AMIN GANNY - Chief Operating Officer, Lucky Cement Limited
TEXT: Pakistan has been consistently facing a trade deficit for a very long time mainly due to its reliance on high imports which includes mineral fuels, oils, machinery, vehicles, electronic equipment, organic chemicals, plastics, vegetable fats and oils. This reliance and the purchasing habit of the people developed due to these imports have marked a negative impact on the economy of Pakistan.
Our foreign investments are drastically low compared to other growing economies in the region. To attract more investments and to provide opportunities of employment, Pakistan needs to cut down its cost of doing business. The Country needs to offers an efficient energy infrastructure and business friendly environment for foreign investments and local businesses to flourish.
Emergence of CPEC
Since the emergence of China Pakistan Economic Corridor (CPEC) Pakistan has come up as a key partner for China's global trading policy with a plethora of new development projects in the country. Now mass industrialization is set to be initiated in the country under CPEC that can help Pakistan to develop self-reliance.
Business Cooperation Agreements in various fields between leading Chinese entrepreneurs
and Heavy Mechanical Complex (HMC) in Taxila is a testament on how Pakistan can make its way towards a "Make in Pakistan" economy.
The revamping of HMC and Pakistan Steel Mills will contribute in import substitution and can help prevent us from importing heavy machinery and steel products from abroad, which gives us the opportunity to develop products locally and bring innovation in local industries as well as more employment opportunities.
By effectively availing this opportunity arising from CPEC, Pakistan can further introduce economic and technological innovation to improve its industries such as agriculture which contributes a major chunk in the Country's GDP. This can be achieved by working on crop sciences, new varieties and through effective use of water with innovation.
To modernize our economy, Pakistan can adapt the steps taken by China as a reference point. By focusing on the already in place Special Economic Zones (SEZ) Pakistan can enhance its dependence on the local industries. This model has facilitated China's economy and such adaption can strengthen Pakistan's as well.
Infrastructural and Economic Reforms
Implementation of effective import-substitution policies in Pakistan can be helpful in uplifting the local industries. But local production alone will not be enough. Integrating and digitizing the existing infrastructure of transportation and energy is key here. Integrated transport systems need to be introduced for swift flow of cargo between producers and consumers. The reduced production and transaction costs will also serve as a stimulus for the economy.
Supply chain management is a demanding challenge for Pakistan especially in the wake of CPEC. We need to speed up the lead times at dry ports and Karachi port to enhance our imports and exports. In Pakistan, roads are the most common mode of transportation and they handle almost all of the total freight traffic. Road transportation, while faster, is nearly always costlier compared to rail systems so a trade-off needs to be made. Massive investments in railway's effectiveness and its capacity building is the need of time along with reduction in the cost of doing business to move towards "Make in Pakistan" initiative.
Pakistan's abundant renewable resources can also boost its power generation capacity. According to International Renewable Energy Agency's assessment the country has up to 60 GW of hydropower potential. The assessment also identifies 50 GW of theoretical wind potential in Pakistan's southern Sindh and Baluchistan provinces and further estimates that 25 million tons of biomass feedstocks from industrial and agricultural residue can also be made available for use, per year. Not only will renewable energy exploitation pave the way for a cleaner, greener country and reduce emissions, but it will also drastically reduce both the susceptibility to global economic shocks and the continuous outflow of precious foreign exchange.
Our mineral rich Baluchistan province with large deposits of copper, gold, rare earth minerals, limestone, gypsum and coal is also an avenue which can offer endless investment opportunities. Despite having one of the largest gemstone reserve, Pakistan has not been able to develop a globally competitive gems industry so far. Pakistan needs to overhaul the existing policy regime and this can be done by following the models adopted by other countries in the region which have incentivized the industry and simplified its procedures.
One of the sectors that will be key in driving the growth resulting from this economic overhaul is the construction sector, which has recently been given the status of an industry. This industry nearly employs 8% of the labor force and accounts for almost 3% of GDP in Pakistan. More than 40 allied industries including electronics, wood products as well as steel, Iron and cement are all directly or indirectly related to construction. With a population of more than 200 million people- and growing fast-Pakistan's population is expected to reach 403 million by 2050, according to the UN. This will create immense scarcity for housing units in the country with a current backlog of 10 million housing units and a demand of building 400,000 housing units annually. Investment in the construction industry will build new housing units, high rises, and commercial hubs which will result in reduction of rents and better quality of life. This will not only improve the infrastructure but will provide an environment for new businesses.
Pakistan's cement industry has also shown positive signs of growth backed by its increased exports of mainly clinker, which rose by 100 percent in last two years. Moreover, Pakistani cement exports have become more diverse in terms of market access, which is promising.
Now by implementing an effective industrial policy will not only help in providing a reliable and high quality local machinery as a substitute to current imports, but key segments like the construction industry will reap immense benefits of these efforts.
Opportunities amid the Pandemic
Today the world faces an unprecedented healthcare crisis which is quickly translating into dire socioeconomic challenges. However, considering Pakistan's abundant natural resources, agriculture assets and affordable human resources this challenge can be transformed into an opportunity to become self-reliant.
The consumer items, which were readily imported before have now indeed became out of reach for people due to the virus outbreak but this has also created a huge vacuum which can be filled by introducing local alternatives.
By understanding the needs of the global markets many of our textile and apparel units have adapted quickly to this health crisis and shifted their production to face masks and shields for healthcare providers and frontline workers. This resulted in exports of a large quantity of health care products and opened a new horizon of global trading for Pakistan. The recent exports of the textile sector can be taken as a case study on how local businesses have quickly adapted this change and offered relevant products to the market.
Pakistan needs a comprehensive long term trade and industrial policy with a focus on logistics and energy infrastructure that reduces cost of doing business to promote innovation and risk taking as well as offers business friendly environment, which will indeed help in capturing new markets and employment generation with value-added exports. The potential for Pakistan to lead a "Make in Pakistan" philosophy was always there, and there has never been a better time than now to quickly adapt and progress towards this notion.
Copyright Business Recorder, 2020