In the last few years, the country had a very consumer-driven economy – there was a never-ending toxic cycle: import goods, run out of money then ask for a bailout/loan. In the long run, this harmed the country’s economy and industry.
This is what was happening in Pakistan according to Abdul Razzak Dawood, the former Advisor to Prime Minister on Commerce and Industry.
While speaking at the first Pakistan Petrochemical Symposium last month which was organized by Corporate Pakistan Group and ACCA, in collaboration with Engro Corp, Tufail Chemical Industries Ltd, Lotte Chemical Pakistan Ltd, ICI Pakistan Ltd and Gatron Industries Ltd, Dawood drove his point home by talking about how comprehensive policies had helped the country grow.
He shared the example of Pakistan’s mobile phone industry. The businessman claimed that earlier, the rate at which mobile phones were being imported into the country was high; this meant that billions of dollars were going out of the country, overtime this has decreased. Why? The country started making phones locally which resulted in money coming into the country. How did this happen? According to Dawood, it came about due to a comprehensive industrial policy on manufacturing mobile phones. According to Dawood, every month the figures for local production are going up and imports are going down. He claims that Pakistan is now manufacturing more phones than it imports.
Petrochemical industry
The next big thing for Dawood, is the petrochemical industry. For this, he said the next gradual step would be to formulate a comprehensive policy and follow it up with sound investment and an implementation plan. “Petrochemicals are the future, provided the stakeholders make a collective effort to come up with a good strategy and policy,” he said. “The petrochemical industry is truly dynamic – all of us should work together in the coming months to ensure that it flourishes. I hope 20 to 25 years from now when I’m no longer in this world, I’ll look down and smile at how the industry flourished,” he added.
The Chairman Board of Investment (BoI), Muhammad Azfar Ahsan, agreed with Dawood and added that petrochemicals are an area where the government is working very seriously.
Speaking at the symposium, he shared that several meetings had been held on the topic in the last few months. He hinted that a policy for the industry would be announced soon – after consultations with all stakeholders.
Ahsan claimed that in the next two to three years, they were expecting an investment of US $3billion. For his part, he said that the BoI was prepared to support the industry in whatever way possible as the Board’s mandate was to “facilitate industrialization, materialize export potential, encourage diversification in knowledge-based sectors and enhance a new level of global economic connectivity through effective policy, advocacy and investment facilitation.”
Like Ahsan, President Overseas Investors Chamber of Commerce and Industry (OICCI), Ghias Khan, believes that a petrochemical policy is needed to set up a successful industry in Pakistan. He said that Pakistan and Bangladesh were perhaps the remaining two South Asian countries which did not have well established petrochemical complexes. For Pakistan, this is detrimental because there is a high reliance on imports of midstream petrochemicals i.e. seven percent of Pakistan’s non-energy import bill is midstream petrochemicals, and low per capita plastic consumption of 8kg versus global average of 55kg.
According to Khan, the current demand of plastics stands at around US$4.3 billion, of which US $3 billion worth of products are imported. He claimed that as the country’s growth of consumption increases, so will its demand. He informed the house that the country’s demand of petrochemicals has increased substantially, thus allowing the setting up of a world scale plant in Pakistan. While highlighting the need for having a long-term policy for the development of petrochemical industry in Pakistan, he appealed to the government for having a two-pronged approach. Firstly, for the petrochemical industry, the government should embark upon the policy of import substitution, resulting in saving of precious foreign exchange. Secondly, the government should provide an enabling environment to the local petrochemical industry by initiating an appropriate tariff and duty structure.
He stated that he had recently been called upon by the federal government functionaries, to help devise the petrochemical policy as well.
“Encouraging investments is going to be critical for the growth of the country, and when you speak of petrochemicals, there are multiple allied industries that benefit from it - whether it’s engineering, project management and energy,” he said.
The way forward
The first thing that needs to be done is to work on a fair and predictable petrochemical policy – this must be done as soon as possible because this is the right time to invest in the sector so Pakistan can capitalize on an existing opportunity.
At present, Pakistan has an opportunity to develop its petrochemical sector. The most viable route to kickstart the development of this sector is to invest in midstream petrochemicals. Currently, there is a local demand of six midstream petrochemicals: Polypropylene (PP), Purified terephthalic acid (PTA), Polyethylene terephthalate (PET), Polyvinyl Chloride (PVC), Methanol, and Linear alkylbenzene (LAB).
Here, it is important to note that the policy should have fair tax incentives to attract investments and be competitive enough to export. This will also increase demand due to domestic and industrial appetite.
Besides the policy, Pakistan needs high tech world-scale petrochemical plants – this would fulfil the country’s requirements which is the need of the hour and will generate employment opportunities. With the government’s policy framework, the private sector’s investment, planning and execution, Pakistan’s petrochemical industry is set to be a huge success.
(The views expressed in this article are not necessarily those of the newspaper)
Copyright Business Recorder, 2022