The economic merry-go-round

Published November 21, 2022

The businessman-turned-politician Prime Minister Shahbaz Sharif’s government is not likely to announce the industrial policy any time soon. The relevant official quarters confirmed that the key policy is still on the drawing board and the finalisation of the initial draft that incorporates the input of trade bodies and other ministries may take months and not weeks.

“Sorry, but there is so much fire-fighting all the time which consumes attention and energies of the ministry of industries that long-term policy making gets neglected,” a senior source in the hierarchy said when reached over the phone in Islamabad for an update on the industrial policy.

“Crafting industrial policy is a very tedious complicated job. The work in progress. Yes, we had a meeting last week, and teams and committees are working as we speak. Still, there are more urgent matters warranting immediate interventions,” another senior ministry official said, hinting at pressure asserted by certain businesses threatening to shut down and exit if the government fails to oblige them.

“For the better part, we end up shuttling between key economic ministries pleading cases of companies and business groups. Please trash the delusion that businesses care for the country or the people. They care for their own bottom line and are willing to go to any length to shield their interest that they tend to universalise. Mine is a very thankless job in every sense of the word,” moaned a top official of the ministry.

The perpetual fire-fighting consumes the attention and energies of the Ministry of Industries and Production, so much so that long-term policy-making gets neglected

“How does characterising businesses a certain way justify the absence of an industrial policy?” retorted a business leader. “It may be good, bad or ugly, but the private sector has a pivotal role in this country’s progress. The control freaks in the over-crowded ministries want their little finger in every pie. They are more a part of the problem,” he asserted.

“The prolonged period of political turmoil has virtually paralysed the bureaucracy that was already not known to be dynamic or efficient,” commented a former federal secretary. “Well, ministers come and go, but the routine work goes on at its pace forever in ministries,” another senior quipped.

Musadaq Zulqarnain, Chairman Interloop Ltd, commented: “Most past policies are not implemented. Many are made without the ownership of the Ministry of Finance and provinces and end up in limbo. Moreover, due to a lack of consensus and political expediency, the policies keep changing every time there is a change in government. With that background and an uncertain political climate, even if the current government succeeds in announcing an industrial policy, there would be relatively low confidence in the longevity of the policy.”

Abdul Aleem, Secretary General Overseas investors chamber of commerce and industry (OICCI), noted: “In 2021, OICCI submitted comprehensive recommendations on the petrochemical and in August 2022 on the draft industrial policy. They outlined measures required for industrial growth, along with detailed sector-wise recommendations. However, OICCI has not been engaged further on the issue though we requested the federal secretary, industries to visit the chamber to discuss proposals.”

Nasser Hayat Magoo, former president Federation of Pakistan Chamber of Commerce and Industry (FPCCI), shared his views in detail. Briefly, he said: “A decade back, the industrial policy was drafted with the technical assistance of the World Bank. It was put on the website of the Ministry of Industries for feedback but has yet to be approved and notified by the cabinet. The global demand dynamics with technological changes warrant a revision to keep in tune with the changing demand patterns. In the absence of a clearly spelt policy, the government interventions are often discretionary and inconsistent.”

Dr Usama Ehsan Khan, an economist at the policy advisory board of FPCCI, said, “I do believe that often politics hamper the working of the administration. Governments historically took sub-optimal politically motivated economic decisions towards the end of their tenure, which burdens the national exchequer. As a consequence, successive governments have to seek the International Monetary Fund’s help. In addition, each new government comes up with its own economic recipe, which brings inconsistency in policies that hurt investors’ confidence.”

The advocacy platform Pakistan Business Council (PBC) has been warning over deindustrialisation, substantiating their claim with official data. The share of manufacturing in GDP has been declining over the past decades. It shrank to about 12 per cent from 14pc in 2012. This decline has seen Pakistan’s share of global exports staying flat while those of competitor nations increased many folds.

The body did not see much hope for job creation or export gains without the trend reversal. In its paper “Contours of a New Industrial Policy,” it highlighted its “Make-in-Pakistan” theme, to be driven by three metrics: the creation of incremental jobs, an increase in value-added exports, and import substitution. It ignored Dr Shahid Javed Burki’s suggestion for decentralisation of policy by letting each province craft its own, keeping its own endowments in sight.

The PBC target goals include fiscal reforms to evenly spread the tax burden as manufacturing, with a 12.1pc share of GDP, can’t sustain 58pc of the tax collection. In addition, tariffs need to be reformed that are highest on finished products domestically produced while being lowest on locally unavailable raw materials and intermediate products.

According to the PBC, Pakistan needs better trade pacts to ensure preferential access for value-added items instead of commodities.

Foreign direct investment needs to be boosted with a focus on import substitution, exports, technology, capital and risk-intensive sectors rather than on short payback, domestic consumption-oriented industries.

Corporatisation and consolidation must be promoted to improve governance standards and accountability.

In addition, a trained and productive workforce through public-private partnerships is essential, along with the facilitation of small and medium enterprises. The PBC wishes to focus on job-creating industries with export potential.

Attempts for comments from minister industries and other leaders of economic ministries did not succeed.

The writer can be reached at asubohi@hotmail.com

Published in Dawn, The Business and Finance Weekly, November 21st, 2022

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