UNIDO 2020: Pakistan Industrial Output Lags Behind Peers in South Asia

Until 2010, Bangladesh was a laggard in South Asia region. Its per capita income was about half of Pakistan's. Now Bangladesh has surpassed Pakistan as the Pakistani economy has suffered significant slow-down from the previous decade. In fact, the Pakistan economy grew at the slowest rate in South Asia as reflected in per capita incomes. While Pakistan's per capita income more than doubled from $500 to $1,000 in the ten years 2000 to 2010, the growth has slowed to less than 30% from 2010 to 2020. 

Per Capita Income Growth in Pakistan Lags in South Asia. Source: Wo...

Pakistan's exports doubled from $10 billion to $20 billion in years 2000-2010. In the last decade 2010-2020, the nation's exports have grown only about 25% to $25 billion. Exports have declined in terms of percentage of the country's GDP from 13% to 10% in the most recent decade. 

Pakistan Exports Since Year 2000. Source: World Bank

 

Return on money invested in Pakistani stock market has also been cut in half in 2010-2020 when compared with the return in 2000-2010.  Shares of companies making up the Karachi Stock Exchange 100 index have returned 8% in US$ terms in 2010-2020, less than half of the 20% during 2000-2010 period. KSE100 still managed to achieve 14% return over the 20-year period from 2001 to 2021, among the highest in the world. 


Stock Market Returns. Source: Tundra 


Foreign direct investment (FDI) in Pakistan ramped up in 2000-2010, reaching the peak of $5.6 billion (3.67% of GDP) in 2007. FDI inflow has since suffered a steep decline.

Foreign Direct Investment in Pakistan. Source: World Bank

Pakistan's manufacturing output tripled from $7 billion in 2000 to $21 billion in 2010. Then it rose just 60% to $34 billion in 2019. The nation's industrial output decline as percentage of GDP from 14% to 12% in the last decade, according to the data from UNIDO, the United Nations Industrial Development Organization. 

Pakistan's Manufacturing Output Trend Since 2000. Source: World Bank

Pakistan has also seen a major decline in the rate of human development growth in the country over the last decade. Pakistan saw HDI (Human Development Index) average annual growth of 1.4% in 2000-2009 and 0.80% in 2010-2019, according to Human Development Indices and Indicators 2018 Statistical Update.  The fastest growth in Pakistan human development was seen in 2000-2010, a decade dominated by President Musharraf's rule, according to the latest Human Development Report 2018.

Pakistan Human Development Index Growth Rate. Source: Human Develop...


Bangladesh surpassing Pakistan in socioeconomic indicators has brought into sharp focus the contrast between Pakistan's decades of 2000-2010 and 2010-2020.What changed? The biggest change is Bangladeshi leader Shaikh Hasina's decision to stifle the unruly Opposition and the media to bring political and economic stability to the South Asian nation of 160 million people. It has eliminated a constant sense of crisis and assured investors and businesses of continuity of government policies. With development taking precedence over democracy, Shaikh Hasina followed the example of Asian Tigers  by focusing on export-led economic growth of her country. She incentivized the export-oriented garment industry and invested in human development. Bangladesh now outperforms India and Pakistan in a whole range of socioeconomic indicators: exports, economic growth, infant mortality rate, primary school enrollment, fertility rate and life expectancy.       

South Asian Countries' Export Growth. Source: Wall Street Journal

Bangladesh's garment exports have helped its economy outshine India's and Pakistan's in the last decade. Impressed by Bangladesh's progress, the United Nations’ Committee for Development Policy has recommended that the country be upgraded from least developed category that it has held the last 50 years. 

The next challenge for Bangladesh is to move toward higher-value add manufacturing and exports, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995, according to the Wall Street Journal

Pakistan Growth By Decades. Source: National Trade and Transport Fa...

