RASTA: Local Research, Local Solutions: Business and Markets, Volume Xi

Edited by Nadeem Ul Haque and Faheem Jehangir Khan

in PIDE Books from Pakistan Institute of Development Economics

Abstract: This project scrutinizes the industrial ecosystem in the Daroghawala industrial cluster of Lahore. The projects scope primarily encompasses the examination of the emergence and growth of this industrial cluster, and the investigation into the dynamics of its small and medium enterprises (SMEs), their growth determinants, and their distinctive economic transaction patterns. The initial phase of the research delves into the spontaneous evolution of Daroghawala into a vibrant and diverse industrial ecosystem. Influencing this development are factors such as urbanization trends, increasing growth in the automobile, steel, and iron industries, the ease of conducting business, and infrastructural accessibility. The study uncovers a historical record of the industrial units developed in this area making up an industrial cluster. Notably, the research emphasises the role of collective industrial entrepreneur associations in spearheading representation and negotiations within this area. This part of the research calls for more in-depth investigations into Lahores unique industrial typologies and ecosystems. The second part quantifies the causal effect of subcontracting from original equipment manufacturers (OEM) on the growth of SMEs operating within Daroghawala. The study finds that the enterprises which had higher OEM permanent clientage ratios grew rapidly in comparison to others. Interestingly, however, the study could not find significant evidence to suggest the nature of the relationship between SMEs growth and their access to corporate loan availability and their research expenditures. It diverged from previous mainstream research but resonated with some studies in the Pakistani context. This divergence underscores the need for further exploration across diverse sectors and geographical regions in the country. In the final phase, the research grapples with understanding formality/informality. Enterprises that develop outside planned industrial zones are usually labelled informal. Through Daroghawalas economic flows, the study develops a robust transaction table showing intraregional commerce, international trade linkages, and considerable tax contributions by firms in informal clusters. These findings challenge conventional perceptions of their informality, further demonstrating their effective integration with formal economic sectors. The evidence of substantive financial flows lends credence to the structuralist school of scholarship on informality.

Date: 2025 Written 2025 Originally published 2025.
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