressively
developed which cater to discerning users. There are no global statistics available
on the subject which could indicate the number of health centres/resorts and total
number of users of such facilities.

The International Health, Racquet and Sports Club Association indicates that
there are approximately 40 million adult members of fitness centres in USA
(about 9.4% of the total population) which is expected to increase to 50 million by
the year 2010. This reflects an increase of 10 million members in about 6 years.

America is facing an epidemic level rise in chronic conditions caused by obesity
and the health behaviours associated with them. Unfortunately, these conditions
come with a staggering price, paid primarily by employers and tax-payers.
Consider the following facts:-

More than 64% of US adults are overweight or obese, with nearly 31 percent of
adults over 61 million people meeting the criteria for obesity
Studies estimate between $69-117 billion/year are spent in direct medical costs
58 million days of work are lost annually
$5.7 billion is lost in revenue

12




Health and fitness is a $ 14.1 billion industry, serving nearly 40 million members
in the USA. Nutrition and weight loss is a $44 billion industry in USA alone.

3.2 REVIEW OF SELECTED HEALTH CLUBS IN DEVELOPED
COUNTRIES
Bally Total Fitness is the largest and only nationwide, commercial operator
of fitness centers in USA with approximately four million members and nearly
420 facilities located in 29 states, Canada, Asia and the Caribbean, operating
under the popular brands Bally Total Fitness, Crunch Fitness, Sports Clubs of
Canada, Pinnacle Fitness, Bally Sports Clubs and Gorilla Sports. The company
enjoys more than 150 million annual visits by members to its facilities.

Bally Total Fitness, USA continues to expand and upgrade its fitness center
operations while simultaneously introducing and growing a number of business
initiatives. In addition to its nearly 420 facilities, Bally offers personal training
services, a line of proprietary nutritional supplements and in-club retail stores in
its fitness centers. Bally also distributes its private label nutritional products and
portable fitness equipment through major retailers and grocery stores.

Reebok Sports Club, London, UK is a premier 100,000 square foot lifestyle
club located in Canada Square, Canary Wharf. It is one of Europe's largest private
members sports club occupying three football pitches worth of Space over three
levels. The Club offers the latest in cardiovascular and strength training
equipment, group exercise classes, purpose-built Pilates Studio, multi-sports hall,
13 metre climbing wall, swimming pool, luxurious locker rooms, business centre
for conferences and functions, Reebok Bar and Deli, The Spa and the Reebok
Sports Shop.

Golds Gym, USA started its first facility on fitness in 1965 dating back to the
original Golds Gym in Venice, California. From that first gym in Venice, Golds

13



Gym has become the largest co-ed gym chain in the world with more that 600
facilities in 43 states in USA and 25 other countries.

Golds Gym has expanded its fitness profile to offer all of the latest equipment
and services including group exercise, personal training, cardiovascular
equipment, spinning, Pilates and yoga, while maintaining its core weight lifting
tradition. With nearly 3 million members worldwide, Golds Gym continues to
provide state of the art fitness centre facilities in 26 countries. Members of Golds
Gym run 556,800 miles a day, or 23 times around the earth.

The Sports Club/LA in Boston, USA is a 100,000 square foot luxury sports and
fitness complex designed for every fitness need. Recognized as the finest sports
and fitness complex in the world, The Sports Club/LA features over 40 different
sports and fitness options under one roof, offering the most popular and
progressive facilities, services and programming combined with personalized
service in an atmosphere of unprecedented comfort and convenience.

3.3 HEALTH CLUBS IN PAKISTAN
The traditional body building gymnasium has existed in Pakistan for decades,
however, its modern health club concept is of more recent origin. Large cities,
towns still have many facilities which offer opportunities for body building and
weight control. Modern health clubs exist in five star hotels and country clubs in
large cities and in the form of specialized health clubs as well.

Health clubs in seven largest cities and urban centres has been proposed in this
prefeasibility study, each club to be of world class standard. The facilities will be
purpose-built (customized) to meet the requirements of an international standard
health club.

Analyses of the seven cities and urban centres is given hereunder consisting of
population base, economic/commercial profile, existing health clubs and country

14



clubs, hotels, etc. (with health club facilities) number of members of health clubs,
country clubs, population segment considered to be potential clients of the new
health clubs, etc.

KARACHI
Karachi with a population of about 14 million growing at 6% per annum mainly
due to in-migration from other regions in the country, the metropolis is the
countrys leading industrial/commercial centre and financial hub. It has thousands
of large/sizeable industrial units and commercial establishments, a busy airport
and the largest seaport (perhaps the only port since Port Qasim is also considered
to fall within its urban periphery). With the commissioning of Gwadar deep sea
port in Balochistan province the city will have two out of three seaports which
currently handles over 11.00 million tons of both inbound and outbound cargo.

Specialized health clubs have made a beginning in Pakistan with SHAPES (Pvt)
Ltd. being the first such venture with a countrywide chain of high quality health
clubs. There are other such ventures which operate at a lower level.

SHAPES (Pvt.) Limited started its first health club facility in 1995 at Lahore
and has in ten years time, established 6 health centres all over the country. It is
ISO-9001/2000 Quality Management System Certified and has more than 1,000
members. The Club offers the following package to its members:-

Facilities offered include executive gym (including hi-tech cardiovascular &
resistance machines), Squash courts (international quality conformance
standards), Air conditioned gymnasium (separate Mens & Ladies Gym), Covered
& heated swimming pool, Steam, sauna & J acuzzi baths, Aerobics (ladies &
gents), Table tennis, Exercise Physiologist clinic for muscles injury prevention,
diet and nutrition

15



Member Benefits include a family membership (4 children under 21 years)
special discount at shapes Caf, free 15 guests per annum, Aerobics =Rs. 800/-
month, Nationwide usage.

Billing Criteria used by Shapes is:
One Time Membership Fee Rs. 400,000/-
Monthly Subscription Rs. 600/- month
Per Person Rs. 350/- month
Child Rs. 100/- month

Persons who acquire permanent membership of the company can use the facilities
anywhere in the country. Shapes also brings out a Quarterly Newsletter Connect
which advises members on food safety and nutrition matters.

Karachi has a number of large and some very old country clubs (established
over 100 years ago) almost all of which have high quality health club facilities.
The level of existing membership, admission fees and waiting list is briefly
described below to assess the potential volume of members who wish to obtain
membership but are unable due to clubs policies.

KARACHI GYMKHANA CLUB
Established about 130 years ago it has a total membership of over 8,000 members.
The club has stopped taking in new members since the last 15 years (only existing
members sons/daughters are eligible to apply for membership). Recently the club
has formulated a system whereby an existing permanent member can surrender
his membership which the club management will sell to a new member at Rs. 2.00
million (50% to be given to the member surrendering the membership and 50% to
be kept by the club). There are people who are interested in acquiring membership
by paying the very large sum of Rs. 2.00 million.



16



KARACHI CLUB
An old and established club with wide range of sporting and health club facilities
it has 6,500 members. Admission of new members is open (after due selection
process) at a joining fee of Rs. 800,000. The club has a modern gymnasium,
fitness centre, sauna/jacuzzi facilities, swimming pool, squash and tennis courts,
etc.

SINDH CLUB
This is a very exclusive club with limited membership (about 700 persons). Only
sons/daughters of existing members are eligible for membership. All health club
facilities exist in the club including other sporting activities and residential
accommodation.

CREEK CLUB
Set up about 12 years ago by the Defence Housing Authority it has over 1,200
members with an admission fee for new members presently fixed at Rs. 600,000.
Facing the Arabian Sea it has a wide range of recreational facilities including
international standard health club services.

DHA COUNTRY AND GOLF CLUB
A venture of the defence authorities, it has an 18 hole golf course, shaded
swimming pool (for men, women and children), Spa facilities for ladies,
residential rooms (with J acuzzi) and a range of other facilities. The club has
already taken 675 Platinum members (in two tranches) at admission fees of Rs.
1.10 million each (upto J uly 2005) with more members joining in the third
tranche.

HOTELS
It is a requirement of the regulatory authorities that any hotel applying for four or
five star rating must have health club facilities. Consequently leading hotels in the
city have well equipped, modern health club facilities which can be used by hotel

17



guests, or outsiders who take membership. The following hotels have the requisite
facilities: Pearl Continental Hotel, Avari Hotel, Marriott Hotel, Sheraton Hotel,
Regent, Plaza, Beach Luxury Hotel, Airport Hotel and Hotel Mehran.

The above hotels offer a variety of health club facilities comprising a gymnasium,
swimming pool, jacuzzi, sauna, squash and tennis courts, etc.

LOCATIONAL ANALYSIS FOR KARACHI
The city is spread over more than 350 square kms with the Defence Housing
Authority and Clifton area considered to be the most expensive localities in terms
of both commercial and residential property. Within these two localities some
commercial areas are more developed and are therefore more expensive than
others.

