The government will have to turn its urgent attention towards 18 vulnerable industries before the impending liberalised trade regime between India and Pakistan if these industries want to be able to sustain both local and global competitiveness.
According new study from Manzil Pakistan, "Pak-India Trade Liberalisation - How will Pakistan's Manufacturing Sector Fare? A Comparative Advantage Analysis", there are 18 industries that are already facing severe pressure due to a heavy influx of Chinese imports during the first phase of the Pak-China Free Trade Agreement (FTA).
These industries include pharmaceutical, plastics, paper, tools and cutlery, tobacco, footwear, cereal/flour/starch/milk preparations and products, vegetable/fruit/nut/ preparations, inorganic chemicals/precious metal compound/isotope, tanning/dyeing extracts/tannins /derivs/pigments etc, photographic/cinematographic goods, articles of iron or steel, copper, manmade filaments, wadding/ felt/non-woven/yarn/t wine/cordage, knitted/crocheted fabric and miscellaneous manufactured articles.
While these industries have performed well in the past they may not be able to do so in an open trade regime with India because of the additional pressure Indian industries. These industries are already facing additional challenges at home such as the energy crisis. The Pakistani government needs to formulate appropriate policies to support these industries before the liberalisation is fully implemented as they are expected to suffer by losing their share in the local as well as the global market.
The study by Manzil Pakistan investigates the progress of the manufacturing sector at home and the results are based on the Revealed Comparative Advantage Index, which is a measure of disadvantage or advantage a country has in the specialisation of a particular product.
The study labels 18 industries as "Vulnerable industries". Out of these 18, five are those which have lost their competitiveness in the global market over the years, while, the remaining 13 have shown marginal growth and are struggling hard to attain or sustain competitiveness. The idea is to bring government's attention to these industries in order to provide appropriate support.
Though the study recommends protection for some industries, it supports a liberalised trade regime with India. The study states that there also exist 17 industries for which trading with India as compared to trading with the current partner ie China might be more beneficial to Pakistan in terms of strengthening balance of payments.
The study proposes a further disaggregated level inquiry mainly to identify the most vulnerable products within the vulnerable industries. It also recommends the need to further investigate the reasons for their vulnerability and the extent to which they should be protected. If such an investigation concludes that Pakistan's trade agreements with its partners have been significant in reducing competitiveness of the industries identified in this study, protectionism for these industries, albeit limited, becomes admissible for review.-PR