LKPC Volume II
Lahore Knowledge Park

LAHORE: The Punjab government has initiated yet another project and this time its scope is not limited to key infrastructure development.

The project is a combination of academia and business and research centres and has the potential to convert the province into a knowledge-based economy.

The $1-billion Lahore Knowledge Park was conceived a few years ago, following which Lahore Knowledge Park Company was established in October 2014 to implement this huge project.

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The management, which has almost completed its groundwork, is hopeful infrastructure work will commence by September this year and within the next 18 months, its first phase consisting of basic infrastructure facilities along with a couple of life-sciences universities will be completed, hence paving the way for private investment in the project.

“It is a very interesting concept from which the entire world is benefitting,” said Lahore Knowledge Park Chief Executive Officer Shahid Zaman while talking to The Express Tribune.

He said the project had been designed on the public-private partnership model where the Punjab government would spend 20% and the remaining 80% equity would be invested by the private sector over a span of 25 years.

“Lahore Knowledge Park will be a fourth generation park being established over 852 acres of land located a few kilometres from the Pak-India border. It will consist of universities and schools, science and innovation hubs, a retail and central business district, a residential district, an entertainment zone and green areas,” said Zaman while giving details.

“The project will serve as a growth engine for Lahore as it will promote education in five key areas, namely, life sciences and bio-technology, design and creative industry, information technology, computer sciences and science and engineering,” he added.

The financial plan of the knowledge park has been designed by Singapore-based company Frost and Sullivan. Once completed, it is estimated, the project will generate around Rs173 billion in labour income and Rs35 billion in tax revenue.

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The total revenue over a period of 25 years is expected to be Rs5.9 trillion, Rs253 billion in labour income and Rs178 billion in corporate income taxes.

“The project has gained immense popularity among local and international investors and a couple of foreign firms have offered to invest the entire equity of $1 billion, however, we as a government want to keep the operational control and encourage more investors to bring their experience and innovation to this park,” said Zaman.

“The project, once operational, will create 40,000 jobs and produce 11,200 PhDs by 2040.”

“I think there is no need for the government to invest more, especially in the first phase that includes basic infrastructure and a couple of universities, since we have been approached by eight to 10 universities willing to open their campuses at the park,” said board member and entrepreneur Almas Hyder.

He said since it was a long-term project, successive governments would have to amend their rules and regulations accordingly for its sustainability.

Lahore University of Management Sciences (Lums) Vice Chancellor and Lahore Knowledge Park Board Member Dr Sohail Naqvi said it all depended on the governments as to how much they intended to invest in higher education.

“The spending has increased over the years and we may see more of such knowledge parks in the future.”

He said the knowledge park board had seasoned and experienced members and the change in governments would not affect the project.

“The project is valuable and attitudes of the governments are now changing; politicians now continue the projects, the main example of which is the Benazir Income Support Programme (BISP).”

The writer is a staff correspondent

Published in The Express Tribune, July 25th, 2016.

BR Research sat down with Mr. Shahid Zaman, the CEO of the Lahore Knowledge Park Company, to discuss some interesting concepts of the creation of a knowledge park in Lahore and how its development will phase out over the coming years.

BR Research: Can you please give us a brief depiction of the Lahore Knowledge Park and how it came into being?

Shahid Zaman: The Company was formed in October 2014, and we started working on the idea a little while before that. Since then the whole process of planning has been going on, which is now nearing completion.

The Lahore Knowledge Park is a very cutting-edge and modern day development, which we do not have in Pakistan. Interestingly speaking, there are hundreds of such kinds of technology parks and IT parks spread out throughout the world. It was very difficult to find people who knew about choosing the right technology park for Lahore, but eventually we did find some people who have had experience with such parks. Having said that, it’s been a learning curve and a journey to understand what we want to develop and achieve.

If we are out to do something as complex as we are out to do, it is better that we get a good understanding of what we wish to do. When you look around the world, you get your first exposure to the earliest knowledge parks that were called science parks in the UK.

The first one was in Cambridge, which was called the Cambridge Science Park. It started in a very interesting fashion back in the sixties; its journeys started when the people working at the university came forward with the endeavour to market and commercialise their research into products.

