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| South Asia Manufacturing. Source: UNIDO IDR 2018 |
Industrial Development Report 2018:
United Nations Industrial Development Organization, also called UNIDO, is a UN agency whose charter is to "promote and accelerate inclusive and sustainable industrial development (ISID) in Member States". It publishes an annual industrial development report that is "an established source of reference on industrial development. Previous editions have been examining the driving forces of industrialization and the positive factors that can lead to social inclusiveness and environmental sustainability. They have examined crucial components of the production side of industrialization, such as capacity building, energy efficiency, employment creation and technological change, to mention just a few."
Here are key data points from IDR 2018 on selected countries, including Pakistan:
Pakistan MVA per capita 2010 $134 2015 $146
Pakistan Manufactured Exports per capita 2010 $102 2015 $94
Bangladesh MVA per capita 2010 $122 2015 $182
Bangladesh Manufactured Exports per capita 2010 $121 2015 $152
India MVA per capita 2010 $228 2015 $298
India Manufactured Exports per capita 2010 $152 2015 $186
China MVA per capita 2010 $1,432 2015 $2,048
China Manufactured Exports per capita 2010 $1,132 2015 $1,601
Pakistan's Export Performance:
The bulk of Pakistan's exports consist of low value commodities like chadar, chawal and chamra (textiles, rice and leather). These exports have declined from about 15% to about 8% of GDP since 2003. Pakistan's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable. What must Pakistan do to improve it? What can Pakistan do to avoid recurring balance of payments crises? How can Pakistan diversify and grow its exports to reduce the gaping trade gap? How can Pakistan's closest ally China help? Can China invest in export oriented industries and open up its huge market for exports from Pakistan? Let's explore answers to these question.
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East Asia's Experience:
East Asian nations have greatly benefited from major investments made by the United States and Europe in export-oriented industries and increased access to western markets over the last several decades. Asian Tigers started with textiles and then switched to manufacturing higher value added consumer electronics and high tech products. Access to North American and European markets boosted their export earnings and helped them accumulate large foreign exchange reserves that freed them from dependence on the IMF and other international financial institutions. China, too, has been a major beneficiary of these western policies. All have significantly enhanced their living standards.
Chinese Investment and Trade:
Pakistan needs similar investments in export-oriented industries and greater access to major markets. Given the end of the Cold War and changing US alliances, it seems unlikely that the United States would help Pakistan deal with the difficulties it faces today.
China sees Pakistan as a close strategic ally. It is investing heavily in the Belt and Road Initiative (BRI) which includes China-Pakistan Economic Corridor (CPEC). A recent opinion piece by Yao Jing, the Chinese Ambassador in Pakistan, published in the state-owned China Daily, appears to suggest that China is prepared to offer such help. Here are two key excerpts from the opinion piece titled "A community of shared future with Pakistan":
1. China will actively promote investment in Pakistan. The Chinese government will firmly promote industrial cooperation, expand China's direct investment in Pakistan, and encourage Chinese enterprises to actively participate in the construction of special economic zones. Its focus of cooperation will be upgrading Pakistan's manufacturing capacity and expanding export-oriented industries.
2. China will also actively expand its imports from Pakistan. In November, China will hold the first China International Import Expo in Shanghai, where, as one of the "Chief Guest" countries, Pakistan has been invited to send a large delegation of exporters and set up exhibitions at both the national and export levels. It is hoped that Pakistan will make full use of this opportunity to promote its superior products to China. The Chinese side will also promote cooperation between the customs and quarantine authorities of both countries to facilitate the further opening-up of China's agricultural product market to Pakistan. China will, under the framework of free trade cooperation between the two countries, provide a larger market share for Pakistani goods, and strengthen cooperation and facilitate local trade between Gilgit-Baltistan and China's Xinjiang Uygur autonomous region. And China will take further visa facilitation measures to encourage more Pakistani businesspeople to visit China.
Pakistan's Role:
Pakistan needs to take the Chinese Ambassador Yao Jing's offer to increase Chinese investments and open up China's market for imports from Pakistan. Pakistan's new government led by Prime Minister Imran Khan should take immediate steps to pursue the Chinese offer. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen to develop a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries. Pakistan must make full use of its vast network of overseas diplomatic missions to promote investment and trade.
Summary:
Pakistan's manufacturing sector is performing poorly relative to Bangladesh and India, according to the United Nations Industrial Development Organization 2018 report. UNIDO data shows that Pakistan's per capita manufacturing value added is not only lower than its neighbors' but it's also growing more slowly since 2010. In fact, Pakistan's manufactured exports per capita have declined in the last decade. Pakistan's exports have declined from about 15% of GDP to about 8% since 2003. The nation's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable. Chinese Ambassador Yao Jing has offered a helping hand to increase Chinese investment and trade in Pakistan. Pakistan's new government led by Prime Minister Imran Khan should take the Chinese Ambassador's plan seriously. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen on a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries.
Pakistan's manufacturing sector is performing poorly relative to Bangladesh and India, according to the United Nations Industrial Development Organization 2018 report. UNIDO data shows that Pakistan's per capita manufacturing value added is not only lower than its neighbors' but it's also growing more slowly since 2010. In fact, Pakistan's manufactured exports per capita have declined in the last decade. Pakistan's exports have declined from about 15% of GDP to about 8% since 2003. The nation's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable. Chinese Ambassador Yao Jing has offered a helping hand to increase Chinese investment and trade in Pakistan. Pakistan's new government led by Prime Minister Imran Khan should take the Chinese Ambassador's plan seriously. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen on a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries.
Related Links:
Haq's Musings
South Asia Investor Review
Can Pakistan Avoid Recurring Balance of Payment Crisis?
Pakistan Economy Hobbled By Underinvestment
Pakistan's IT Exports Surging
Can Indian Economy Survive Without Western Capital Inflows?
Pakistan-China-Russia Vs India-Japan-US
Chinese Yuan to Replace US $ as Reserve Currency?
Remittances From Overseas Pakistanis
Can Imran Khan Lead Pakistan to the Next Level?
China to Expand Manufacturing in Special Economic Zones
28 comments:
But I think Pakistani LSM has performed exceptionally during last three fiscal with average 6% annual growth & thus forming a key portion of incremental increase in GDP
Faisal: " But I think Pakistani LSM has performed exceptionally during last three fiscal with average 6% annual growth & thus forming a key portion of incremental increase in GDP"
I think you're right. The UNIDO report's is based the 2015 manufacturing data. But I don't think #Pakistan's #exports reflect improved domestic #manufacturing output.
