The State Bank of Pakistan observes that official data is not appropriately capturing the vibrant economic activities in the country e.g., retail sector and real estate, thereby implying that the actual growth was higher than the real GDP increasing by 4.1 percent.
SBP in its Annual Report of 2013-14, issued on Wednesday, strengthens its arguments by pointing that there are coverage issues in the Large-Scale Manufacturing (LSM) since only 15 sectors are identified instead of 22 identified International Standard Industrial Classification of United Nations. The manufacturing data reported by India contains all categories identified by ISIC.
SBP says on the coverage issue: "Coverage issues undermining LSM growth Large scale manufacturing data is compiled across countries, according to the International Standard Industrial Classification of the United Nations Statistics Division, which has defined 22 broad categories of manufacturing. In the case of Pakistan, however, the coverage of LSM pertains to only 15 sectors identified by the ISIC. Data pertaining to manufactures of wearing apparels & dressing; publishing, printing products & recorded media; fabricated metal products (except machinery & equipment); office & accounting machinery and computers; medical precision & optical instruments; and recycling of metal and non-metal waste scrap, is not included as part of Pakistan's LSM.34 The current LSM index is based on the Census of Manufacturing Industries (CMI) conducted in FY06," says SBP.
Following are the coverage issues in LSM
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Sectors Issues
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Textile (i) LSM data for cotton cloth and cotton yarn
is collected by the Ministry of Textile, which
only covers mill sector activity. The non-mill
sector, which entails over 90 percent of over
all production of cotton cloth in the country,
is not included in the data set.
(ii) Textile production data is not classified
according to different types of fabrics; yarn;
fibers; and final products (such as apparel,
cotton based denim, bed-wear, hosiery). This
makes analysis of production trends very
difficult. However, PBS coverage of export
data is more extensive, and includes a number
of categories, like: hosiery/knitwear,
bed-wear, towels, tarpaulin & other canvas
goods, readymade garments, and synthetic
textiles.
Automobiles PBS reports the production of units registered
with Pakistan Auto Manufacturers
Association (PAMA) only, which include:
Pak Suzuki, Indus, Honda, Fiat, Deewan,
Hinopak, Ghandhara, Sind Engg, Master and
Isuzu. This leaves out some leading bus and
trucks manufacturers, namely Afzal Motors
and Al-Haj FAW motors.
Chemicals PBS reports data for 11 categories of chemicals,
with caustic soda claiming the largest share.
For caustic soda, production numbers are
obtained from Sitara Chemicals, ICI and Nimir
Industrial Chemicals. The production of Engro
Chemicals, which caters to one-third of the
entire domestic demand of caustic soda, is not
included in LSM data.35
Fast Moving (i) Food sector: Given the significant change
Consumers Goods in Pakistan's consumption patterns, the
(FMCG) demand and production of a number of
processed food items has grown in the past
few years (e.g. packaged milk & products,
dairy items, yogurt, pastas, cereals, frozen
and ready to cook items, etc). The production
of these items however, is not included in
LSM data, which leaves out large and vibrant
manufacturers like Unilever, Kolson, Nestle,
Efoods and National Foods.
(ii) Non-food: Similarly, non-food FMCGs
are also not captured by LSM. This includes
products like cosmetics, personal care products
and toiletries, which are produced by
prominent brands like Unilever, Medicam, and
Procter & Gamble.
Plastics The production of plastics is completely
absent from the LSM data set. According to
the Pakistan Plastic Manufacturing
Association (PPMA), there are around 6,000
upstream and downstream units operating in
the country, employing 0.6 million people.
This sector is producing a broad range of
products ranging from household items,
industrial containers, medical & surgical
items, auto parts, stationery items, PVC
pipes, etc. Yet they are not covered in LSM.
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Source: http://www.aptma.org.pk/Pak_Textile_Statistics/pedrc.asp
In our view, the coverage of LSM should be enhanced by including rapidly growing sectors, and manufacturing units, to provide a more realistic picture of large scale manufacturing, as discussed in the following:
While the growth in manufacturing textiles posted a slowdown in FY14, the export quantum of almost all textile categories (with the exception of cotton yarn) posted an increase in the year. In fact, the provision of GSP+ from the EU, suggests strong growth prospects of this sector. The apparent disconnect between production and export numbers can be addressed by improving data coverage of textiles. This is all the more important given the 20 percent share of textile in the LSM index;
-- In automobiles, the production of buses and trucks posted a decent increase after taking into account the growth numbers of two large firms that are not covered by PAMA;
-- In chemicals, while the production of caustic soda posted a 8.4 percent YoY decline in 2013 (according to LSM data), Engro Chemicals reported a 5.6 percent increase in production this year.37 The inclusion of this company could have offset the reported decline in caustic soda;
-- The sales and profit margins of almost all leading manufacturers of both food and non-food FMCGs, posted a healthy increase during FY14, which indicates strong growth in this sector;
-- In the case of plastics, while exports posted a decline in FY14, imports of raw materials witnessed 26.4 percent growth in this year, which indicates robust growth in manufacturing in this segment.
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