ISLAMABAD, June 2: Large-scale manufacturing declined to 4.6 per cent in November 2010 due to reduction in cement and steel production, stated the Economic Survey 2010-11 released on Thursday. The manufacturing sector faced a mixed trend during July–March 2011 as some month have shown positive growth rate and some negative. The three main factors affecting performance of the sector are energy crisis, rising input costs and lack of demand.

The negative growth in petroleum group is driven by circular debt. Lower domestic and external demand for cement which resulted in negative growth in non-metallic mineral products, and domestic lower consumption demand compelled negative growth in steel and electronics industries.

The performance of the LSM is affected by factors like weakening of demand in international and domestic market, inflation, high input costs, high government sector borrowing, crowding out availability of credit to the private sector and acute energy shortages.

Initial spurt in large-scale manufacturing was supported by enormous raise in pay and allowances of public sector employees, and huge transfer of resources to rural areas owing to higher prices of agriculture output.

Moreover, significant rise in workers remittances and public and private transfers to the flood affected population made a strong impact on consumer demand for durable goods.

The Quantum Index of Large-scale manufacturing (QIM) managed to register positive growth of 1.71 per cent during the period July-March 2010-11 over comparable period of last year.

Main contributors to this modest growth included leather products (30pc), automobile (14.6pc), food, beverages and tobacco (9.3pc), paper and board (2.9pc), chemical (1.4pc) fertilisers (0.8pc), pharmaceuticals (0.5pc) and textile (0.2pc). However, some groups dragged index down with negative growth. They included engineering products (15.4pc), steel products (13.1pc), electronics (12.9pc), non-metallic minerals (9.6pc) and petroleum products (4.2pc).Textile sector performance showed a slight improvement owing to hike in global prices. Some important item-wise contribution in Large Scale Manufacturing (LSM) growth included power-looms (70.8pc), TV sets (28.6pc), sugar (26.5pc), LCVs (23.3pc), cars and jeeps (16.1pc), cooking oil (9.7pc) and wheat milling (6.9pc). However, some of the items depict negative growth, such as deep freezers (49.3pc), diesel engines (33.9pc), buses (24.7pc), pig-iron (15.9pc), beverages (12.5pc), cotton ginned (10.5pc) and cement (9.7pc). Industrial investment: Provisional estimates of industrial investment or gross capital formation in the manufacturing sector registered a decline of 11pc in the current fiscal year 2010-11.

This decline is due to massive decline in private investment in the manufacturing sector, which decreased by 11.1pc.

On the other hand, public sector capital formation also decreased by 3.5pc. Public and private sector investment in large scale manufacturing declined by 3.5 and 27.2pc, respectively. While the entire investment in small-scale came from private sector and registered a positive growth of 14.6pc.

Textile: Textile industry contributes about 60pc to the total export earnings of the country, accounts for 46pc of the total manufacturing and provides employment to 38pc of the manufacturing labour force.

Economic Survey 2010-11 states that textile and clothing industry would continue to be the driving force of Pakistan’s economic growth; Engineering: Pakistan’s engineering industry has a large potential to grow and contributes towards GDP and exports.

However, huge potential of export growth in engineering goods remains unutilised due to multiple reasons, including lack of focus on development and promotion of engineering industry.

Automotive: Growth in automobile industry depends heavily on economic growth and availability of financing from financial institution at favourable terms.

The sector recorded a positive growth in cars, LCVs/jeeps and two/three wheelers during July-March-2010-11 as compared to same period of the preceding year whereas the buses, trucks and tractors witnessed a decline in their production as compared to the previous year. A total of 9,22 motorcycles and 72 auto rickshaws were exported in July- March 2010-11.

The Car/LCV sector also exported 397 vehicles and parts worth $1.66 million in July-March 2010-11.

Fertilizer: The fertiliser industry witnessed urea production shortfall of about 150,000 tons in Kharif and 200,000 tons in Rabi 2010-11. The survey stated that Pakistan needs an addition of 100-150 thousand tonnes per annum in the production capacity of urea and DAP to meet its fertiliser requirements for crop sector up to 2025 and for this purpose an integrated large scale fertiliser complex.

Cement: Presently the country exports cement to Afghanistan, India, Africa, and Middle East. Export of cement is exempted from the Sales Tax and Federal Excise Duty, but domestic consumption is charged Sales Tax at 17pc and Federal Duty at Rs700 per ton. The national average retail price of cement in the domestic market has shown a gradual increasing trend since June 2010.