Another great example of Technology Park is the famous Silicon Valley, which is an offshoot of Stanford. When you look around globally you find that there are all kinds of parks. There were parks that were developed organically, and they were called first generation parks that came out of universities. Gradually they started becoming more formalised. If you look at the Cambridge Science Park, it is a property adjacent to the Cambridge University. We took the opportunity to understand the model by visiting the Cambridge Science Park through our partners, the British Council and the International Association of Science Parks.

To understand the growth part, we notched step further by attending some international conferences;

one particular discussion at the Warwick University Park came in pretty useful. Then the idea was to see something that is being developed. We went to another British university that is currently developing one right inside the town as an extension of the university. The crux of it all is research being conducted in the universities with these cutting edge companies followed by cross-fertilisation, and thereafter conversion of the research and R&D into marketable products. There are parks in Iran and Turkey that are extensions of universities as well. There are many in India as well and largely in the form of IT parks. In China, everything is at a colossal scale, but those parks are somewhat different than what we see around.

We decided to do an international tender for hiring global expertise as there was none locally available. As you are aware Pakistan has its difficulties when it comes to image. We did a lot of leg work in identifying companies that provide this sort of consultancy. We reached out to the US, UK, Dubai and Europe, which required visits, meetings, involvement of our embassies and chamber groups. After that, the interesting thing was to make a request for proposal (RFP). It took us some time but we came up with a good RFP that is in accordance with international standards. We had companies that came in from Korea, Italy, Singapore, Germany and the UAE.

So after a long process we finally chose a company from Singapore through the RFP, called Frost and Sullivan. We carried out a study spanning over a period of seven months for a knowledge and growth park for Punjab as a whole, followed by a study specifically for Lahore.

A question may arise that why a study should be done for the whole of Punjab when the knowledge park is to be based in Lahore. It was thought necessary to know about the larger crucible we were going to be operating in, and hence the study on the entire province. In short, the study showed us that there are two areas that are fit as per certain criteria that we had developed for KGP’s in the province of Punjab: Lahore and Faisalabad. These criteria were based on the triple alliance of the availability of research activity, industry and levels of higher education. And then of course, the fourth pedestal was provided by the government. So we came up with these two cities, one of them is on a border line was Rawalpindi.

Then we went ahead and found the Lahore Knowledge Park Company under Section 42 registered with the SECP. It has a board of directors with a majority of private sector personalities in it with high integrity, vision and exposure. We have Mr. Razak Dawood who is a prominent business person of Pakistan with multinational business links; we have Dr Sohail Naqvi who has been the DG of HEC and who is now the Vice-Chancellor of LUMS; we have Ms. Saleema Hashmi and other prominent leaders in academia and business. And then we have the government side that includes the chairman P&D, secretary finance, CEO of Punjab BOI and so on.

The majority is from the private sector because the government wants to run it like a company and avoid undue interference.

BRR: What is the current status of the project, and what milestones have to be achieved?

SZ: As I said it has been a complex journey, and the very fact that where we started and where we are right now, speak volumes about the Chief Minister’s vision of the province. It is a time consuming process as international tendering is involved.

If we come to the planning side, first of all we went through an international tender for concept planning and business feasibility, which was given to Frost and Sullivan. After that, came the master planning stage; we went through a local tender as we had the necessary expertise available for that with the winner being Osmani and Company. Soon, we will get the preliminary master plan and by July-end, we will have the plan ready. Thereafter, the design and studies will follow, and in August we will complete these processes.

It also requires a comprehensive PR and marketing exercise. Alongside this, we also have our transaction advisors. We did an international tender for that too as per the CM’s instructions. They will advise us whether to become an authority or remain a company. Secondly they will advise us on how to become a special economic zone in order to facilitate our growth parks and, bring in investment. The model is public private partnership, and as far as the structure is concerned our concept planners gave us a 20:80 model with 20 percent coming from the government and the rest from the private sector. However, it is imperative that the government comes in with the first injection to develop the infrastructure. This park is being developed on a self-sustainability model, and leasing is going imperative in bringing that about.

BRR: Will the government’s investment be in the shape of equity or a grant?

SZ: It will be a grant. It is a Rs105 billion project or $1 billion, out which Rs21 billion will come from the government. We have submitted a development budget of Rs8.2 billion for FY16-17 to P&D. The budgeted allocation so far is Rs2 billion for starting purposes. Out of the earmarked Rs8.2 billion, two campuses and infrastructure will have to be built.

BRR: What is the total area designated for the project?