CPEC spurs Pakistan’s industrial growth, up by 5.4% in FY18
https://dailytimes.com.pk/286581/cpec-spurs-pakistans-industrial-growth-up-by-5-4-in-fy18/
The country’s large scale manufacturing (LSM) sector has witnessed growth of 5.38 percent during the fiscal year 2017-18 (FY18) compared to the corresponding period of last year, but, below the government’s FY18 target of 6.3 percent.
LSM grew 3.13 percent in 2015-16, 3.38 percent in 2014-15, 5.39 percent in 2013-14, 4.28 percent in 2012-13 and 5.6 percent in 2016-17.
The factors, according to the central bank, which facilitated LSM growth mainly included increased capacity utilization due to ease in energy supplies; high credit off-take owing to low interest rates; output stimulus in associated industries due to widespread construction activities; and an improved business environment on the back of CPEC related projects and favorable law and order situation.
Construction allied and consumer durable industries registered a notable growth. However, sugar industry was not able to capitalize on record sugarcane production; in stark contrast to last year, when it was the main driver of LSM growth.
The Quantum Index Numbers (QIM) of large scale manufacturing industries was recorded at 147.07 points during July-June 2017-18 against 139.55 points during same period of last year, according to latest data of Pakistan Bureau of Statistics (PBS).
The State Bank of Pakistan (SBP) said industrial production has witnessed the highest growth in the current fiscal year since FY08. The performance can be traced to noteworthy contributions from construction and manufacturing activities. Public sector development program (PSDP) and CPEC related expenditure have had a spillover impact on manufacturing sub-sectors such as steel, cement and automobiles. However, the industry could not achieve the growth target set for FY18 on account of a lower increase in gross value addition (GVA) by electricity generation and gas distribution.
The highest growth of 13.24 percent was witnessed in the indices monitored by Oil Companies Advisory Committee (OCAC) followed by Ministry of Industries with 5.04 percent and the indices of Provincial Bureaus of Statistics (PBOS) with 4.4800 percent.
On month-on-month basis, the industrial output increased by 0.51 percent in June 2018 compared to June 2017 while it decreased by 8.30 per cent if compared to May 2018.
Meanwhile, the major sectors that showed growth during the said fiscal compared to same period of the previous year, included textile (0.38 percent), food beverages & tobacco (2.78 percent), coke and petroleum products (13.24 percent), pharmaceuticals (2.94 percent), non metallic mineral products (11.04 percent), automobiles (17.78 percent), iron and steel products (21.78 percent), electronics (32.43 per cent), paper and board (9.38 percent), engineering products (7.58 per cent), and rubber products (6.21 percent).
On the other hand, the industries that witnessed negative growth include f, chemicals (0.23 percent), fertilizers (9.88 percent), leather products (0.19 percent), and wood products (37.75 percent).
The provisional QIM is being computed on the basis of the latest production data of 112 items received from sources including Oil Companies Advisory Committee (OCAC), Ministry of Industries and Production (MoIP) and Provincial Bureaus of Statistics (PBoS). OCAC provides data of 11 items, MoIP of 36 items while PBoS proved data of remaining 65 items.
50 Auto Factories' Production Improved With JICA Support
https://www.urdupoint.com/en/business/50-auto-factories-production-improved-with-j-425957.html
Small and Medium Enterprises Development Authority (SMEDA) has improved production systems of 50 Auto Factories with the support of Japan International Cooperation Agency (JICA).
Small and Medium Enterprises Development Authority (SMEDA) has improved production systems of 50 Auto Factories with the support of Japan International Cooperation Agency (JICA).
SMEDA Chief Executive Officer Sher Ayub disclosed this here Wednesday while commenting on second term of SMEDA-JICA joint project being run for technical support of auto parts manufacturing industry in Pakistan.
The project, he said, was being conducted in coordination with Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM).
He acknowledged services of the Provincial Chief SMEDA-Sindh Mukesh Kumar to make this project successful in close coordination with PAAPAM.
He said that Auto sector was one of the rapidly growing sectors in Pakistan. Its contribution towards the national economy in the form of technology transfer, employment and revenue generation is visible, he said and pointed out that the sector had a significant room to further improve quality, bring innovation and flexibility of manufacturing system which is being addressed with the support of JICA. He observed that Japan's technical support had helped the local auto parts manufacturers to get prepared for export market by improving quality and productivity of their products, as per world's requirements.
Earlier, at a ceremony held at PAAPAM Office, the SMEDA (Sindh) Provincial Chief Mukesh Kumar gave a briefing on the activities to be conducted under second term of SMEDA-JICA joint project for technical support of Auto sector in the country.
Yoshihisa Onoe - senior representative of JICA Pakistan Office, Hiroshi KANEKI - Chief of JICA Technical Team, Hiroshi SASAKI-Deputy Chief of JICA Team, Ikuta, Ishitaki, Sato (JICA Experts) and Muhammad Ashraf Sheikh, Senior Vice Chairman PAAPAM also spoke on this occasion.
Yoshihisa Onoe-the Senior Representative of JICA, in his address, assured to continue the technical support for Pakistan's industry to compete in the world market in terms of technical know-how and the modern manufacturing techniques.
He acknowledged that JICA's collaboration with SMEDA and PAAPAM had proved to be very useful for the local auto parts' manufacturing industry in Pakistan.
He was glad to note that productivity of the sector had increased to an optimal level, whereas, the rejection rates to be witnessed in the manufacturing processes had reduced to the lowest possible level. He said that the SMEs, engaged in auto parts manufacturing, had a great potential to compete the world market and assured to extend fullest technical support of JICA to impart the best practices being exercised in auto sector of the developed world.
Muhammad Ashraf Sheikh, Senior Vice Chairman (PAAPAM) appreciated SMEDA initiatives to get JICA's technical cooperation for auto parts industry.
He said that PAAPAM members had greatly availed of the assistance to increase their productivity and reduce rejection rates in their manufacturing processes. He urged SMEDA and JICA to continue the program even after completion of the set period.
This plan is dead on arrival.