 

Vietnam ruled by autocrats is rapidly becoming an Asian Tiger. With rising manufacturing costs in China and the US-China trade war,  many major manufacturers are relocating to other countries in Asia. This situation has helped Vietnam emerge as a hub of foreign direct investment (FDI). FDI flow into the country has averaged more than 6% of GDP, the highest of any emerging economy. The country’s recent economic data shows a rise of 18% in exports, with a 26% jump in computers/components exports and a 63% jump in machinery/accessories exports.  These figures have earned Vietnam the moniker of the newest "Asian Tiger".

Musharraf Years & History of Pakistan's GDP Growth Rates. Sourc... 
 
It was in 2007 that Pakistan caught the "democracy" fever led by the lawless lawyers of Lahore. This led to the return of corrupt dynastic rule of Asif Zardari and then Nawaz Sharif. The year 2007 also marked the beginning of yet another lost decade that saw Pakistan's per capita gdp's continuing lag behind South Asia region and other emerging economies. 
Pakistan was the original "Asian Tiger" back in the 1960s when  other developing Asian economies sought to emulate its development model. It became an export powerhouse in the 1960s when the country's manufactured exports exceeded those of Thailand, Malaysia and Indonesia combined.  The creation of major industrial estates in Karachi under President Ayub Khan's industrial policy incentivized industrial production and exports of value added manufactured products such as textiles. Now the country's industrial output lags its neighbors'. 
History of Pakistan's Manufactured Exports

With Chinese looking to relocate some of their industrial production to low-cost countries, Pakistan has a golden opportunity to grow its industrial output and exports again. Here's Karen Chen explaining why:
“Vietnam is too crowded already and moved into automobiles and electronics. There is no space for investment in Vietnam. Myanmar doesn’t have infrastructure. India is terrible. In Bangladesh you don’t have right conditions for setting up fabric units. So Pakistan is the ideal location for such garment manufacturing because of abundance of cheaper labour. The investment and tax policies for SEZs and new projects are also good. We’ve confidence to be at here.”
Seizing the opportunity to attract export-oriented investors will help Pakistan become the next Asian Asian Tiger economy. It will help the country avoid recurring balance-of-payments crises that have forced the nation to seek IMF bailouts with all their tough conditions. Focusing on "Plug and Play" Special Economic Zones (SEZs) is going to be essential to achieve this objective.

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Comment by Riaz Haq on September 27, 2020 at 6:51pm

#Motorcycle production boom in #Pakistan as #COVID19 #lockdown ends. 2.8 million motor vehicles were produced locally during fiscal year 2016-17, which increased to 3.22 million in 2017-18 with a little bit of decline recorded in 2018-19 to 2.86 million.
https://tribune.com.pk/story/2265823/motorcycle-production-booms-as...

Industry players expect production to increase around 800,000 units

The first quarter of the fiscal year 2021 is witnessing higher production of motorcycles as the economy recovers from the lockdown that had been imposed to contain the spread of Covid-19 pandemic.

“There is a boom in motorcycle industry of Pakistan,” said Association of Pakistan Motorcycle Assemblers (APMA) Chairman Muhammad Sabir Shaikh.

He added production of motorcycles will hopefully increase around 800,000 units after the current month ends.

Looking at the growing demand for the two-wheeler vehicle, Emerging Innovation - a bike manufacturing company - has set up a new production line for bikes called Revolt.

“We have set up the production plant with 99% deletion program; ie the company will use locally produced auto parts in the making of two-wheelers,” said the company’s country head Anwar Anees, adding, “The locally produced motorcycle will be 33% less costly with an increased fuel efficiency of 62-kilometre mileage.”

“Locally held research and development (R&D) for over two million markets with the aid of engineers from different local universities helped us achieve this efficiency,” said Anees.

Besides two-wheelers, demand for three-wheeler rickshaws and loaders has also increased due to which the company has applied for permission from the government to produce three-wheelers and hybrid electric bikes.

“It is commendable that new production lines are being set up,” said Provincial Minister for Industries and Trade Jam Ikramullah Dharijo. “New factories mean more jobs, which Pakistan is in dire need of at the moment.”

