Industrial policy

Late last week, the government presented the country’s first-ever National Industrial Policy (NIP) to the federal cabinet for approval. The NIP aims to revive Pakistan’s declining industrial and manufacturing sector, targeting GDP growth of 6 per cent, manufacturing growth of 8.0 per cent and $60 billion in exports by 2030. As with most of the country’s economic initiatives, this policy will require IMF approval and the finance ministry has asked the Ministry of Industries and Production to seek the Fund’s clearance for the incentives proposed under it. Although buried under the developments surrounding the 27th Amendment, this initiative may actually prove to be more decisive in terms of making a real difference in the quality of life for most people. The nation’s industrial sector has been in decline for years, with its share of GDP reportedly falling from a little over a quarter in 1996 to just 18 per cent in 2025. Private investment in the nation’s industrial sector has reportedly declined by around 46 per cent in the last six years. Deindustrialisation does not quite describe what is happening here. Pakistan was never truly among the ranks of the industrialised nations. However, with agricultural land rapidly being swallowed up by urban sprawl and getting hit by both floods and water scarcity, there was a 13.5 per cent decline in the production of major crops in the last fiscal.

So if we were never really an industrialised country but now agriculture too is in decline, what exactly is left of the country’s economy? Is the service sector going to carry all the growth and employment from here on out? That seems highly unlikely, and a vibrant economy will require a strong industrial sector. In that sense, the NIP is a step in the right direction. It identifies several factors holding back industrial growth such as macroeconomic instability, policy uncertainty, lack of credit, excessive regulation and unreliable and expensive power. To deal with these issues, the NIP calls for tax reforms, stronger intellectual property protections and lower port charges. A framework to help foreign and local investors channel offshore capital into investments is also on the cards, along with a national land bank with certain areas designated as industrial zones. Although IMF approval for the NIP’s proposals is still yet to arrive, work to revive industry already appears to be in motion. The Ministry of Industries and Production on Monday informed the National Assembly that the government has earmarked 700 acres of Pakistan Steel Mills (PSM) land for its revival or the establishment of a new steel mill, and the government has also announced that Google will manufacture 600,000 Chromebooks in Pakistan every year.

One hopes that any industrial policy will also address the fact that industrial expansion has to be done in a sustainable manner. The climate disasters of recent years have demonstrated that this is not a luxury issue and the country’s solar boom shows that it also makes economic sense to be environmentally friendly. There is also the fact that serious, competitive manufacturing requires an educated populace. The days of looking at manufacturing as something for the ‘less educated’ are gone, and the West is now scrambling to re-shore manufacturing jobs. Nations have realised that a country that lacks the capability to make its own goods suffers in terms of quality of life. If that is not enough incentive, one can also look to the macro instability caused by our trade deficits and import dependence. But factories cannot function without workers who know what to do in them.