Pakistan’s Path to Industrial Revival: A National Policy at Last?
After decades of policy delays, Pakistan is set to launch a National Industrial Policy for 2025–26, following IMF clearance. The long absence of a cohesive industrial strategy has stifled growth and competitiveness. Its swift implementation is now critical for economic revival.
Two Decades of Policy Paralysis
Pakistan’s industrial sector has operated without a national framework since the late 1990s. Several draft policies were prepared but never implemented. In response, the government introduced limited sector-specific plans. However, these failed to drive broad-based industrial expansion across the economy.
The Cost of Inaction: Declining Industrial Output
The lack of a strategic policy has had clear consequences. Industry’s share of GDP fell from 26% in 1996 to about 18% today. Large-Scale Manufacturing (LSM), a key economic engine, has repeatedly missed growth targets. High production costs, outdated technology, and energy shortages continue to hinder key sectors like textiles, autos, and steel.
A Glimpse of the Proposed Policy Framework
The forthcoming policy outlines a 10-year roadmap with reviews every 18 months. It targets 8% annual manufacturing growth and $60 billion in exports by 2030. Proposed measures include boosting SME credit, reviving non-operational units, enacting investor protection laws, and reducing corporate tax over three years.
Persistent Challenges to Competitiveness
Serious structural hurdles remain. These include regulatory inconsistency, weak innovation, high borrowing costs, and low foreign direct investment (FDI). Moreover, export growth stays marginal. Without addressing these fundamentals, even a well-designed policy may fall short.
Learning from Global Models
Comparisons with other emerging economies are revealing. Countries like India, Vietnam, and Malaysia combine strategic planning with clear incentives tied to output and exports. They focus on building specialized manufacturing clusters and promoting domestic technology. Pakistan’s draft policy, in contrast, appears less ambitious and lacks specific mechanisms for technological modernization.
The Critical Gaps: Alignment and Future-Readiness
Two major concerns are provincial coordination and future trends. Punjab and KP already have their own industrial policies. National-provincial alignment is essential to avoid fragmentation. Furthermore, the draft policy pays limited attention to forward-looking sectors like green technology, digital manufacturing, and renewable energy-driven industry—areas critical for future competitiveness.
The Imperative of Implementation and Coordination
The policy's success will depend entirely on execution. It requires strong institutional capacity, seamless inter-agency coordination, and commitment across political cycles. Transparent monitoring and a predictable environment for investors are non-negotiable for rebuilding confidence.
Author’s Perspective: A Necessary but Insufficient Step
While the policy is a welcome and overdue signal of intent, its current form may not be transformative. True industrial revival requires more than fiscal incentives; it needs a fundamental shift in how the state supports industry. This includes prioritizing export competitiveness, embracing Industry 4.0 technologies, and rigorously linking incentives to performance metrics like job creation and import substitution. The policy must be a living document, dynamically adapted based on real-world outcomes.
Scenario: Revitalizing the Textile Sector
Consider Pakistan's textile industry, a major export earner struggling with high energy costs and outdated machinery. A focused policy intervention could offer conditional subsidies for upgrading to energy-efficient looms and dyeing units, coupled with guaranteed power tariffs for export-oriented units. Simultaneously, establishing sector-specific skill academies and streamlining export refunds could enhance productivity and competitiveness, helping recapture global market share.
FAQ: Pakistan's National Industrial Policy
Q: Why has it taken so long to develop a national industrial policy?
A> Policy development faced delays due to bureaucratic inertia, changing political priorities, and the complexity of aligning federal and provincial interests over decades.
Q: What are the main goals of the new policy?
A> The key targets are achieving 8% annual growth in manufacturing and increasing exports to $60 billion by 2030, alongside reviving sick industrial units and improving the investment climate.
Q: How will this policy help attract foreign investment?
A> Proposed measures like legal reforms to protect investors, phased tax reductions, and clearer regulations aim to create a more predictable and attractive environment for Foreign Direct Investment (FDI).
Q: Will the policy address high energy costs for industry?
A> While the policy framework recognizes expensive energy as a critical constraint, specific, actionable plans for providing competitive and reliable energy to industry will be crucial for its success.
Q: How does this policy relate to provincial industrial strategies?
A> This is a key implementation challenge. The national policy must be harmonized with existing provincial plans (e.g., in Punjab and KP) to ensure a unified, efficient approach and avoid contradictory regulations.
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