‘Champion industries’ designated

LAHORE – Apart from the restructuring of major state enterprises and industrial setup in the country, ‘National Industrial Policy 2011 – Implementation Framework’ has earmarked some preferred sectors or ‘champion industries’, including electronics, engineering, automobiles, transport and energy sectors, to achieve the objective of sustained economic growth.
Documents obtained by Pakistan Today reveal that National Industrial Policy 2011 – Implementation Framework recommends the commitment of roughly Rs 20 billion targeted at specific engineering sectors in the next five years.
Official documents advocate that the consensus on the utility of free market polices has been broken in the wake of the 2008-09 financial crisis. All countries including China, Germany, France, the United Kingdom and the United States are now actively pursuing industrial policies that are aimed at gaining control of the resource allocation process from markets and channeling them into industrial revival.
Elaborating on the automobile industry, policy documents indicate that the auto sector is one of the largest manufacturing industries in the world. But, Pakistan’s contribution to the global trade in it is negligible. Earlier, it was pointed out that import-substitution policy has been allowed to run its course, the auto industry has seen the indigenisation of technology and the establishment of hundreds of suppliers, leading to global competitiveness of Pakistani products such as tractors and motorcycles. However, progress seems to have halted on this because existing policies are held in abeyance or local production is discouraged through opening up imports.
National Industrial Policy 2011 – Implementation Framework says the auto vendors offer the opportunity of becoming a much bigger contributor to the global supply of intermediary good. Funding should be made available to encourage existing vendors to develop strategic alliances with global brand names, the creation of regional hubs in Pakistan by international vendors, as well as encouraging technology transfer.
It recommends a number of policy inputs including strict compliance with tariff-based system, reinstitution of a deletion list with revised indices and prices of international components while the Federal Board of Revenue (FBR) must ensure reduced transfer pricing by Original Equipment Manufacturers (OEM) and to relax conditions for Pakistan-specific licences for assembly and exports.
In addition, it advocates priority for two wheelers, three wheelers, tractors and buses, where the government should incentivise mark-up for complete deletion, facilitate acquisition of foreign brands and joint ventures, facilitate outward FDI through purchase of foreign firms with research and development capabilities as well as those with known brand names.The documents also underscore that the import of fully made-up cars should be strongly discouraged, ban on import of used cars and time-bound shift to multi-axle trucks and prime movers.
Official documents recommend some policy interventions to encourage value addition and development of local supply chain and skilled labour for electronics industry. Policy documents propose zero duty on import of basic components and progressive increase to 10, 20 and 30 percent for sub-assemblies, assemblies and complete build-up units (CBU).
In addition, documents also advocate similar advantage for equipment and software used for assembly and production, encourage growth of local supply chain for basic electronic materials, preference for local vendors or brands in government tenders, protection of Intellectual Property Rights to encourage foreign direct investment and contract manufacturing, testing and integration and review curriculum at university and polytechnic levels.
The report also classifies machinery, equipment and automobile manufacturing as ‘champion industries’.
Apart from a number of policy interventions, it proposes the restructuring of State Engineering Corporation, Engineering Development Board and partial privatisation of Heavy Mechanical Complex. Furthermore, it recommends the establishment of machinery consortium made up of domestic and foreign firms and incentives for internal and external transfer of technology and professional management.