Large Scale Manufacturing for Growth

The manufacturing sector grew at an average rate of 8 percent from the sixties to the eighties, but fell to 3.9 percent during the nineties. This was mainly caused by reduction in investment levels due to lack of continuity and consistency in policies. Political instability law and order position in the major industrial centres, transport bottlenecks, as well as unreliability and inadequate availability of power supply at affordable rates were additional factors pulling down the sector. The sector has shown impressive recovery recently and has grown at a compound rate of 10.9 percent per annum during 2001 – 05, with Large Scale Manufacturing (LSM) growing even faster (Fig 1). Political and macroeconomic stability, rationalisation of tariffs, increase in investments, improved utilisation of productive capacity, and growth in demand for manufactured products, resulting from higher exports and consumer financing have been the major factors leading to this growth. Share of manufacturing in Pakistan’s GDP is currently 18.2 percent, and production costs have come down because of higher volumes.
Pakistan’s manufacturing industry is heavily dominated by food, textiles and apparel, and leather industries to the extent of over 50 percent. The share of textiles and its derivatives in exports was as large as 67 percent in 2003¬04. Other major segments in manufacturing include chemicals and pharmaceuticals (15.2 percent) , basic metal industry (7.7 percent), nonmetallic mineral products (5.1 percent), machinery (4.6 percent), cement 4.4 percent), automobiles (4.4 percent). Automobiles, electronics, cement, fertilizers and textiles have all showed cumulative double digit growth during the last three years.
An important feature of the engineering sector is the level of competence reflected in local design and local content, (with deletion levels of 80 – 100 percent in electrical goods, 56–89 percent in automobiles and motor cycles, and 75¬100 percent in domestic appliances). The share of high technology goods in Pakistan’s exports, however, is under 1 percent, which is indicative of an obvious neglect or inability to exploit a major opportunity, since engineering goods make up 63 percent of world trade in 2003, with electronics contributing nearly half of this value.