The largest drawback for “Lollywood” was the declining number of theatres throughout the country. Pakistan's crumbling infrastructure of classic cinema houses, many of which are now dives showing seedy B-movies, is unfit to compete. One film distributor estimates that there are just 150 cinemas in a country of 180 million people, and 130 of those are "in a shambles".
The already small number of screens was further reduced by mobs who torched cinemas in Karachi and Peshawar last year to protest against a YouTube video said to be blasphemous.
But big investments in new digital multiplexes have begun luring middle-class youngsters to the cinema for the first time.
All of Pakistan's leading cities now have at least one decent cinema. Even Islamabad, the capital city, which has not had a cinema for more than a decade, will soon get a Mandviwalla multiplex.
In addition to dramatic cuts in entertainment taxes in 2001, the biggest boost to business was the discovery in 2007 of a lucrative loophole that allows cinemas to sidestep a ban on showing movies made in India.
Movies that are released through international distributors like Fox or Universal are imported as American or British movies and these movies have been the major players in the box office.
A small band of enthusiastic film-makers, often cobbling together financing from what they have earned directing television commercials for washing powder and soft drinks.
"This is guerrilla film-making," said Shahzad Nawaz, director of a recently released film called Chambaili.
"You have to do everything yourself and you have to invest blood and tears to make it happen."
Compared with India's £2bn Bollywood film industry, the dozen or so films produced in Pakistan in recent years represent a tiny output. But there is hope that it will be the start of something big.
"The industry is re-emerging very fast," said Nadeem Mandviwalla, a leading cinema owner, "but after 30 years of decline there is a lot of catching up to do."
The movie business was crushed, he said, by the rise of pirated videos and DVDs . According to a report published last year by the US government, Pakistan is among the 13 worst countries in the world for intellectual property theft.
Sceptics say the failure to protect the home market means Pakistani film-makers will never be able to compete. But Fazli and Mandviwalla believe the glut of Indian movies is helping to educate a new generation of filmgoers on the joy of big-screen entertainment, ultimately creating an audience for home-produced films.
Film-makers, increasingly located in Karachi rather than Lahore, the traditional home of Pakistan's "Lollywood", still need to work out how to make films, on a fraction of Bollywood's budgets, which can compete in a sea of Indian movies, with their signature mix of spectacle and big song-and-dance numbers. Nadeem Paracha, a cultural commentator at Dawn newspaper said, "Pakistanis expect something different, something that has their own flavour.
"If they can come up with that perfect formula, then I think there will be people going out and watching these movies."
A huge help is the rapidly declining cost of technology: film-makers now routinely make stunning-looking films with the same high-grade digital cameras used on films such as Prometheus and The Hobbit. The bottom line is, only around half a dozen films are made every year.
Director Shahzad Nawaz warned that people should not get carried away.
"To truly say we have an industry we need a new film opening every week before we can claim there is a true renaissance," he said.
"This is a great new experiment, but it is going to take time."
