ISLAMABAD, Feb 2: The manufacturing and industrial sector of Pakistan is suffering from various structural problems, resulting in slow growth rate of output and exports, low level of investment and high concentration of the manufacturing industries.

The working draft of the Vision-2030 finalised by a committee of the Planning Commission, has called for industrial diversification to compete with other developing countries for increasing exports, particularly through value-addition and quality control.

It said that technical inefficiencies, poor quality of products, low level of research and development (R&D) activities have resulted into slow growth of productivity, making the Pakistani products "uncompetitive" in the world market.

The traditional industries such as food and textile still account for an overwhelming share of the manufacturing output; food industries accounted for 13.8 per cent and industries for 24 per cent of the total manufacturing of value added products.

On the other hand, industries for machinery both electrical and non-electrical, and automobile accounted for just 4.4 per cent and 4.7 per cent of value added, respectively. Even though chemical industries accounted for around 15.2 per cent of manufacturing output, most of the chemical industries output is concentrated in low-tech and low value added industries.

The draft calls for massive structural changes rather than a marginal change, a shift in the 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.

In this regard, the draft said that four sectors with the largest share in world trade are machinery/semi-manufacturers, electronics and electrical, pharmaceuticals, automobiles, and agriculture products, in that order with the last classified as low technology.

Pakistan's strength at present lies in textiles (excellent local and foreign markets); however, the automotive sector (just coming up to the right economies of scale), pharmaceuticals (large domestic market and just beginning exports) and electronics/electrical/home appliances, (growing fast, with large local demand, and some exports) are showing great promise on the basis of a fast growing middle class, consumer financing and capacity utilisation.It said that the share of agriculture in GDP has fallen from 39 per cent in 1969-70 to 21.6 per cent in 2005-06. During the same period, share of the services sector increased from 38.4 per cent to 52.3 per cent and manufacturing from 15.9 per cent in 2001-02 to 18.2 per cent during 2005-06.

To reach the quantitative targets of 30 per cent GDP share by 2030, within an overall average GDP growth rate of seven per cent until 2030, the manufacturing sector needs to grow at an average rate of just under 10pc.

Taking about cost of doing business, the working draft vision said that one window operations have been promised for a long time, but have only now reached fruition with an excellent public private partnership for creating industrial zones, industrial estates and industrial corridors, where skills and physical and administrative infrastructure can be clustered and matched for greater efficiency.

This will further reduce the cost of starting new enterprises. A textile city in Karachi and garment cities in Lahore and Faisalabad are current projects in exploiting cluster strengths in key sectors.

It also said that small and medium enterprises (SMEs) are an integral part of the country's manufacturing supply chain in all sectors. They are also major players in industrial chain, producing a wide variety of products such as sports goods, bed wear, towels, surgical instruments and marble fire places, large share of which are exported.

In this behalf, the draft proposed that with SMEs as the focus in order to improve quality of processes, products and management; this will be coupled with incentives for those who undertake such upgrades.

This needs to be implemented as on-the-job training for those businesses having up to 10 employees, but it will have to be based in a formal environment for medium sized organisation having 10-50 employees.