Muneeb ur Rehman

The large-scale manufacturing (LSM) sector of Pakistan is experiencing a low growth rate, requiring the government to implement policy measures to enhance the performance of this sector. Talking to WealthPK, Saqib Sherazi, Chairman of Pakistan Automotive Manufacturers Association (PAMA), said the LSM sector’s dismal performance was due to various external and internal factors. According to the Pakistan Bureau of Statistics, during July-March of FY2023, the LSM sector recorded a  negative growth of 8.11% against a positive growth of 10.61% in the corresponding period of the last year.

Saqib identified import restrictions and rupee devaluation as the leading internal factors responsible for the decline in the LSM sector’s growth. “The depletion of foreign exchange reserves and substantial devaluation of the rupee have substantially impacted the country's capacity to import essential inputs of production,” he said. The textile sector witnessed a dip of 16.03% during July-March FY2023 compared to 3.23% growth in the same period last year. Moreover, the main contributors to the overall negative growth of 8.11% are, food (-1.62%), tobacco (-0.57%), textile (-3.16%), garments (2.94%), petroleum products (-0.68%), cement (-0.85%), pharmaceuticals (-1.30%), and automobiles (-1.85%). Saqib said the high energy prices, historic increase in the policy rate to above 20%, and floods had their share in the overall negative performance of the LSM sector.

Highlighting the external factors, he said, “The global economic slowdown and supply chain disruptions in the aftermath of the Ukraine crisis led Pakistan to bear the economic consequences”. In order to enhance the growth of the LSM sector, he said the government should invest in alternative energy sources, such as solar, wind, and hydropower to reduce the cost of energy, which was being supplied at a high rate to the manufacturing sector. Saqib also suggested the government facilitate the import procedures for the manufacturing sector in order to ensure the provision of necessary inputs. Encouraging LSM through incentives and support can expand the market opportunities for the manufacturers, he said. LSM is the backbone of an economy that provides employment and improves the revenue base. Pakistan can also show a positive growth trajectory in the LSM sector through the government’s support.

Credit: INP-WealthPk