The market price of commercial land ranges between Rs. 40,000 to Rs. 100,000
per square yard depending upon its precise location (corner plot facing main road
or side road, etc.). Cost of land is estimated taken at Rs. 85,000 per square yard
which is adequate to purchase a suitable plot, in the leading
commercial/residential area of Karachi for this project.

LAHORE
The capital of Punjab province is a rapidly growing metropolis with a large
industrial, commercial base and presence of multinational companies. With a
population reaching close to 8 million the city has historical significance from the
early days of civilization in the sub-continent.

Lahore has a number of specialized health clubs, country clubs with international
standard health clubs and 4-5 star hotels with well equipped health club facilities.
Growing economy and rising income levels is increasing public awareness
relating to disease prevention and physical fitness which is causing more and

18



more people to take membership of health clubs. A review of existing facilities
alongwith analyses of potential sites is given below.

LAHORE GYMKHANA CLUB
The club was set up over 100 years ago and presently has about 6,000 members
with admission restricted to children of existing members. It has an 18 hole golf
course and all health club facilities plus other sporting activities.

DEFENCE CLUB
A premier country club, a venture of the defence authorities, this country club
offers all types of facilities such as sports, library, TV/movies, catering,
parties/marriages, etc. It has good quality health club facilities and is a much
sought after establishment. Total current membership is 2,500 at an entry fee of
Rs. 700,000 per member.

PEARL CONTINENTAL HOTEL
This 5 star hotel has excellent health club facilities consisting of gymnasium,
fitness centre, swimming pool, sauna/J acuzzi, squash/tennis courts, etc. Hotel
guests are entitled to use the facilities without charges (this service is included in
the room tariff, however, massage, manicuring, etc. is charged separately). The
hotels tariff for using health club facilities is Rs. 5,000 per month or Rs. 30,000
per annum.

AVARI HOTEL
This hotel also has high standard health club facilities comparable to international,
world class standards. The facilities consist of swimming pool, sauna/J acuzzi,
well equipped gymnasium, fitness centre, squash court, massage, manicuring
services, etc. Annual charges are Rs. 44,000 plus General Sales Tax (15%) adding
upto a total of Rs. 50,600 per annum.



19



SHAPES (PVT.) LIMITED
This company started its first health club facility in 1995 at Lahore, and has in
ten years time, it has established 6 health centres all over the country. It is ISO-
9001/2000 Quality Management System Certified. The Club offers the following
package to its members:-

FACILITIES includes executive gym (including hi-tech cardiovascular &
resistance machines), Squash courts (international quality conformance standards)
Air conditioned gymnasium (separate Mens & Ladies Gym), Covered & heated
swimming pool, Steam, Sauna & J acuzzi baths, Aerobics (ladies & gents), Table
tennis and Exercise Physiologist clinic for muscles injury recovery, diet and
nutrition

MEMBER BENEFITS includes family membership (4 children under 21
years), Special Discount at Shapes Caf, Free 15 guests Per Annum, Aerobics =
Rs. 800/- month and Nationwide usage

BILLING CRITERIA
One Time Membership Fee = Rs. 400,000/-
Monthly Subscription = Rs. 600/- month
Per Person = Rs. 350/- month
Child = Rs. 100/- month

Persons who acquire permanent membership of the company can use the facilities
anywhere in the country. Shapes also brings out a Quarterly Newsletter Connect
which advises members on food safety and nutrition matters.

M/S OSIM INTERNATIONAL LIMITED WITH M/S BEE ENTERPRISE
LTD.
Osim International is a global leader in health lifestyle products (expected to
reach sales of US $ 1.00 billion in 2005) and in joint venture with M/S Bee

20



Enterprises Ltd. of Lahore is establishing a chain of health food stores all over the
country. It operates in 23 countries with over 700 outlets. The OSIM brand of
specialty foods has a range of 140 products with 4 major focuses:-

Health
Hygiene
Fitness
Nutrition

The company has entered into a marketing and distribution agreement with M/s
Bee Enterprises Limited, Lahore to open 25 outlets in Pakistan in 3-5 years time
in all large cities/towns of the country. The first outlet opened in Defence Housing
Authority, Lahore in late 2005.

LOCATIONAL ANALYSES FOR LAHORE
Lahores property prices have increased significantly during the last decade. The
Defence Housing Authority is currently considered to be the most expensive
housing and commercial area, followed by Garden Town, Model Town, Iqbal
Town and EME Society. In each one of these leading areas the price fluctuates
very widely depending upon the exact location of the plot. Currently market
prices range from about Rs. 30,000 per square yard to a maximum of about Rs.
120,000 per square yard. For the purpose of this prefeasibility study cost of land
has been estimated at Rs. 85,000 per square yard.

ISLAMABAD
The countrys capital presently has the highest urban land prices, higher than
those in Karachi and Lahore. The city is a concentration of federal government
offices, foreign and diplomatic missions, offices of overseas companies and
Pakistan business/industrial houses, etc.


21



With a population of about 645,000 persons, the city has a high level of literate,
educated population. It has a modern country club with high class health club
facilities. It has two five star hotels (Marriott and Serena Hotels) with
neighbouring city of Rawalpindi having the Pearl Continental Hotel, Rawalpindi
Club and Services Club.

ISLAMABAD CLUB
Spread over a very large area this club is located about 2 km from the city centre
in scenic surroundings. It has excellent health club facilities consisting of
swimming pool, sauna/J acuzzi, gymnasium and fitness centre, squash and tennis
courts. Total membership currently stands at 5,000 members with 300 persons on
the waiting list. The admission fee for new members joining the club is
Rs. 400,000.

MARRIOTT HOTEL
Known as Holiday Inn when it was originally set up, this five star hotel has high
class health club facilities which cater to the needs of international visitors and
Pakistani guests in addition to other persons who take membership facilities.

The hotel renovates and refurnishes its facilities from time to time in order to
keep all equipment and facilities in the most modern condition. Its gymnasium
and fitness centre possesses the most modern and expensive equipment. The
swimming pool, sauna/J acuzzi are excellently maintained.

SERENA HOTEL
This is a modern, luxury five star hotel with state of the art health club facilities.
In keeping with the high standards of the hotel, its health club facilities are of
world class standards. The hotels weight control room and fitness centre can
justifiably pride on its most modern and expensive equipment. The sauna/J acuzzi
facilities are similarly of excellent standards.


22



LOCATIONAL ANALYSIS FOR ISLAMABAD
With new sectors being developed alongwith new housing projects, the city is fast
expanding horizontally. The prime commercial area is the Blue Area, followed by
Mauve area, J innah Supermarket, etc. Some of the prime commercial land has
become extremely expensive (going upto Rs. 200,000 per square yard). However,
these plots are considered suitable for banks, showrooms, etc.

Commercial plots suitable for building health clubs can be purchased at prices
ranging from Rs. 80,000 to Rs. 150,000 per square yard (a rate of Rs. 140,000 per
square yard has been taken in the prefeasibility report).

FAISALABAD
This city is popularly known as textile city due to the heavy concentration of
textile mills here (spinning, weaving mills, finishing units and powerloom
factories). A population of about 2.65 million persons makes it Pakistans third
largest urban centre and a thriving industrial and commercial centre.

The city has a modern Serena Hotel with 200 rooms and good quality health club
facilities consisting of gymnasium, fitness centre, swimming pool, sauna/J acuzzi,
etc. The facilities are popular with the citys residents who need to take
membership of the health club (facilities are used by hotel guests without any
additional charge).

The Chenab Club is an old, established country club with sporting facilities and a
good health lcub (swimming pool, gymnasium, fitness centre, sauna, etc.) The
Chenab Club and Serena Hotel are both located on Mall Road, Civil Lines,
Faisalabad.

LOCATIONAL ANALYSIS FOR FAISALABAD
The D-Ground and Saddar area are prime commercial locations in this city with
land prices currently in the range of Rs. 1.50-2.50 million per marla of 30 square

23



yards (or Rs. 50,000 to Rs. 83,000 per square yard). These rates are for front,
main road locations, however, plots suitable for health clubs can be acquired for
Rs. 60,000 per square yard (which has been provided in the financial projections).

MULTAN
A city of approximately 1.50 inhabitants, Multan is situated in the heart of
Punjabs cotton growing region which is the main source of its economic activity
and prosperity. The city has a large number of cotton ginning mills, edible oil
extraction plants, textile mills, etc. and is rapidly growing into a modern
cosmopolitan centre.

HOTEL HOLIDAY INN
A modern hotel with high class health club facilities, it offers membership to the
citys residents. The health club comprises gymnasium, fitness centre, swimming
pool, sauna/J acuzzi facilities.

