Pakistan through its 75 years of existence has numerous industrial and economic policies. However, although industrial policy changed directions, economic policy has mainly remained primarily dependent, till today, on international aid, loans and grants.
Pakistan’s initial industrial policy focused on large-scale manufacturing (LSM), thus resulting in industrialisation in the 60s decade. But LSM is not a massive job creator and LSM setups can only be set up in places where required infrastructure, manpower, and other complementary options are available. Therefore, this industrialisation and resultant job creation was limited to a few large cities such as Karachi, and Lahore. LSM thrived but it took a massive hit with the nationalisation policy in the 70s. Resultantly, LSM setups became more of bureaucratic dens and these profit-making entities regressed into debt incurring nightmares, and now even to run these setups, massive public money is spent on a recurrent basis.
Slowly, as the population increased and on inputs from international development agencies, the government realised that it needed to support indigenous small and medium enterprises (SMEs) to create jobs, increase revenue and support the economy. Further, from the past nationalisation experience, the government realised that it needed to liberalise the economy and allow private companies to enter the market.
Resultantly, the late 1980s saw the entrance of international auto manufacturers in Pakistan. Also, various government institutes were set up to promote SMEs. These government departments were to devise policies and serve the interests of SMEs, helping them to integrate into the large firms’ value chains.
However, the economy was still primarily running on international loans and grants, and our nationalised LSM continued to haemorrhage. The 2000 decade saw a massive explosion of media, internet and mobile service. New channels sprouted overnight, and considering the large population, international mobile operators jostled to enter the market. Also, consumer goods companies entered the market sensing a large consumer base.
Consumerism flourished when banks started giving loans on anything and everything, from microwave ovens to automobiles. This truly turned our economy into a consumer-based economy.
To aggravate the economic situation, most of the international firms entering the economy called themselves ‘manufacturers’, while barely assembling their products in the country. There were weak industrial policies and even weaker implementation and monitoring tools to monitor various industrial sectors to encourage them to localise their products and involve local SMEs in the production of their products. This resulted in a huge trade deficit with various countries from which these firms were importing their products.
Thus, successive governments started running huge deficits as imports massively outpaced exports.
This became only more obvious now when there are no more loans to support a consumptive-based economy, which imports a major share of its needs and leisures from abroad. In the latest instance of solar power generation policy, USD 1.2 billion of photovoltaic modules (PVMs) in the last fiscal year were imported, while it is predicted that USD 1.8 billion of PVMs would be imported in the current fiscal year, thus further straining the economy.
Presently, the government is cutting imports resulting in shutdowns of import-dependent industries (economy) in the country, resulting in job losses, layoffs and loss of revenue to the government.
To compensate for the lost revenue, the government is squeezing the already dying middle and lower middle classes by imposing more taxes, which is further shrinking the already squeezed economy.
The answer to reviving the economy does not rest in levying more taxes or soliciting more loans but shifting to a manufacturing-based economy, meaning more and more industrial sectors such as the auto sector, consumer goods, solar panels, and wind turbines industries need to be indigenised with greater participation of local SMEs.
Last but not least, emphasis on quality and productivity should be positively ensured through strict adherence to international quality standards, so that our industry is able to compete at international levels.
The writer is a freelance columnist