Large scale manufacturing: growing by fits and starts

The LSMI production figures released by Pakistan Bureau of Statistics (PBS) for the first six months of FY13 once again highlighted the below par productivity plaguing a number of once-flourishing industrial sectors; a major detractor which has bogged down growth under the 2.5 percent mark.
Output data for the month of December is a bitter sweet symphony repeating the same notes yet again; weakening production figures for fertilizers, leather products and electronics and a stunted, malnourished growth exhibited by the larger players including textile, pharmaceuticals and chemicals.
Begging attention yet again is the automobile sector that saw production decline by 5.2 percent during December, while on the whole the sectors output sank by more than nine percent year-on-year during the Jul-Dec period on account of ground lost to imported CBUs.
The local industry- accused by many to be victims of their own making- has been the centre of protectionist policies, having been allowed to reign in a non-competitive atmosphere for a large part of 20 years.
Hurting badly after being roundly kicked to the curb by the rising imports, the auto lobbys retaliation and the subsequent reduction in the age limit of imported cars by ECC however, has yet to turn the sectors days which remain gloomy.
Unfortunate circumstances also continue to plague the fertilizer producers as urea production witnessed an 11.8 percent decline year-on-year during the Jul-Dec period. Already suffering on account of curtailments on the SNGPL network, the sectors face-off against imports is also set to be a bloody encounter.
With the first SABIC consignment of some 27,500 tons of urea hitting Gwadar Port in early February, breathing room for local producers will be limited further. Set to be sold off for a subsidised rate of Rs1,600 per 50-kilo bag, the imported urea is expected to leach away from local producers sales and margins.
On a brighter note, the mediocre performance shown by the weightiest segment in LSMI basket should improve in the coming months as the textile sector especially the yarn intensive segment is set to witness a boom period on the back of higher demand from abroad.
Witnessing a small 0.31 percent growth during the Jul-Dec period, yarn manufacturers are all set to reap the benefits of a depreciating rupee and rising international yarn prices-both of which are going to support output from the local textile mills.
On the whole however, things remain in a fix as higher domestic demand coming off of thriving consumerism has limited the meager LSM growth within a few select segments. And as the few booming segments rejoice in their success, others continue to sink right before our eyes.

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Manufacturing items           Weight          Growth %

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                                         Dec-12 Jul-Dec 12

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Food/Beverages & Tobacco       12.73     -10.22       2.69

Iron & Steel products           5.39      33.02       19.3

Fertilizers                     4.44      17.46      10.01

Electronics                     1.96      -9.92      -12.7

Textile                        20.91       1.49       0.24

Automobiles                     4.61       -5.2      -9.08

Coke & Petroleum products       5.51       13.5      10.45

Pharmaceuticals                 3.62       4.14        6.5

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Source: PBS