SERVICES CLUB (GARRISON MESS)
This club is owned and managed by the armed forces personnel, however,
membership is also offered to civilians. It has all sporting and health club
facilities which are in increasing demand by the citys residents.

MULTAN CRICKET CLUB
As the name suggests this is a club devoted primarily to cricket, however, it also
has a good health club which is used by its members.

LOCATIONAL ANALYSIS FOR MULTAN
Hussain Agahe Market and Saddar Bazar (Multan Cantonment area) are the two
leading commercial centres of the city. Prices of commercial property in these
two areas ranges between Rs. 20,000 to Rs. 40,000 per square yard. Cost of land
has been taken at Rs. 35,000 per square yard in this study.


24



HYDERABAD
The second largest city of Sindh province has developed into an industrial and
commercial centre on the basis of a rich agricultural hinterland growing a range of
food and cash crops. The Kotri industrial area adjoining the city is a rapidly
expanding centre of manufacturing units.

The citys population is presently estimated at 1.46 million making it the fifth
largest urban centre in the country. It has a number of body building clubs,
however, there is no specialized health club which offers the full range of
services, facilities.

LOCATIONAL ANALYSES FOR HYDERABAD
The city has commercial areas which have developed traditionally with the
growth of the city as well as new commercial areas which have been specially
developed in recent years. Leading commercial areas which are suitable for
locating a health club, alongwith current market prices are analyzed below.

Defence Housing Authority (Sector II) is a newly planned, developed commercial
area where land prices range between Rs. 35,000 to Rs. 45,000 per square yard
depending upon precise location of the plot.

Saddar Bazaar (Cantonment area) is a popular commercial area with prices of
plots in the region of Rs. 32,000 to Rs. 40,000 per square yard. Qasimabad (near
Latifabad Housing Colony) is another leading commercial area with land prices in
the range of Rs. 30,000 to Rs. 45,000 per square yard.

Other commercial areas which are suitable for the project are:- Tilak Charrhi,
Shahi Bazaar, Gari Khata, Fakir-ka-Pir and Hala Naka.
Prices of commercial land in the above areas generally range between Rs. 20,000
to Rs. 40,000 per square yard. Financial projections in the prefeasibility study

25



have been made on the basis of Rs. 40,000 per square yard which is adequate to
purchase a suitable plot of land.

PESHAWAR
A city of 1.30 million residents the capital of NWFP province has become the
centre of industrial, commercial and economic activities not only for the NWFP
province but also for the entire Northern Areas. Industrial sector, agriculture,
mining, extraction of precious and semi-precious stones, trade with Afghanistan,
etc. are some of the main activities which are fueling the citys economic
development.

The city has a number of clubs, good hotels which provide the citizens with
recreational and sporting facilities.

PESHAWAR CLUB LIMITED
A sprawling country club with good sporting and health club facilities, it is
popular with the high income category population.

SERVICES CLUB
This club caters to members of the defence forces and has a wide range of
facilities including a good health club.

PEARL CONTINENTAL HOTEL
This five star hotel has excellent health club facilities consisting of gymnasium,
fitness centre, sauna/J acuzzi, swimming pool, etc. which are used by hotel guests
and also other persons who acquire membership.

LOCATIONAL ANALYSIS FOR PESHAWAR
Main commercial areas of the city are analyzed below alongwith present land
prices.


26



SADDAR (CANTONMENT)
This is a prime shopping area with very high prices of commercial property
ranging from Rs. 150,000 to Rs. 250,000 per square yard. This area is suitable for
shops, showrooms, banks, etc.

PESHAWAR ROAD
This is a rapidly developing area with property prices ranging from Rs. 100,000 to
Rs. 140,000 per square yard. The plots are generally of small sizes suitable for
shops, showrooms, etc.

HAYATABAD
This area has both industrial and commercial plots in distinctly demarcated
regions. Commercial plots are currently priced between Rs. 60,000 to Rs. 80,000
per square yard depending upon location.

UNIVERSITY ROAD
This is a relatively more recent commercial area which is fast developing due to
its favourable location. Prices of commercial plots are between Rs. 30,000 to Rs.
40,000 per square yard.

Land prices in the prefeasibility study have been taken at Rs. 65,000 per square
yard which is sufficient to purchase a suitably located plot for the project.

3.4 PROSPECTS FOR NEW FACILITIES
Conventional techniques applied to ascertain consumer demand for industrial
products can not be applied to this service sector. Existing country clubs (which
also have health clubs and fitness centres) were contacted to determine the level
of membership, admission fees and subscription charges, and the number of
persons waiting to become members. This will provide an indication of the
potential demand for such services, facilities.

27



As is evident from the previous sections that existing clubs are insufficient to
cater to the increasing demanded for such facilities in view of very high
admission fees and restriction on admission of new members by some clubs.

The success of Shapes is also an indicator that more health clubs and Spa facilities
are needed in the country. Members generally come from the educated and
wealthy class who reside in large cities. Total population of selected cities,
estimated number of households and the number of households which are
considered as potential members are shown below.

TABEL - 5
POPULATION OF MAJOR CITIES
Population
(000) S.
No.
City
1998 2005
Estimated No.
of Households
In 2005
10% of
Households
are Potential
Members
1 Karachi 9,269 13,943 2,788,600 278,860
2 Lahore 5,143 7,236 1,447,200 144,720
3 Faisalabad 2,009 2,653 530,600 53,060
4 Multan 1,197 1,484 296,800 29,680
5 Hyderabad 1,167 1,456 291,200 29,120
6 Peshawar 988 1,304 260,800 26,080
7 Islamabad 529 645 129,000 12,900
TOTAL 5,744,200 574,420
Source: National Census 1998 for 1998 population data estimated for year 2005
Note: Average household size of 5 members has been assumed to estimate
number of households/families in each city.

Ten percent of the population is estimated to have the financial resources to
obtain membership of the proposed health club facilities. One person from the
family takes membership which entitles all household members to avail club
facilities. In comparison to 574,420 families/households who are considered as
potential members of the health clubs in all seven cities, the financial projections
are based on 1,350 members in the first year of operation (for all seven cities),
rising to 1,823 members in the second year, 2,460 members in the third year and
3,322 members and 4,484 members in the fourth and fifth years of operation.

28



CHAPTER 4
FINANCIAL APPRAISAL

This chapter evaluates various financial aspects of the project (cost of project,
earnings forecast, rates of return, payback period, cash flow, balance sheet, etc.).
Wherever calculations, workings, etc. are voluminous, a summarized version is
presented in this chapter.

4.1 COST OF PROJECT
Total project cost is estimated at Rs. 1,268.154 million as shown below in
summarized form (details in Annex 4 and 4.1).

TABLE - 6
COST OF PROJECT
(Rs. in 000)
Head of Expenditure Amount
Land 921,800
Buildings and Civil Works 207,200
Facilities and Equipment:-
Category A Club 30,108
Category B Club 22,236
Partitioning, Furnishing and Air-conditioning 16,800
Investment in Head Office and Unit Offices 4,985
Vehicles 2,975
Preliminary and Pre-operating Expenses 5,850
Contingencies 36,200
Fixed Cost 1,248,154
Working Capital 20,000
TOTAL PROJECT COST 1,268,154

4.2 FINANCIAL PLAN
The project is proposed to be financed through a combination of equity and
Ijara/Lease financing in the ratio of 50:50 respectively. The financial assistance
(Ijara/Lease) will carry a profit markup rate of 9 percent per annum payable over
a period of ten years.

29



TABLE - 7
FINANCIAL PLAN
(Rs. in 000)
Source of Finance Share Local Currency Total
1) Financial Assistance
Ijara/Lease Financing 50 %

634,079 634,077
Sub-Total (1) 50 % 634,079 634,077
2) Equity
Sponsors 50 %

634,077 634,077
Sub-Total (2) 50 % 634,077 634,077
TOTAL (1) + (2) 100 % 1,268,154 1,268,154

4.3 EARNING FORECAST
A summarized version of the Earnings Forecast is given below.

TABLE - 8
EARNINGS FORECAST
(Rs. in 000)
1
st
Year 2
nd
Year 3
rd
Year 4
th
Year 5
th
Year
Revenue Receipts
(Income)

505,950

375,533

506,970

646,740

822,245
Cost of Services 99,605 102,771 106,084 109,549 113,175
Gross Profit 406,345 272,762 400,886 537,191 709,070
Total Operating Expenses 7,810 7,130 9,070 11,092 13,472
Operating Profit 398,535 265,632 391,816 526,099 695,598
Total Markup &
Amortizations 58,237 52,530 46,823 41,116 35,409
WPPF +WWF 23,821 14,917 24,150 33,949 46,218
Profit Before Taxes
Provision For Taxes
316,477
117,096
198,185
73,328
320,843
118,712
451,034
166,883
613,971
227,169
Net Profit 199,381 124,857 202,131 284,151 386,802
DIVIDENDS:
Percent
Amount
Retained Earnings
Cum. Retained Earnings
25 %
158,519
-
40,862
25 %
158,519
(33,662)
7,200
25 %
158,579
43,612
50,812
25 %
158,579
43,612
50,812
50 %
317,039
69,764
182,800

4.4 RATES OF RETURN
On the basis of the earnings forecast and related projections, rates of return for the
project are calculated below.

