Making an industrial policy work

August 14, 2022

Education, technology and industrial policy should be treated as complements

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fter years of lagging behind, the industrial landscape of the Punjab is showing encouraging signals of an imminent turnaround. The revival of its manufacturing sector could provide a much-needed boost to its economy.

However, revitalising the province’s manufacturing industry will not be easy. The Punjab needs to address critical shortcomings in its supply chain management, infrastructure and availability of skilled labour. Furthermore, the lack of streamlined processes, low levels of economic complexity and innovation hamper productivity in this sector in the Punjab and Pakistan.

The aim here is to analyse the roadmap for reviving Punjab’s manufacturing sector as well as explore different ways that policymakers can go about doing so.

With an agricultural share of the GDP of 23.13 percent and an industrial sector share of 17.72 percent, the Punjab’s dependence on the former is much more significant than its contribution to the latter. The manufacturing sector has been struggling to gain momentum for decades. The absence of a robust supply chain network and the absence of a skilled labour force are some of the primary challenges the sector faces. A lack of reliable infrastructure, especially when it comes to energy and transportation, has also contributed to the sector’s decline in the Punjab. With power outages occurring on a daily basis and roads in a state of disrepair, setting up a factory in the province is almost impossible.

The Punjab has a long and distinguished history of industrialisation. The province’s transition to industrialisation commenced in the late 1940s with the establishment of several textile mills. The highly-skilled labour force and ample supply of water for power generation were some of the primary factors that contributed to the rise of Punjab’s textile industry. This sector quickly evolved into a hub for other types of industries, such as cotton, wool and silk products. The presence of a number of engineering-based industries, as well as a vibrant machine-based sector also helped it become one of Pakistan’s top industrial hubs. However, the rise of Punjab’s industrial sector came to a halt in the 1990s, when the country experienced a severe economic crisis. In the absence of political stability and sustained economic reforms, the economy suffered enormously. The Punjab was hit the hardest, with the number of operational textile mills falling from 170 in the late 1980s to just 50 in the 1990s.

The government should encourage cooperation between firms and universities by encouraging and setting up grants and scholarships that reward innovation. Such tightness between academia and industry is bound to make firms more innovative. These links are necessary in order to achieve the goals set by the SDGs and to improve productivity.

One of the most significant hurdles in reviving the manufacturing sector is the lack of a robust supply chain network. The current supply chain model is not only dysfunctional but also highly unreliable. In order to boost its manufacturing sector, the Punjab needs to invest in its infrastructure and establish a supply chain authority. The province should focus on building an effective vocational training system. Furthermore, its manufacturing sector needs a boost in the availability of raw materials.

A recent study titled Documenting Firm-level Innovation in Punjab’s Textile Sector provides some valuable insights into how the industrial sector in the Punjab can be revamped. The study found that there is a lack of innovation and value addition in the textile sector, which is one of the key industries in the Punjab. In order to become more competitive in the global economy, it is essential for the Punjab to focus on increasing value addition in its industrial sector. It was found that exporting firms, trying to increase their market share, spend positive sums on research and development. The government should encourage cooperation between firms and universities by encouraging and setting up grants and scholarships that reward innovation. Such tightness between academia and industry is bound to make firms more innovative. These links are necessary in order to achieve the goals set by the SDGs and to increase productivity. A big takeaway recommendation inferred from the results of the study is that education, technology and industrial policy should be treated as complements. Estimates show that the lack of a skilled labour force significantly reduces the probability of innovation. Not only is creating a skilled labour force important; creating meaningful jobs for the workers is equally important.


The writer is a freelance contributor



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