Health Club and Spa Facilities

8/10/2019 Health Club and Spa Facilities

1/65


2/65


3/65

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 vary 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


4/65

i

TABLE OF CONTENTS

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

CHAPTER 1 - INTRODUCTION...................................................................................1

1.1 OVERVIEW ................................................................................................................................................1

1.2 OBJECTIVESAN DSCOPEOFSTUDY..............................................................................................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 ...........................................................................82.10 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

TA BLE 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............................27TABLE 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


5/65

ii

TABLE 11- CASH FLOW... ...............................................31

TABLE 12BALANCE SHEET ..................................... ..32

ANNEXURE - 1 PAKISTAN - A PROFILE


6/65

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


7/65

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.


8/65

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)

1stYear 2

ndYear 3

rdYear 4

thYear 5

thYear

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.


9/65

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 cityliving. 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.


10/65

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.


11/65

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 (Jacuzzi), 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,


12/65

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 REQUIREDThis 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


13/65

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

Jacuzzi (Spa)

Sauna

Weight Control

Fitness Centre

Aerobics

Physiotherapy

Massage therapy

Nutritional Courses

Cosmetic Treatment

6,000 square feet

-

Jacuzzi (Spa)

Sauna

Weight Control

Fitness Centre

Aerobics

Physiotherapy

Massage therapy Nutritional Courses

in Cosmetic Treatment

Cost of constructing swimming pool, Spa/Jacuzzi, 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


14/65

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 (Jacuzzi), 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

234567

Karachi

LahoreFaisalabadMultanHyderabadPeshawarIslamabad

9,269

5,1432,0091,1971,167 988 529

13,943

7,2362,6531,4841,4561,304 645

A

ABBBBA

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.


15/65

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 108Head 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 / StageTime Required

(months)

Preparatory activities (preparation of feasibilitystudy, application for financial assistance, etc.) 2.0

Sanctioning of financial assistance 3.0

Fulfillment of post-sanction formalities, allocationof funds, legal documentation, etc. 3.0

Opening of first health club 24.0

Opening of the 7thhealth 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


16/65

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.


17/65

9

FIGURE -1

PROPOSED ORGANOGRAM OF A HEALTH CLUB

2.10 SYSTEMS AND PROCEDURESThe 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 OperationsGeneral Manager

Finance &Administration

ChiefAccountant

ManagerAdmin

AccountsOfficer

Health Club Health Club Health Club

Health Club


18/65

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. Jacuzzi,

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.


19/65

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


20/65

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 USAwith 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, USAstarted its first facility on fitness in 1965 dating back to the

original Golds Gym in Venice, California. From that first gym in Venice, Golds


21/65

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 Gymhas 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


22/65

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

Karachiwith 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 clubshave 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 & Jacuzzi baths, Aerobics (ladies &

gents), Table tennis, Exercise Physiologist clinic for muscles injury prevention,

diet and nutrition


23/65

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.


24/65

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 Jacuzzi) 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 July 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


25/65

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


26/65

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/Jacuzzi, 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/Jacuzzi,

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.


27/65

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 & Jacuzzi 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


28/65

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.


29/65

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/Jacuzzi, 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/Jacuzzi 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/Jacuzzi

facilities are similarly of excellent standards.


30/65

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, Jinnah 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/Jacuzzi,

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


31/65

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/Jacuzzi 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.


32/65

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


33/65

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/Jacuzzi, 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.


34/65

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.


35/65

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% ofHouseholds

are PotentialMembers

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 estimatenumber 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.


36/65

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 16,800Investment 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 andIjara/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.


37/65


38/65

30

TABLE - 9

RATES OF RETURN

(in Percentages)

Year 1 Year 2 Year 3 Year 4 Year 5Gross 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


39/65

31

4.7 CASH FLOW

Projected cash flow of the project is shown hereunder.

TABLE - 11

CASH FLOW

(Rs. in 000)End of

Constr.1st Year 2nd Year 3rd Year 4th Year 5thYear

SOURCES

Net ProfitAdd back:DepreciationAmortization

-

--

199,381

19,4581,170

124,857

19,4581,170

202,131

19,4581,170

284,151

19,4581,170

386,802

19,4581,170

Funds from Operation - 220,009 145,485 222,759 304,779 407,430

Paid-up CapitalLease FinancingInc. in Current Liability

634,077634,077

-

--

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 AssetsCap. ExpensesRepay of Lease Inst.Payment of DividendsIncrease (Decrease) inCurrent Assets

1,242,3045,850

--

-

--

63,408-

12,969

--

63,408158,519

(9,308)

--

63,408158,519

7,072

--

63,408158,519

7,488

--

63,408221,927

9,275

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

Surplus / (Deficit)Cash Opening BalanceCash Closing Balance

20,000-20,000

148,63220,000

168,632

(83,750)168,632

84,882

(4,240)84,88280,642

77,36480,642

158,006

114,820158,006272,826


40/65

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.1stYear 2ndYear 3rdYear 4thYear 5thYear

ASSETSCurrent Assets:-Cash/Bank BalanceAccounts ReceivableStores & Spares

20,000--

168,6329,9693,000

84,88218,7773,500

80,64225,3494,000

158,00632,3374,500

272,82641,1124,000

Total Current

Assets20,000 181,601 107,159 109,991 194,843 318,938

Capitalised ExpensesFixed Assets (at cost)Less: Accum. Dep.

5,8501,242,304

-

4,6801,242,304

19,458

3,5101,242,304

-

2,3401,242,304

-

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

EQUITYCurrent Liabilities:-Dividends PayableAccounts Payable

--

158,5195,000

158,5197,000

158,5199,000

158,51911,000

158,519136,000

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

EquityPaid-up CapitalRetained Earnings

634,077-

634,07740,862

634,0777,200

634,07750,812

634,077113,036

634,077182,800

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


41/65

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.


42/65

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.


43/65

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

Jammu & Kashmir lies to the north of Punjab.


44/65

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 27oC, but temperatures vary with

elevation from -30oC to -10oC during cold months in the mountainous and northern areas

of Pakistan to 50oC 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 July is hot, with 25 to 50% relative humidity; Monsoons start in July 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


45/65

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


46/65

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.


47/65

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


48/65

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.


49/65

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


50/65

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


51/65

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,


52/65

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.


53/65

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.


54/65

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 June

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

Health Club and Spa Facilities

Documents

Transcript of Health Club and Spa Facilities