. .

Manufacturing sector: The declining growth

  1. Pak-Indonesia joint venture

  2. Self-sufficiency in agriculture
  3. Manufacturing: The declining growth

It plays a very important role for the development of economy

Aug 21 - 27, 2000

Growth performance of manufacturing sector remained pathetic, particularly large-scale manufacturing shows almost zero growth during fiscal year 1999-2000. Manufacturing Sector with 17 per cent contribution in the Gross Domestic Product (GDP), plays a very crucial role for the development of country. During last decade specially large scale manufacturing sector slowed to an average of 4.7 per cent in the first half and further to 2.5 per cent in second half of 1990s, according to the economic survey 1999-2000.

Statistics show that over all manufacturing sector has grown by 1.6 per cent as against 4.7 per cent of the corresponding period of last year. Our manufacturing sector comprises of large-scale manufacturing and small scale manufacturing, statistics depicted zero per cent growth in large scale manufacturing during July-March 1999-2000 which was 2.7 per cent in corresponding period of last year which reflects an alarming situation.

Drastic decline in the level of sugar production by 24 per cent was the major reason behind the stagnation in the growth of industrial sector as sugar immensely contributes to the manufacturing sector. Statistics show that sugar has been the driving factor regarding its impact on over all sector for instance the large scale manufacturing grown by 7.4 per cent in 1997-98 but without sugar the growth was zero. Excluding sugar manufacturing sector shows a growth of 6.4 per cent during first 9 months of current fiscal years.

Food, beverages and tobacco showed a substantial decline of 18.2 per cent with 24 per cent decline in sugar, 6.2 per cent in cooking oil, 8.4 per cent in blended tea and cigarettes shows decline of 11.2 per cent. 24 per cent decline in sugar, 6.2 per cent in cooking oil, 8.4 per cent in blended tea and cigarette shows decline of 11.2 per cent. The other group is automobile shows declining trend by 19.2 per cent jeeps and cars (23.5per cent), light commercial vehicles(43.2per cent) and motor cycles show 3.8 per cent decline. The performance of other major large scale organizations remained progressive during last fiscal years and these are expected to be at rising level in future. These include jute industry, fertilizer industry, vegetable ghee, cement and public sector industries.

As we discussed earlier that sugar industry and automobile sector remained in doldrums which adversely affected the manufacturing sector at large. Sugar industry particularly in this concern, drastic decrease in sugar production necessitated import of sugar this year. Recent statistics show that rising trend in the export of sugar had damaged the local sugar mills businesses. Finance Minister recently in a meeting of economic advisory board expressed some concern over the fact that the major reason for the zero growth in a manufacturing and industrial sector was decline in sugar production.

The role of small scale manufacturing sector can not be overlooked in this regard because Small and Medium Enterprises (SMEs) play a very crucial role for the development of the country and economy. In Pakistan, it almost provides 80 per cent of employment in manufacturing sector and generates one fourth of export earnings. Non-availability of credit caused hampering this sector, government has recently announced micro-credit banks in order to facilitate the small investors with easy availability of credit. Punjab Small Industries Corp, Sindh Small Industries Corp, NWFP Small Industries Development Board are involved in the promotion of SMEs.

The production value of all industrial units under control of Ministry of Industries has shown an increase of 7 per cent as compared to corresponding period of last year. The major contributors in this regard are State Engineering Corp(SEC), Pakistan Automobile Corp(PACO), National Fertilizer Corporation(NFC) which show an increase in production value. While Pakistan Industrial Development Corporation (PIDC) showed 54 per cent and State Cement Corporation of Pakistan(SCCP) showed 18 per cent decline in production value. Excluding Pakistan Steel, net sales of state owned industrial units is expected to increase by 12.7 per cent by the end of current fiscal year. During last year only NFC, PACO and PERAC are expected to mark profit in this year while rest of them is likely to incur loses.

Overall statistics of the fiscal year 1999-2000 shows that public sector investment in industrial sector remained slow with a 0.6 per cent growth as compared to private sector investment in large scale manufacturing with sharp increase of 30.6 per cent. An overall increase of 20.4 per cent was witnessed in industrial investment or capital formation in the manufacturing sector.

On the other hand official resources also depict that during first month of the current financial year sharp decline has been registered in the export of manufactured goods. Negative trend was prevailing in most of the value added item of exports. Even downward trend was prevailing in most of the textile manufactures last month. Cotton yarn topped the list by reaching 19.69 per cent in July 2000 as compared 18.58 per cent in July 1999.

Manufacturing sector demands special consideration for its growth and survival due to its significance for the development of economy and capital formation. Specially government should announce comprehensive policy and relief packages to sugar industry like textile sector to revive it and to improve the over all growth performance of manufacturing sector, large-scale in particular and small scale in general.