The Pakistan Investment Policy 2023 has been announced at an opportune time when the country, in the wake of a prevalent economic recession, badly needs investments, both foreign and domestic, in various sectors of the economy, such as agriculture, infrastructure and industry. The Policy will focus on reducing the cost of doing business, facilitating the ease of doing business, and streamlining business processes, and to achieve these objectives, in the short- and long-terms, various measures are being considered for providing incentives to new industries, promoting industrial clusters and special economic zones to facilitate investors, etc., and, above all, announcement of an integral industrial policy with thrust on increasing productivity and improving international competitiveness is expected. It is anticipated that implementation of the Policy would attract around $25 billion investments, mainly from the Gulf countries and Saudi Arabia, over the next few years.
The Pakistan Investment Policy 2023 has been announced at an opportune time when the country, in the wake of a prevalent economic recession, badly needs investments, both foreign and domestic, in various sectors of the economy, such as agriculture, infrastructure and industry. The Policy will focus on reducing the cost of doing business, facilitating the ease of doing business, and streamlining business processes, and to achieve these objectives, in the short- and long-terms, various measures are being considered for providing incentives to new industries, promoting industrial clusters and special economic zones to facilitate investors, etc., and, above all, announcement of an integral industrial policy with thrust on increasing productivity and improving international competitiveness is expected. It is anticipated that implementation of the Policy would attract around $25 billion investments, mainly from the Gulf countries and Saudi Arabia, over the next few years.
To provide fresh impetus to reviving economic growth the Policy should be directed towards furtherance of industrialization as a priority, developing manufacturing sector, in particular, for the reasons of import substitution, higher value-addition, utilization of indigenous resources, and generating jobs for highly-skilled and highly-qualified manpower. Today, Pakistan’s industrial sector is well-established and largely contributes to the national economy. Major industries are textiles, automobiles, engineering, chemical, cement, pharmaceutical, sugar, fertilizer, iron & steel, electronics, paper & paperboard, and leather. Most of these industries however are traditional and conventional industries with narrow diversification, and the country remains generally an import-oriented and consumption-led market.
To stimulate the overall economic growth and sustainability it is imperative to broaden and diversify the industrial base to cover new areas in manufacturing, which will also enhance export of goods in successive years. Expeditious implementation of the second phase of the China Pakistan Economic Corridor (CPEC) program with emphasis on setting up the Special Economic Zones (SEZs) in various parts of the country will support strengthening industrialization. The SEZs in the four provinces are at various stages of development, scheduled to be completed in a few years. China is also interested in relocation of its selected manufacturing industry to Pakistan. For a long time Saudi Arabia has been planning to establish in Pakistan an oil refinery and industries based on minerals, which may result in technological advancement and adoption of environment-friendly technologies in these areas.
Pakistan imports 51,800 shipping containers of various types and sizes annually from China and the USA, ranking third largest importer of shipping containers in the world. Globally, containerization for cargo transportation is on the increase and Pakistan’s import bill on container procurement and leasing is likely to surge manifold in coming years. Container manufacturers are the backbone of the shipping industry, as reflected in the fact that Pakistan’s three major container ports handle more than 2.2 million TEU (Twenty-foot Equivalent Units) annually. The government had plans in 2021 to acquire its own container ships fleet through public-private partnership. It is expected that Pakistan’s total demand for shipping containers will be around 100,000 TEU annually.
Most common 20-ft and 40-ft dry containers these days cost from $2,000 to $4,400 per unit in the international market, whereas the high cube (HC) type and specialized containers price is $6,000 and up to $18,000, respectively. Shipping containers are being produced in China, Japan, South Korea, Taiwan, Singapore, India, USA, UK, France, Italy and Poland. Global shipping container market is of the size of $11.3 billion. It is therefore desirable that the shipping container manufacturing facilities be established locally, under joint venture or technology transfer arrangements with a reputed foreign firm. Total investment in the project, with initial capacity of manufacturing 50,000 TEU per year, is estimated to be $14 million.
Another feasible project is the ATM (Automated Teller Machines) and Banking Kiosks Assembling Unit to be set up under a licensing agreement with an international brand. Total population of the ATMs in Pakistan is about 15 million, one of the lowest globally in terms of ATM-to-population scores. But the use of ATMs is increasing exponentially and there is significant potential for marketing ATMs that have an estimated 20 percent annual growth in the country. Each machine costs $2,000 to $8,000 depending on its brand, design, type and additional features. Hardware like CPU, ATM bodies, wiring, railing, safety, and software can be provided by the well-developed vendor industry. Diversification of products, such as internet & telephone banking kiosks and automatic can/bottle dispensing machines, can be undertaken progressively. The project, to produce 3,000 to 5,000 ATMs annually, may require an investment in the range of $15 million to $20 million depending on various factors.
For many decades, Pakistan has been dependent on imported used and obsolete construction, earthmoving and agricultural machinery as it could not develop local manufacturing of the required equipment. It is critically important that progressive manufacturing of various equipment like excavator, bulldozer, tower crane and farming machinery (small tractors, farm vehicles etc.) be undertaken under joint venture arrangements. Likewise, oil drilling rigs, mineral processing equipment, heavy pumps and high-pressure valves for process industries and equipment for fertilizer plants should be produced and made available locally.
Lastly, but importantly, there is a need to add new steelmaking capacity by establishing an integrated steel plant as a long-term strategy. Pakistan imports about 13.5 million tons of iron & steel scrap and finished products annually, though the demand has been declining in recent years due to economic slowdown. Domestic industry produces less than 5 million tons of iron & steel due to lack of installed capacity and operational capability. The fate of the revival of Pakistan Steel Mills at Karachi, with an annual capacity of 1.1 million tons, has been sealed, it seems, at least until a foreseeable future. The Chinese had proposed sometime in 2016 to construct a steel mill in Gwadar but there has been no advancement on the project since then. An integrated steel mill of one-million tons capacity, based on modern technology and processes, is proposed, which may cost around $730 million. Products will include rolled products (long), flat products (plates, thin strips, etc.) and pig iron.
The writer is retired Chairman of the State Engineering Corporation
