Economic Advisory Group for a reset of Industrial Development Strategy

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Setting the Scene

Setting the Scene

In its third meeting, the Economic Advisory Group has outlined its vision for Pakistan’s industrial development breaking away from the mould of old industrial policy set in 1960s.

The members of the Group highlighted that the old industrial policy was defined on the basis of selection of winners and losers by the government which led to industrial protection, continuation of infant industry, and misallocation of credit. Despite various instruments of support provided, including subsidies and financing facilities, Pakistan could not move up the ladder of value addition in the manufacturing. Today the industrialization further suffers from anomalies in tax and tariff policies which have led to an anti-industry and anti-export bias.

The Economic Advisory Group welcomed the new auto policy, which has helped in increasing consumer choice and competition within the auto sector of the country by attracting new investment. It further stressed the need of integrating public safety in the vehicles being assembled in Pakistan.

Giving example of mobile phones, the members suggested to consider mobile phone as a capital investment instead of a consumption good. This re-classification can provide cheaper access of latest technology for the citizens, entrepreneurs and IT talent workforce by lowering down of tariffs on information technology products.

Members were of the opinion that while setting up new special economic zones, including technology zones is a good sign, preferred strategy is a general improvement in the policy, such as accession to the Information Technology Agreement, alignment of border mechanisms, and harmonization of taxes. Most of 83 industrial zones in Pakistan remain under-utilized and ghost towns, the members were apprised.

In its outline of a new vision for Pakistan’s industrial development, the group has identified a few priorities which include heavy investment in skills development, trade facilitation, consumer welfare, regional integration, and an increase in the absorptive capacity by improving firms’ capacity to access and utilize information. By investing in these areas, the government can extend its support to alll players without discriminating one sector over others. Importantly, we cannot have an industrial policy in isolation without integrating it with tax and tariff policy.

The Group observed that the industrial protection enjoys the support of special lobbies in Pakistan and hoped that a constituency for consumer choice can be soon evolved.

EAG has urged the Ministry of Industries to initiate work on a new industrial development strategy for the country and align its efforts with the provincial ministries to prepare a cohesive national framework.

EAG is an independent group of economists, policy analysts, financial experts and academics to deliberate on Pakistan’s economic policies. Third meeting of EAG was attended by Dr. Aadil Nakhoda, Dr. Vaqar Ahmed, Dr. Ahmed Pirzada, Najma Minhas, Samir Ahmed and Ali Salman. More information is available at: https://primeinstitute.org/economic-advisory-group-eag/.

Media Mention: THE NEWS and The Nation

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Policy Research Institute of Market Economy

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