Pakistan is at a crucial juncture where the industrialists, government and other key stakeholders need to make some urgent calls related to the economy. There is a dire need to address the unsustainable economic equation by prioritizing smart investments that will decrease the country’s imports and boost exports.
Latest data released by the Pakistan Bureau of Statistics (PBS) reveals that the country’s trade deficit remained significantly high at $32 billion in the first eight months of current fiscal year.
The government had envisaged the annual trade deficit target at $28.4 billion, however, this mark has already been breached in the seventh month of current fiscal year. As a result, Pakistan’s economic situation is precarious as the higher deficit will lead to more foreign borrowing.
Currently, the country’s imports are twice that of exports which means that more dollars are flowing out of the country than coming in – this adds to our trade deficit and in the long run, weakens the Pakistani rupee against the dollar. Just earlier this month, the dollar climbed to an all-time high of around Rs 180.
To curb imports and achieve long-term growth, Pakistan needs to urgently embark on an industrialization journey. Globally, the petrochemical industry is recognized as the base for industrial development. As of now, Pakistan is one of the few countries with significant reliance on petrochemical imports.
Domestic production of petrochemicals is essential as it provides raw material for more than 20 industries including food packaging, cars, appliances, construction, paints, pharmaceuticals, textile, furniture, medical equipment, and soaps & detergent. Thus, petrochemicals enable our daily lives by providing lightweight, high-strength, non-porous and durable solutions at economical costs.
A ripe opportunity for Pakistan
Pakistan’s petrochemical sector is underdeveloped as evidenced by the absence of a petrochemical cracker (equipment that converts simple fossil fuel to different products), high reliance on imports of petrochemicals i.e., 5% of Pakistan’s total import bill, and low per capita plastic consumption of 8kg versus the global average of 55kg. Thus, Pakistan has a clear opportunity and economic rationale to develop its petrochemical sector.
The most viable route to kick-start the development of this sector is to invest in midstream petrochemicals. Currently, there is adequate local demand of six midstream petrochemicals: Polypropylene (PP), Purified terephthalic acid (PTA), Polyethylene terephthalate (PET), Polyvinyl Chloride (PVC), Methanol, and Linear alkylbenzene (LAB). The availability of on-purpose technology and adequate local demand will lead the way to set up global scale midstream petrochemical plants in Pakistan.
A vibrant midstream petrochemical sector will ensure the development of a downstream industry by providing raw material and technical support. In the long run, midstream petrochemical sector will generate the necessary demand to justify the establishment of a large-scale petrochemical cracker in Pakistan.
The way forward
If we take a step now, these projects will become operational by 2026-27 and generate significant economic dividends for Pakistan through net import substitution and job creation.
To turn this ambition into reality, the country needs a holistic, long-term petrochemical policy. Given that petrochemical projects are capital intensive and have long gestation periods, they will require a 15-year roadmap to attract investment. Analyses by industry experts indicate that the development of a robust petrochemical sector can change the country’s fortunes, but this cannot happen without a comprehensive policy.
At this point in time, Pakistan is already behind. We need to catch up. If we miss out on the opportunity to invest and develop the country’s petrochemical sector, it will be our loss. In the absence of a petrochemical policy, the dream of mega industrialization will stagger for another decade or two, and we will continue to be a trade-oriented and import dependent country.
It is imperative that we immediately position ourselves towards industrialization and embark on a journey of sustainable economic growth. But before we start, we need to get our house in order. We need to understand the benefits of a petrochemical industry in Pakistan, we need to come up with a policy and we need to work together – government, investors and the civil society - to ensure that the petrochemical industry in Pakistan is a roaring success.
(The writer is an academician and a freelance journalist. She can be reached at masoodtooba@gmail.com. The views expressed in this article are not necessarily those of the newspaper)
Copyright Business Recorder, 2022