January 08, 2007 Monday Zilhaj 17, 1427
Setting priorities for economic growth
By S.M. Saleem
PAKISTAN has great potential for rapid industrialisation and economic growth which is currently capped by constraints of varied nature. To identify and remove the hurdles, it is essential that a thorough analysis of the situation may be made. An attempt has been made here to point out weaknesses and strengths of the country and to make recommendations for accelerating pace of industrial and economic growth..
WEAKNESSES / DRAWBACKS: Negative global perception, poor law and order situation; lack of consistency in official policies; socially hardship place for expatriates; poor presentation and marketing of domestic products; lack of full knowledge about products required and quality needed in the international market; lack of focused efforts ââ¬â exploitation of strengths. Besides, policies, planning and efforts do not conform to nationââ¬â¢s own priorities and requirements of the international trade.
Other constraints include red tape and corruption, poor infra-structure facilities such as deplorable condition of industrial estates, shortage of power and water supplies, broken roads, overflowing sewerage lines etc.; low industrial and agricultural productivity; tremendous loss of ââ¬Åwork hoursââ¬Â due to strikes, political disturbances and power shortage; non-competitiveness of industry. In global index of competitiveness, Pakistan ranking is at 91.
STRENGTHS: Pakistan is an emerging market. Around 20 per cent of thes total population of 160 million falls under the per capita income level of $5000 ââ¬â 6000 / annum. Thus around 32 million people have disposable income. .
There is abundance of raw material for converting into value-added products. The country has a unique topography, climate and irrigation system where a wide variety of field crops namely wheat, rice, corn, sugarcane, cotton and vast range of vegetables, fruits and medicinal herbs can be grown on large scale. It is among the 10 largest cotton, rice and wheat growing countries.
Pakistan can be the ââ¬ÅFood and Fruit Basketââ¬Â of Middle East and East Asia provided ââ¬Åintensive agricultureââ¬Â is practiced, world class grading, packaging and marketing is organised and agricultural raw material is processed for value- addition. The scope is unlimited for earning foreign exchange and turning the economy around from a constant trade deficit to trade surplus situation.
Unlike some other Asian countries, Pakistan has a good pool of professional manpower as well as labour force for any technical or man power intensive industry. Compared to some of the South and East Asian countries, English language understanding as well as written and spoken capability here is much better which is an advantage for attracting foreign investment and doing international trade.
The stage of industrial development, in most of the segments, is still at a very low level of technology and the existing industrial base is very narrow and consists of very basic industries such as cement, sugar, textile, cigarette, edible oil, fertiliser, soda ash, caustic soda, PVC etc. There is no down stream petro-chemical industry except a small polystyrene plant. In general there is hardly any basic manufacturing or high- tech industry. The country is virgin for in-flow of technology based industries.
Pakistanââ¬â¢s geographic location and its proximity to Middle East, China and Central Asia offers several advantages such as nearness to some of the largest oil and gas deposits of the world, proximity to food market of Middle East, land route link with China and Central Asia via Afghanistan and Turkmenistan and the fact that Pakistan offers one of the shortest routes to sea port to Central Asian countries. So far these strategic advantages have not been exploited for export and trade. Sialkot and Wazirabadââ¬â¢s iron smiths and fabricators and Karachi and Punjab jewelers are one of the best in the world. The iron smiths of Sialkot had successfully produced tank parts during 1965 war on their lath machines. Craftsmanship of Sialkot produces sports goods which are also quite outstanding. Similarly jem and jewelry craftsmanship is quite good. However, all this talent has been marginally used and great potential exists to gain a place and name in the world market of sports goods, jewelry, steel fabrication, moulds making, utensils manufacturing provided the entrepreneurs are properly helped and guided to produce products as per quality needed in the international market.
Medicinal plants and other herbs: A large number of medicinal herbs like Aloe Vera, Ispaghol, Carum copticum, Cassia fistula, Artemisia absinthium, Illicium grifithi, Linum usitatissimum etc. can be easily grown . These herbs are in great demand in the world market. Scientifically growing these and marketing after processing can make significant contribution to foreign exchange earning..
