By the time the Government of Pakistan decided to focus on information technology, make it an engine of growth for our economy and come up with the right incentives, the dot.com revolution was over.
Since then we have managed to produce an army of software graduates with no jobs in the market place and dreams of making this sector an export money spinner are yet to materialise.
Similarly, by the time we got the legal structure in place enabling the financial system to grease the wheels of construction activity in a low interest environment in the country, we are now once again faced with a situation where our hopes to make construction a major creator of new employment and growth appear to be fading.
It is so because the costs of most materials are going up in an unprecedented manner not only affecting building activity but also adversely impacting the public sector development programme.
Prices of rolled steel, cement and even cables (due to higher price of copper wire) etc are climbing and have sky rocketed in case of rolled steel bars.
Since March last year, the crisis in the steel industry has been looming and the Ministry of Industries has been apprised repeatedly of the prevailing shortage of suitable raw material.
It is indeed a sad spectacle that they appear surprised by the crisis staring us in our face.
THERE ARE THREE SOURCES OF SUPPLY: Pakistan Steel, steel melting sector primarily located in the Punjab, and ship breaking industry at Gadani, Balochistan.
As the ship breaking activity started slowing down due to high prices of ships heading for the scrap yard, we failed to give the fiscal break to ship-breakers to counter this trend.
On the other hand, with steady growth in the economy and the relatively cheap availability of financing for housing, the demand for steel products started rising. Country's annual need is estimated at four million tonnes, while Pakistan Steel only caters for 25 percent of this demand.
Therefore, all the government really needs to do is to equalise Pakistan Steel's retail price with imports.
Traditionally, this has meant a 20 percent tariff protection.
The iron ore and coal requirements of Pakistan Steel are covered by long term five year contracts.
The problem is the unprecedented hike in freight cost of these raw materials. This has gone up by $14 million per year according to the management of the Steel Mill.
Freight constitutes less then 20 percent of total raw material cost, whereas, the price of bars and billets has shot up from Rs 38,000 to Rs 55,000 a ton, clearly showing that black market has now emerged.
Unless this is countered by drastically reducing the tariff on mild steel bars (finished goods) to 10 percent, local mills would have no incentive to stay in business.
Secondly, the levy of five percent on raw materials imported by Pakistan Steel needs to be reduced to zero along with imported re-rollable steel scrap, shredded scrap and ships for breaking.
We know that the Central Board of Revenue would not agree with us. But this is where the vision of the policy makers in Finance Ministry as well as the Federal Cabinet will be tested.
Can they take radical steps to counter this extra-ordinary situation?
The real problem now facing the country is not the price of steel products but the availability of various kinds of iron and steel raw materials and the hoarding, which have led to dwindling inventories in various industries ranging from re-rolling mills, drum producers and even the vending industry to the auto assemblers.
Once the supply position eases and inventories are built-up to the normal level we can levy duties in a cascading way, giving 10 percent protection to the local industry.
We require a level playing field for our industry to be competitive with others. Both India and Korea have drastically curtailed duties and banned exports to ease domestic availability.
We also need to move fast and rectify the situation by promptly increasing the availability to lower the prices.
These are unusual times of tremendous uncertainty and manufacturers are facing major supply disruptions.
Unless corrective measures are quickly in place we shall see the wheels of industry grinding to a halt and even government's development projects in the irrigation sector would suffer cost over-runs.
This must not be allowed to happen. A fall in industrial output will impact our growth target for the year when PSDP's projections need to be achieved to sustain growth, generate employment beyond FY2004 for a meaningful dent in poverty reduction.
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