DESPITE prolonged deindustrialisation which is still continuing, the government is not yet clear whether to implement its National Industrial Policy 2011 or do away with it. The draft policy was approved in May 2011.

The policy document is a good piece of research which comes up with some ambitious targets like eight per cent industrial growth per annum (with interrupted power and gas supply), creation of more than four million new jobs and 100 per cent value addition in the manufacturing sector. It further claims the policy would turn Pakistan into a ‘world factory’ rather than a ‘shop’ in next 10 years.

The broad areas covered in the NIP 2011 are: reducing dependence on imported inputs (specifically, chemical, steel, and mining); promoting knowledge-intensive industries (electronics, machinery, pharmaceutical); performance-based import protection (mainly automobiles and electronics); value-addition-based export subsidies; and removing supply-side bottlenecks such as energy shortages and deficient transport infrastructure.

It also seeks to double the manufacturing output in the next 10 years and expand the stagnant industrial employment from the current 13 per cent of the country’s total labour force to 20 per cent. While the policy looks good on paper, it raises the question as to how will the targets be achieved.

Lack of political commitment, direction, availability of funds, and structural lacunas in the policy documents are some of the snags in its implementation.

The political will is largely missing to either review the NIP or implement it in its present form. Though the policy was evolved and approved by the higher authorities, the ministry of industry is more into monitoring the prices and focused on few industries like sugar, fertiliser, automobile, etc. The broad policy issues have been put on the back- burner.

The industries’ ministers appointed in the past few years are running the affairs of the utility stores to ‘stabilise prices’. These stores have become attractive destinations for political appointments by industries’ ministers and bureaucrats.

Another factor for the non-implementation of industrial policy is that textiles, the most powerful sectorm, is no more under the ambit of ministry of industries. The NIP is silent on textile and clothing industry, which constitutes 46 per cent of the total manufacturing sector. A separate ministry for textile industry promotes the interest of the textile and clothing industry through separate policies.

Commenting on the draft policy, Dr Vaqar Ahmad, head of the economics wing of the Sustainable Development Policy Institute, said the NIP follows the distorted approach of the past. The policy favours the protection of specific industrial sectors like steel, fertilisers and chemicals etc. The NIP is based on the premise that free market and free trade policies have not been successful, thus protecting certain sectors is necessary to place them on the path of indigenous broad-based industrialisation.

In Pakistan, textile, automobiles and fertilisers sectors still seek budgetary subsidies but remain uncompetitive globally even after over 40 years of fiscal support. The support incentives now can only be given to ‘new activities’ with a clear benchmark of success and failure, Dr Vaqar argued.

The economist is not alone in criticising the NIP, but the State Bank of Pakistan in March last also advised the government to rethink the industrial policy as in the present form it would not yield the desired results. The central bank pointed out two stumbling blocks in the implementation of the policy—- energy shortage and under-developed mining sector.

In the policy document, industrial consumers were given preference over the domestic consumers, resetting the priority for gas distribution. For a democratic government it is neither possible nor workable. For instance, the textile industry in Punjab went without gas for 172 days in recent past.

The central bank also advised revised incentives structure in the mining sector for which the provinces have to be on the board.

In short, the role of industrial policy is to create an enabling environment for broad-based industrialisation, encourage innovation in a wide range of sectors, rather be focused on a few traditional types of industries always looking for incentives rather than improving quality of their products at a competitive prices.