Reommendations: To catch up with other regional countries and to be economically stable, Pakistanââ¬â¢s GDP should be growing at 10 per cent plus per annum, exports should be doubled to $35 billion per annum and foreign exchange reserve should be equal to two years import bill i.e. around $50 billion. For this purpose, a crash programme is needed to accelerate pace of its industrial and economic growth.
An industrial and export vision for the next 10 years must be developed after a thorough discussion with trade bodies, big, medium and small size entrepreneurs, industrialists and agriculturists. The vision must be debated and approved by the national assembly and the senate so that it may not be scrapped with the change of the government. The vision must envisage a two prong plan covering large as well as medium and small scale industries. The proposed industrial vision should incorporate the following essential elements:
Since Pakistan is way behind in global competitiveness, it should us on ââ¬Åeconomy of scaleââ¬Â to increase cost effectiveness and to be competitive in the world market.
There is an urgent need to improve productivity and gradually replace smaller units of textile, leather and garments and go for mega size modern units to compete with India, China and other countries. Similar approach may be adopted for other big industries such as cement, sugar etc.
It is necessary to fully channelise the local talent, entrepreneurship of the people and to produce products for the niche markets of the world. The small and medium size industries must be supported in a planned manner on the same pattern as SIRI (Small Industries Research Institute) of India which identifies, develops project cost, marketing feasibility as well as provides process and equipment details for the benefit of small and medium size entrepreneurs.
The policies have been inconsistent and are devoid of vision and direction. The current policy environment is not good enough to achieve rapid industrialization and economic growth. The policy needs a thorough review, appraisal and scrutiny. A bold forward looking policy is required which may reduce capital investment on land, equipment and machinery. The duty and sales tax on raw materials converted into value added products for export should be totally removed. To reduce capital cost, no duty and sales tax may be charged on plant and machinery. Similarly tariff on raw materials which can be converted into value added products may be reduced.
Industrial estates: Currently none of our industrial estates meet the international standard of infra-structure, roads, drainage system, pollution control, greenery and general lay out.
For industrial development and attracting foreign and local investment, development of industrial estates of international standard with good lay out, roads, assured utilities supply, drainage system, waste disposal system, pollution control, environmental protection and trouble free communication lines are essential pre-requisites.
The industrial estate must have its own security system and police. A self contained power generation and water supply system is also necessary for any modern industrial estate.
Every industrial estate must have fully empowered governing body and estate administrator should be answerable to the governing body so that estate may be efficiently managed.
Plots in the industrial estates must only be given to genuine industrialists and entrepreneurs. There should be an irrevocable condition of establishing the industry within a maximum period of four years otherwise the plot should be automatically cancelled and taken over by the industrial estate. The land should be given on reasonable price and the ownership must be non-transferable to eliminate real estate speculators and investors.
Specific modern industrial estates may be set up as suggested below for industries with estimated per annum exports:
Surgical goods industrial estate($1bn) ; sports goods ($3bn) ; jem and jewelry ($1bn); home appliances ($0.5bn) ; food packaging and processing $15bn; utensils manufacturing($0.5bn) fabrication and mould making $0.5bn ;plastic fabrication and moulds $0.5bn cutlery manufacturing $1bn.
If no separate industrial estates can be set up for each of the listed category of items, at least areas may be allocated for specific industries within the industrial estates.
As far as textile, sports goods and leather industries are concerned, these may be set up in Sindh and Punjab. Estimated export potential of these industries is $15billion plus.
There is a need for public-private research institute for grading , storage, handling , packing and processing of agricultural products. A $15 billion plus can be earned from export of fruits, vegetable, herbs and cut flowers provided:
Our industrial and agricultural production and exports can get a big boost if proper guidance is available to produce, pack, promote and market products as per international standards. For this purpose competent foreign experts may be hired by the government to provide guidance to industries and businesses which have great potential of growth and export, provided these can be upgraded to meet the international standards.
