Towards a Prosperous Pakistan:

A Strategy for Rapid Industrial Growth

Pakistan Development Forum Federal Minister Industries, Production & Special Initiatives 26th April 2005

Strategy for Industrialization

Where are we today?
An

assessment of our Industrial performance so far

9Share of Manufacturing in GDP 9Export performance 9Consistency of Growth 9Private Investment performance 9Comparison of Job Creation 9Manufacturing Technology level

Share of Manufacturing in GDP (%age)

45

Pakistan
40 35 30
Percentage Share

Indonesia

Malaysia

Korea

25 20 15 10 5 0 1960 1965 1970 1977 1980 1985 2000 2001

Source: World Bank - World Development Reports

Pakistans Share of World Exports Export of manufactures 1990 2002 World % % China 1.85 6.21 Mexico 1.06 2.88 Malaysia 0.66 1.57 Thailand 0.61 1.1 India 0.52 0.70 Pakistan 0.18 0.18 Source: WTO, Sherani (2004)

TRADE BREAKUP World Vs Pakistan-2003

World Trade Breakup
Non-Ferrous Metals, 1.80% Manuf & Eng Goods, 69.50%

Pakistan Trade Breakup

Mining & Fuel, 10.80% Agri Products, 9.30% Misc, 3% Textile & clothing, 5.60%

Textiles, 66.1% Others 5.6%

Marble Granite , 0.4% Engineering goods, 3.9% Chemical, 1.7% Agri Products, 8.8% Leather, 6.3% Petroleum, Sports 2.2% Goods, 2.7% Carpets, 2.4%

Industrial Performance of Pakistan : Growth Rate of Manufacturing

12
Total

10 8
% age

6 4 2 0 1950s 1960s 1970s 1980s 1990s 2000-01 2001-02 2002-03

Source: 50 Years of Pakistan Volume I Summary, Statistical Supplement of Economic Survey, 2002-03 and Economic Survey 2003-04.

20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 1980-81 1981-82

Figure 2.2: Trends in Private Investment (% of GDP)

India Pakistan Bangladesh

1982-83

1983-84

1984-85

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

Source: World Development Indicators 2004, Pakistan Economic Surveys 1987-88, 1992-93, 2003-04

2002-03

Employment in industry (% of total employment)

35

1982
30

1999

31.7

25 20.3 20 17.1 15 13.8 18.4

24.4

12.9

13.6

10

0 Pakistan Thailand Malaysia India

Source: World Development Indicators, Various years

Industrial Performance of Pakistan: Manufacturing Share of Pakistan in GDP

Total
20

Large Scale

Small Scale

18

16

14

12 % age share

10

0 1950s 1960s 1970s 1980s 2000-01 2001-02 2002-03 2003-04

Source: 50 Years of Pakistan Volume I Summary, Statistical Supplement of Economic Survey, 2002-03 and Economic Survey 2003-04.

Source: 50 Years of Pakistan Volume I Summary, Statistical Supplement of Economic Survey, 2002-03 and Economic Survey 2003-04.

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Technology Intensity in Manufactured Exports (%)

90% 80% 90% 70% 80%

70% 60% 60% 50%

Fig 1. 5 Technology Intensity in Manufactured Exports

Pakistan

India

China

Malaysia
Malaysia

Thailand
Thailand

Technology Intensity in Manufactured Exports (%) Pakistan India China

50 40% %
40%

30% 20%

30% 20%

10%
10% 0%

0%

1981 1981
Based Source: Lall, 2003

2000 2000

1981 1981

2000 2000

1981 1981

2000 2000

1981 1981

2000 2000

ResourceBased Resource

Low Technology Technology Low

Medium Technology Medium Technology

High Technology Technology High

Our Vision

11

Re-position the Ministry of Industries, Production & Special Initiatives to play a leadership role in formulating and implementing a comprehensive strategy for rapid industrialization of Pakistan which aims at maximizing job creation and enhancing Pakistans international competitiveness.