Bikes production in this venture may be the highest ever in the history of Pakistan, said Shaikh. “Sales of motorcycles are also breaking records.”

“However, motorcycles data reported by the media is not complete,” he highlighted.

He said that the data is mostly taken from Pakistan Automotive Manufacturers Association (PAMA), which has only five motorcycle producing members while around 40 companies are producing bikes in the country. Those companies are registered with the Engineering Development Board (EDB).

According to a report by EDB Electric Vehicle Policy 2020-25, two-wheelers and three-wheelers vehicles constitute a significant portion of Pakistan’s overall auto manufacturing.

A total of 2.8 million motor vehicles were produced locally during the fiscal year 2016-17, which increased to 3.22 million in 2017-18 with a little bit of decline recorded in 2018-19 to 2.86 million.

Out of 2.86 million vehicles manufactured in Pakistan, more than 2.4 million motorcycles were manufactured during the same period, said the report.

Comment by Riaz Haq on October 26, 2020 at 3:24pm

‘Tis the season for business

https://www.dawn.com/news/1586960

On the front of global trade, the pandemic-related disruptions and trade barriers such as higher tariffs on key suppliers (China and India) opened up a window of opportunity for Pakistani exporters. The changing market dynamics in the West, where economic stress increased the share of low-end products in the market, also worked for the advantage of Pakistan. The fact that the country dealt with the health crisis better and succeeded in containing the number of cases and the mortality rate also encouraged overseas importers to mark Pakistan as a safe and viable source for imports.

“I have been in the business of industrial chemicals and dyes for years, but had just been catering to local demand. But with over 20pc tariff on Chinese products in the United States, my produce entered the gigantic US market. I started exports to the West this year for the first time and the month-on-month increase has given me confidence to look at the possibility of scaling up the capacity to realise the full potential of exports,” a former president of a chamber of commerce and industry said.

“Pakistan’s industry is bouncing back on the strength of sound fundamentals. Cheaper credit and supportive fiscal measures helped, but it’s the rising demand that has energised businesses. We hope that the government and the opposition will realise the gravity of the economic situation and ensure stability if it cares about the country and its hard-pressed people,” said Shariq Vohra, newly elected president of the Karachi Chamber of Commerce and Industry (KCCI). He said there are 2,700 industrial units in the city, 90ppc of them being small with 10-20 employees.

Comment by Riaz Haq on October 30, 2020 at 7:54am

Pakistan Lubricants Market Size Forecast to Reach $1.91 Billion by 2025. #Pakistan, world’s 4th-largest producer & 3rd-largest user of #cotton, has been a focus area for industrialization and growing lubricant use in #textile #industry. #exports #economy https://reportedtimes.com/pakistan-lubricants-market-size-forecast-...

Pakistan Lubricants Market size is forecast to reach $1.91 billion by 2025, after growing at a CAGR of 5% during 2020-2025. Lubricants create a thin film between the moving parts for enhancing the transfer of heat and reducing tension during the contact of parts. Due to which they are used for applications such as wear reduction, corrosion protection, and smooth operation of engine internals. Owing to the increasing use of lubricants in textile and automotive, the growth of the Pakistan Lubricants Market is expected to accelerate in the forecast era.


Engine Oil is extensively used in Pakistan Lubricants Market. Engine oil is crucial in the smooth running of engines, reducing fuel emissions, and increasing engine efficiency. Engine oils provide better lubrication, cleaner engine, effective cooling, protects from corrosion, and acts as a seal owing to which it is vastly preferred for various transportation modes. Engine oil helps to cut expensive maintenance for vehicle owners and also gives longer engine lifespan. Since, engine oils clean, cooling, and prevent corrosion of the engine, they save the engine from being clogged and damaged. Because of this, mechanical components last longer and corrode less, and engines, in turn, have a longer and safer lifespan. Also, by using good engine oil, there is a reduction in emissions and fuel consumption which anticipates enhancing the market in the forecast era.


