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Pakistan industrial output set to rise to 25pc of GDP

ISLAMABAD — Pakistan expects its industrial production to increase to 25 per cent of the gross domestic product (GDP) by 2015 from the current 19 per cent, to be supported by increased output from five ‘priority sectors’ like automobiles, construction, engineering, chemicals and fertilisers.

Marketing

“This will require that we improve our skills, modernise the industries technologically, ensure availability of raw material at competitive rates and undertake an aggressive marketing initiative to get a better market share internationally,” according to Jahangir Khan Tarin, federal minister for industries, production and special initiatives.

This means the share of the industry would rise to one-fourth after seven years from the current one-fifth. The government has estimated that industrial production would increase by 10.90 per cent this fiscal year from 8.45 per cent last year, which was less than the target of 13.90 per cent.

Last month, the Asian Development Bank (ADB) lowered its forecast for Pakistan’s growth rate to 6.50 per cent for the current year against the 7.20 per cent target set by the government for the year.

Structural issues

ADB stated that the ultimate causes of poor exports are grounded in long-term and deep structural issues relating to the lack of diversification of export industries, poor compliance with quality standards, and concentration of exports in a small number of markets, it added.

Tarin conceded that the industrial base in Pakistan is “very low, highly lopsided and mostly dependent on textiles”. The industrial base is low because of basic structural weaknesses developed over the years. It has not developed like other developing countries. The manufacturing sector contributes 25 to 35 per cent to the GDP in developing countries but we have not developed like others. We are now making efforts to follow that route and broad-base our industrial sector, said the minister.

Performance

He said excessive protectionism in the past has been the root cause for a lacklustre performance of the industrial sector in general. “My biggest concern is that we had strength in textiles, but we are in danger of losing our edge because of over-protection to the textile industry and if we do not prepare for the international marketing competition.”

He said the share of manufacturing in GDP was 12 per cent when General Musharraf took over and has increased to 19 per cent in 2006-07. He said the industrial sector has played a key role in developing countries but this area has not developed in Pakistan like other developing countries. The manufacturing sector contributes 25 to 35 per cent to the GDP in developing countries but we have not developed like others. “We are now making efforts to follow that route and broad-base our industrial sector.”

To change this structural base is a long-term job and basic challenges we are going to face are lack of skills, modernisation of technology and provision of raw material. So, we are now focusing on skill development, including managerial skills and labour skills, particularly in the engineering sector.

Tarin said our engineering sector, particularly iron and steel, has been hostage to protectionism. The Pakistan Steel Mills that should have been a source of strength for iron and steel has, in fact, been hampering growth. So we have reduced import duties to make raw material available at lower costs.

Initiatives

Secondly, Pakistan has been lacking marketing initiatives. Hence, the Engineering Development Board is being revitalised while efforts are being made to urbanize the SME sector. The minister did not agree that utility costs were extremely high in Pakistan. “That is a myth.”

He said the textile ministry has recently got a study done by an international firm WERNER’s which after comparing a number of countries has come up with the conclusion that utility costs are not high. However, efficient use is the key and this is an area where we could improve things by developing managerial and labour skills and technology upgradation.