30



TABLE - 9
RATES OF RETURN
(in Percentages)
Year 1 Year 2 Year 3 Year 4 Year 5
Gross Profit to Sales 80.31 72.63 79.07 83.06 86.24
Oper. Profit to Sales 59.00 70.73 77.29 81.36 84.60
Net Profit to Sales 39.41 33.25 39.87 43.94 47.04
Net Profit to Equity 31.44 19.69 31.88 44.81 61.00

4.5 PAYBACK PERIOD
Payback period for the project, both in terms of owners equity and total
investment, is calculated below.
Total Investment = Rs. 1,268.154 million
Equity = Rs. 634.077 million

(Rs. in 000)
Year Net Profit
1 199,381
2 124,857
3 202,131
4 284,151
5 386,802

Payback period for Equity = 3.38 years
Payback period for total investment = 5.20 years

4.6 CAPITAL: OUTPUT RATIOS
Capital output ratios, representing the revenue generation potential of the project
in relation to the investment involved in its establishment, are calculated below.

TABLE 10
CAPITAL: OUTPUT RATIOS
(Rs. in 000)
Year 1 Year 2 Year 3 Year 4 Year 5
Total Investment - - 1,268.154 - -
Sales (Output) 505.95 375.53 506.970 646.74 822.25
Capital: Output Ratio 1:0.40 1:0.30 1:0.40 1:0.51 1:0.65

31



4.7 CASH FLOW
Projected cash flow of the project is shown hereunder.

TABLE - 11
CASH FLOW
(Rs. in 000)

End of
Constr.
1
st
Year 2
nd
Year 3
rd
Year 4
th
Year 5
th
Year
SOURCES

Net Profit
Add back:
Depreciation
Amortization


-

-
-


199,381

19,458
1,170


124,857

19,458
1,170


202,131

19,458
1,170


284,151

19,458
1,170


386,802

19,458
1,170
Funds from Operation - 220,009 145,485 222,759 304,779 407,430

Paid-up Capital
Lease Financing
Inc. in Current Liability


634,077
634,077
-

-
-
5,000

-
-
2,000

-
-
2,000

-
-
2,000

-
-
2,000
TOTAL INFLOW 1,268,154 225,009 147,485 224,759 306,779 409,430

USES
Fixed Assets
Cap. Expenses
Repay of Lease Inst.
Payment of Dividends
Increase (Decrease) in
Current Assets


1,242,304
5,850
-
-

-


-
-
63,408
-

12,969


-
-
63,408
158,519

(9,308)


-
-
63,408
158,519

7,072


-
-
63,408
158,519

7,488


-
-
63,408
221,927

9,275
TOTAL OUTFLOW 1,248,154 76,377 231,235 228,999 229,415 294,610

Surplus / (Deficit)
Cash Opening Balance
Cash Closing Balance

20,000
-
20,000

148,632
20,000
168,632

(83,750)
168,632
84,882

(4,240)
84,882
80,642

77,364
80,642
158,006

114,820
158,006
272,826

32



4.8 BALANCE SHEET
Balance sheets for the first five years of operation are shown below:-

TABLE - 12
BALANCE SHEET
(Rs. in 000)
End of
Constr.
1
st
Year 2
nd
Year 3
rd
Year 4
th
Year 5
th
Year

ASSETS
Current Assets:-
Cash/Bank Balance
Accounts Receivable
Stores & Spares



20,000
-
-


168,632
9,969
3,000


84,882
18,777
3,500


80,642
25,349
4,000


158,006
32,337
4,500


272,826
41,112
4,000
Total Current
Assets
20,000 181,601 107,159 109,991 194,843 318,938

Capitalised Expenses
Fixed Assets (at cost)
Less: Accum. Dep.

5,850
1,242,304
-

4,680
1,242,304
19,458

3,510
1,242,304
-

2,340
1,242,304
-

1,170
.242,304
-

-
1,242,304
-

Fixed Assets (net) 1,248,154 1,222,846 1,203,388 1,183,930 1,164,472 1,145,014
TOTAL ASSETS 1,268,154 1,409,127 1,314,057 1,296,261 1,360,485 1,463,953

LIABILITIES AND
EQUITY
Current Liabilities:-
Dividends Payable
Accounts Payable




-
-




158,519
5,000




158,519
7,000




158,519
9,000




158,519
11,000




158,519
136,000

Total Current Liab. - 163,519 165,519 167,519 232,927 330,039

Financial Assistance

634,077

570,669

507,261

443,853

380,445

317,037

Equity
Paid-up Capital
Retained Earnings


634,077
-


634,077
40,862


634,077
7,200


634,077
50,812


634,077
113,036


634,077
182,800

Total Equity 634,077 674,939 641,277 684,889 747,113 816,877
TOTAL
IABILITIES AND
EQUITY
1,268,154 1,409,127 1,314,057 1,296,261

1,360,485 1,463,953


33



CHAPTER 5
CONCLUSIONS

Specialised health clubs are almost non-existent in the country with only one such
venture which has established a chain (M/s Shapes Private Limited). Modern
health club facilities are available at five star hotels and country clubs (the latter
only for club members). Health clubs in hotels also have restricted usage
(primarily meant for hotel guests). Outsiders are also given access to the facilities
on varying membership tenures/charges.

The high level of admission fees at most country clubs and long waiting lists
coupled with the success of M/s Shapes indicates that large potential exists for
setting up new health club facilities in the country.

i
ANNEXURE 1
PAKISTAN - A PROFILE

INTRODUCTION







Pakistan is located in South Asia. It borders Iran to the southwest, Afghanistan to the
northwest, China to the northeast and India to the east. The Arabian Sea marks Pakistans
southern boundary.




ii













The total area of Pakistan is 796,095 square kilometers and the country is divided
administratively into four provinces Balochistan, North-West Frontier Province, Punjab
and Sindh and numerous federally administrated areas. The disputed territory of Azad
J ammu & Kashmir lies to the north of Punjab.
iii
Pakistan has a diverse array of landscapes spread among nine major ecological zones
from north to south. It is home to some of the worlds highest peaks including K-2 which
at 8,611 meters above sea level is the worlds second highest peak. Intermountain valleys
make up much of the North-West Frontier Province, while the province of Balochistan in
the west is covered mostly by rugged plateaus. In the east, irrigated plains along the Indus
River cover much of Punjab and Sindh. In addition, both Punjab and Sindh have deserts,
Thal, Cholistan and Thar deserts respectively.

Most of Pakistan has a generally dry climate and receives less than 250 mm of rain per
year. The average annual temperature is around 27
o
C, but temperatures vary with
elevation from -30
o
C to -10
o
C during cold months in the mountainous and northern areas
of Pakistan to 50
o
C in the warmest months in parts of Punjab, Sindh and the Balochistan
Plateau. Mid-November to February is dry and cool; March and April bring sunny spring,
May to J uly is hot, with 25 to 50% relative humidity; Monsoons start in J uly and continue
till September; October- November is the dry and colourful autumn season.

Pakistan had an estimated population in 2005 of 160 million, 40% of this population was
less than 15 years of age. The major cities of Pakistan and their estimated populations
are; Karachi (16.0 million), Lahore (8.0 million), Faisalabad (6.0 million), Rawalpindi
(5.0 million), Multan (4.5 million), Hyderabad (3.0 million), Gujranwalla (1.8 million)
Peshawar (1.6) and Quetta (0.85). Islamabad, the Capital of the country, has a population
of around 750,000.

According to the 1973 Constitution, Pakistan is governed under a federal parliamentary
system with the President as head of state and a Prime Minister as head of government.
The legislature, or parliament, consists of the Lower House (National Assembly) and the
Upper House or Senate. Members of the National Assembly are directly elected for five-
year terms.

Executive power lies with the President and the Prime Minister. The Prime Minister is an
elected member of the National Assembly and is the leader of the majority party in the
iv
National Assembly. An electoral college consisting of members of the national and
provincial legislatures elects the president for a five-year term.

After the events of 9/11, Pakistan has become a key US ally in the war against terror.
This alignment is totally in-line with the views of the majority of Pakistanis who practice
and preach a moderate version of Islam. The Government of Pakistan fully realizes the
need for promoting Islam as a modern progressive religion. The Government has chosen
the difficult option of fighting the war against terror by clamping down on Taliban and
Al-Qaeda remnants along the border with Afghanistan. The people of Pakistan fully
support the Government in its efforts to promote the true face of Islam.

