DIVERSIFICATION IN EXPORT REGIME ESSENTIALLY REQUIRED

Engineering and other industrial products have yet produced results

From SHAMIM AHMED RIZVI,
 Islamabad

May 09 - 15, 2005

Though the industrial sector has started making its presence felt by contributing towards the overall economic growth of Pakistan, yet it stands no where when compared to the growth rate achieved by the economies elsewhere in the region.

In Pakistan, the share of manufacturing in GDP has risen by about 30 percent since 1968 while this sector has contributed over 280 percent growth in case of Malaysia, 170 percent in Thailand and 120 percent in Korea.

It is significant to note that South East Asian countries which used to depend largely upon production and export of primary products in past, have dramatically shifted their production structure and export basket in favor of manufacturing and non-traditional exports.

Bangladesh for example has authored the success story for such transformation. From its earlier dependence on jute and jute products it has successfully moved on to garments and knitwear which now accounts for more than 60 percent of its exports.

In case of Pakistan, however, primary products and exports based on particularly cotton and its value-added products continue to have a dominant share owing to lack of diversification in exports surplus. Engineering and other industrial products have a little share in the exports regime of the country. This neglected area, however, was taken into notice by the present government which has realized the importance of the significance of the engineering industry to provide a sound footing to the national economy. Musharraf government came out in 2002 with an ambitious "10 years engineering vision" envisaging 10 to 12 billion dollar investment plan to increase the role of industrial products and manufacturing sector by 25-30 percent respectively in GDP.

The engineering vision plan evolved by the Ministry of Industry and Industrial Development Board under the supervision of the then Minister for Industries Razzaq Dawood, aims to develop engineering industry to produce export surplus in industrial products and manufactured goods worth over $5/6 billion by 2010 from 270 million dollar at present against a world market of $ 6 trillion.

In the past deficit financing, adverse balance of payment situation and inflation have been the key factors at the macro level that are responsible for the economic disaster in Pakistan. At the micro level it is attaching low priority to the development of the engineering industry and the adoption of negative attitude towards a Research and Development (R&D) based policy and promote the transfer of technology and development of an indigenous industrial base that have not provided any chance of self-reliance. The net result has been the primary manufacturers, low value addition and low level of technology.

With the advent of WTO, the economies are getting integrated and fast creating a situation where the fittest shall survive. In view of the above facts, the current cut-throat competition calls for a long run objective to enable the industry to face the challenges, which may require simultaneous implementation in the following three areas:

(a) Leveraging Existing Industrial Strengths. (b) Creating a strong intermediate sector and Domestic Linkages (c) Creating External Linkages through FDI.

VISION 2010

In line with its long-term planning, the present government decided in 2000 to chalk out a ten-year "Engineering Vision 2010" to achieve the desired results which include the cliche of "Asian Tiger" in the foreseeable future.

This long-term vision was based on export led industrial growth to add $ 5 to 6 billion exports of engineering goods through diversification and optimizing available resources and non-resource based industries. The emphasis was to be on full integration of manufacturing operations through value-addition to enhance industrial linkages and to increase productivity and competitiveness by (1) Global Orientation; (2) Public/Private Sector Industry; (3) Productivity Enhancement and Quality/Standard; (4) Industrial Database and (5) Balanced Regional Industrialization.

There was a hope that the engineering vision and the defense products export organization set up by the government would help boost exports by over 25 percent during fiscal year 2002-03 around 50 percent by 2004-05. The government had advised the entrepreneurs, engaged in the engineering industry, to make concerted efforts to penetrate into the potential markets of Malaysia and Thailand, which had a demand of $30 billion engineering goods. However a little has been achieved in terms of the objective of the vision so far.

The development of engineering industry is generally characterized with an all out government support. In Pakistan, this support is not visible if not absent. Consequently, our engineering industry remains far from its true potential in the face of rising imports of capital goods. Pakistan continues to be a single crop economy i.e. cotton which offers limited opportunities for expansion and growth in future.

It is essentially required that our reliance is shifted to other high value-added areas like engineering goods industry, we night miss the bus in the 21st century world of science and technology, otherwise!