No 'free market' FDI in export oriented industry has ever created a competitive export sector.China also insists on MNCs pairing with a local partner and local sourcing of components.
Let us see the example of India's automobile industry.India exports more automobiles and auto components than China while Pakistan...
Modern Auto industry started with Maruti udyog a JV with 74% ownership of the Indian state,Suzuki owned 26%.
India studied the global car industry and selected on Suzuki as being relatively small and not a Japanese national champion like Toyota,Honda,Nissan would be willing to put up with onerous indigenization conditions.Its a win win India contributes more than 50% of Suzuki worldwide revenue
The new result is India Auto Component manufacturers Elcon,Bharat Forge,Sona Koyo,Sumi Industries etc are now world class and a major export earner having been hand held by MAruti for a decade.
Now when any car maker wants to enter India he can make near 100% of the car including engines,drive train etc in India by simply handing over blueprints to Indian component manufacturers.Everyone from BMW to Fiat does this.
In addition when Tata/Mahindra decided to get into auto manufacturing in the late 90s this industrial base ensured no reinvention of the wheel was required.
Pakistan in contrast went for screw driver assembly of obsolete models by rent seeking companies like Indus Motors.
We can see the difference.
Anon: "No 'free market' FDI in export oriented industry has ever created a competitive export sector."
I disagree.
I have personally seen how US and Japanese companies invested in Penang, Malaysia in electronics assembly/test plants that created lots of jobs and significantly boosted their exports. This happened all over east and southeast Asia.
"I have personally seen how US and Japanese companies invested in Penang, Malaysia in electronics assembly/test plants that created lots of jobs and significantly boosted their exports. This happened all over east and southeast Asia."
Could it be that Malaysia and east asian countries opted for it. As Husain Haqqani has pointed out in his book, right from 1947, Pak was interested in arms only.
TD: " Could it be that Malaysia and east asian countries opted for it. As Husain Haqqani has pointed out in his book, right from 1947, Pak was interested in arms only."
Hussain Haqqani misleads by telling half truths.
Unlike Pakistan, the East Asians did not face an enemy 6X their size that was bent on undoing them.
And the East Asians enjoyed US security guarantees that Pakistan did not have.
The US and the West did invest in Pakistan in the 1960s when Pakistan's development model was taught at Harvard Business School and Koreans came to Pakistan to learn. Then came the 1971 war imposed by India and Bhutto's nationalization that scared away foreign investors.
https://www.riazhaq.com/2014/06/civilian-democracy-vs-military.html
Pakistan was on a similar trajectory as the Asian Tigers during 1960s under Gen Ayub Khan's rule. GDP growth in this decade jumped to an average annual rate of 6 percent from 3 percent in the 1950s, according to Pakistani economist Dr. Ishrat Husain. Dr. Husain says: "The manufacturing sector expanded by 9 percent annually and various new industries were set up. Agriculture grew at a respectable rate of 4 percent with the introduction of Green Revolution technology. Governance improved with a major expansion in the government’s capacity for policy analysis, design and implementation, as well as the far-reaching process of institution building.7 The Pakistani polity evolved from what political scientists called a “soft state” to a “developmental” one that had acquired the semblance of political legitimacy. By 1969, Pakistan’s manufactured exports were higher than the exports of Thailand, Malaysia and Indonesia combined."
Livestock revolution enabled Pakistan to significantly raise agriculture productivity and rural incomes in 1980s. Economic activity in dairy, meat and poultry sectors now accounts for just over 50% of the nation's total agricultural output. The result is that per capita value added to agriculture in Pakistan is almost twice as much as that in Bangladesh and India.
https://www.riazhaq.com/2013/11/pakistan-leads-south-asia-in.html
http://sawtee.org/presentations/27-28-dec-2015-2.pdf
Water Situation in Pak
The per capita availability of water has decreased from 5650 cubic meters per annum in 1951 to 940 cubic meters in 2015 and by 2020 to 855. (Note: This was in Feb 2015 when it was assumed that Pakistan's population is 190m). Pak is now an absolute water scarcity country. Pak's predominant employment sector is agriculture which is water intensive. More population means more pressure on water.
Pakistan's productivity per unit of water is 0.13kg / cubic meter, which is 1/3 of India and 1/6 of China. It's productivity per unit of land is 1/3 of Egypt and 1/2 of India or Saudi (Source: Economic survey of Pakistan: 2013-14, pg 250).
Anon: "Pakistan's productivity per unit of water is 0.13kg / cubic meter, which is 1/3 of India and 1/6 of China. It's productivity per unit of land is 1/3 of Egypt and 1/2 of India or Saudi (Source: Economic survey of Pakistan: 2013-14, pg 250)"
I'm not sure where they got these figures. Here's what I found in World Bank sponsored research:
http://www.waterwatch.nl/fileadmin/bestanden/Project/Asia/0053_PK_2002_CropWaterProductivity.pdf
Crop yields show distinct North-South and East-West variations: wheat yields in the Indian Punjab average 29% higher than in the Pakistani Punjab to the west, and wheat yields in the Pakistani Punjab are 33% higher than in the Pakistani Sindh to the south. These spatial patterns of wheat yield are similar for 1984-85 and 2001- 02. Because crop evapotranspiration in the Pakistani Punjab and Indian Punjab are similar, the difference in crop yields between these two regions is also responsible for the difference in water productivity values. This important conclusion implies that increased water productivity can only be achieved by increased crop yields. Experiments of the Pakistan Agricultural Research Council across the country (n=41) have indicated that the overall yield of wheat can be increased by 54%, provided that inputs are optimal. Improved management of water quality (groundwater and canal water) and evacuation of drainage water are important components for improving agricultural production. Seed quality, fertilizers, and pesticide control should also be improved.
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Water productivity values for wheat in 2001-02 (dry year) were higher due to increased solar radiation, which boosts crop growth when good quality groundwater is sufficiently available. During this 17-year period, yield increases were also due to improvements in farming practices and seed quality. In an average rainfall year, the water productivity for wheat in Pakistan (0.76 kg/m3) is 24% less than the global average (~1.0 kg/m3) and, therefore, can be classified as “moderately acceptable”. During the drought of 2001- 02, water productivities were at the same level as the global average. Hence, drought results in a more efficient utilization of water resources by wheat crops grown in the rabi (the dry winter season). Rice yield in the Punjab is on-average 24% higher than in the Sindh. The water productivity of rice (0.45 kg/m3) is 55% below the average value for rice in Asia (~1.0 kg.m3). Contrary to wheat, the water productivity of rice decreased during the 2001 drought, because rice is sensitive to water stress and to salinity that is intensified through increased tubewell withdrawals.