The US Government fully backs and supports Pakistan in this war against terror. US Aid
which was stopped after the 1998 Nuclear Test has been restored and Pakistan will
receive US$ 3.0 billion over the next 5 years, divided equally between economic and
military aid.

Pakistan follows a very active policy of regional alliances for trade and economic
development. It is an active member of the South Asian Association for Regional
Cooperation (SAARC) which groups Pakistan, India, Bangladesh, Sri Lanka, Nepal,
Bhutan and the Maldives. It is also an active member of the Economic Cooperation
Organization (ECO) comprising of Turkey, Iran, Pakistan, Afghanistan, and the six
Central Asian Republics. Pakistan has an observer status at the Gulf Cooperation Council
(GCC) as well as ASEAN and Shanghai Cooperation Organization. Being a member of
WTO it conforms to most of the international trade regimes.

ECONOMY
Pakistans economy has made significant progress in the last six years. This has been
possible because of the Governments policy of initiating growth through domestic and
foreign direct investment. The GDP growth rate has increased from 1.8% per annum in
2001 to 8.4% per annum in 2005. Despite the devastating earthquake in October 2005,
the economy is expected to grow at over 6.6% in 2006. Pakistans GDP in 2005 was
v
estimated at US$ 385.2 billion and its per capita GDP was US$ 2,400. The Countrys
credit rating has been upgraded by Moodys from Caa1 in 2002 to Ba3 i.e. stable in
2006.

Pakistan has over 3.5 million laborers working in various countries of the Middle East. In
addition, Pakistani technical and professional manpower is engaged in lucrative pursuits
in USA, UK, Canada, Malaysia, etc. These non-resident Pakistanis annually send over
US$ 4.0 billion in foreign remittances.

The Government of Pakistans policy of encouraging Foreign Direct Investment (FDI)
has seen it grow from a mere US$ 376.0 million in 1999 to more than US$ 1.5 billion in
2005 which is expected to grow to over US$ 3.0 billion in 2006.

In addition to Foreign Direct Investment, low domestic interest rates have meant that
there has been an upsurge in domestic investment; the weighted average rate of lending
has fallen from 16% in 1999 to approximately 8% in 2005.

The Governments economic policy has seen foreign currency deposits rise from US$ 1.7
Billion in 1999 to now US$ 13.0 billion in 2006; this has led to both low rates of inflation
and to a stable exchange rate.

With the Government of Pakistan targeting annual growth in the economy at 7.5% per
annum in the next 5 years, Pakistan is the country of choice for foreign and domestic
investors.

INFRASTRUCTURE
The National Highway Authority (NHA) has the responsibility for 17 of Pakistans major
inter provincial links called the National Highway including the Motorways, which are
access controlled and tolled highways. Total length of roads, under NHA, currently
stands at 8845 Kms.

vi
These roads account for only 3.5% of Pakistans entire road network but cater for 80% of
the commercial road traffic in the country. Improvement and extension of the existing
network is, therefore, essential to develop remote areas and provide better connection
between the economic centers of Pakistan. In addition a first class road network is
essential if Pakistan is going to connect its all-weather Arabian Seaports with the
landlocked Central Asian Republics and Western China. The Government has initiated
work on the North-South Trade Corridor with planned investment of over US$ 60 billion.

In order to further speed up the development of the road network, the Government is
actively seeking the participation of the private sector to implement road projects on a
Build-Operate-Transfer (BOT) basis. A number of projects are currently being
implemented under the BOT concept and others are in the identification stage. These
BOT projects cover the construction of new roads as well as the upgrading of existing
roads.

Pakistan has about 1062 km of coastline on the Arabian Sea running from the Indian
border to the Persian Gulf. The Karachi Port is the premier port of Pakistan and is
managed by the Karachi Port Trust (KPT). Karachi port handles about 75% of the entire
national cargo. It is a deep natural port with a 11 km long approach channel to provide
safe navigation up to 75,000 DWT tankers, modern container vessels, bulk carriers and
general cargo ships. The Karachi Port has 30 dry cargo berths including two Container
Terminals and 3 liquid cargo-handling berths. KPT intends to cater for 12-meter draught
ships, which are the most widely used container vessels. In order to facilitate
accommodate and fast turnaround time of mother vessels, the KPT is offering to the
private sector the opportunity to develop a terminal on BOT basis. In addition KPT has
plans to develop a Cargo Village on 100 acres. This Cargo Village shall serve as a
satellite to the port, integrating container, bulk and general cargo handling as well as
providing processing plants for perishable exports. With direct connection to the National
Highway Network, as well as National Railways Network the cargo village shall also
alleviate the problem of upcountry trade with cost effective storage/handling services in
the vicinity of the port. A master plan is under preparation and all the units within the
vii
village shall be allocated to the private sector on BOT and Build-Operate-Own (BOO)
basis within the next year.

Pakistans second Sea Port, Port Qasim is located 50 kilometers to the South East of
Karachi. It is the Countrys first industrial and multi-purpose deep-sea-port. Currently it
is handling 23% of Pakistans sea trade. Port Qasim has attractions and advantages for
investment both in port facilities and port-based industrial development. Port Qasim
Authority from the very beginning has actively sought the help of the private sector in the
development of its port structure. Some of the projects which have been completed with
private sector involvement include; dedicated oil terminal developed in private sector on
BOO basis at a cost of US$ 87 million to cater for oil imports with a handling capacity of
9 million tons per annum, a container terminal developed by P&G Group, Australia, at a
cost of US$ 35 million on BOO basis, for chemicals imports a facility in collaboration
with Vopak of Netherlands on BOT basis at a cost of US$ 67 million. Some of the
projects which the Port plans to develop with the private sector on the basis of BOT
include; establishment of a second oil jetty, establishment of a dedicated coal and
clinker/cement terminal and the establishment of a marine workshop and dry dock
facilities.

To encourage industrial development the Port Qasim Authority has reserved 300 acres of
land on a prime location in the Eastern Industrial Zone (EIZ) for allotment of plots to
Overseas Pakistanis to induce and encourage foreign investment and provide them an
opportunity to establish small size industries in Pakistan. Each plot is measuring 100
square yards at a very low cost on attractive terms and conditions. This is in addition to
existing 1,200 acres of industrial zone which houses a number of auto assemblers such as
Toyota, Suzuki, Chevrolet and the Textile City spread over 1,250 acres.

The Pakistan Merchant Marine Policy 2001, has deregulated the shipping sector and aims
to attract investment; both local and foreign, public and private, by offering a range of
incentives. The new policy in addition to offering duty-free import of ships, offers many
new incentives to local and foreign investors including Income Tax exemption till 2020.
viii
Pakistan's annual seaborne trade is about 45 million tons, just 5 per cent of which is
carried by the national carrier Pakistan National Shipping Corporation (PNSC), the
country's annual freight bill surpasses staggering $ 1.5 billion which is causing a colossal
drain on foreign exchange resources, the marine policy aims to reverse this situation to
some extent.

The Shipping Policy aims to revive and augment national ship-building/capacity to meet
20 per cent ship construction requirements of the country merchant marine and entire
requirements of support and ancillary crafts. The policy also aims to rejuvenate and
expand the ship repair potential to undertake the entire range of repairs and maintenance
of 50 per cent of Pakistani Flag ocean-going vessels and all ancillary sectors. The new
Shipping Policy offers many financial incentives for potential investors. It offers tax
exemptions and concessional tax measures backed by assurances. It also aims at
simplifying the rules by deregulating the sector.

To begin with, ships and floating crafts tugs, dredgers, survey vessels, and specialized
crafts purchased or bareboat chartered by a Pakistani entity flying the Pakistani flag
will be exempt from all import duties and surcharges till 2020. The policy accords shop-
building and ship-repair the status of an industry under the investment policy which is
entitled to all incentives contained therein.

To attract foreign investment, all port and harbor authorities in Pakistan will allow all
ships and floating crafts 10 per cent reduced berthing rates when the same are berthed for
purposes of repair and maintenance. Under the Policy, ships and all floating crafts are
considered bonafide collateral against which financing can be obtained from Banks and
Financial Institutions subject to policy of the financial institution.

There are 42 airports in the country managed by the Civil Aviation Authority (CAA). Out
of these, five airports; Lahore, Karachi, Islamabad, Peshawar and Quetta are international
airports. The CAA is planning to develop a new international airport at Islamabad for
ix
which land has been acquired and it is planed to fund the US$ 250-300 million on BOT
basis.

The Pakistan International Airlines (PIA) is the national flag carrier flying to 46
international and 36 local destinations. Other Pakistani airlines in the private sector
include, Aero Asia, Air Blue, Shaheen Air International and Pearl Air. In addition to
direct flights from most parts of the world, Pakistan can also be accessed through the
regional hubs of most international airlines, which operate through airports in the Gulf
countries.

