Industrial Policy on anvil

The Federal Minister for Industries and Production, Liaquat Ali Khan Jatoi, after presiding over a meeting of the 15 state-owned Corporations the other day, disclosed that a National Industrial Policy was under preparation.
A committee for this purpose, he stated, has already been constituted with the Secretary for Industries and Production, Javed Ashraf Hussain as chairman.
The minister expected that the recommendations of the committee to be submitted within the next two months, would include identification of industrial projects for investment by both local and foreign investors, parameters would also be drawn up for the improvement of training to skilled industrial workers.
The formulation of an Industrial Policy, which at present is conspicuous by its absence, can be described as an appropriate move. It may be recalled here that Industrial Policy was a regular feature of economic management up to 1980s.
This practice however was discontinued in the early 1990s for deregulating the investment activity, thereby seemingly offering free choice to investors to establish of different types of industrial projects.
The experience of the last two decades shows that the absence of an Industrial Policy did not bring about any favourable change in the tempo of investment. Instead, the potential investors were deprived of necessary guidelines which were, in the past, conveyed in an Industrial Policy.
A marked slowdown in investment activity in industrial sector has, therefore, been noticeable over the past several years despite the fact that a Board of Investment was established to take care of inquiries from potential investors.
In this context, the formulation of an industrial policy may prove helpful in accelerating the pace of industrial investment in the country.
However, the proposed Industrial Policy should be jointly prepared by the Ministry of Industries and the Board of Investment.
The latter should associate itself more actively in the task of promoting industrial investment by making available comprehensive guidelines to potential investors.
There can be no two opinions that multifarious questions arising in the minds of foreign investors in particular would have to be answered satisfactorily by the authorities concerned. These questions can be generally dealt with in the forthcoming Policy.
The training of industrial workers is no less an important task for the government to attend to.
The programme for establishing over two dozen training institutes in the four provinces, with financial assistance from Japan, is undoubtedly a significant development.
Trained and experienced manpower is undoubtedly an essential pre-requisite to achieving enhanced labour productivity and efficiency of machinery, which alone can enable our industries to compete successfully in the international market.
Another important aspect brought into focus by the Federal Minister for Industries and Production was that the public sector corporations, with one or two exceptions, have improved their profits in the current financial year.
This disclosure may be seen as an encouraging development for stepping up the process of privatisation of the remaining public sector industrial units.
The overall improvement in efficiency and profitability in public sector industries is not always an automatic process because fresh dozes of investment are always needed for modernisation of plant and machinery.
The profitability of these industries, therefore, depends heavily on the availability of budgetary provisions of the government.
In view of the continued budget deficit the government is always short of funds to make additional investment.
Thus, the best course is the privatisation of these enterprises, which would generate private investment on a rising scale.
Our macro-economic policy focus is correct, but the trade policy has pointedly highlighted the need for brand management; quality orientation and compliance with International Standards.
However, we need to understand that Pakistan's competitiveness has been eroding over time.
The ongoing difficulties emanating from high power tariff and power outages, non-compliance with quality standards and infrastructure deficiencies are dampening investment interest.
The success of a well thought-out industrial policy will be dependent on reduction of the cost of doing business, productivity enhancement and upgradation of support mechanisms in terms of physical, technological, intellectual and financial infrastructure.
The key to it lies in efficiently calibrating the macroeconomic policy and then sustaining the policy focus if the present turnaround in the economy is to be consolidated for a much needed take-off.