#Pakistan's #PTI government led by #ImranKhan plans to review or renegotiate #CPEC agreements with #China. #Chinese FM Wang Yi visiting #Islamabad indicates #Beijing open renegotiating its 2006 trade deal with Pakistan. https://www.ft.com/content/d4a3e7f8-b282-11e8-99ca-68cf89602132
Pakistani ministers and advisers say the country’s new government will review BRI investments and renegotiate a trade agreement signed more than a decade ago that it says unfairly benefits Chinese companies.
The projects concerned are part of the $62bn China-Pakistan Economic Corridor plan — by far the largest and most ambitious part of the BRI, which seeks to connect Asia and Europe along the ancient silk road.
They include a huge expansion of the Gwadar port on Pakistan’s south coast, as well as road and rail links and $30bn worth of power plants.
“The previous government did a bad job negotiating with China on CPEC — they didn’t do their homework correctly and didn’t negotiate correctly so they gave away a lot,” Abdul Razak Dawood, the Pakistani member of cabinet responsible for commerce, textiles, industry and investment, told the Financial Times.
“Chinese companies received tax breaks, many breaks and have an undue advantage in Pakistan; this is one of the things we’re looking at because it’s not fair that Pakistan companies should be disadvantaged,” he said.
Wang Yi, Chinese foreign minister, who visited Islamabad at the weekend, indicated that Beijing could be open to renegotiating its 2006 trade deal with Pakistan. “CPEC has not inflicted a debt burden on Pakistan,” he told reporters. “When these projects get completed and enter into operation, they will unleash huge economic benefits.”
But Islamabad's second thoughts follow other recent setbacks for BRI, which is seen by many as a bid by China’s President Xi Jinping to extend Beijing’s influence throughout the world. Governments in Malaysia, Sri Lanka, Myanmar and elsewhere have already expressed reservations over the onerous terms of Chinese BRI lending and investment.
Imran Khan, the former cricket star who was elected Pakistan’s prime minister last month, has established a nine-member committee to evaluate CPEC projects. It is scheduled to meet for the first time this week and will “think through CPEC — all of the benefits and the liabilities”, said Mr Dawood, who sits on the new committee.
“I think we should put everything on hold for a year so we can get our act together,” he added. “Perhaps we can stretch CPEC out over another five years or so.”
Several other officials and advisers to the Khan government concurred that extending the terms of CPEC loans and spreading projects out over a longer timeframe was the preferred option, rather than outright cancellation.
Pakistan is in the middle of a financial crisis and must decide in the coming weeks whether to turn to the IMF for its 13th bailout in three decades, as pressure on the Pakistani rupee makes the burden of servicing foreign currency debt more onerous.
Asad Umar, Pakistan’s new finance minister, told the FT he was evaluating a plan that would allow Islamabad to avoid an IMF programme, which several people close to the government say would i nvolve new loans from China and perhaps also from Saudi Arabia.
Mr Umar and Mr Dawood both said Pakistan would be careful not to offend Beijing even as it takes a closer look at CPEC agreements signed over the past five years. Mr Khan was elected on a platform of anti-corruption and transparency and has pledged to publish details of existing CPEC contracts.
“We don’t intend to handle this process like Mahathir,” Mr Umar said, referring to the newly elected nonagenarian Malaysian prime minister who has warned about the risk of Chinese “neo-colonialism” Malaysia has cancelled three China-backed pipeline projects and put a showpiece BRI rail link under review.
#Pakistan eyes boosting medicine exports. #Pharmaceutical #exports are currently earning $230 million with potential to expand up to $2 billion. The industry is the 6th largest sector contributing to the overall exports of Pakistan. https://tribune.com.pk/story/1813190/1-pakistan-eyes-boosting-medicine-exports-2b/
The Drug Regulatory Authority of Pakistan (Drap) has assured the pharma industry that in order to further facilitate exports, the authority will establish a separate desk where all concerns of exporters regarding issuance of necessary documentation will be addressed.
Pharma exports are currently earning $230 million with potential to expand up to $2billion.
A meeting was held on Thursday under the chairmanship of Federal Minister for Health Services Aamir Mehmood Kiani with pharmaceutical exporters. The purpose of this meeting was to discuss mechanisms to boost volume of pharmaceutical and alternative medicine exports.
The federal minister in response to concerns of the pharma industry, being represented by the Pakistan Pharmaceutical Manufacturing Association and top 20 pharma exporters of Pakistan, emphasised on the need of harmonisation and facilitation of pharma export by engaging customs and the Trade and Development Authority of Pakistan (TDAP) for resolution of their grievances.
He said the sector has huge potential and needs harvesting to benefit the country by earning money abroad through improved exports of pharmaceutical and alternative medicine. It was also apprised the industry could expand its volume of exports as the 6th largest sector contributing to the overall exports of Pakistan.
Kiani advised stakeholders to submit a working paper on how export volume can be improved. Following which, CEO DRAP, Dr Sheikh Akhter Hussain apprised the federal minister that DRAP has already taken initiative to facilitate local manufacturers who are exporting to other countries.
#Pakistan's #cement industry earned foreign exchange revenue of US$27.57m by #export of 617,745t of cement during the month of August 2018, up from US$20.96m in prior month.
https://www.cemnet.com/News/story/164961/pakistan-cement-exports-rise-during-july-and-august.html#.W62Q7UcKoTI.twitter
According to Federal Bureau of Statistics, Pakistan's cement industry earned foreign exchange revenue of US$27.57m by exporting 617,745t of cement during the month of August 2018, compared to US$20.96m from exporting 475,134t of cement in previous month. This equated to a growth of 31.5 per cent and 30 per cent in terms of value and quantity, respectively MoM.
When compared with the figure of August 2017, earning of US$22.41m from 442,945t of cement – it translates to a YoY growth of 23 per cent in foreign currency earnings and 39.5 per cent in quantity.
On a cumulative basis, export revenue during July-August 2018 surged by eight per cent to US$48.53m with exports of 1.09Mt of cement and US$44.93m from exports of 871,434t in July-August 2017. The growth in Pakistan rupees rose by 27.1 per cent to PKR6bn during this period.