The Pakistan Railways provides an important nation-wide mode of transportation in the
public sector. It contributes to the countrys economic development by catering to the
needs of large-scale movement of freight as well as passenger traffic. Pakistan railway
provides transport facility to over 70 million people and handles freight above 6 million
tons annually.

The Pakistan Railways Network was based on a total of 11,515 track kilometers
(including track on double line, yard & sidings) at the end of 2001-2002. This network
consists of 10,960 kilometers of broad-gauge and 555 kilometers of meter gauge.

Pakistan Railways has launched modernization activity with rehabilitation and
improvement plan both for its infrastructure and rolling stock including prime mover.
The ongoing schemes worth over US$ 500 million are progressing satisfactorily and have
brought a radical improvement in service. The railways is gearing up to the challenge of
providing improved connectivity to Iran, India, and link the upcoming Gwadar Port to
Afghanistan and onward to Turkmenistan.

Pakistan Telecommunication Limited (PTCL) dominated Pakistans telecommunications
market for the fixed-line services. Today the Pakistan Telecommunication Authority
(PTA) has the role of a regulatory body and is responsible for implementing the telecom
deregulation policy. For a long time, Pakistan lagged behind in the region as far as
x
telecom access is concerned. With cellular mobile revolution taking place, Pakistan's
tele-density currently stands at 10.37%, with gross subscribers base of fixed (5.05
million) as well as mobile subscribers (10.54 million) touching 15.59 million for a
population of 160.0 million.

The Telecomm Sector has attracted the largest FDI in Pakistan with approximately
US$ 1.5 billion having been invested in 2005.

At the moment there are six companies providing mobile phone services in Pakistan, with
the largest of them, Mobilink (owned by Orascom Telecom) with nearly 50% of the
market share, other foreign players include MCE, Telenor and Warid.

In addition Wateen Telecom, a subsidiary of UAE-based Al Warid Telecom, has
launched a US$ 75.0 million project to lay an optic fiber optic backbone across the
Country. The first segment of the project of 800 kms would stretch from Karachi to
Rahimyar Khan and would be further linked with the rest of the country up to Peshawar
through 63 cities. When completed the backbone would be 5,000 kilometers, long
spanning the length and the breadth of Pakistan and would facilitate both the corporate
and residential segments, providing voice and high-speed data services on a converged
wireless network.

Pakistan in 2005 had 70 operational providers of internet services across 1,900 cities and
towns of the Country catering to about 2 million subscribers. In addition the Government
has reduced bandwidth rates for high speed board band internet connections and the
number of subscribers in this category is expected to grow to 200,000 by end of 2006.

AGRICULTURE
Agriculture accounts for nearly 23 percent of Pakistans national income and employs 42
percent of its workforce. Nearly 68 percent of the population lives in rural areas and is
directly or indirectly dependent on agriculture for their livelihood. Livestock is the single
largest contributor 47 percent share in the national income. The major crops; cotton,
xi
wheat, sugarcane and rice contribute 37 percent to agriculture while the minor crops like
oilseed, spices, onion and pulses contribute another 12 percent.

Pakistan is the fifth largest producer of milk in the world. The per capita availability of
milk at present is 185 liters, which is the highest among the South Asian countries. Milk
production in Pakistan has seen a constant increase during the last two decades. The
production has increased from 8.92 million metric tons in 1981 to 28 million metric tons
in 2005. There is a large and untapped potential in the dairy industry. With a population
of 160 million, a significant demand for dairy products exists in Pakistan. There is a need
for establishing modern milk processing and packaging facilities based on advanced
technology to convert abundantly available raw milk into high value added dairy
products. In addition, with improved conditions for milk pasteurization, availability of
chilled distribution facilities and consumer preference for the low cost pasteurized milk,
the sector provides unique opportunity for investment in establishing pasteurized milk
production plants.

There is also great scope for establishing related industries in the form of an efficient
milk collection system and refrigeration & transportation facilities. The sector offers
opportunity to foreign investors for establishing a joint venture for the production of
dairy products, particularly dried milk and infant formula milk for which great demand
exists in the neighboring countries like Afghanistan, Iran, UAE and Saudi Arabia.

Out of the 28 million tons of milk produced per annum in Pakistan, only 2.5 to 3 per cent
reaches the dairy plants for processing into variety of dairy products. Pakistans dairy
industry produces Ultra Heat Treated (UHT) Milk, Pasteurized Milk, Dry Milk Powder,
and Condensed milk. Other major milk products produced by the dairy industry include
butter, yogurt, ice cream, cheese, cream and some butter oil. Approximately half of the
0.3 million tons of milk available to the industry is processed into UHT milk, 40 percent
into powdered milk, and the remaining 10 percent into pasteurized milk, yogurt, cheese
and butter etc. Major players in the sector include Nestle, Haleeb and Engro Foods.

xii
Pakistan produced 1.1 million tons of beef, 740,000 kgs of mutton and 410,000 kgs of
chicken meat in 2005; in addition it also produced approximately 5 billion eggs in 2005.
Processed meat is exported to Saudi Arabia, UAE, Oman, Bahrain, Qatar and Kuwait in
the Middle East and Malaysia in the Far East. Pakistan exports around 40,000 live
animals and 2.83 million kg of meat to the Gulf.

Cotton is an important non-food crop and a significant source of foreign exchange
earning. It accounted for 10.5 percent of the value added in agriculture and about 2.4
percent of the GDP in 2005. Pakistan in 2005 produced about 14.5 million bales of
cotton.

Rice is a high value added cash crop and is also a major export item, it accounts for 5.7
percent of the total value added in agriculture and 1.3 percent of the GDP. Production of
rice in 2005 was about 5 million tones. In 2005 rice became the second largest export
from Pakistan when the country exported rice worth US$ 934 million. In addition to high
value Basmati rice, Pakistan also exports IRRI 6 parboiled rice and IRRI rice to Africa.

Sugarcane is an intensive cash crop and serves as the major raw material for production
of white sugar and gur. Its share in the value added in agriculture is 3.6 percent and 0.8
percent in the GDP. The total sugarcane crop in 2005 was estimated at 45 million tones.

Wheat is the leading food grain of Pakistan, and being the staple diet of the people, it
occupies a central position in agricultural policy. It contributes 13.8 percent to the value
added in agriculture and 3.2 percent of the GDP. The size of the wheat crop in 2005 was
estimated at 21.0 million tons.

In addition to the above, Pakistan also produces bajra, jowar, tobacco, barley, oilseed,
pulses, potato, onion, chillies etc.

xiii
The Government of Pakistan has launched a plan to promote Corporate Agriculture
Farming and has offered a number of incentives to develop the sector including the
provision of land and other facilities.

MANUFACTURING
In the post quota regime, total exports of textile increased from $ 6.5 billion in 2004 to
$ 7.4 billion in 2005. Pakistan textiles are poised to achieve $ 10 billion exports by J une
2006. This growth is largely driven by the continuity of government policies, positive
macroeconomic indicators, tariff rationalization, removal of sales tax on textile
chain, deregulation, lower interest rates, increased market access, public-private
partnership programs and the creation of a hassle free environment by the government.

The Government of Pakistan continues to take steps to further develop the textile sector
focusing on bridging the skills gap promoting research and development activities,
facilitating an increase in the number of women employees, outsourcing of specialized
work and simplification of procedures. To facilitate value addition in the textile
sector, world class departments in various disciplines related to textile industry are being
set up in three universities. These departments will have linkages with corresponding
foreign departments of high repute.

In the past 5 years, approximately US$ 5.5 billion have been invested in the textile sector
with the major investments being in spinning ($ 2.6 billion), weaving ($ 1.5 billion), and
textile processing ($ 600 million). A Rs.10 billion, Pakistan Textile City facility located
on 1,250 acres of land near Karachi is in the process of being set-up. This will have its
own desalination plant, effluent treatment plant, a self-power generation plant and all the
other modern facilities required for industrial production. It is expected that the Textile
City will lead to an increase in exports of US$ 400 million and provide jobs to 60,000
workers

Pakistans leather exports in 2005 were US$ 883 million which is the second largest
export sector after textiles. It is expected that exports will cross the US$ 1 billion mark in
xiv
2006. Major exports include finished leather; both for garments and footwear, finished
leather garments, leather work gloves, and other leather products. The major centers for
the manufacture of leather and leather products are; Karachi, Lahore, Sialkot and Kasur,
it is estimated that there are more than 700 tanneries operating in Pakistan employing
more than 100,000 persons, in addition another 150,000 workers are employed in the
value addition sectors. In order to promote the industry, the Government has zero-rated
the sales tax on the leather sector and is working to ensure that the industry conforms to
international waste management standards.

