The focus of government efforts
will be on the small and medium enterprises in the private sector
From Shamim Ahmed
Mar 06 - 12, 2000
The Economic Advisory Board (EAB) during its 2-day meeting in Islamabad
last week considered and approved the broad guidelines of the New Industrial Policy which
may be launched by the next financial year.
The second day meeting of the board which was presided over by the
Finance Minister Shaukat Aziz was informed that the new policy which will be announced in
April aims at removing major regulatory distortions, technological deficiencies and
various other impediments that were confronting the industrial sector.
According to a handout issued after the meeting, the board was informed
that in the industrial sector, the focus of government efforts will be on the small and
medium enterprises in the private sector. It was noted that this sector represented vast
potential for employment generation and exports expansion. But at present small and medium
enterprises were suffering on account of low technological base, poor credit allocation,
weak infrastructural support, poor marketing conditions and low value addition.
For a concentrated support to the sector, it was planned that in the
beginning four sub-sectors, namely fisheries, textiles, farm-based industry and marble,
were selected for a targeted intervention.
Based on detailed analysis, these sectors will be provided support
through credit availability, technological information, establishment of institutional
stakeholders that bridge information gaps about markets and cost effective methods of
value-addition. The board was further informed that there were still certain areas where
public sector had a role to play in industrial development. For instance, many of the
processing facilities to enhance non-traditional exports were required to be developed in
the vicinity of areas where private sector would not easily set up industry.
For this purpose, Pakistan Industrial Development Corporation (PIDC)
will act as a catalyst, through joint venture arrangements with the private sector. All
other public sector corporations will gradually dissolve as soon as their units were
Earlier, the Secretary Ministry of Industry and Production Abu Shamim
Arif while addressing a seminar, revealed that a long-term industrial policy was under
preparation by the government. According to him several committees have been constituted
comprising representatives of the private sector associated with the various types of
industries in the country, for formulating appropriate recommendations. The disarray and
lack of adequate base of capital investment in the industrial sector was attributed by
Arif to inconsistencies in fiscal and other policies of the previous governments which
ultimately bore heavily on the growth process of industry which he felt deserved redressal
in the upcoming new policy.
It is true that industrial development in Pakistan has left much to be
desired especially after the sixties for one reason or the other. There can be no two
opinions that rapid industrial growth can alone contribute to attainment of economic goals
such as sustainable economic growth, reduction in unemployment, dynamic export growth,
full-scale development of human and material resources of the country and the ultimate
achievement of a self-reliant economic base. At present, the share of industrial sector in
the GDP has remained low at around 17 to 18 per cent lagging far behind the agriculture
sector's 24.5 per cent. This it indicative of the fact that even after 52 years of
independence, the country has largely remained an agrarian economya glaring evidence
of underdevelopment and low per capita income in dollar terms.
The factors responsible for the slowdown in industrial investment in
the country may be varied and many, the foremost among which was the sweeping
nationalisation of well established, privately-owned large scale industrial units with the
result that in subsequent years at leastfor 6 to 7 years, private investment in industry
remained conspicuous by its absence.
It is also true that Industrial Development in Pakistan has left much
to be desired as it remained neglected specially after the sixtes for one reason or the
other. This apathy created a damaging gap in the pace of industrial development at a time
when developing nations in the South East Asian Region were actively engaged in the
promotion of industrial investment. The period from the late 1970s to 1980s was marked by
renewed official policy pursuits including formulation of industrial policy measures to
encourage investment in the private sector. However, no attention was given during this
period to disinvest the government's ownership in the nationalized industrial sector
although private investment was permitted in industries which were under state management.
The era was also marked by closely regulated industrial investment through official
approvals which entailed long delays in procedural rigmarole, and hence the conspicuous
slow pace of industrial investment.
The period beginning in 1990s was noted for deregulation of sanctions
in private investment in industry. However, despite attractive concessions like areawise
and industry-wise tax holidays and other concessions, the investors concentrated on
textile, leather and a few other industries. The goal of broadening the base of industrial
sector especially through establishment of capital-intensive industries like chemicals and
engineering continues to be far from reach. At the same time the existing industrial
sector comprising mostly textiles and a few other types of industries was quite often
shaken in so far as its profitable operations are concerned, by what is now described as
inconsistency in the government's economy and fiscal policies such as abrupt removal of
fiscal incentive, frequent increases in power and fuel charges, tight credit policy and
high interest rates. The regular depreciation in the exchange rate of rupee contributed to
a rise in cost of imported raw materials and spares and led to closure of a large number
of industrial units.
While preparing a new policy, this, among other factors, should also
kept in mind that most of the changes in the economic policies of the previous governments
was largely due to the pressures and conditionalities of the international financial
institutions. It should be assured that the new policy takes care of them to prevent any
boottleneck in its smooth implementation.