Key sectors of lubricant growth: Engine oil, textile mills & wind turbines. Electric vehicles pose a challenge to lubricant growth.

Automotive Industry held the largest share in the Pakistan Lubricants Market in 2019and is projected to grow at a CAGR of 7% during the forecast period 2020-2025.

The textile industry uses lubricants such as greases, heat transfer fluids, gear oils, engine oils, transmission, and hydraulic fluids, and anti-static oils.

Wind-turbine lubricants play a critical role in equipment operation, maintenance, and reliability of a wind farm. New installations of a wind farm will drive up lubricant consumption for the initial fill of the wind farm.

Comment by Riaz Haq on October 30, 2020 at 7:58am


‘Exports to increase up to $28 bn by end of current fiscal’, says Razzak Dawood. “Though we need to do a lot on various conventions, but the progress on many issues mentioned in the detailed report will help continue the GSP Plus facility for Pakistan.” https://www.thenews.com.pk/print/728019-exports-to-increase-up-to-2...


Razzak Dawood Tweet:I happy to share the good news that more and more brands are shifting to Pakistan. We just heard that Hanes, Guess, Hugo Boss & Target have shifted orders from China to Pakistan.

https://twitter.com/razak_dawood/status/1321838253788532736?s=20

Comment by Riaz Haq on November 8, 2020 at 4:22pm

#China Radio on #CPEC: Improvements in #energy & #transportation infrastructure have laid the foundation for the #industrial development of #Pakistan. The next phase of the CPEC project focuses on industrial cooperation. #industries #Manufacturing https://tribune.com.pk/story/2271510/cpecs-rapid-progress-laying-fo...

The projects implemented under the China-Pakistan Economic Corridor (CPEC), a flagship project of the Belt and Road Initiative, will not only benefit certain areas but also development in Pakistan, commented China Radio International (CRI) Urdu on Sunday.

“The way in which the CPEC projects have been implemented over the past five years and the results that have emerged show that the purpose of building up CPEC is not to benefit certain areas, but to promote development in Pakistan,” the CRI Urdu said of the progress made in the construction of CPEC projects.

The Urdu service stated that the infrastructure, construction of industries and the elimination of energy shortages will provide an environment for Pakistan according to its resources, which will also benefit the people of Pakistan and guarantee a bright future.

The Orange Line Metro train in Lahore is the first electric public transport project, the introduction of which not only increased travel facilities for the people but also created new jobs.

In the past five years, CPEC projects have created 55,000 direct jobs in the road infrastructure sector, of which 48,000 have been created specifically for local Pakistanis.

According to a spokesman for the Chinese Ministry of Foreign Affairs, major projects with a direct investment of US $25 billion have been completed since the inception of CPEC. The projects completed under it are are part of The Belt and Road Initiative.

As for the shipping of cargo, the trade began at the Gwadar port during the first six months of this year, through which up to 20,000 tons of goods were shipped to Afghanistan; the initiative also created jobs in the shipping sector. There was no doubt that these projects entailed infrastructure as well as energy supply, and job opportunities, the CRI maintained.

According to the proposed two-gap model of economist Hollis B Channery, developing countries should introduce foreign investment and stimulate exports to boost their national economies. In this regard, CPEC has played an important role in the development of Pakistan.

The initiative has also addressed the issue of limited investment potential, insufficient foreign exchange savings and deficits in Pakistan, and has provided excellent quality for Pakistan’s economic growth.

Pakistan’s GDP growth rate is significant and it has created 70,000 jobs in Pakistan, the China-based Urdu service added.

Since its inception, CPEC has considered the elimination of energy shortages in Pakistan as an important sector for construction. Over a period of five years, energy projects under the CPEC framework added 3,340 MW of electricity to Pakistan in early April 2019, accounting for 11% of the installed capacity in the country.