SZ: This is an 852-acre property, and on 50 acres the government is building a Pakistan Kidney and Liver Research Institute (PKLRI). The location is near the Punjab Elite Force training centre on Bedian Road near D.H.A phase VII. This land has been donated by the government as a testament to its commitment in promoting education.

BRR: Technology parks have evolved immensely since their inception. Which generation park will be seen in Lahore?

SZ: This is going to be a fourth generation park. Parks have actually gone to the fifth generation now. But given our circumstances, environment, industry and research levels etc, our consultants advised us to develop it as a fourth generation park. This model actually provides a complete lifestyle. It has the necessary components that a KGP ought to have. It has the educational, research, and incubators component, which has special priority. It has the existing businesses in those particular four sectors which we have defined from the biggest to the smallest. So there is a continuous interaction going on between the `students, faculty and the market because the whole idea is to market your research. It is going to be a linkage of academia to the industry, which has been largely missing. Even abroad, businesses complain of the fact that educational institutes are far behind what they are looking for. We have defined four sectors through the study: ICT, life sciences and biotechnology, engineering and sciences and lastly the creative industry. The creative industry includes software, games, media

and arts. When you are developing sectors, you take into consideration the society; economy, educational and R&D levels and finally we chose these four sectors out of eight.

Then additionally the business support services have to be there, which include legal, business, financial services. There has to be intellectual property rights available especially for the start-ups. We have provided the whole institutional structure for the start-ups which is going be part of LKP.

Moreover, from a lifestyle point of view, we would like to invite people who are working there to also live there. The vision is to make it into a mini city. We are designing it as a smart and green city with special emphasis on environmental aspects as well as traffic planning. There will be entertainment and shopping avenues as well to create the whole lifestyle model.

BRR: Social sciences, law and humanities are completely missing though. Is there any plan to include them in the future?

SZ: Well said. We realise that they are essential to creating a holistic knowledge based environment. You are absolutely right that they have to be included, and we will be working to add more sectors as the park develops further.

BRR: Would you like to shed some light on master plans as to how many campuses and structures will be there in the layout?

SZ: The concept is to have one public university with two campuses. Then we have an applied sciences institute. We have also left space for one or two schools because the concept planners pointed out that it will be very beneficial to have children going to school in such a technologically driven environment. Then we have facilities for sports and recreation. We also have design school and business school included in the layout. The way we fashioned it is that the campuses are going to be based on the outskirts so that there are no traffic issues. Then you have your necessary components of security, a police office and fire emergency services. We have sprinkled some housing areas as well. Three campuses will be from the private sector, two campuses will be government run, and the schools will be largely from the private sector. In the long term we can consider a public private partnership mode for the schools as well. There will also be infrastructure to boost the four innovation hubs or entrepreneurship centres. Each sector will be having its own hub, and it will be decided later whether we will mix them or keep them exclusive.

BRR: Wouldn’t it be better to include other fields as well in these innovation hubs like for example nursing?

SZ: Definitely. I will add another one to it. The hospitality industry for example. There are skills that you can learn to upgrade the existing workforce and make their skill sets more marketable. Other sectors are on the cards as well.

BRR: Could you please give a timeline for the completion of the infrastructure development?

SZ: We have planned ground-breaking by September, 2016. From September onwards, we have given an 18-month period for completion of the first phase as per the CM’s instructions and our

planning paradigm. This will probably include basic infrastructure, the two campuses and a certain number of buildings especially for housing for the plug and play people as well as the young entrepreneurs and incubators.

BRR: Will you be able to spend Rs9 billion in twelve months’ time allocated for the current fiscal year?

SZ: Out of this Rs 3 billion is for infrastructure development and some components of it like roads, electricity, gas connections, drainage would require full completion. For building construction we are trying to bring new construction methodologies into the fray. For example, we were talking to one of our advisers in Italy who told us that the construction is done in ten times less time using the new state of the art construction methods. For this also, we will look to partner local synergies with international exposure, and the LKP will also contribute in developing technology pertaining to building and construction. The second component is the design build part, which will have faster implementation and can absorb the majority of the large financial injection.

BRR: When do you expect the private sector investment to start pouring in? Will it be tilted towards FDI or local investment as well?

