LAHORE: The Punjab government is in a process of making industrial policy for the province and developed a draft ‘industrial strategy for the Punjab government’ which lacks number of areas, but these areas need to be included in the final policy.
The industry department has sent the copy of proposed industrial policy draft to stakeholders including the economist, researchers, government departments, academicians and sectors experts to give their input in the formulation of policy. Different sector experts, institutions and economist highlighted number of missing areas and give suggestions to include in the proposed industrial policy.
Technology sector experts believed that the proposed industrial policy of Punjab should incentivise the industry to move up the technology ladder. It should create firm level incentives for investment in advanced machinery based on the technological sophistication of the industrial output. The policy should lay down a proper mechanism for up-gradation of the skill set of industry through technology transfer in joint ventures.
Investing in labour is the sole way to adopt advanced technologies and stimulate higher growth. Punjab’s industrial policy model must facilitate the industry to switch from low-skilled to high-skilled labour. In all the industries that have been established through a joint initiative with the foreign companies e.g. in CPEC, there should be a minimum level of domestic labor. Secondly, the industrial policy model should envision an improvement in the working conditions which would result in an increase in the productivity of the workers. Thirdly, the industrial policy should ensure the provision of training facilities in all the industrial zones/clusters with a minimum proportion of these devoted to training women. Fourth, the Industrial Policy should make sure that all industrial zones/ joint Industrial initiatives should provide their workers with high quality insurance benefits in addition to the basic government insurance such as PESSI (Punjab Employees Social Security Institution) and EOBI (Employees Old Age Benefits Institution).
Furthermore, the Policy should focus on private sector led investment strategy and incentivise the private sector to invest in mega projects. Currently most of the mega projects are undertaken by public sector which also has the effect of crowding out private sector in terms of getting the bank credit.
Protection of the environment is a very important area which the Industrial policy of Punjab should not ignore. The Industrial Policy should put minimum requirements of renewable energy and clear environment for the new Industries. However for the swift implementation of these requirements in the industrial sector, the discretionary powers of the governments should be curtailed and the role of Chambers of Commerce and Trade Associations should be enhanced.
The Industrial Policy of Punjab with the fiscal levers available to the province can provide the following incentives to the Industry.The government should make reduction in provincial sales tax on services and expansion in coverage through industrial policy. The rate of provincial sales tax on services should be reduced and certain sectors which are exempted from the collection of provincial sales tax should be brought in the tax net. Besides, reducing the provincial sales tax rates for the entities that provides corporate training to the low skilled workers in the Industrial Zones/clusters.
The budget allocated for vocational training at the provincial level should be enhanced by ten times for inclusion of more labor force in the skill development process.The Punjab government should also cover the exemption of infrastructure development cess on imports of capital goods for manufacturing for a certain period of time trough the policy.
Furthermore, for the expansion of business and supporting the smaller firms, there should be an incubation period of 2-3 years in which they should be exempted from paying any provincial taxes. This would give some financial space to the small companies and allow them to enter into the tax net once they are profitable. To incentivise the private sector in availing the credit facilities and achieving higher growth, the government of Punjab can finance 3-5 percent mark-up of the new industries for a certain period of time
The government should also provide transportation subsidy to the high cost of transporting the capital goods/machinery from Karachi Port to the Industrial in Punjab. Currently, this cost is a big hindrance in setting up of new technology intensive industries in the province of Punjab. To get around this obstacle, the government of Punjab should subsidise a certain percentage 20-30 percent of the transportation cost from Karachi Port to the Industrial site. To expedite the process of industrialisation in the new industrial zones, the government should lease the land available in the industrial zones at economical rates.
The energy cost in Pakistan is considerably higher as compared to other countries in the region. As a result, the exports of Pakistan get uncompetitive in the world market. The Punjab government should subsidise the electricity bill by 20-30 percent for a certain time for the new industries in the Industrial Zones. This will especially facilitate the labour intensive industries by reducing their cost of business.
The proposed industrial policy should also support the woman entrepreneurs: There should be special provisions in the new Industrial Policy for supporting the women entrepreneurs to attend the international trade fairs. The government should contribute a certain percentage of 20-25 percent in the equity investments of the woman entrepreneurs.
The Industrial Policy should also focus on improving the business climate at the provincial level. Effective reforms as recommended by Lahore Chamber of Commerce and Industry (LCCI) should be done in the regulatory framework relating to various indicators of Ease of Doing Business, (Business Registrations, Registering Property, Construction Permits and Contracts Enforcement).
