The draft of industrial policy would be presented by the core group at a meeting of the Task Force on industrial policy to be held in Islamabad on August 12. The core group, carrying out the exercise of presenting the draft of industrial policy, is major in economics from LUMS and is also affiliated with overseas colleges of economics.
The group has been entrusted upon the task of drafting trade policy commensurate with the changing pattern of the global economy. The global economy remains dominant with more than sixty percent share of trading in engineering merchandise. Pakistan has remained a very narrow base for its external trade which has remained dismal also.
The reference to the dismal performance is referred to Pakistan being fourth largest producer of cotton in the world with about two percent share in the world trade of textile and clothing. The trading of textile and clothing of about 500 billion US dollars is shared by only two percent from Pakistan as textile with sixty years of all supports including prohibitive subsidy supports in terms of WTO rules has not exceeded beyond ten billion US dollars.
The arithmetic of co relationship of being fourth largest producer of cotton should have a share over hundred billion US dollars in the world trading of textile and clothing. From time and again trade policy reviews by WTO has suggested government of Pakistan to diversify its trade. It is high time that country should chase the biggest slice of the trade in global market trade of engineering merchandise. That needs an industrial policy with an outcome to make the industrial manufacturing, in specific engineering as the forefront or the main driver of our economy in future.
The momentum of presenting an industrial policy has geared up to give a roadmap for the development of industrial economy. In the absence of facilitating fiscal, monetary, regulatory and other burdens of governance, the investments in the Greenfield, more or less remains subject matters of the risky decisions by the entrepreneurs without any guidebook assuring the predictability and reliability of return on investments in the industrial economy, in which engineering manufacturing can be a source of cheaper inputs for in home consumption as substitute of higher value imports but as well as it can participate in the outward oriented economic trade. This would read with the advisory noted of WTO as an outcome of identifying weaknesses in the Pakistan economy being narrow.
The Secretary Ministry of Industries and Production under the desire of Minister is moving fast to collect the consensus on the industrial policy which is being routed for developing agreements among stake holders before the industrial policy is finally launched.
Industrial Policy activity is being funded by the Non Lending Technical Assistance programme (NLTA) of the World Bank. In order to have views of a vide range of stake holders the Minister for Industries and Production had set up a 'Task Force' on the Industrial Policy. The 'Task Force' is supported by a core group that is actually working on the recommendations for the final document.
The brief record of progress so far is as follows: A thirty four member Task Force and core group have been established which include representatives from the Chambers of Commerce and Industry, Federal, Provincial governments, academia and business experts. An inception report was presented in May 2010. Consultations with FPCCI have been made twice including holding of workshop with stakeholders from different industrial sub-sectors.
A series of consultative meetings took place all over the country with Trade Associations, Chambers. Thereafter a draft was presented at the Sukkhur, Hyderabad, Karachi; Multan, Faisalabad, Peshawar, Lahore, Gujranwala Chambers. Now the preliminary draft of the industrial policy is being presented in nine workshops all over the country. Our industrial sector has been hit hard by a combination of economic factors.
The 'International Economic downturn'; energy crises, lack of uninterrupted electricity supply and its increasing rates; high mark up; law and order situation; tariff/ taxation issues; high cost of furnace oil; rising cost of doing business. The consultative process to put in place an industrial policy would be an ongoing activity to ensure that policies deliver results and are adapted and molded in line with fast changing economic conditions.
It is the endeavour of MOl&P that the policy document take on board the views of the industry and it is for this purpose that MOl&P decided to go to the respective chambers, trade associations of industry and identified stake holders.
Later on the policy would be placed on the website of MOl&P to receive inputs from those who have not had an opportunity to join in these consultative workshops. MOI&P expects that this joint effort would produce a quality policy document which would prove to be a water shed in bringing the lagging manufacturing sector to the forefront as the main driver of our economy.
Engr. M A Jabbar, member of the task force on industrial policy, talking to Business Recorder said that Pakistan needs to adopt an approach based on three considerations: selecting the winners, both industries and enterprises, that could exploit niches for themselves in the rapidly changing global system of production; decentralising industrial policymaking to the provinces so that each province can take advantage of its endowments; choosing the industries that can play a role in creating a large number of jobs for the country's rapidly increasing work force.
He said that industrial policy should look into comparative advantages of geographical locations of each province for recommending establishment of certain type of industry and upgrading of the existing investments in the green fields in the geographical locations.
He said that the aim of the policy should be to further develop the industrial base so that the existing industries and corporate entities working in the sector could acquire the scale and expertise that would help them to compete with the tens of thousands of multinational corporations that are now operating in the global economy.
The engineering base through Automotive vending industry is already experiencing production base of conversion of Ferrous, Non ferrous, Plastic, Polymer science raw materials into finish products. The parts supply and in home servicing of the energy sector through engineering manufacturing would promote employment, technology and as well as the strength to grow from parts manufacturing to capital goods manufacturing.
The industrialised and on rapid industrialisation in some of the countries is contributed by in home production of machinery and equipment supporting production of engineering merchandise. The policy has to care and support if not at the level of textile support but at least marginal to show the policy interest to motivate entrepreneurs to invest in industrial and engineering economy.
In designing the industrial policy there should be focus on a number of considerations to industrialise the country. One, we should be mindful of the history of industrial development in the country. Two, the changes that have occurred in the global economic system - in both the system of industrial production as well as the system of international trade.
Three, much of the industrial policy should be the responsibility of the provinces through development of infrastructure and industrial states with state of the art supporting facilities, laboratories, human resource development centers for providing the required people to support the industry and engineering merchandise manufacturing base. Four, considerable emphasis should be given on the development of Small and Medium Enterprises (SMEs).
The development of this part of the industrial economy has not received as much state attention as it deserves the policies though have been claimed to have been made but these need to be integrated in the industrial policy for a paradigm shift from talking to doing or from paper hanging to the output as a counting account for GDP and its growth. This can be promised by industrial policy which actually is acting in co-ordination and tandem with other government bodies to make the success as the objectives of all as a single government agenda.
Engr. Jabbar said that special constraints in the development and investment in greenfield that needs to be addressed include (i) critical infrastructure bottlenecks (particularly in the power sector) that raise the cost of doing business; (ii) inadequate access to and quality of infrastructure services in urban centers; (iii) inefficient contract enforcement, property rights protection, and quick dispute resolution mechanisms; (iv) poor human capital development and rigid labour markets that reduce labour productivity and result in suboptimal resource and factor allocation decisions; and (v) shallow financial and capital markets and consequent low levels of market capitalisation and savings.