Caretaker Prime Minister Anwaar ul Haq Kakar, although not mandated to address long-standing issues, has undertaken various measures to revitalize the national economy, with a focus on long-term improvements in industrial production. Recently, he directed relevant authorities to formulate a comprehensive five-year economic plan and prioritize the development of a national industrial policy.
Caretaker Prime Minister Anwaar ul Haq Kakar, although not mandated to address long-standing issues, has undertaken various measures to revitalize the national economy, with a focus on long-term improvements in industrial production. Recently, he directed relevant authorities to formulate a comprehensive five-year economic plan and prioritize the development of a national industrial policy.
The last comprehensive integrated industrial policy, intended to liberalize and deregulate Pakistan's industrial sector, was released in 1991. Since then, the government has frequently adopted sector-specific policies, such as those for textiles, fertilizers, automobiles, and information technology, often influenced by special interests. This approach has led to the prosperity of a few favored industries at the expense of others.
In 2011, the Ministry of Industries and Production drafted the National Industrial Policy, emphasizing the promotion of specific indigenous industries like steel, fertilizer, chemicals, and engineering. However, this draft did not align with vested interests in trade and industry, resulting in it remaining unimplemented. Despite commitments in December 2018 to announce a comprehensive industrial policy in June 2019, it was never realized.
Various organizations, including the Pakistan Business Council, Institute of Business Administration, Lahore School of Economics, the Consortium for Development Policy Research, and Fredrich-Ebert-Stiftung, alongside accomplished individuals like Prof Dr Atta-ur-Rahman and Dr Ishrat Husain, have presented recommendations for a new industrial policy for quite some time. Recent publications by the World Bank (WB) and the Asian Development Bank (ADB) have also covered issues and concepts on Pakistan’s modern industrial policy. However, elected governments have refrained to undertake the formulation of a national industrial policy, seemingly neglecting the promotion of overall industrial growth for national prosperity.
The importance of a national industrial policy is underscored by the United Nations Conference on Trade and Development (UNCTAD), stating that over 84 countries globally—both developed and developing—accounting for 90 percent of global GDP, have evolved formal industrial development strategies. UNCTAD emphasizes that industrial policy is a continuous work in progress for countries at all levels of development.
Given the current decline in industrial output, especially in the manufacturing sector, coupled with falling exports and decreasing foreign and domestic investments, urgent and pragmatic measures must be adopted. The formulation and implementation of an integrated and dynamic National Industrial Policy are crucial for achieving all-round industrial and economic progress.
In the last fiscal year 2022-23, the industrial sector registered a negative growth of about 3 percent, the lowest in many decades, primarily due to declines in the manufacturing sector and construction, exacerbated by the global economic recession. The manufacturing sector, dominating overall industry, experienced significant contraction for the first time in many years, with its growth declining by over 8 percent compared to about 11 percent in the preceding year.
Major industrial segments, including petroleum, chemicals, cement, automobile, steel, machinery & equipment, food & beverages, and pharmaceuticals, showed lackluster performance, leading to reduced output and low profitability. Net Foreign Direct Investment (FDI) inflow decreased during the year 2023, registering a 23 percent decline compared to the previous year. The Investments to GDP ratio stood at 13.6 percent compared to 15.6 percent in the previous year, and total exports declined by 12 percent compared to the fiscal year 2022.
The industrial sector, with the manufacturing subsector constituting 65 percent, contributes about 12.8 percent to the overall GDP and employs more than 16 percent of the national labor force. Currently characterized by low productivity, low value-addition, and non-competitiveness, the industry faces challenges such as high production costs, expensive electricity, lack of technological upgradation, and non-compliance with quality control standards. Other factors hindering industrial growth include lack of competitiveness, absence of innovation, inadequate infrastructure, poor logistics support, and lack of funding.
To address these challenges, the formulation and implementation of a comprehensive, dynamic, and pragmatic National Industrial Policy are essential. This policy should focus on strengthening, expanding, and diversifying the manufacturing base, increasing productivity, and marketing in various industrial sub-sectors. It should absorb existing sector-specific industrial policies and integrate with provincial policies. The industrialization strategy should aim at deepening and diversifying the industrial structure through the development of more local linkages and indigenous technological capabilities and the promotion of medium- and small-scale industries.
The industrial policy should support product designing, value-addition, and adherence to international quality standards. Sector-specific reforms for key industries—automobiles, fertilizers, chemicals, capital goods, and steel—should be a highlight. The policy should aim to optimize import substitution by offering incentives to local manufacturing units and discouraging imports of finished goods.
Effective management of the policy should create an enabling environment for encouraging innovation and developing new ideas across various industrial sub-sectors. The manufacturing sector, employing over six million people, should serve as a catalyst for creating additional jobs for professionals and skilled workers. A comprehensive and coherent policy based on the latest domestic, regional, and global developments is imperative for accelerating economic development and industrial production.
Industrial units to be established in the future, in addition to conventional industries, should cover emerging industries like the manufacture of environmental/pollution control & treatment equipment, precision machinery & automation, specialty chemicals & pharmaceuticals, and advanced materials (such as precision ceramics, engineering plastics, high-grade fiber material, and high-performance compost materials).
The new industrial policy, with a futuristic approach, needs to be strong, attractive, and focused on long-term perspectives. Key industries in Pakistan, including textile, automobile, steel, engineering, agriculture, and construction materials, require strategic restructuring for sustainable growth. The focus should shift from quantitative to qualitative growth, leveraging technology from advanced countries, upgrading industry structures, and strengthening core competencies in product planning and marketing.
The writer is retired chairman of the State Engineering Corporation
