Chemical Vision 2030

Efforts on for rise in engineering goods’ exports

By Alauddin Masood

The authorities are engaged in formulating plans for the speedy development and growth of the country’s chemical industry and for tackling the challenges facing it. Globally recognised to be the ‘mother of all industries,’ the plans for the Pakistani chemical industry’s growth have been styled as ‘Chemical Vision 2030.’ 

The Engineering Development Board has given the task to Pakistan Industrial Development Company to prepare a study for the speedy development of the country’s chemical industry. The study will focus on the optimum utilisation of the existing potential of Pakistan’s chemical industry and suggest steps for the growth and development of the country’s mineral-based chemical industry, agro-products based chemical industry and petro-chemical industry.

Pakistan has one of the biggest reserves of lignite coal, which can be converted into liquid or gas and used as a substitute for crude oil. At about 200 billion metric tonnes (mt), the value of the country’s proven coal fields is estimated to be about US$ 6.0 trillion at the current market value.

Furthermore, Pakistan’s refineries produce 1.6 to 2.0 million mt of naphta, which forms the basic feedstock for most of the large scale activity. Being unable to add value to naptha (one of the most important hydrocarbon ingredients), the entire quantity of the country’s naptha produce is exported, mostly to chemical plants in the Far Eastern countries.

Derived from crude oil, coal and other forms of hydrocarbons, naptha is further processed or cracked for use in a wide range of downstream industries ranging from fibers to textiles, pharmaceuticals to paints and varnishes, metallurgy to explosives, construction materials to printing, etc. To establish a good base of chemicals industry, a quantity of about 1.5 mt naphta is said to be quite sufficient.

Since Pakistan produces a sufficient quantity of naptha, it can conveniently set-up at least one naptha cracker plant to ingnite the country’s interests in the world of chemistry and start deriving benefits from naptha derivates, which are used by a wide range of industries, including textile mills, pharmaceutical industry, paints and metallurgy industry, construction material industry, etc .

Without strides in the chemical sector, Pakistan may find it difficult to emerge as an industrialised country and, therefore, it needs to take urgent steps for setting up a naptha cracker plant. 

Amongst chemical products, Pakistan is presently self-sufficient in meeting the domestic demand for caustic soda and soda ash from its indigenous production, but it needs to further expand the base of its chemical industry as hundreds of basic chemicals are still imported by the country.

Increasing engineering goods exports

Meanwhile, the Government has also decided to prepare a 10-year plan for increasing the export of Pakistani engineering goods.

For introducing low value added engineering goods in the African continent, Islamabad has decided to formulate an action plan styled as “Branding Pakistan Engineering” for exporting Pakistani engineering goods to the 16 countries in the African continent. Envisaging both short-term and long-term measures, the plan aims at increasing the share of Pakistan’s engineering products in the international market for the engineering goods. 

Under the plan, structural changes will be introduced in the indigenous engineering industry and joint ventures will be launched in collaboration with international firms of repute for increasing the export of Pakistani engineering goods. 

For exploring prospects for the export of Pakistani engineering goods, the government plans to arrange visits of Pakistani trade delegations to the African countries to assess the demand for various products in those states, probe the possibility and also the mode for the export of engineering goods. 

Plans are also afoot to harness the latest technology and develop the skills of workers in the electrical, chemical, foundry and steel industries for improving the quality of Pakistani engineering products and making them compatible with the international standards. 

According to a study, European Union countries earn US$ 360 billion, Latin American countries US$ 375 billion, African countries US$ 152 billion and India US$ 35 billion from the export of their engineering goods whereas Pakistan’s share in the overall global trade for the engineering goods stands at 0.013 per cent.

LSM growth

After recording 13 successive months of negative growth, Pakistan’s large-scale manufacture (LSM) sector witnessed a growth of 0.9 per cent in August 2009. However, the average growth for the first two months (July and August) of the current year has been recorded at 0.2 per cent. 

Pakistan’s LSM index has been on the decline since June 2008, when it stood at 212.26. However, by August 2009, the LSM index declined to 193.05 per cent. Since it registered a decline of 4.8 per cent during the first two months of the current year alone, the economists caution that one should remain careful in interpreting the positive growth in August 2009 as a sign of recovery. 

The country’s industrial production would continue to remain depressed for a variety of reasons, including continued political instability leading to poor governance, worsening of security environment, power shortages, weak external demand, relatively higher interest rate, weakening of Pakistani rupee and the corresponding increase in the cost of imported inputs.

For the last about a decade, the authorities have been talking about raising the share of LSM sector in the country’s exports.

Agricultural sector and its value additions still remain the mainstay of Pakistan’s economy, contributing about 60 per cent to the country’s export earnings. Even in this sector, with over 50 per cent share in the country’s external trade the textile segment continues to retain its position as the major contributor to the overall exports. However, at 3.0 per cent, the share of engineering goods in the country’s exports still remains dismally low.

Our neighbouring country, India has succeeded in raising her income from the export of engineering goods to 60 per cent of her total export pie against 16 per cent from the textile sector. Compared to the western countries, since the engineering manufactures of India are comparatively cheaper, India has created a niche in the international market and the demand for her machine goods continues to grow. Consequently, India’s export earnings and also her foreign exchange reserves continue to surge.

It is the considered opinion of the economists that countries solely or largely dependent upon agriculture are destined to remain poor and at the bottom rung amongst the community of nations. Due to its inability to move from an agricultural country to an industrial or services providing country, Pakistan’s economic status has been gradually sliding down amongst the community of nations.