Make in Pakistan: Mighty Slogans, Mighty Responsibilities

WAJID BUKHARI - Resident Director, Amreli Steels Limited

TEXT: 'Make in Pakistan' is a visionary approach to overhaul our economy by industrialization and self-reliance that will spur job creation and investment - the hallmarks of any growing economy. We face the daunting task of creating over a million jobs every year to keep pace with a growing population and young workforce that may be talented but have a weak educational background and skillset. It is through 'Make in Pakistan' that we can hope to become self-reliant and diversify our export-oriented industries to tackle the continuous deficit that unleashes a vicious cycle of currency depreciation, inflation and debt

But as we have seen countless times in the past, a vision is useless if it cannot be executed or its implementation is stifled. 'Make in Pakistan' is a great over arching objective, but in order to achieve and implement this in its true spirit we will need to embrace a policy of tariff protection in the short term and take a sectorial approach as each industry has its unique challenges, threats, and requirements.

To abide by the 'Make in Pakistan' mantra, tariff protection will play a significant role in the short term due to the state of affairs in our country. We currently rank a dismal #110 out of 141 countries on the Global Competitiveness Index (released by World Economic Forum) and #108 on the Ease of Doing Business Index (reported by World Bank). As such, it is no surprise that the cost of doing business is extremely high in Pakistan; energy prices are higher than global competitors and always rising; global LPI ranking of #122 indicates uncompetitive logistic infrastructure; large number of taxes and high rate of taxes. Moreover, lack of long term policy direction and a boom-bust economic cycle has frequently put Pakistani businessmen to the test, marred investment appetite and hindered wealth formation. The conclusion is rather obvious- domestic industry will require tariff protection until the government can tackle the host of issues that we currently face to make ourselves competitive against imports and start to diversify our export oriented industries.

This is where sectorial roadmaps become the key starting point to implementing 'Make in Pakistan' in a sustainable manner. Ten-year road maps need to be made for each major industry with the view of eventually reducing protection, generating surpluses and becoming export oriented. Making industry roadmaps are not an easy task, it must include stakeholder consultation from industry experts & leaders, academia, consultants and government officials but one can assume that key players in the private sector can play a leading role. The issues of export bias, inefficiency and abnormal profits that arise from protection can also be reviewed in such sectorial analysis to ensure tariff protection is only being used as a stop gap measure until structural issues are resolved over a defined time period. While the private sector may need some incentives to be nudged in the right direction, the difficult question is whether the government will be able to tackle all the cost of doing business, ease of doing business and infrastructural bottleneck issues in a reasonable timeframe.

Most importantly, 'Make in Pakistan' must be owned by all government institutions and decisions should be taken with this over-riding objective in mind.

Mis-alignment of institutions may be the biggest threat to 'Make in Pakistan' and industrialization in general. It is too often that there is talk of global competitiveness but the tough decisions are not made; tariff anomalies are not resolved due to revenue considerations, sub-standard manufacturers are not regulated due to backlash, and tax evaders are not taken head on but regulated indirectly by putting further burden on the documented sector.

We must take lessons from China, an economic success story that is unmatched in history. They did not become an economic power-house by trade liberalization and reduction in import tariffs. They developed a strong manufacturing base between 1980-2000 by restricting imports, focusing on Making in China, building infrastructure, creating jobs and developing competencies. India has also followed a similar model. The government has taken the right step in adopting the 'Make in Pakistan' model. Now its implementation is where all the focus must be.

Copyright Business Recorder, 2020