On the road to industrialisation

November 26, 2023

There is a need to set up industries in every district of the country

On the road to industrialisation


ur economic planners must realise that our population is growing at more than two percent per annum, thereby adding 4.5 million consumers every year. However, our manufacturing capacity is less than that needed even for the current demand.

This is primarily the reason that our imports are constantly on the rise. We are self-sufficient in cement, sugar and rice. We produce only 30 percent of the tyres needed for our cars, the rest are either imported or smuggled in. Ninety percent of bus and truck tyres are either imported or smuggled.

We import or smuggle many electronic gadgets though we have manufacturing facilities for those. Even fruit juices made from our mangoes and citrus fruits are imported. We do produce juices for the local markets but export none.

We produce good furniture but furniture imports are constantly rising. We import milk powder while much of the fresh milk produced here is wasted as it fails to reach the main consumption centres. We import crockery because what we produce locally does not suffice. It is also of an inferior quality.

Consumption is likely to keep growing for decades to come. If we do not produce or manufacture more than the needful we will be in more trouble.

Those who manage our economy must find out why the industrial sector in Pakistan is shrinking. We have a youth population larger than the entire population of most European countries where the populations are ageing and consumption shrinking. They have to spend more and more on medical care.

We should start focusing on our comparative advantage and set up industries in every district of the country. The industrialisation effort can start with 50 towns with a population of more than 200,000 people.

Such towns are natural markets/ business centres. They have the potential to urbanise quickly. For too long we have been on our knees. We have to stand up. We are taller than most of us think.

Spatial and industrial infrastructure development is needed in and around all population clusters, particularly metropolitan cities. Industrial zones, industrial corridors and industrial estates need to be demarked. People in every region should get the benefits of economic development generated in their regions. This will promote efficiency and fairness.

Airports/ seaports/ dry ports should be managed through public-private partnerships. Industrial clusters should be supported and enabled to compete globally. Cluster-specific industrial estates and technical schools should be set up in and around all major clusters, starting with at least 50 towns.

The government should be a regulator and supporter of economic activities. It should build large markets and regional economic and industrial hubs, providing opportunities for new entrepreneurs to grow SMEs and build large companies with world class infrastructure; connected to the global value chain.

The pattern of structural change that this framework proposes is in line with the local realities. Such an industrial policy will lead to desirable socio-economic changes by addressing employment and supply problems.

This necessitates a reliable and stable policy framework and avoidance of ad hoc-ism in government policies. Growth pushed by public funding may not produce sustainable development if the financial sector is lagging behind.

A supportive regulatory environment is essential for industrial growth. Regulations should be investor- and business-friendly so that investments are sustained over long periods of time.

A supportive regulatory environment is essential for industrial growth. Regulations should be made investor- and business-friendly so that investments are sustained over long periods of time.

Fiscal discipline is paramount and has far-reaching consequences for the monetary policy. Excessive fiscal deficits and resultant public sector borrowing for non-income-generating and non-wealth-creating activities can cause a ‘crowding-out’ of productive investments.

Public finance should be disciplined and rule-based rather than discretionary. To ensure industrial growth, the country needs healthy productive and hardworking human resource, technical and vocational skill development and an education system integrated with the diverse needs of a growing industrial economy. A good healthcare infrastructure is necessary to keep the workers productive and happy.

We also need a trustworthy, appropriately designed and competitively priced energy and physical infrastructure. This is of immense importance for domestic as well as international production and trade.

Pakistan is in dire need of linking technological developments (mainly in research organisations) with commercial activity.

Some strategic interventions are needed to ensure sustained high industrial growth. These include merging and aligning of relevant ministries like water, power, petroleum and industries.

There is a need to train 2 million workers every year. The government should provide scholarships/ loan funds and include the private sector in the effort to deliver good skill training. It must develop new and innovative ways of channelising funds to the technical education and vocational training sector.

Efforts should be made to improve the productivity of workers, thus increasing their incomes and quality of life.

Growth of industries along traffic arteries and major highways, redefined as industrial corridors, is essential as every district in Pakistan has its own geographic, historical and demographic reality. Local resources and advantages should determine the kind of infrastructure required in each district.

Financing industries is a major issue. This may require developing new institutions to organise long- and medium-term financing.

The Pakistani diaspora should be incentivised to invest in the country. Remittances should to be channelised to productive investments. The Board of Investment should be given the mandate to build on this opportunity. The government should encourage expatriates to engage with new industries where technology and knowledge will lead to a competitive advantage.

Cartelisation must be discouraged and punished through effective anti-trust laws. An effective legal framework and rules should be developed for a speedy resolution of business disputes. Trade bodies have to be empowered to play an effective role in this area.

Standardisation and research and development should be encouraged. The process should be guided by local requirements. Adoption of global standards must be encouraged and certification subsidised.

Tax laws and location policies should favour the formal sector. Cottage industries and micro enterprises should be recognised.

Large infrastructure projects like naphtha crackers, refineries, polymer manufacturing, chemical plants, etc, should be planned and undertaken. The government should improve the communication infrastructure. Local and international transport infrastructure should connect seamlessly.

The writer is a senior economic reporter at The News, Lahore

On the road to industrialisation