Pakistans light engineering sector consists of twenty-eight sub-sectors including
consumer durables and other industrial products. The surgical instrument manufacturing
sector which forms part of light engineering sector is clustered around Sialkot and
exports 95% of its production. There are about 2,500 large, medium and small sized units
with the industry employing about 50,000 skilled and semi-skilled workers. The surgical
goods sector produces both disposable and reusable instruments. The product range
consists of more than 10,000 different items.

The cutlery industry which in 2005 exported goods worth approximately US$ 31 million
is mainly concentrated in the locality of Wazirababd, Nazimabad and Allahbad in
Gujranwalla district. There are approximately 300 units and 25,000 people are directly or
indirectly employed by the industry. The industry has great export potential and requires
better marketing strategies.

The auto parts sector consists of more than 1,200 vendors who are supplying to about 84
Original Equipment Manufactures (OEM) massive capacity increase in Pakistan. The
total investment in the vendor industry exceeds Rs.10 billion and employs more than
40,000 skilled and semi-skilled workers and also brings in more than US$ 160 million in
the form of export earnings.

With the local auto assemblers planning to increase production to 500,000 units by 2008
from the 2006 production figure of 170,000 units, the vendor industry is gearing up for.
xv
Although the industry has made considerable progress on its own, the need is for joint
collaboration with foreign companies which will not only bring production techniques
but also help in marketing the production of the local vendor industry.

There are a total of 42 assemblers of motorcycles in Pakistan who between them
manufacture 600,000 motorcycles a year, it is expected that the production will increase
to 1 million units a year in the next two years. The main manufacturers of motorcycles in
Pakistan are; Honda, Yamaha and Suzuki who between them command more than 80%
of the domestic market

There are 11 Fertilizer units operating in Pakistan with an installed capacity of 6 million
tones out of which nitrogenous fertilizer has a capacity of 4.9 million tons and phosphatic
fertilizer has a capacity of 1 million tons. Wheat being the most important crop 45% of
the total fertilizer consumption is in this Sector. Cotton consumes 21%, rice 10%,
sugarcane 8% while the remaining 16% is consumed by other crops.

Out of a total of 24 cement plants, currently 22 units are operative, 17 companies being
listed on the Karachi Stock Exchange. The country, at present, has an installed capacity
of producing 17.55 million tons of cement per annum, mainly Portland cement. It is
envisaged to increase installed capacity (also by expansion) to 28.21 million tons per
annum by 2008. New projects as well as capacity increases in existing units should boost
production capacity to about 7 million by 2007.

The demand for cement is expected to be robust, as the Government of Pakistan has
initiated a massive reconstruction drive in the earthquake hit regions of Northern Pakistan
and Azad Kashmir. In addition large quantities of cement will be required for the mega
construction projects initiated by the Government of Pakistan including the construction
of large dams and road projects. Also the industry has good prospects for exporting
cement to Afghanistan where reconstruction work is on-going on in that Country.

xvi
Pakistan is the twelfth largest producer of sugar in the World; it ranks fourth in sugarcane
production and holds seventh position in yield, which is about 50 tons per hectare.

The sugar industry has 76 units installed mostly in Punjab and Sindh. The total capacity
of the industry is estimated at 5 million tones per annum. In order to provide incentives to
the growers, the Government determines a support price keeping in mind the production
costs and profits of other crops. The Government and the Industry are trying to increase
cane yield to ensure an increase in the total production of sugar.

The demand for Steel has undergone a dramatic increase in 2005; the total consumption
of steel in 2005 is estimated at 5 million tons as against a domestic production of only 3.2
million tones. The biggest producer of domestic steel is the Pakistan Steel Mills with a
capacity of 1.1 million tones per annum. In addition to the Pakistan Steel Mills there are
approximately 350 steel re-rolling mills in the country, which mainly cater to the needs of
the construction industry.

The demand for steel is expected to further surpass production because of increased
demand due to economic activity and construction of large dams and infrastructure
projects in the Country. The Government is encouraging the private sector to come
forward and invest in mini steel mills and in the mining sector. The Government in an
effort to increase production, is in the process of privatizing major light and heavy
engineering concerns.

OIL, GAS & ENERGY SECTOR
The Pakistani economy is expected to grow at a rate of 7 to 8 percent over the next five
years. In order to sustain the growth momentum a rise in levels of income and increased
availability of goods and services, the country is following a policy to increase the supply
of and the conservation of energy.

In 2005 the consumption of petroleum products in household and agriculture exhibited
sharp decline to the tune of 16.8 and 16.2 percent, respectively. The decline in the use of
xvii
petroleum products was mainly on account of the availability of alternative and relatively
cheaper fuels in the form of natural gas and LPG

Historically, the country is dependent on oil imports. The crude oil import for 2005 was
about 8.3 million tons, equivalent of US$ 2,606 million. The import of petroleum
products import was 5.7 million tons, an equivalent of US$ 1,998 million. The total
annual import bill for the year 2005 was US$ 4,604 million. Due to increase in
international prices of crude oil, the import bill in 2006 is expected to be US$ 5,500
million. Pakistan has five refineries, namely, National Refinery, Pakistan Refinery,
Bosicor, Pak Arab Refinery and Attock Refinery; annual oil refining capacity is 12.82
million tons. In the downstream oil marketing business, the main players are; Pakistan
State Oil (100% owned by the Government of Pakistan), Caltex, Shell and Total.

Pakistan has an interesting Geo-dynamic history of large and prospective basin (onshore
and offshore) with sedimentary area of 827,268 sq. km. So far about 844 million barrels
crude oil reserves have been discovered of which 535 million barrels have already been
produced. A Prognostic potential of total endowment of hydrocarbons has been estimated
as 27 billion barrels of oil. To date various national and international exploration and
production companies, resulting in over 177 oil and gas discoveries, have drilled more
than 620 exploratory wells. Indigenous production of crude oil during the year 2005 was
66,079 barrels per day. The main companies in the upstream chain include; BHP
Petroleum, Lasmo Oil, Shell, OMV Pakistan etc.

Pakistan is among the most gas dependent economies of the world. Natural gas was first
discovered in 1952 at Sui in Balochistan province that proved a most significant and the
largest gas reservoir. After successful exploration and extraction, it was brought to
service in 1955. This major discovery at Sui followed a number of medium and small size
gas fields in other parts of the country.

So far about 52 TCF of gas reserves have been discovered of which 19 TCF have already
been produced. Natural gas production during 2005 was about 3.7 billion cubic feet per
xviii
day. Pakistan has well developed and integrated infrastructure of transporting,
distributing and utilizing natural gas with 9,063 km transmission and 67,942 km of
distribution and service lines network, developed progressively over the last 50 years.

Natural gas sectoral consumption during 2005 was: power (43.7%), fertilizer (16.4%),
cement industry (1.2%), general industry (19.5%), domestic (14.8%), commercial (2.3%)
and Transport (CNG; 2.1%).

Gas importation projects envisage about 1500 to 2000 km long pipelines connecting
regional gas supply sources such as Turkmenistan, Iran and Qatar to the domestic
pipeline network bringing in more than 1.5 billion cubic feet gas per day. With further
extension, the imported gas can also reach the Indian market.

Pakistan started using Compressed Natural Gas (CNG) as transport fuel through
establishment of research and demonstration CNG refueling stations by the Hydrocarbon
Development Institute of Pakistan (HDIP) at Karachi in 1982 and at Islamabad 1989.
CNG is now fast emerging as an acceptable vehicular fuel in place of oil. Pakistan is third
largest user of CNG in the world after Argentina and Brazil. As many as 835 CNG
stations have been set up in the country by December 2006 and 200 stations were under
construction. With 850,000 CNG vehicles on the road, the CNG sector has attracted
Rs.20 billion investment while another Rs.2 billion is in the pipeline, providing 16,000
jobs.

Large diesel vehicles (buses and trucks) being the major consumer of HSD are now the
next target for substitution by CNG for economic and environmental reasons. Meanwhile
a private company has imported some CNG diesel dual-fuel buses for Karachi and plans
are also underway for local manufacturing of these buses.

The total power generation capacity of Pakistan is 19,540-mw. In order to sustain a
higher GDP growth rate of 78 percent, the Government is planning to increase its power
generation capacity by 143,000-mw in the next 25 years, to 162,590-mw.
xix
The 25-year Energy Security Plan (ESP 2005-2030) approved recently by the
Government envisages increase in nuclear power generation by 8,400-mw to 8,800-mw
by the year 2030 from current nuclear power of 400-mw. The ESP envisages the share of
nuclear power to increase to 4.2 per cent of country's total energy mix from the current
rate of 0.8 per cent. The current energy mix has (highest) 50 percent share of gas, 30
percent oil, 12.7 per cent hydel, 5.5 per cent coal, 0.8 per cent nuclear and zero percent
renewable energy.

