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| Manufacturing sector posts 3.3pc negative growth |
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Friday, June 12, 2009
By Israr Khan
ISLAMABAD: Pakistan’s manufacturing sector paints a dismal picture as it posted negative growth of 3.3 per cent during the fiscal year of 2008-09 against 4.8 per cent expansion during last fiscal year.
Adviser to Prime Minister on Finance Shaukat Tarin, while launching the Economic Survey 2008-09 here on Thursday, said that the sector missed 6.1 per cent target by huge margin and said that the massive contraction was due to loadshedding, security environment, political disruptions and top of the all tight monetary policy.
Small and medium manufacturing sector maintained its healthy growth of last year at 7.5 per cent, however production in large-scale manufacturing during July-Mar 2008-09 witnessed a broad-based decline of 7.7 per cent against the revised growth target of negative 5.0 per cent.
The sluggish growth in the large-scale manufacturing during the current fiscal year is mainly caused by the impact of severe energy shortage, deterioration in domestic law and order situation, sharp depreciation in rupee vis-‡-vis US dollar and most importantly, week external demand on the back of global recession coupled with slowdown in domestic demand.
According to the survey, the group wise analysis performance indicated that most of the groups of the LSM experienced negative growth during July-March 2008-09. The substantial decrease was recorded in automobile group at 39 per cent, followed by electrical 31.3 per cent, petroleum 9.2 per cent, food, beverages and tobacco 10.5 per cent, steel products 5.62 per cent, tyres and tubes 4 per cent and textile 0.73 per cent.
The survey says the main reason for negative trend in the automobile sector was due to imposition of additional taxes on the industry, depreciation of rupee against major currencies, imposition of 35 per cent cash margin on import letters of credits, continued import of used vehicles.
Besides, stringent regulatory measures high mark-up rates for financing of vehicles, decline in consumers disposable income because of high inflation and materials cost were the other reasons for the downward trend.
Electronics industry performed below its potential, principally due to severe shortage of electricity, increased cost of financing and government revised upward duties on hundreds of items. Likewise, food, beverages and tobacco group (weight: 14.35 per cent) declined by 10.5 per cent. Production of beverages (weight: 0.28 per cent) declined by 3.7 per cent as the prices of sugar, one of the key inputs in beverages, sharply rose in recent months.
Production of cigarettes (weight: 3.06 per cent) increased by 11.37 per cent, whereas tobacco exports increased by 37.30 percent. Production of vegetable ghee (weight: 4.24 per cent) and cooking oil (weight: 1.32 per cent) declined by 8.17 per cent and 3.52 per cent respectively, while import of palm oil, main ingredient in ghee and cooking oil, decreased by 4.96 per cent during July-March 2008-09.
Petroleum products group another sub-sector of the LSM recorded a decline of 9.2 per cent, in production due to circular debt being the main financial constraint of refineries. The Pakistan State Oil (PSO) owes about Rs38 billion to different refineries, and it has receivables of about Rs85 billion against Independent Power Producer (IPPs), thus increasing the severity of the problem. In addition, due to relatively high petroleum prices and overall slowdown in economic activities, sales of POL dropped during current financial year.
Steel product group posted 5.6 per cent decline during the period under review. This industry is suffering from the lagged impact of (high past) international commodity prices besides sluggishness in domestic construction activity amid lower public sector spending under PSDP. Capital flight towards once lucrative Middle East real estate as well as increased cost of construction due to high inflation also led to decline in domestic construction activities.
The survey says that the textile sector being an export oriented industry of Pakistan and more prone to international demand shocks, is under severe stress amid a global recession, however, textile production has declined slightly, by 0.7 per cent over the same period last year. Textile sector was badly hit by power shortage and weak external demand. Both cotton yarn and cotton cloth industries, which have the largest shares in the textile sector, posted negative growth of 0.3 per cent and 0.3 per cent respectively.
The Economic Survey 2008-09 further says that the production of a few groups depicted increase like fertiliser (21.5 per cent), followed by non-metallic minerals product group (4.8 per cent), chemicals (3.8 pre cent), leather products (2.9 per cent), paper and paperboard (2.9 per cent), pharmaceutical (0.9 per cent) and engineering (0.8 per cent).
Fertiliser the only industry, having considerable weight in LSM (3.4 per cent), has registered a double digit growth of 21.53 per cent during first nine month of current financial year owing to strong demand and low base effect due to last year’s closure of a phosphatic fertiliser plant for BMR and expansion purposes.
Among non-metallic mineral products, production of glass sheet (weight: 0.05 per cent) and cement (weight: 4.14 per cent) grew by 13.2 per cent and 4.7 per cent, respectively.
The sustained growth in recent years in the cement industry is an outcome of increase in production capacity and exploitation of export markets. Cement exports increased by 48.78 per cent. Chemical group’s output (weight: 2.88 per cent) increased by 3.85 per cent. Major increase in this group was witnessed in production of paints and varnishes (S) 19.18 per cent, paint and varnishes (L) 13.25 per cent, hydrochloric acid 10.27 per cent, soaps and detergent 7.55 per cent and starch products 5.87 per cent. Output of upper leather, sole leather and footwear, having 2.27 per cent weight as a whole increased by 2.90 per cent. Overall footwear exports grew by 11.3 per cent, whereas, leather footwear exports increased by 15.6 per cent. Paper and Paperboard witnessed increase of 2.9 per cent. Output of pharmaceutical depicted an increase of 0.9 per cent due to an increase in import by 4.9 per cent. However, their export declined by 5.4 per cent.
Engineering products (weight 0.45 per cent) witnessed increase in output by 0.8 per cent during current financial year. Prime contributors towards engineering products growth were wheat thrashers (147.1 per cent), safety razor blades (10.14 per cent) and diesel engines (0.18 per cent). Production of sugarcane machines, power looms, bicycles, and chaff cutters, however, declined by (36.86 per cent), (26.86 per cent), (30.42 per cent) and (3.37 per cent) respectively.
A review of production of selected items of large scale manufacturing having a total weight of 61 per cent out of 75 per cent is unsatisfactory. In the food category there was a decline in production of vegetable ghee (8.2 per cent), cooking oil (3.5 per cent), and sugar (26.3 per cent) over the same period last year.
Cotton yarn (0.3 per cent) and cotton cloth (0.3 per cent) recorded slight negative growth while petroleum products also witnessed 9.2 per cent decrease. Similarly other items like jeeps and cars (48 per cent), deep freezer (17.7 per cent), refrigerator (12.2 per cent), pig iron (12.4 per cent), upper leather (7.6 per cent), nitrogenous fertiliser (0.8 per cent), and tea blended (0.5 per cent) have also witnessed negative growth. However, production of a few items depicted increase in their production such as cigarettes (11.4 per cent), cotton (ginned) (1.4 per cent), liquids/syrups (1.7 per cent), phosphatic fertiliser (33.3 per cent), cement (4.7 per cent) and coke (51.7 per cent).
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ISSN 1563-9479 
