November 4, 2003	Tuesday	Ramazan 8, 1424

KARACHI, Nov 3: The State Bank of Pakistan does not foresee any new investment in cement, sugar, thermal power generation, automobile and consumer electronics in near future because of the excess capacity created by large investment during the middle of the 1990s.

The SBP report on 2002-03 national economic performance released on Monday notes existing capacity utilization of all the segments of the industry at about 60-70 per cent.

“Thus no new investment is warranted in these big ticket and highly capital intensive industries,” the report observes while making a reference to what it calls a “popular question” that is being raised frequently in the media and discussed these days. The question is “Why is new industrial investment not taking place in the Pakistan?” The SBP report has also tried to offer explanation as to why there is no improvement in employment situation in Pakistan.

It states that monetary and credit policies aimed at stimulating aggregate demand through consumer financing for housing and construction, automobile sector and consumer durables should lead to higher use of existing capacity.

In economic terms, this improved efficiency in resources use in these sectors should be able to generate higher growth in these industries without any new investment.

In other sub sectors such as fertilizer, steel, chemicals, paper and paper board, the SBP report notes that industries are operating at almost full capacity. These industries can benefit from net investments through substituting of imports by domestic production. New investments in these industries will push the growth rates higher.

In textiles, the largest manufacturing sub sector, the SBP report notes that there has been both an expansion in capacity and balancing, modernization and replacements of the existing capacity in the last three to four years. As the industry scratches over from old technology to adopt state-of-the-art technology, it upgrades the quality of its products and improves competitiveness in the international markets.

“But this does not necessarily create new job opportunities and thus the widely held perception that investment in textile industry of almost $3 billion has not shown any visible impact on employment situation in the country,” the report states.

It points out that large flows of foreign direct investment in oil and gas sector since 2000 have also not resulted in concomitant employment expansion as the investment is highly capital and skill intensive.