During the current year Pakistan’s manufacturing sector has shown very little signs of recovery. At best perhaps at the end of the current fiscal, this sector would record a growth of about two per cent which could only be described as stagnant growth compared to last year.

The adverse impact of the 9/11 on our industrial sector has not yet been overcome despite the fact that the world economy has started showing sings of visible recovery. During the last year as per the State Bank report, new units were established in petroleum refining, fertilizer and automobile sectors. While during the current year, DAP fertilizer plant established by Fauji Jordan Fertilizer Company (FJFC), closed down its operations in October 2001.

The government on its part has claimed that during the last 30 months it has developed the industrial visions for four major sectors namely textile,fertilizer and engineering. It has also reduced duties from 35 to 30 per cent and has a plan to further reduce it from 30 to 20 per cent, 10 per cent and 5 per cent subsequently to provide industrial raw material at lower cost so that the local products can complete at the global level. The government also takes the credit of what it describes as the intensification of its industrial policy reforms process. And in this connection a large number of public sector industries have been privatized for Rs10 billion; a number of public corporations have been merged for rightsizing and economy ( increasing the rate of unemployment in the country); some unviable agencies are being wound up, whereas the public sector is being reduced very fast ( further deepening the recession), the private sector investments are being extensively facilitated to strengthen the economic turn-around.

But the facts on the ground speak of something entirely opposite. In the first 8 months of the current fiscal year the total bank credit lifted by the private sector was only Rs49 billion compared to Rs84 billion for the same period last year. Even if adjusted against the issue of Term Finance Certificate (TFCs) to the tune of Rs7.5 billion, improvement in the public offering on the stock exchange, lower incidence of inflation, appreciation of the exchange rate and lower prices of cotton, the over all private sector credit still looks very low compared to what was borrowed by this sector last year in the same period.

The government is also claiming the credit for having achieved two years extension in the deletion programmes, which was scheduled to be wound up by December 2001 under the WTO requirements to provide greater breathing space to the local vendor industry. The government expects this one achievement would serve as a major stabilizer for the local engineering industry, which is the largest industrial sector of Pakistan after textiles.

Despite all these claims, the industrial sector has continued to stagnate with no signs of recovery. In fact the impact of the referendum on the overall industrial activity has been rather highly negative with work in most of the units coming to a stop for almost the entire month of April in view of the country wide public meetings held by the President and the forced balloting in factories all over the country on the referendum day.

The on going eye-ball-to-eye ball confrontation on our borders with India has also not helped matters any. Internally the political polarization that was caused by the President during his referendum campaign also has largely mired the industrial peace in the country with the investors once again going into the wait-and-see mood. The multilateral aid agencies too seem not to have viewed the referendum driven delays in the reform process with any favour.

The government further claims that it is focusing on improving of financial technology and intellectual infrastructures. In this connection, a college of technology is being established in Gujranwala in the private sector which will impart higher education in specific technologies like ceramics, light engineering and machatronics. Similar colleges are expected to be established in Gujrat and Sialkot. The development of export processing zones in Sambrial and Risalpur are said to have been completed.Saindak and Reko Deq in Balochistan have been declared as export processing zones. Dudder Zinc-lead project is also expected to be declared as an export-processing zone. The new colleges and technical institutes and even universities that are now being set up in the private sector in the country are mostly money making organizations. These institutes in the first place do not have competent faculty. Most of the teachers on the roll in these organizations are either part timers or inadequately qualified to teach the subject which they teach. And secondly the fees in these institutes are, more often than not, too exorbitant even for upper middle class families. With inefficient faculty this costly education in these institutes has so far produced more and more ignorant graduates who do not contribute in any way to nation-building but add to the rate of unemployment in the country which has been soaring in the last three years. It is time for the government to rethink and review its manufacturing sector policy. In the last 50 years we have only wasted our resources on developing the so-called engineering goods industry and other sun-set industries like cement, sugar and fertilizers. We have comparative advantage only in textile. we must continue to focus on value addition in this sector and other agro-based industries. Next we should accelerate our plans to bring down duties from 30 per cent to 5 per cent. And now that we have over $5 billion in the forex reserves we should take the risk of letting the rupee go and find its own highs or lows as dictated by the international market. This would actually make Pakistan a very attractive place for increased trans-shipment activities or in other words turn it into a thriving ware house economy.