Priority: A classification and prioritisation list of industries may be drawn and must be used as the basis for developing vision for the next 10 years, and policies for industries, tariff structure, import and export, fiscal measures, taxation etc. etc. According to their contribution in the economic growth , industries and businesses may be classified and prioritised.
http://www.dawn.com/2007/01/08/ebr13.htm
Setting priorities for economic growth
By S.M. Saleem
PAKISTAN has great potential for rapid industrialisation and economic growth which is currently capped by constraints of varied nature. To identify and remove the hurdles, it is essential that a thorough analysis of the situation may be made. An attempt has been made here to point out weaknesses and strengths of the country and to make recommendations for accelerating pace of industrial and economic growth..
WEAKNESSES / DRAWBACKS: Negative global perception, poor law and order situation; lack of consistency in official policies; socially hardship place for expatriates; poor presentation and marketing of domestic products; lack of full knowledge about products required and quality needed in the international market; lack of focused efforts ââ¬â exploitation of strengths. Besides, policies, planning and efforts do not conform to nationââ¬â¢s own priorities and requirements of the international trade.
Other constraints include red tape and corruption, poor infra-structure facilities such as deplorable condition of industrial estates, shortage of power and water supplies, broken roads, overflowing sewerage lines etc.; low industrial and agricultural productivity; tremendous loss of ââ¬Åwork hoursââ¬Â due to strikes, political disturbances and power shortage; non-competitiveness of industry. In global index of competitiveness, Pakistan ranking is at 91.
STRENGTHS: Pakistan is an emerging market. Around 20 per cent of thes total population of 160 million falls under the per capita income level of $5000 ââ¬â 6000 / annum. Thus around 32 million people have disposable income. .
There is abundance of raw material for converting into value-added products. The country has a unique topography, climate and irrigation system where a wide variety of field crops namely wheat, rice, corn, sugarcane, cotton and vast range of vegetables, fruits and medicinal herbs can be grown on large scale. It is among the 10 largest cotton, rice and wheat growing countries.
Pakistan can be the ââ¬ÅFood and Fruit Basketââ¬Â of Middle East and East Asia provided ââ¬Åintensive agricultureââ¬Â is practiced, world class grading, packaging and marketing is organised and agricultural raw material is processed for value- addition. The scope is unlimited for earning foreign exchange and turning the economy around from a constant trade deficit to trade surplus situation.
Unlike some other Asian countries, Pakistan has a good pool of professional manpower as well as labour force for any technical or man power intensive industry. Compared to some of the South and East Asian countries, English language understanding as well as written and spoken capability here is much better which is an advantage for attracting foreign investment and doing international trade.
The stage of industrial development, in most of the segments, is still at a very low level of technology and the existing industrial base is very narrow and consists of very basic industries such as cement, sugar, textile, cigarette, edible oil, fertiliser, soda ash, caustic soda, PVC etc. There is no down stream petro-chemical industry except a small polystyrene plant. In general there is hardly any basic manufacturing or high- tech industry. The country is virgin for in-flow of technology based industries.
Pakistanââ¬â¢s geographic location and its proximity to Middle East, China and Central Asia offers several advantages such as nearness to some of the largest oil and gas deposits of the world, proximity to food market of Middle East, land route link with China and Central Asia via Afghanistan and Turkmenistan and the fact that Pakistan offers one of the shortest routes to sea port to Central Asian countries. So far these strategic advantages have not been exploited for export and trade. Sialkot and Wazirabadââ¬â¢s iron smiths and fabricators and Karachi and Punjab jewelers are one of the best in the world. The iron smiths of Sialkot had successfully produced tank parts during 1965 war on their lath machines. Craftsmanship of Sialkot produces sports goods which are also quite outstanding. Similarly jem and jewelry craftsmanship is quite good. However, all this talent has been marginally used and great potential exists to gain a place and name in the world market of sports goods, jewelry, steel fabrication, moulds making, utensils manufacturing provided the entrepreneurs are properly helped and guided to produce products as per quality needed in the international market.
Medicinal plants and other herbs: A large number of medicinal herbs like Aloe Vera, Ispaghol, Carum copticum, Cassia fistula, Artemisia absinthium, Illicium grifithi, Linum usitatissimum etc. can be easily grown . These herbs are in great demand in the world market. Scientifically growing these and marketing after processing can make significant contribution to foreign exchange earning..