Our Mission
To

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increase the share of Manufacturing in GDP to 25% in 2010 and 30% in 2015.
9value addition in Textile sector 9focus on the engineering sector 9making holistic interventions across the entire value chain in key SME clusters 9directly improving living conditions for Labour

To achieve this through

Our Mission
9reducing the cost of doing business

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9creating a strategic partnership between the Public and Private sectors 9fostering ownership of Industrialisation policy by the public at large 9creating an institutional framework inter-ministerial coordination industrialization for for

Value addition in Textile sector

Upgrading ginning sector Contamination free cotton Upgrading

14

productivity of garment

sector Investing heavily in Fashion design Creating International brand names

Focus on Engineering Sector

institution
9Chairman & CEO both from private sector
EDB Role enhanced to create

15

Engineering Development Board (EDB) as focal

9Link with International value chain 9Link with Engineering academics 9Bridge between Defence Hi-Tech sector and Private sector 9Bringing an International Vision to existing industry sectors
Component manufacturing Sector Ginning Metal Re-rolling

Focus on Engineering & SME Sectors

Creation

16

of Technology Up-gradation & Skill Development Company (TUSDEC)

9Public-Private Partnership
CEO from private sector

9PITAC to function under TUSDEC 9Role of TUSDEC

Intervene to Upgrade Technology and skills in key SME Industrial clusters Common facility centres / Skill development centres / technical upgradation centres Demand driven All to be managed by the private stakeholders of each particular cluster

Focus on SME Sector

Formation

17

of Strategy Working Groups

(SWOGs)
9SWOGS bring together the Industrial Cluster on a common platform and all relevant Ministries and Provincial Governments which impact on that sector
Foreign experts brought in with help of US A.I.D Pilot new projects with Holistic approach
z

Island of Excellence strategy

Focus on SME Sector

Priority Sectors Phase I Action Plan ready by 15th May 05
9Gem & Jewellery 9Marble and Granite 9Dairy

18

Phase II Action plan by 15th August 05

9Fans 9Sports Goods 9Surgical 9Fisheries 9Furniture

Focus on Knowledge Based SME Entrepreneurship

Enterprise Competitiveness Support Fund
Objective:

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To upgrade the competitiveness of Pakistani Industry to respond to the new challenges and opportunities in the knowledge based and high tech economy Activities proposed
9Venture Capital 9Business Incubators in Universities 9Enterprise development fund collaboration with

Match-making grants y Credit guarantee y Equity financing

Reducing Cost of Doing Business

Creation

20

of National Industrial Parks Development & Management Company (NIP) as Public Private partnership
9To develop state of the art Industrial Parks all over the country
1,500 acres Pak Steel Downstream Industrial area Peshawar and Quetta Sheikhupura for engineering cluster Rural Pakistan

Reducing Cost of Doing Business

The Unemployment challenge

21

9Lopsided job creation 9Lahore, Karachi, Faisalabad and the Central Punjab Engineering triangle 9Entire rural hinterland of Sindh and Punjab missing out 9Balochistan Province and large parts of NWFP also missing out
Must

evolve strategy of successful Industrial Parks in rural areas

Challenges

The Main Challenge

If

23

we are to follow the path of rapid industrialization and take Manufacturing share of GDP from 18% to 30% then
9Every Ministry involved and Provincial governments have to work with a singleminded, focussed vision 9A new Institutional framework has to be developed which dovetails with the world as it is today

Ministries that Impact Industrialization

MOIP&SI Petroleum / Water and Power Science and Tech / Higher Education Labour Education Federal and Provincial Commerce

24

Communication / Ports and Shipping / Railways Finance / State Bank of Pakistan Provinces

Future Challenges
Energy Most critical for Industrialisation

25

9Plentiful energy required at most efficient possible price.

Labour Simplifying the complex web of regulation. Enhancing Labour Skills Labour Welfare Education Raising basic education levels

Future Challenges

26

Transport Sector An efficient, secure and cost-effective logistics chain, North-South through Pakistan is essential
9Target 48 hrs from Peshawar to Karachi 9Increase Railway for Freight
Port Performance

9Reduce Container dwell time from 12 to 4 days

Science and Technology Institutions which set Standards for Industry must have Industry focus

Future Challenges Provincial Governance Labour regulation Inspection regimes Skill training Livability of Cities Law and Order Land Record problems

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Thank You