The additional 143,053-mw would include 8,400-mw of nuclear power, 26,200-mw
hydel-power, 19,753-mw coal based energy, 9,520 mw renewable energy, 1,360-mw oil
based and 77,820-mw gas based power production.

By the year 2010, the country would have an additional power of 7,880-mw and hence
total capacity would reach 27,420-mw. This additional power would not include any new
plant in the nuclear sector, but hydel generation would increase by 1,260-mw, coal based
increase of 900-mw and renewable energy increase of 700-mw. A minor increase of 160-
mw would take place in the oil-based generation while gas based power production
would increase by 4,860 mw.



xx
IMPORTANT CONTACTS

Deputy Chairman,
Planning and Development Division,
Ministry of Planning & Development,
Govt. of Pakistan,
Block P, Pakistan Secretariat,
Islamabad.
Office Tel: 92 (51) 9211147, 9202783
www.mopd.gov.pk

Secretary,
Planning and Development Division,
Ministry of Planning & Development,
Govt. of Pakistan,
Block P, Pakistan Secretariat,
Islamabad.
Office Tel:92 (51) 9211147, 9202783
www.mopd.gov.pk

Secretary,
Ministry of Finance,
Govt. of Pakistan,
Block Q, Pak. Secretariat,
Islamabad.
Office Tel: 92 (51) 9201962
Fax No: 92(51) 9213705
www.finance.gov.pk

Secretary,
Ministry of Industries, Production &
Special Initiatives,
Govt. of Pakistan,
Block A, Pak. Secretariat,
Islamabad.
Office Tel: 92(51) 9210192, 9211709
E-mail:secretary@moip.gov.pk
http://www.moip.gov.pk

Secretary,
Ministry of Communication,
Govt. of Pakistan,
Block D, Pak. Secretariat,
Islamabad.
Office Tel: 92 (51) 9201252

Secretary,
Ministry of Commerce,
Govt. of Pakistan,
Block A, Pak. Secretariat,
Islamabad.
Office Tel: 92(51) 9208692,
www.commerce.gov.pk

Secretary,
Ministry of Health,
Govt. of Pakistan,
Block C , Pak. Secretariat,
Islamabad.
Office Tel: 92(51) 9211622
Fax No: 92(51) 9205481

Secretary,
Ministry of Food, Agriculture and
Livestock,
Govt. of Pakistan,
Block B, Pak. Secretariat,
Islamabad.
Office Tel: 92(51) 9203307,9210351
Fax No: 92(51) 9210616

Secretary,
Ministry of Ports & Shipping,
Govt. of Pakistan,
Block D , Pak. Secretariat,
Islamabad.
Office Tel: 92(51) 9215354
Fax No: 92(51) 9215349

Secretary,
Ministry of Tourism,
Govt. of Pakistan,
Block D , Pak. Secretariat,
Islamabad.
Office Tel: 92(51) 9213642
Fax No: 92(51) 9215912
Email:secretary@tourism.gov.pk



xxi
Governor,
State Bank of Pakistan,
I.I. Chundrigar Road,
Karachi. Pakistan.
Phone: 111-727-111 Fax: (+92-21)
9212433-9212436
www.sbp.org.pk

Chairman,
Board of Investment,
Govt. of Pakistan,
Attaturk Avenue,
Sector G-5/1,
Islamabad.
Tel: 92(51) 9207531, 9206161
www.pakboi.gov.pk

Chairman,
Pakistan Telecommunication
Authority,
Head Quarter Sector F-5/1,
Islamabad.
Tel: 92-51-2878143,9225326,
Fax: 92-51-2878155
E-mail: chairman@pta.gov.pk
www.pta.gov.pk

Chairman,
Oil & Gas Regulatory Authority,
Tariq Chambers, Civic Center,
Melody Market, Sector G-6,
Islamabad.
Tel: 92-51-9221705
Fax: 92-51-9221714
Email: chairman@ogra.org.pk
www.ogra.org.pk

Chairman,
Pakistan Electronic Media Regulatory
Authority,
Green Trust Tower,
6th Floor, J innah Avenue, Blue Area,
Islamabad
Phone#:0092-051-9222320/26/32/40/42
E-Mail: ctv@pemra.gov.pk
www.pemra.gov.pk
Chairman,
Securities and Exchange Commission
of Pakistan,
National Insurance Corporation
Building,
J innah Avenue,
Islamabad-44000,
Telephone: 92-51-9207091 (3 lines)
Fax: 92-51-9204915
Email: enquiries@secp.gov.pk
www.secp.gov.pk

Chairman,
Export Promotion Bureau,
Govt. of Pakistan,
5th Floor, Block A
Finance & Trade Centre,
Shahrah-e-Faisal.
Karachi.
Tel: 92-21-9206462-70
Fax: 92-21-9206461
www.epb.gov.pk

Chairman,
Engineering Development Board,
Govt. of Pakistan,
5-A, Constitution Avenue, SEDC
Building (STP), Sector F-5/1,
Islamabad,
Tel: 92-51-9205595-98
Fax:92-51-9205595-98
Email: edb@edb.gov.pk
www.engineeringpakistan.com

Chairman,
Alternative Energy Development
Board,
Govt. of Pakistan,
344-B,Prime Minister's Secretariat,
Constitution Avenue,
Islamabad.
Phone No: 92-51-9223427, 9008504
Fax No: 92-51-9205790
E-mail: support@aedb.org
www.aedb.org
Chairman,
xxii
Small & Medium Enterprise
Development Authority,
6th Floor, LDA Plaza, Egerton Road,
Lahore.
Tel: 92-42-111-111-456
Fax: 92-42-6304926
E-mail helpdesk@smeda.org.pk
www.smeda.org.pk

Managing Director,
Private Power and Infrastructure
Board,
50 Nazimuddin Road, F7/4,
Islamabad, Pakistan.
Tel: 92-51 9205421,9205422
Fax: 92-51 9215723,9217735
Email: ppib@ppib.gov.pk
www.ppib.gov.pk

CEO,
Competitiveness Support Fund,
House No. 53,
Street 1, F-6/3,
Islamabad.
Cell: 92-300 856 5277
Email: arthur.bayhan@telefonica.net
www.competitiveness.org.pk

Chairman,
Pakistan Software Export Board,
2nd Floor Evacuee Trust Complex
F-5, Aga Khan Road
Islamabad - 44000
Tel: 92-51-9204074
Fax: 92-51-9204075
www.pseb.org.pk

Managing Director,
Karachi Stock Exchange (Guarantee)
Limited,
Stock Exchange Building, Karachi.
Tel: 92-21-111-001122
Fax : 92-21-241 0825
Email: info@kse.com.pk
www.kse.com.pk
Chairman,
Karachi Cotton Association,
The Cotton Exchange,
I.I Chundrigar Road,
Karachi, Pakisan.
Tel : 92-21-242-5007, 241-2570,
Fax : 92-21-2413035
Email: contact@kcapak.org
www.kcapk.org

President,
Federation of Pakistan Chambers of
Commerce and Industry,
Federation House,
Sharea Firdousi, Main Clifton,
Karachi.
Tel: 92-21-5873691,93-94
Fax : 92-21-5874332
Email : fpcci@cyber.net.pk
info@fpcci.com.pk
www.fpcci.com.pk

President,
Karachi Chamber of Commerce
Industry,
Aiwan-e-Tijarat Road,
Off Shahrah-e-Liaquat,
Karachi.
Tel: 92-21- 241 6091-94
Fax : 92-21- 241 0587
Email: info@ karachichamber.com
www.karachichamber.com

President,
Lahore Chamber of Commerce
Industry,
11, Shahrah Aiwan i Tijarat,
Lahore. Pakistan.
Tel: 92-42 -111-222-499
Fax : 92-42 -636-8854
www.lcci.com.pk






xxiii
President,
Rawalpindi Chamber of Commerce
and Industries,
Chamber House, 39 - Mayo Road
(Civil Lines),
Rawalpindi.
Tel: 92-51-5111051-54
Fax: 92-51-5111055
E-mail : rcci@isd.wol.net.pk
www.rcci.com.pk




































Secretary,
Overseas Chamber of Commerce and
Industries,
Chamber of Commerce Building,
Talpur Road, P.O. BOX 4833,
Karachi.
Tel: 92-21-2410814-15
Fax: 92-21-2427315
E-mail: info@oicci.org































Study Commissioned by:
EMPLOYMENT & RESEARCH SECTION,
PLANNING & DEVELOPMENT DIVISION, GOVERNMENT OF PAKISTAN,
PAKISTAN SECRETARIAT, P- BLOCK, ISLAMABAD
Tel: (92-51) 921 2831, Fax: (92-51) 920 6444