Data from the All Pakistan Cement Manufacturers Association (APCMA) recorded that cement exports from Pakistan to Afghanistan and India fell by 34 per cent and 22 per cent to 278,253t and 164,552t, respectively during first two months of the current financial year. However, cement exports to rest of the world rose by 149 per cent to about 633,385t during this period.
#Japan's Multi-national #Apparel Brand Uniqlo to Outsource #Garments to #Pakistan. Three #Pakistani garment #manufacturing companies one each in #Faisalabad, #Karachi and #Lahore have been selected. #RMG #textiles #Exports https://www.researchsnipers.com/japanese-apparel-brand-uniqlo-to-outsource-garments-to-pakistan/ via @researchsnipers
One of the most famous apparels brand in the world, Uniqlo is planning to outsource textile garments to Pakistan. Uniqlo will outsource for its 3000 branches worldwide from three Pakistani firms.
The subsidiary of Japanese retail holding company Fast Retailing Inc, Uniqlo Inc has collaborated with three local Pakistan companies aiming to boost the textile exports of the country.
Also read: Pakistan Textile Exports Increased by 8 percent reaches $8.8 billion
Initially, Uniqlo selected five textile companies in Lahore, Faisalabad, and Karachi. Uniqlo representatives were sent to all the companies to assess them and analyze their potential.
An official said, “The initial visit of the Uniqlo team has been successful, which is a big breakthrough.” Three companies were selected by Uniqlo for a joint venture.
Adding, “They still requested for some more companies for shirt fabric and others for circular cutting and sewing.”
For the fiscal year 2017-18, the textile exports of Pakistan increased by almost 9% to $13.53 billion. The textile exports account for almost 60% of total Pakistan’s exports. But compared to the last decade the textile export share of Pakistan in the world market has gone down from 2.2% to 1.7%.
The world’s biggest clothes retailer company Spanish Inditex Group opened its branch office in Pakistan in February. The aim was to double its imports from Pakistan. Other important foreign buying companies in Pakistan include Walmart Global Procurement, Li and Fung Pakistan, JC Penny and others.
Uniqlo is planning to make another trip to Pakistan by end of the month to finalize the deal with the three Pakistani companies.
Uniqlo is a big name in Japan known for providing quality products at affordable rates. The official said, “Therefore, any significant move by Uniqlo into Pakistan for investment and procurement will generate a ripple effect… it will boost textile export. From its factories, Uniqlo supplies apparels to its more than 3,000 sales outlets all across the world.”
#Pakistan Positioning For #Aerospace Services Growth. Pakistan is hoping to lean on skills and experience garnered from assembling jet trainers and combat #aircraft in a bid to attract international aerospace companies to invest. #defense #aviation http://aviationweek.com/defense/pakistan-positioning-aerospace-services-growth
Pakistan is hoping to lean on skills and experience garnered from assembling jet trainers and combat aircraft in a bid to attract international aerospace companies to invest. Islamabad is pouring money into the creation of its first aerospace cluster, the National Aerospace Science and Technology Park (NASTP), part of its future vision to create an Aviation City around Kamra, home to the country’s aerospace efforts. The NASTP aerospace cluster will be located at Kamra, west of ...
Joint venture: #Pakistan, #China firms to build $200m glass #manufacturing complex for production of premium, #export-quality #glass products in special economic zone. https://tribune.com.pk/story/1834085/2-joint-venture-pakistan-china-firms-build-200m-glass-manufacturing-complex/
Deli China and JW SEZ Group have joined hands for establishing a $200 million modern glass manufacturing complex in Pakistan for the production of premium, export-quality glass products.
In this regard, the groundbreaking ceremony was held at the Prime Minister’s Office where prominent businessmen, government officials and a Chinese delegation were present.
Commenting on the initiative, Prime Minister Imran Khan said initiatives like ‘Make in Pakistan’ were immensely important for the economic development of the country.
“We need to promote such initiatives and the government will fully support such projects which are aimed at producing jobs and boosting the economy,” he said. “This investment is an indication of foreign investors’ confidence in the market of Pakistan.”
Pakistan, China may sign deal for investment in agriculture
The two sides have established Deli-JW Glassware Company Limited for the project. Pak-China Investment Company is facilitating Chinese investment in Pakistan and is also assisting in financing the project.
The project will utilise natural resources in Pakistan and use latest technology to convert into glassware, float glass and other kinds of glass products.
The project will be set up in the Industrial City M-3, Faisalabad whereas the unit for the processing of key raw material will be set up in Risalpur, Khyber-Pakhtunkhwa.
Pakistan needs to improve competitiveness to attract FDI
The main glass manufacturing complex will comprise glassware manufacturing units, float glass units and other value-added glass products. The groundbreaking for phase-I of the project was held on Thursday and it will start production by the end of 2019.
#Pakistan agrees to sell #JF17 #aircraft to #Nigeria Air Force. #Nigerian Air Chief Air Marshal Sadique Abubakar called for closer coordination to fast-track the process for the acquisition of the JF-17 multirole fighter aircraft from Pakistan. https://www.nigerianews.net/naf-partners-with-pakistern-to-purchase-equipment/
The Islamic Republic of Pakistan has promised to strengthen its strategic partnership with the Nigerian Air Force (NAF) in equipment and spares acquisition to further enhance professionalism.
A statement by the NAF Spokesman, Air Commodore Ibikunle Daramola, said the Pakistan High Commissioner to Nigeria, retired Maj.-Gen. Waqar Kingravi, made the pledge when he visited the Chief of Air Staff (CAS), Air Marshal Sadique Abubakar on Friday in Abuja.
NIGERIA NEWS gathered that Kingravi said Pakistan would also partner with the NAF on research and development, training and other relevant areas to further enhance professionalism.
He said he was at NAF Headquaters to assure the CAS of the commitment of the Pakistan Government to strengthening the existing cordial relationship between Nigeria and Pakistan.
The commissioner said the relations between the two counties had spanned several decades and yielded several mutually beneficial military collaborations.
Kingravi noted that having once headed the Army Aviation Corp of the Pakistan Army, he was familiar with peculiar requirements of air operations.
He added that he would pay particular attention to ensure that the ties between the air forces of the two countries were taken to even greater heights.
