ERA OF INDUSTRIAL DEVELOPMENT
FOZIA AROOJ (email@example.com)
Oct 19 - 25, 2009
Sustainable growth of economy requires rapid industrialization and paramount importance to be placed at providing the country with an industrial base that can satisfy a number of objectives. As a matter of fact, industry participates extensively to the growth of the economy, provides employment to a rapidly increasing workforce, narrows inter-personal and inter-regional income disparities, and increases exports.
Steady growth of industry is required for import substitution, development of agriculture and freedom from rigid foreign currency control.
Various institutions have served for the rapid industrial growth of Pakistan. Major contributories in this respect included Pakistan Industrial Development Corporation (PIDC), Pakistan Industrial Credit and Investment Corporation (PICIC), Industrial Development Bank of Pakistan (IDBP), and National Development Finance Corporation (NDFC).
Manufacturing and agro based industries are the need of the hour for Pakistan and they require immediate attention of policy makers and government authorities. We actually need accelerated growth of manufacturing industries as they give more productivity than services and a major chunk of our tax revenue is collected from industry. The growth of service sector is indirectly related to manufacturing industry because industries like IT, banking and others are the biggest consumers of the products of manufacturers. Success of both these sectors occurs if they go hand in hand.
Long-term economic growth is dependent on development of a strong industrial base. Developed countries have stepped forward by adopting a progressive industrial evolution approach where they started with traditional non-tech industry and then promoted high technology capabilities and finally acquired ultimate dominance in industries like automobiles, ship breaking, microprocessors, electronics etc. Pakistan's policy makers paid little heed to these steps and as a consequence the country did not take advantage of the changes in its external environment as was done by several Asian economies, including India, which saw a sharp increase in the rate of domestic output, exports and also a restructuring of their economies. These economies are now better integrated with the global economy compared to Pakistan.
Since last several years, Pakistan has been following a policy of minimum government intervention and maximum incentives to private sector. However this has not been producing the desired results and there is no prominent industry tycoon except Nishat and Engro. The underlying causes behind this failure are multiple. We are faced with inadequate power supply which is the life blood of industry. Banks are reluctant to extend long term financing facility to green field projects. Taxation system is rigid and does not give incentives to business community. Policy makers are not determined to promote industries particularly manufacturing enterprises.
Large businesses feel that the growth of the black economy is hurting development of the industrial economy. There is an urgent need to develop a level playing field for enterprises of various sizes. At the moment, small enterprises, by avoiding taxes and by avoiding a number of fairly stringent regulations, have increased their market share in the local market at the expense of large firms. The large producers find it difficult to compete with SMEs.
It is also important to develop international trade as an important determinant of efficient industrialization. There is an anti-export bias in the traditional approach. This is another area where the private sector could work with the government to; (a) identify changes in policies that would create a pro-export orientation and, (b) identify the institutions that need to be improved or established to realize the government's objectives.
Businesses are deeply concerned about the state of physical infrastructure, which has lagged behind the development of the economy and does not meet the needs of a trading nation. Belonging to the sector of infrastructure but demanding a separate treatment is shipping, an area in which a decent beginning was made in the 1960s but has allowed the industry to run it down. Absence of appropriate shipping facilities imposes enormous burdens on exporters, adding significantly to costs.
The businesses recognize that Pakistan has not given the sector of agriculture the attention it deserves. Properly developed agriculture could be a major source of exports, of not only grain but also other low value-added products.
Pakistan could carve out a decent space for itself in processed foods. But, this will need investment by the state in infrastructure (cold chains, for instance), technology to increase productivity as well as the quality of products, finance and market advice. Once again, the public and private sectors could be partners.
Pakistan's geographic location provides it with many opportunities it needs to exploit. It is the only relatively large country that shares borders with the world's two emerging giants, China and India, with more than a billion people each. Pakistan has seriously lagged behind developing the technological base of the economy. Our country has a weak private sector, which cannot compete in an open sector. This is because the state has failed to invest in human capital and infrastructure. The objectives of the state should be changed and economic development has to be focused with industrialization and industry should be backbone and driving force for the economy. We cannot grow without industry and even our other sectors such as agriculture and manufacturing needs industrial input. There is a dire need of reducing costs of manufacturing, end to corruption, reduction in export duty, discouraging speculative business of land, besides developing an infrastructure to bring back the economy to its right track.