SZ: We are certainly targeting FDI as well a local investment. Up till now as we were still in the planning phases; we kept the project under wraps. Secondly we did the PR in a very methodical manner. Even being under wraps, we had very keen responses from investors who heard about the project. We had one very big Chinese company that wanted to take over the project, but we declined because we would like to do it in a certain fashion. This is a major initiative that Pakistan is taking and it is going to be growth engine for Lahore. Then we had this consortium that came from Hong Kong that also showed interest. We welcome international participation, but we would like to develop it according to our own plan and give it our own direction.

BRR: What about the political risks facing the project if for example there was a change in the government come 2018?

SZ: The first thing in this endeavour is commitment, which continues to be demonstrated by the CM. Without his efforts, this would never have been possible. And I will repeat it again that this government is dedicated to getting into the realm of the knowledge economy. The biggest commitment was shown by giving us 6500 kanals of land free of cost for the promotion of education and this industry academia connectivity. Keeping that in view, it is very important that we capitalise on this commitment and put the foundations in place in this tenure. At the same, the idea of the development of an authority again goes to making it more robust because companies can come and go but authorities are there to stay. Also the involvement of the stakeholders that includes major representation from the private sector will ensure the longevity of this project. I believe that if it has the relevant stakeholders including the business and academic community, you have got quite a few pegs in the ground to making it self-sustainable.

LAHORE: Punjab government is all set to launch its long term Lahore Knowledge Park that will prepare the local businesses for the challenges of the fourth industrial revolution. In an interview with The News, Lahore Knowledge Park Company CEO and Chairman Shahid Zaman explained the salient futures of the park and concept behind its launch.

Q. What is the philosophy behind this ambitious project and how will it benefit the economy?

A. Our aim is to make Punjab the hub of the knowledge economy, not only for Pakistan but for the entire region. The disruptions caused by new innovations are eroding the competitiveness of our economy. We have established few quality information technology institutions to remove some knowledge deficit but this is not enough. We need to facilitate similar or better institutions for life sciences, biotechnology, design and creative industry and of course more information technology and computer sciences institutes. Most of our businesses, particularly the small and medium entrepreneurs would come under immense pressure once the full impact of the fourth industrial revolution spreads around the globe. We have only ten or maximum twenty years to be prepared for the challenges that lie ahead. Industry 4.0 or the fourth industrial revolution is the current trend of automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of things and cloud computing. Industry 4.0 creates what has been called a ‘smart factory’.

Q. How advanced are developed economies in this regard?

A. According to a study by a US-based institute, 19 percent of German companies have either implemented the full industry 4.0 concept (such as a smart factory) or have taken first measures towards the concept (such as the introduction of autonomous robots), compared with 16 percent of US companies. German companies are on to a somewhat faster track despite the common perception that US companies are the front-runners in embracing digital transformation. The speed of transformation has quickened recently. Approximately 60 percent of German manufacturers have applied, or plan to apply (within the next one or two years), digital factory logistics or predictive maintenance, compared with approximately 40 percent of US manufacturers. We have not even started in that direction.

Q. How would the Lahore Knowledge Park facilitate Pakistani entrepreneurs?

A. The absence of meaningful academia-industry linkages is mainly because they are located far away from the industrial hubs. There is a communication gap between the researchers and the industry sponsors. Most of the research by academia goes to waste because it is not in line with the requirements of the industry. We will bring academia and businesses closure to each other. Lahore Knowledge Park will have two state of the art universities located at the periphery of the park along with knowledge based establishments adjacent to each other to facilitate easy access to information sharing and collaboration. Besides universities, the park will have schools, science and innovation hubs, retail, entertainment, central business district, residential districts and green areas. These will be developed in collaboration with the private sector.

Q. What is the total cost of the project and who will finance it?

A. The total cost of the project is Rs100 billion or around $1 billion. It will be build on 850 acres of land that has been provided free of cost by the Punjab government. It is a prime land located adjacent to DHA, Lahore. Punjab government would provide Rs21 billion for the development of infrastructure and buildings of the universities and schools. Around Rs8 billion have been earmarked for the project in the budget for 2016-17. The government has assured that additional funds will be provided if we consumed the allocated amount this year successfully. The majority of board members are from the private sector. Because of its prime location it will attract a lot of investment from the private sector. Many companies would be willing to establish their business offices inside the park to benefit from the research facilities available in the park.