Kingravi also commiserated with the NAF on the tragic air mishap that occurred on Sept. 28, which led to the death of Sqn.Ldr. Bello Baba-Ari.
In a remark, Abubakar said that the relationship between the Pakistan Air Force (PAF) and NAF was extremely cordial and had continued to grow over the past few years.
He noted that the story of the successes recorded in the counter insurgency operations in the North–East, could not be written without mentioning the support rendered by the Pakistan government.
Abubakar recounted several occasions when the PAF had gone beyond the usual to assist the NAF.
He assured Kingravi that the NAF would continue to provide the necessary support and cooperation to enable him succeed.
The CAS called for closer coordination in order to fast-track the process for the acquisition of the JF-17 multirole fighter aircraft from Pakistan.
He also appealed to the High Commissioner to liaise with PAF to develop a special programme for the conduct of basic fighter training for NAF pilots.
Despite dip in #textile sector, knitted #garment #exports soar 16%. #Pakistan’s overall textile exports were recorded at $1.13 billion in October 2018, down 0.12% compared with $1.132 billion in the same month in 2017. https://tribune.com.pk/story/1849520/2-despite-dip-textile-sector-knitted-garment-exports-soar-16/
Despite a slight dip in overall textile exports, the knitwear garment sector has maintained a steady pace of growth in its shipments and led the sector with an increase of 16.13% in its exports for October 2018.
Pakistan’s overall textile exports were recorded at $1.13 billion in October, down 0.12% compared with $1.132 billion in the same month last year.
However, the knitwear garment sector stood on top with the highest exports in the textile chain as well as in total national exports with a growth of 16% compared with October 2017.
Knitwear garment exports grew 10.41% in July-October 2018 against the corresponding period of previous year.
With cut in input cost, textile sector vows to double exports
“Knitted garments have a great potential for expansion,” commented Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Central Chairman Muhammad Jawed Bilwani.
“The knitwear garment sector can achieve new milestones and its export can be enhanced by 25% every year, provided the government gives serious consideration to the proposals sought from the sector,” he said.
The sector alone earned $2.719 billion for the country in fiscal year 2017-18, which included knitted products like hoodies, shirts, t-shirts, jerseys, pullovers, trousers, jackets, etc. The sector has ranked high in the textile group over the past three years.
Textile exports drop 16% after rebate reduction
Bilwani termed it appreciable that the government was giving priority to five zero-rated export sectors – textile (including jute), carpet, leather, sports and surgical goods – and was also prioritising the export industry for the provision of uninterrupted gas supply with special tariffs, which was a longstanding demand of the PHMA. He was of the view that if the government considered the exporters’ proposals and resolved all their problems and issues, a breakthrough in exports could be easily achieved.
He called exports the lifeline that would support and strengthen the national economy. He also demanded that the government consider and set separate electricity tariffs for the five zero-rated industries and introduce uniform tariffs for water consumption as well. Currently, water tariffs for the industries in Karachi were the highest when compared with other regions and provinces.
Meanwhile, the PHMA has written a letter to the finance minister, requesting him to register all export-oriented textile manufacturers as zero-rated industries so that they could avail themselves of the facilities. “Many small and medium export-oriented industries are not registered as zero-rated in utility bills due to cumbersome tax payment procedures as they first pay sales tax and then apply for tax refund,” he said.
#Pakistan #food #exports up 16.9%. In Q1 of FY 2018-19, foodstuff exports from Pakistan grew by 16.93% as compared to the corresponding period of last year. These exports were recorded at $885.8 million as against $740.5 million the year before http://www.freshplaza.com/article/9035122/export-of-pakistan-food-commodities-up-percent/#.W_IX8oVdSKI.twitter
On month-to-month basis, the exports increased by 31.25 percent in September 2018 as compared to the same month of last year.
During the period from July to September 2018, exports of fruit and vegetables increased by 49.34 percent and 19.17 percent respectively. In first quarter, 130,747 tons of fruit worth $101.9 million were exported as compared to exports of 83,073 tons (at $68.2 million) in the same period last year.
During the period under review, Pakistan also earned $16.1 million by exporting about 4,289 tons of spices, recorded at 3,558 tons and $13.4 million of same period of last year, registering an increase of 21.82 percent.
Technology Can Address Problems Plaguing Pakistan Economy By Henny Sender, Financial Times
#Technology can address problems plaguing #Pakistan #economy. #Investments by #China’s #Alibaba and promise of local start-ups highlight potential for innovation. #startups #ecommerce #fintech #exports #trade https://www.ft.com/content/6f2633d4-e7f9-11e8-8a85-04b8afea6ea3 via @financialtimes
In May Alibaba bought Daraz, the biggest local e-commerce platform in Pakistan, from Germany’s Rocket Internet for about $200m. By joining the platform, smaller manufacturers can reach new customers in China. Already the site has 6m registered buyers and thousands of sellers. Two months earlier, Alibaba’s Ant Financial paid $185m for a 45 per cent stake in Telenor Microfinance Bank — a deal that promises to improve financial inclusion and support small businesses in Pakistan......Shahid Mustafa, Telenor’s chief executive, says: “In five years we will be the largest tech company in Pakistan.”...... Already Telenor, which says it has 75,000 agents and 176 branches across the country, has recruited thousands of software engineers. At an incubator on the outskirts of Karachi, young companies are addressing even more daunting problems.......Muhammad Khurram founded Aqua Agro, which specialises in smart irrigation. Mr Khurram estimates that farmers who use his smart devices need half as much water, yet they increase yields of crops such as lemons by 30 per cent. He is also using crowdfunding to raise money.
At the same time, another member of the same incubator, Fatima Anisha, has devised a technique to treat organic waste and turn it into fertiliser which improves yields without using harmful chemicals......While the efforts of the country’s start-ups are in many cases modest, they offer a vision of how the country — often with help from bigger Chinese technology groups — could start to find solutions.
#Pakistan asks #China to diversify #investments, PM adviser Razzak Dawood says. Country wants more #Chinese money in #agriculture, #industrialization and #education. #CPEC https://asia.nikkei.com/Spotlight/Belt-and-Road/Pakistan-asks-China-to-diversify-investments-PM-adviser-says
So far, most CPEC projects have focused on power and infrastructure. But Dawood said the country has actually canceled some power projects due to them being "too large and unnecessary."