The shortage of electricity has been significantly reduced and in addition to power generation projects, China has built the Matiari-Lahore (an 878 km long, 660 kV) HVDC transmission line project in Pakistan – the second HVDC transmission line in the world to extend the life of the country's power grid.

The construction of the corridor is progressing rapidly, significantly reducing Pakistan's energy problem in the process. Improvement in the transportation infrastructure has laid the foundation for the industrial development of Pakistan. The next phase of the project focuses on industrial cooperation.

Given the pace of the projects, their completion and results, it can be said that CPEC is undoubtedly a new impetus for the sustainable development of Pakistan, the CRI added.

Comment by Riaz Haq on April 15, 2021 at 6:57pm

Engro to establish petrochemical plant
Unit will help slash country’s chemical imports, boost exports

https://tribune.com.pk/story/2293972/engro-to-establish-petrochemic...


Engro Corporation, a diversified group of companies, has announced that it will undertake advance studies for setting up a manufacturing plant in the petrochemical sector at an estimated cost of over $1 billion, which will slash Pakistan’s chemical imports and give a push to exports.

The conglomerate intends to establish a plant for the manufacturing of polypropylene resin, which is used in making plastic bags for carrying and supplying fertiliser and sugar to the market, confectionery wrappers, plastic pipes and other construction fitting material, film and sheet.

“We are pleased to announce that the board, in its meeting held on April 8, 2021, has approved an amount of up to $31.4 million (approximately Rs4.8 billion) towards conducting engineering, design and technical studies including a front-end engineering design (FEED) study in relation to the PDH-PP (propane dehydrogenation-based polypropylene) project,” Company Secretary Shomaila Loan said in a notification to the Pakistan Stock Exchange (PSX) on Friday.

“At present, Pakistan meets local requirement for the chemical by importing approximately 500,000 tons a year,” Engro Corporation President and CEO Ghias Khan told The Express Tribune in an interview in December 2020.

The company was considering setting up a global-scale plant with installed capacity of 550,000-750,000 tons a year, he said and added that the estimated cost of the project could be around $1-1.2 billion.

The demand for the chemical is growing at 7.5% per annum. Keeping in view the project studies, arrangement of financing, potential investment partners (if considered) and construction, the plant would consume six to seven years for development and start of commercial production, he said.

“We may arrange financing for the project in two years from the time the board gives its go-ahead for the plant,” he said.

“The company will seek investment opportunities in this area, which creates avenues for both substituting imports and enhancing the export potential, which will help in building foreign currency reserves of the country,” said a company notification issued in April 2019. Khan said that the company would import raw material (propane gas) to produce polypropylene resin locally.

“The project will save Pakistan a net $250-300 million annually,” he said. Besides, the company might consider exporting the surplus production. Neighbouring country China was a big importer of resin globally, he added.

“Results of these studies, when completed, are expected to lead towards the final investment decision in relation to this project,” Loan said in the notification.

“The decision will also be based on a conducive policy environment and arranging the right mix of debt and equity partners at such time.”

The corporation’s share price dropped 3.08%, or Rs9.44, to close at Rs297.49 with trading in 1.3 million shares at the PSX.

----------------------

KBR, Inc. KBR announced that it has entered into an agreement with JS Energy Limited. Per the agreement, KBR’s K-PRO™ Propane Dehydrogenation (“PDH”) technology will help JS Energy to convert propane into propylene for a PDH project in Pakistan, which is anticipated to be commissioned in 2024. However, financial terms of the agreement have been kept under wraps.

In 2019, KBR introduced K-PRO that offers propylene selectivity and conversion. K-PRO is a revolutionary step for the PDH industry that furnishes innovative designs at a very low cost of capital. Also, K-PRO's proprietary catalyst doesn’t require high-cost metals and pollutants, consequently resulting in an ideal environment and lower business overhead.

https://finance.yahoo.com/news/kbr-inks-license-deal-js-141402146.html

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