Reommendations: To catch up with other regional countries and to be economically stable, Pakistanââ¬â¢s GDP should be growing at 10 per cent plus per annum, exports should be doubled to $35 billion per annum and foreign exchange reserve should be equal to two years import bill i.e. around $50 billion. For this purpose, a crash programme is needed to accelerate pace of its industrial and economic growth.
An industrial and export vision for the next 10 years must be developed after a thorough discussion with trade bodies, big, medium and small size entrepreneurs, industrialists and agriculturists. The vision must be debated and approved by the national assembly and the senate so that it may not be scrapped with the change of the government. The vision must envisage a two prong plan covering large as well as medium and small scale industries. The proposed industrial vision should incorporate the following essential elements:
Since Pakistan is way behind in global competitiveness, it should us on ââ¬Åeconomy of scaleââ¬Â to increase cost effectiveness and to be competitive in the world market.
There is an urgent need to improve productivity and gradually replace smaller units of textile, leather and garments and go for mega size modern units to compete with India, China and other countries. Similar approach may be adopted for other big industries such as cement, sugar etc.
It is necessary to fully channelise the local talent, entrepreneurship of the people and to produce products for the niche markets of the world. The small and medium size industries must be supported in a planned manner on the same pattern as SIRI (Small Industries Research Institute) of India which identifies, develops project cost, marketing feasibility as well as provides process and equipment details for the benefit of small and medium size entrepreneurs.
The policies have been inconsistent and are devoid of vision and direction. The current policy environment is not good enough to achieve rapid industrialization and economic growth. The policy needs a thorough review, appraisal and scrutiny. A bold forward looking policy is required which may reduce capital investment on land, equipment and machinery. The duty and sales tax on raw materials converted into value added products for export should be totally removed. To reduce capital cost, no duty and sales tax may be charged on plant and machinery. Similarly tariff on raw materials which can be converted into value added products may be reduced.
Industrial estates: Currently none of our industrial estates meet the international standard of infra-structure, roads, drainage system, pollution control, greenery and general lay out.
For industrial development and attracting foreign and local investment, development of industrial estates of international standard with good lay out, roads, assured utilities supply, drainage system, waste disposal system, pollution control, environmental protection and trouble free communication lines are essential pre-requisites.
The industrial estate must have its own security system and police. A self contained power generation and water supply system is also necessary for any modern industrial estate.
Every industrial estate must have fully empowered governing body and estate administrator should be answerable to the governing body so that estate may be efficiently managed.
Plots in the industrial estates must only be given to genuine industrialists and entrepreneurs. There should be an irrevocable condition of establishing the industry within a maximum period of four years otherwise the plot should be automatically cancelled and taken over by the industrial estate. The land should be given on reasonable price and the ownership must be non-transferable to eliminate real estate speculators and investors.
Specific modern industrial estates may be set up as suggested below for industries with estimated per annum exports:
Surgical goods industrial estate($1bn) ; sports goods ($3bn) ; jem and jewelry ($1bn); home appliances ($0.5bn) ; food packaging and processing $15bn; utensils manufacturing($0.5bn) fabrication and mould making $0.5bn ;plastic fabrication and moulds $0.5bn cutlery manufacturing $1bn.
If no separate industrial estates can be set up for each of the listed category of items, at least areas may be allocated for specific industries within the industrial estates.
As far as textile, sports goods and leather industries are concerned, these may be set up in Sindh and Punjab. Estimated export potential of these industries is $15billion plus.
There is a need for public-private research institute for grading , storage, handling , packing and processing of agricultural products. A $15 billion plus can be earned from export of fruits, vegetable, herbs and cut flowers provided:
Our industrial and agricultural production and exports can get a big boost if proper guidance is available to produce, pack, promote and market products as per international standards. For this purpose competent foreign experts may be hired by the government to provide guidance to industries and businesses which have great potential of growth and export, provided these can be upgraded to meet the international standards.
Priority: A classification and prioritisation list of industries may be drawn and must be used as the basis for developing vision for the next 10 years, and policies for industries, tariff structure, import and export, fiscal measures, taxation etc. etc. According to their contribution in the economic growth , industries and businesses may be classified and prioritised.
http://www.dawn.com/2007/01/08/ebr13.htm