"Now, we are saying, 'No thank you.' Pakistan is asking China to look at industrialization, agriculture and education in line with the CPEC," he explained.
He said Pakistan have to diversify CPEC projects. After being criticized about its loan shark-like tactics related to the Belt and Road Initiative, China has been reconsidering its approach. An expert in Chinese politics pointed out, "Now the Chinese leadership is reviewing CPEC by mobilizing their research institutes. They are paying much more attention to the situations in recipient countries and their sentiment toward China."
Pakistan is going through hard times. The country has suffered a severe financial crunch due to huge expenditures on infrastructure, especially in the power sector, and too many imports of electrical equipment, steel products and other necessities related to the CPEC. As a result, its current-account deficit has skyrocketed and foreign reserves have dropped to their lowest level in four years.
In its latest outlook, the International Monetary Fund sees Pakistan's economic growth slowing to 4% in 2019. But Finance Minister Asad Umar recently pointed out that the economy is already on the road to recovery.
Dawood explained that Umar is not talking about growth rate, but about stabilizing the economy. "We will go through a period of lower growth for one or two years, then our economy will pick up," Dawood said.
Now, both domestic industrialists and foreign investors are closely watching the country's negotiations with the IMF over an $8 billion bailout package.
Dawood stressed, however, that Pakistan is not relying solely on the IMF. "We are approaching friendly countries, that is, Saudi Arabia, the United Arab Emirates and China, " he said. Pakistan has already confirmed receiving aid packages from Saudi Arabia and UAE.
According to Dawood, Pakistan "will make necessary arrangements" to overcome its current difficulties.
The country is also trying to meet the IMF's call for tax reform. Dawood noted Pakistan has introduced a reform package that includes simplification of tax layers and the rebalancing of direct and indirect taxes. "The informal sector does not pay tax, so widening the tax net is important," he said.
This autumn, the country launched the "Make in Pakistan" initiative to boost exports, cut the trade deficit and develop the country's skills. "We are giving incentives again to manufacturing in Pakistan. We also reduced custom duties, and are talking a lot to get market access to China, Indonesia, Malaysia and so on," he said.
Pakistan is pinning its export hopes on manufactured goods like motorcycles, tractors, refrigerators, washing machines and transformers. It also hopes to tap into the global demand for information technology products and workers. "We have around 35,000 technical graduates every year," Dawood pointed out. "We know competition is very tough, but now Pakistan is exporting $3 billion of IT services and software annually."
Regarding foreign investment in Pakistan, Dawood gave some examples. "Unilever, Coca-Cola, Telenor and Suzuki Motor have made investments. Now, Exxon Mobile has re-established its office in Pakistan after more than 20 years, and announced a $250 million investment."
Special Economic Zones (#SEZs) in #Faisalabad alone would help #Pakistan grow its #exports by $1billion to $1.5 billion per year in the short span of time by ensuring effective and comprehensive planning, Says (FIEDMC) Chief Mian Kashif #economy https://nation.com.pk/15-Sep-2019/sezs-to-boost-exports-to-1-5b-per-annum-fiedmc
Appreciating economic vision of Prime Minister Imran Khan, he said the premier has directed all the concerned departments to remove hurdles in the way of development of SEZs and establish them on priority basis.
Fortunately, he said almost hundred percent plots in M-3 Industrial Estate have already been sold out while hundreds of units have become operational and were playing their role in providing exportable surplus in addition to accommodating thousands of workers.
Mian Kashif said that the industrial city would house more than 400 textile, steel, pharmaceutical, engineering, chemical, food processing, plastic and agriculture appliances units in addition to providing jobs to 250 thousand workers.
He claimed that the city was also expected to attract Rs400 billion local and foreign direct investment which would help Pakistan to stabilise its economy. He further said that Faisalabad was strategically located in the heart of Pakistan with two motorways passing from its eastern and western sides.
He said that this city has a unique privilege to contribute 60 percent towards textile exports and 45 percent towards total exports of the country.
He further said that it was not only restricted to textile which was its iconic identification but hundreds of SMEs hailing from chemicals, steel, food processing and others were also playing their role in the overall economy of Pakistan.
FIEDMC Chairman further said investors from China, Turkey, Korea and Britain have pumped $ 1.10 billion and their confidence in Pakistan have been restored as they are also bringing more investors from their respective country to invest in SEZs.
He said these investors expressed their eagerness to explore the possibility of investment in diverse sectors of Pakistan especially in ceramics, chemicals, steel, food processing and automobiles.
He said Prime Minister Imran Khan clearly directed them to focus on developing such industry in SEZs which is based on export and import substitution to restrict the import bill.
He said the good thing is that a number of Chinese industries have started pumping investment in SEZs and apparently the reason behind this is the production cost in China has increased which is making Pakistan one of the beneficiaries of on-going US China trade war.
He emphasised that consistent policies were imperative to attract foreign investment into the country, which could lead the economy towards sustainable growth.
He said industries operating in the FIEDMC will have an immediate access to high-quality infrastructure, un-interrupted power supply, public facilities and support services along with simpler ease of doing business.
Chief Operating Officer Muhammad Aamer Saleemi also briefed the delegation and said FIEDMC in collaboration with Industrial Police Liaison Committee has established police post at M-3 Industrial City and the industrial community will work under safe environment.
“The whole industrial estate will be monitored by high resolution surveillance cameras and 24 hours police patrolling will be provided in the estate,” adding he said this would make FIEDMC the safest industrial estate in the country.
He said CPEC will attract $40 billion worth of investment which will directly raise investment-to-GDP ratio by 2.8 percentage points besides some indirect investment addition.
“The investment in hard currency will also support exchange rate stability in the country and stabilise balance of payments situation in the country,” he added.
#Turkish owned Dawlance sees $400 million in appliances’ #exports from #Pakistan. It has 3 new factories for automatic washing machine & water dispensers in the country. It has begun exporting water-dispensers to #Europe & #microwave ovens to #Bangladesh https://www.thenews.com.pk/print/613473-turkish-firm-sees-400mln-potential-in-appliances-exports
Pakistan could fetch $300 to 400 million from exports of home appliances if the government focuses on non-traditional export sector and diversify exportable products, an industry official said on Thursday.
Chief Executive Officer Umar Ahsan said the company is committed to transfer technology to Pakistan to increase value-added exports from the country.
