June 04, 2007	Monday	Jamadi-ul-Awwal 18, 1428

Pakistan's manufacturing and industrial sector suffers from various structural problems causing slow growth of output and exports, low level of investment and high concentration of manufacturing industries.

And like in the past, this time too the government is examining a number of proposals submitted by various official agencies and trade bodies for providing some relief to the industry in the budget 2007-08.

The Board of Investment (BoI) and the Federation of Chamber of Commerce and Industry (FPCCI) have separately prepared their recommendations. And the Central Board of Revenue (CBR) is believed to have agreed to offer certain concessions to make the industry competitive in the international market.

"The government is considering some industry specific concessions in the coming budget", said the Secretary General Revenue Division and the Chairman of CBR, Abdullah Yousuf.

He told Dawn that some of the problems faced by the industry have been identified to help improve the sector. Technical inefficiencies have to be overcome and the poor quality of products needed to be improved. Asked to indicate the specific concessions being considered, he said that it would not be appropriate for him to talk about them before the budget.

"We are very much aware of the problems of our industry and we will try to resolve them in the budget", he said adding that the government wanted the industry to grow at a faster rate to become competitive. All possible measures have been proposed by various bodies including the CBR to help our industry", the chairman CBR added.

The government was trying to create a right environment to help the industry. For making exports competitive, various recommendations have been formulated which are being considered by the government. He said 3.3 per cent growth in exports is surely a matter of concern and that the issue needed to be taken very seriously by the government as well as the exporters.

Mr Yousuf said that one of the factors that contributed to the low growth of exports was the competition from the Chinese and Indian products. "The government can offer fresh concessions and other possible fiscal and non-fiscal incentives to help increase our exports.

"Now we are examining what kinds of exemptions or incentives could be offered, especially on raw material, plants and machinery", he said, adding that poor quality of products and absence of proper research and development activities lead to slow growth rate of productivity, making the country's products uncompetitive in the international market. Diversification of products is another important issue which needs to be taken into account by the businessmen and the entrepreneurs, he said.

A senior official of the Planning Commission said that issues concerning the weak performance of industry and low level of exports have been discussed during the last few important meetings. Some of their problems will be addressed in the budget, he said, adding, in a world of aggressive competition it is not enough to keep generating growth exclusively from factors accumulation. Empirically, between 20-25 percent of growth has emanated from productivity gains in various countries.

The entire process for increasing productivity needs to be based upon the realisation that most people who actually do work are hardly educated and lack training. The objective is to promote higher value manufacturing while maintaining traditional edge in low technology and resource based industries. For this to happen, we must not only make policies, but also implement them effectively.

The wide range of activities and skills available, even when they are limited or circumscribed or scattered, lead us to believe that it is possible to achieve these objectives.

It is necessary to move out of the low skills equilibrium which traps both individuals and employers in a low expectations and low productivity environment. A focused policy thrust, supported by adequate resources, will be sought for raising the threshold levels of technology and skills which will lead to better productivity and better quality.

Pakistan has to make important strategic choices to ensure sustainable growth in the manufacturing sector in a rapidly changing, and international competitive environment. This requires massive structural changes rather than marginal change, a shift in production paradigm to technology and knowledge-based industrialisation, with a focus on the quantitative and qualitative growth of an integrated and competitive industry in the private sector.

"The inefficiencies of import substitution must give way to an export led strategy, and to diversification away from traditional industries and services", he said.