Q. When will the park be fully operational and did you consider outsourcing the park to any private investor?

A. It is a 25 years project but the basic work will complete in the next three years. The park will be in deficit in the first 12 years mainly because of the construction and infrastructure activities. The deficits will start disappearing thereafter. A Chinese investor and recently a Hong Kong based group offered to bear the entire cost of the park. We have politely declined as we do not want any deviation or over commercialisation of our project.

LKPC Volume I Newsletter

Lahore Knowledge Park Company Chief Executive Officer Shahid Zaman says the park will be a mini smart and green city that will create over 40,000 jobs and more than 11,200 PhDs by 2040, becoming a business and innovation hotbed.

PUNJAB’s ambitious $1bn Lahore Knowledge Park, the first of its kind in the country, is expected to lead the way to transforming the province into a knowledge-based economy by creating ‘state-of-art infrastructure for cluster interaction of universities, businesses and researchers to drive innovation and entrepreneurship’.

Punjab’s three-year Economic Growth Strategy (2015/2018) also targets the transformation of the province into knowledge economy.

The government may consider creating another park in Faisalabad and/or in Rawalpindi.

“The park will be mini smart and green city that will create over 40,000 jobs and more than 11,200 PhDs by 2040.”

The government is also considering proposals to change the company into an authority and declare the Lahore Knowledge Park a tax-free zone

“It will become a business and innovation hotbed in Pakistan for the five key economic growth hubs — life sciences and biotechnology, design and creative industry, information technology and computer science, science, and engineering — that are heavily reliant on knowledge workers,” Lahore Knowledge Park Company Chief Executive Officer (CEO) Shahid Zaman said in an interview with Dawn.
Additionally, the park also provides space for legal, financial and other business services.
The work on the park spread over an area of 852 acres is expected to be launched by September this year. The land has been provided by the provincial government free of cost.
An area of 50 acres has been allocated within the park for an independent provincial project of the state-of-theart Punjab Kidney and Liver Institute.
The Punjab government will contribute 20pc of the total cost or Rs21bn over the life cycle of the park in the shape of a grant and has already set aside Rs2bn for the project in its budget for the next fiscal year. The rest of the money will come in the shape of private investment.
Zaman said the company will target both domestic and foreign direct investment into the park, adding some Chinese and East Asian investors had already shown keen interest in investing in the park. “Several Chinese investors even wanted to take over the project but we declined because we want to develop it according to our own plans,” he said.
The management of the LKP Company — formed in the public-private partnership mode — expects to complete infrastructure development and construction of two public universities in the next 18 months.
“The park will provide a complete lifestyle. The key components of the park — universities and schools, science and innovation hubs, retail, entertainment, central business district, residential district, and green areas — will be developed in a holistic and phased approach with a large involvement of the private investors,” the CEO said.
“The universities and knowledge-based establishments will be located on the periphery of the park and adjacent to one another to facilitate easy access, information sharing and collaboration. The business district is going to be centrally located to house businesses, retail, entertainment, professional services and commercial facilities.”
Zaman said there are around 500 functional knowledge parks — and as many under-developed — around the world, and many of them exist as extensions of the universities, offering academia, researchers and businesses a combined space to cohabit. “The Lahore Knowledge Park will house around 13,200 people and is projected to be used by 53,000 souls every day.”
According to the Frost and Sullivan, the consultant firm that has developed the concept paper for the park, the project will annually generate Rs173bn in the shape of labour income and Rs35bn in tax revenues. The total revenues, or wealth, that the project is expected to create in 25 years is estimated to be a whopping Rs5.9tn in (the form of business) revenues, Rs253bn in labour income and Rs178bn in corporate income tax.
The financial plan projects that the project will run a deficit for 12 years. Annual deficits will, however, disappear after year 20 when the park will stop constructing buildings. The company will have an accumulated deficit of Rs5.70bn in year 2017, which is projected to disappear in year 24 and to become a consistent surplus.
From Year 1 to Year 25, the LKPC will have generated cumulative revenues of Rs39.2bn and the tax authorities will have received a total of Rs462bn in taxes.
“The plan is to make the project self-sustainable,” the CEO said. He added that the land will be leased out to private investors for a specific period.
The government is also considering proposals to change the company into an authority and declare the park a tax-free zone. “The decision will be made on the recommendation of the consultant,” he said, adding, “We’ll begin reaching out to the private investors shortly after the launch of the project.”