“Automatic washing machines can be exported from Pakistan. There is a potential to fetch $300 to $400 million in export revenue from products manufactured in the company’s (Dawlance) supply chain,” Ahsan said, talking to media. Overall exports could increase $10 to $15 billion per annum with diversification of exports and through focusing on non-traditional items. “But, first of all this requires a level-playing field to all the new sectors of the economy,” he added.
Ahsan accompanied Can Dinçer, chief commercial officer of Acrelik, Turkish parent company of Dawlance. Dinçer said the company has invested over $300 million in Pakistan since acquisition of Dawlance in 2016.
“We have re-invested $60 million in Pakistan whatever we earned here and now (are) eyeing to increase our shares in exports,” he said. “We are asking the government to focus on diversifying exports related to engineering goods instead of relying on few products, such textile, surgical and other products.”
Dinçer said the company’s plan is to introduce competitive pricing model in all categories to better response to the needs of the changing demands while using the distribution channels effectively in 2020.
“Since 2016, we have gained a very strong foothold in one of the world’s most promising markets, Pakistan and further built on the strengths of Dawlance,” he said. “We are very proud to see that Dawlance and Arçelik grow together as part of a larger and global organisation.”
Dawlance set up new production lines to manufacture automatic washing machine and water dispensers in the country. It also began exporting water-dispensers to Europe. It has three factories and is expanding its sales and service network, which comprises of 1,800 plus dealers across Pakistan.
The company recently inaugurated an experience store in Peshawar, offering complete range of products to consumers. It plans to establish more experience stores in other cities. Ahsan said China is the company’s main competitor because of the economy of scale. Cost of production needs to be reduced to increase Pakistan’s share in world’s exports.
On taxation, he said the Federal Board of Revenue abolished 10 percent depreciation out of total investment and the company made it part of its calculations. “We took investment decision in view 10 percent depreciation allowance,” he said. “We asked the FBR to provide this facility.”
Ahsan said the company has so far upgraded skills of 300 workers to meet quality and standard requirements for the manufactured products.
#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-foundation-for-pakistans-industrial-development-cri-urdu
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.
Muneeb Sikander
@MuneebASikander
1/2 Pak Flood hit rural economy
Work produces things of value and transforms physical world in ways to make life better and survival possible.
But without organised and purposeful productive action, i.e., work, not possible for most people asis at the base of economic order
https://twitter.com/MuneebASikander/status/1572606162939289601?s=20&t=hDUZH4AawwsjZEdasU77jw
----------------
2/2 Flood hit rural areas
Agrarian to agriculture/livestock based or limited workshop industry. Limited Agri TFP + 15.4 million at poverty risk
1. Need for agri TFP improvement
2., Need to diversify economic base by Proto-industrialization,
https://www.stlouisfed.org/publications/regional-economist/second-quarter-2021/how-jump-start-industrialization-sub-saharan-africa
https://twitter.com/MuneebASikander/status/1572606221076819970?s=20&t=hDUZH4AawwsjZEdasU77jw
How to Jump-Start Industrialization in Sub-Saharan Africa
May 27, 2021
By Yi Wen , Iris Arbogast
https://www.stlouisfed.org/publications/regional-economist/second-quarter-2021/how-jump-start-industrialization-sub-saharan-africa
KEY TAKEAWAYS
Most sub-Saharan nations have such low per capita incomes that it would take decades of double-digit growth to attain U.S. living standards.
Nations that industrialize successfully often begin with small-scale efforts and progress to mass-producing heavy industrial goods.
African countries could follow this development pattern with government-provided infrastructure and other support.
When considering income disparities across nations, the differences often can be striking, particularly for nations in the sub-Saharan region of Africa. Per capita income in many poor countries like these is 30 to 50 times smaller than in the U.S. In sub-Saharan Africa, 38 of 48 countries had gross national income (GNI) per capita levels below $2,300 in 2019, while GNI per capita was $65,850 in the U.S., according to data from the World Bank’s World Development Indicators database.
Generations of economists have studied economic development and given policy suggestions to officials in poor countries in Africa and elsewhere, but the disparities remain. To catch up to U.S. living standards, they would need to grow at about 11% per year for 40 to 50 years—an almost impossible standard that only China has come close to achieving in recent history.
The New Stage Theory of Development
The commonality between successful Asian countries’ industrialization (such as China’s rapid rise in the past 40 years) and successful European nations’ industrialization (such as the British Industrial Revolution in the 18th* and 19th centuries) is that these economies all went through three key stages during their industrialization, according to the New Stage Theory of Development (NST):1
Proto-industrialization, which features massive numbers of workshops in rural areas with small-scale production of basic consumer goods for long-distance trade
A first industrial revolution, which features mass production of labor-intensive, light consumer goods for domestic and international markets
A second industrial revolution, which features mass production of capital-intensive, heavy industrial goods
The first stage is very important but has been largely ignored by development economists. During this initial stage, rural farmers or poor households in urban areas use their free time to manufacture simple products and engage in long-distance trade. This raises their income and nurtures the formation of an increasingly unified market and primitive production networks, while developing entrepreneurship and labor skills. 2
During the second stage, large-scale factory systems become prevalent for light industries such as textiles, processed food, toys and furniture. This mass-production stage is labor-intensive, export oriented and benefits from poor countries’ comparative advantage in cheap labor. Mass production in the second stage is profitable only because proto-industrialization has created a large enough market and distribution networks for consumer goods.
Finally, the expansion of light industry in the second stage facilitates the formation of a large enough market for heavy industrial goods—such as means of transportation, energy, steel and heavy equipment. This is not only because the income of workers needs to be high enough to purchase big-ticket items such as automobiles, but because mass production of heavy industrial goods is profitable only after the second stage creates a mass-production chain to support their demand. 3
UNIDO Report 2022 Industrial Stats (Manufacturing Value Added Per Capita)
https://www.unido.org/publications/international-yearbook-industrial-statistics
Afghanistan $28
Bangladesh $356
Brazil $875
China $3,076
Germany $8,270
India $331
Indonesia $776
Iran $712
Iraq $123
Japan $8,110
Kenya $145
Nepal $48
Malaysia
Pakistan $176
Philippines $656
Russia $1,394
Turkey $2,271
UK $4,202
USA $7,343
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