LAHORE: Healthy growth registered by
Large Scale Manufacturing Sector (LSM) without significant contribution from
basic textiles (that has highest weight in LSM index) depicts that Pakistan’s
economy is becoming less textile centric.The data released for the first two
months of this fiscal reveals that LSM growth was 11.8 percent. The data for
September and October is still awaited. The weight of textiles yarn and fabric
in LSM is over 20 percent. Its growth during first two months of this fiscal
was less than one percent.
This
shows that other sectors with lower weights in the index grew at much higher
pace to register a double digit growth. The sectors that grew above 30 percent
during July and August 2017 include iron and steel products, none metallic mineral
products and automobiles. Pharmaceuticals, paper and board, wood products, and
engineering goods posted double digit growth.
During the Pakistan Peoples’ Party (PPP) era, LSM growth was led by the textile
sector, but the growth was very low. During the past four years, LSM growth is
being led by non-textile sectors and the pace of growth has been very high
being 5.6 percent in 2016-17.The growth in LSM during the past four years has
been accomplished more from the re-activation of idle capacities than new
investments. If the current pace of growth in non-textile sector continued,
many sectors will have to go for capacity expansion.
Automobile
sector for instance is now operating at its optimum capacity in passenger car
segment. The demand for cars is increasing at a rapid pace and further supplies
would not be possible without new investments.Capacity enhancement in
non-textile sectors would enable many industries to achieve economies of scales
and launch their products in global markets. A tractor manufacturer has already
started exporting its units to many destinations.
Pharmaceutical companies are getting approval for their products in developed
economies and are on the export path. Home electronics too command some markets
in the Middle East. Exports of light engineering products have started
increasing.The emergence of the non-textile LSM sector as the main engine of
industrial growth is a good omen for our economy. We badly need product
diversification instead of depending solely on textiles to increase our
exports.
This calls for a more broad-based export policy that facilitates all promising
sectors instead of being textile-centric. The failure of our export policy is
evident from the fact that we have not been able to even maintain our share in
the five exporting sectors facilitated by successive governments.Even in textiles we have been gradually losing our share. In
1997-98 our share in textile and clothing in the global market was two percent
that has now declined to 1.5 percent ($12 billion out of global textile and
clothing trade of over $800 billion). The decline is sharper in leather, sports
goods, and surgical instruments.
We
need to find market for the cars, motorcycles and tractors that are produced in
the country. We need more registration of generic medicines in developed
economies to boost our pharmaceutical exports.Our auto-parts manufacturers
should be facilitated to find new markets in Africa and Central Asia. Cement
manufacturers should be facilitated to increase exports through land and sea
routes.Currently we do not have any policy to facilitate these potential export
industries. The new export policy should focus on lowering the cost of
production in all sectors instead of providing subsidies to a few sectors. It
is high time to benefit from surge in productivity in non-textile LSM sectors.Textile
exports started almost two decades after independence from a low level, when
state started supporting the sector. Non-textile industries now need more
prudent support. Their export potential is much higher than textiles.It is
worth noting that Software exports are growing on the strength of the
entrepreneurial spirit of the IT players without any government support. This
in fact is a knowledge-based activity that does not require as much capital as
talent.
Source: Samaa News, Pakistan Thursday, 16 November 2017