Money Matters

The missing numbers

Money Matters
By Dr Umer Khalid
Mon, 05, 20

The manufacturing sector of any developing country is considered as the main engine of economic growth and employment generation. The manufacturing sector in Pakistan is one of the most important of the productive sectors, contributing over 13 percent to the country’s GDP and providing employment to 26 percent of the non-agricultural workforce. Moreover, in comparison to other sectors, manufacturing is the largest contributor to government revenues in the form of taxes and levies. However, the performance of the sector has been declining over the last two decades as the industrial base of the country has eroded considerably due to cheaper imports brought about by poorly negotiated free trade agreements, over-taxation of manufacturing activities, higher input costs and lack of policy coherence in the post 18th Amendment era.

The manufacturing sector of any developing country is considered as the main engine of economic growth and employment generation. The manufacturing sector in Pakistan is one of the most important of the productive sectors, contributing over 13 percent to the country’s GDP and providing employment to 26 percent of the non-agricultural workforce. Moreover, in comparison to other sectors, manufacturing is the largest contributor to government revenues in the form of taxes and levies. However, the performance of the sector has been declining over the last two decades as the industrial base of the country has eroded considerably due to cheaper imports brought about by poorly negotiated free trade agreements, over-taxation of manufacturing activities, higher input costs and lack of policy coherence in the post 18th Amendment era.

However, one of the biggest and perhaps the least debated of these factors has been the lack of collection and dissemination of reliable statistics on manufacturing activities on a regular basis in the country. The Census of Manufacturing (CMI), which is conducted every five years by the Pakistan Bureau of Statistics (PBS) in collaboration with Provincial Departments of Industries and Bureaus of Statistics, serves as the main repository of data on large-scale manufacturing industries (LSMI) in Pakistan. The CMI measures production, values of inputs and outputs, fixed assets stocks, employment & employment cost and industrial taxes of large-scale manufacturing industries. It thus takes stock of new developments in the industrial sector by providing information on new industrial products and enterprises. Most importantly, the CMI is used for developing new weights for the Quantum Index of Manufacturing (QIM), which tracks changes in production of LSMI over time on monthly as well as cumulative basis.

Despite the crucial importance of data obtained from the CMI, it is most unfortunate that the latest report of CMI published by the PBS is for the year 2005-06, which is nearly 15 years old now. Although, data for two subsequent rounds of CMI in 2010-11 and 2015-16 has been collected, this has not been made available publicly in the form of published reports. In this age of information technology and digitalization, it is unacceptable that authentic data for the large-scale manufacturing sector of the country is not available for the last 15 years. What is most alarming about this situation is that due to non-availability of consolidated data of CMI rounds of 2010-11 and 2015-16, new weights for the QIM are not available and it continues to use weights derived from the much older CMI 2005-06. Thus, in all likelihoods the estimates of large-scale manufacturing production in national income accounts are understated and a true picture of the contribution of this sector to the country’s GDP is not available.

According to newspaper reports, the main reason cited by officials of PBS for not releasing reports of CMI for 2010-11 and 2015-16 is the lack of cooperation from the provincial Industries Departments in compilation of data from industrial establishments, in particular the low response rate of manufacturing enterprises received from province of Sindh in both rounds. Data for each round of CMI is collected through questionnaires sent to manufacturing establishments registered or those that qualify for registration under the Factories Act 1934, employing 10 or more workers. The legal basis for carrying out the CMI is provided under the Industrial Statistics Act 1942 and the General Statistics (Reorganization) Act 2011 under which the PBS was established. Section 47 of the General Statistics (Reorganization) Act 2011 lays down penalties in the form of fines up to a maximum of five hundred thousand rupees for companies that ‘willfully refuse to furnish such information as required’ as fines and in case of ‘continuing offence’ a further fine extending ‘up to twenty five thousand rupees per day for the period during which the offence continues’.

It would therefore seem that either the enforcement of these penalties by the PBS and provincial statistical agencies against the establishments, failing to provide data, is weak, or maybe the element of collusion is involved here. The latter may also be indicative of one of the many unresolved issues arising out of the 18th Amendment that has severely weakened position of the federal government to get compliance from provinces on the issues of vital national interest. The PBS has recently been given under the administrative control of the Ministry of Planning and Development, which is mandated with carrying out long-term planning of different economic sectors. How can credible five-year plans for the manufacturing sector be developed when production data for the manufacturing sector is based on estimates derived out of a 15-year old CMI round, is a valid question?

The Planning Minister is requested to immediately look into these issues and take appropriate measures, including taking up this issue in the Council of Common Interests, if necessary. One recommendation in this regard could be to amend the relevant law to empower federal utility companies to disconnect the electricity and gas connections of establishments that fail to respond to the CMI questionnaire after a certain time frame.

The writer is an economist