PTI Industrial Policy

7/29/2019 PTI Industrial Policy

1/20

Reviving Industry & Creating Jobs


2/20

Industry faces uncertain future

Average growth of only 2% in 5 years record low

Government does not honor commitments

Lack of security for business community

Crippling gas & power crisis

Lack of access to finance - crowding out of private sectorPoor trade linkages limited access to big markets

Inadequate, insufficient industrialization centered in too

few locations in countryNeglected, disadvantaged SMEs

Weak Institutions, weak Infrastructure

Skill shortages across all sectors

Under invoicin lar e undocumented econom


3/20

Investment has collapsed

Investment to GDP 12.5% in FY12 record low

Source: Pakistan Economic Survey FY12

0.0

5.0

10.0

15.0

20.0

25.0

FY07 FY08 FY09 FY10 FY11 FY12

Investment declined to 12.5% of GDP,

Lowest level of investment

since 1950.


4/20

Power deficit may rise to over 11,000 MW in 5 years

Source: NTDC National Power System Expansion Plan 2011, NEPRA State of Industry Report 2011, PPIB, WAPDA public documents

12,000

16,000

20,000

24,000

28,000

32,000

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Peak Demand Peak Generation

Projected peak demand

at 6% p.a. growth

About 2,500 MW of ongoing,funded projects should come

online between FY11-15

Few sizable projects due to

circular debt

NeelumJhelum likely to be delayed

further

(11,400 MW)

(8,600 MW)

(6,400 MW)

(5,700 MW)


5/20

The Gas deficit will more than double in 5 years

Source: Petroleum Institute of Pakistan projections updated for actuals

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2

011-12

2

012-13

2

013-14

2

014-15

2

015-16

2

016-17

2

017-18

2

018-19

2

019-20

2

020-21

MMCFD

(3.5 bcfd) (5.2bcfd)

Projected gas supply from

domestic sources

Projected gas demand

(1.6 bcfd)


6/20

Crowding out of private investments

Government

Agriculture

Industry

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 June-12

PKR

trillion

Government has left

no money for industry

or farmers leading to

collapse of economy

Banking sector credit by sectors

Source: State Bank of Pakistan


7/20

Regional Trade is the lowest in the world

Source: World Bank

27%

16%

6%5%

3%

1%

0%

5%

10%

15%

20%

25%

30%

East Asia Europe Latin

America

Sub Saharan

Africa

Middle East South Asia

Intra-regional trade as a % of GDP


8/20

Rapid Industrial growth for job creation

Create 10 million jobs through 9% growth

Restore investor confidence / business friendly

environment

Affordable and reliable energy

Democratization of Capital

Human Resource development

Industrial zone in every district of Pakistan

SME development / sector development companies

Regional trade hub

Institutional strengthening

9%

2%


9/20

Restore investor confidencePolitical solution to end war on terror

Professional police system, independent of political

interference, to improve law & order

Mechanism to address corruption and rent seeking

Address challenges for doing business with respect

to regulation; contract enforcement and property

rights; infrastructure; information symmetry;

development of integrative supply chains.

Delivering on legally binding government contracts

Alternative dispute resolution mechanism to speed

up contract enforcement


10/20

Energy Emergency

Electricity & Gas shortages to be eliminated within

PTIs first term in office

Resolve Circular Debt through moving to lower cost

generation and reduction of line losses

Bring Load shedding to manageable proportions

Fast track gas imports and ensure equitable rationing of

Gas until new gas supply arrives

Provinces to play their role in Energy generation

Make Pakistan an Energy Secure state


11/20

Increase availability of Capital

Create space for Bank lending to industry by reducing fiscal deficit to 4.5%

of GDP within PTI first term in office

Set up specialized financial institutions to raise long term capital for

infrastructure, industry (similar to role of now defunct NDFC, IDFC)

Specialized financial institutions to raise capital for SMEs

Deepen financial markets through vibrant debt and capital markets

Make Pakistan the world leader in Islamic Finance

Raise capital from expatriate Pakistanis through retail bonds, IPOs

Stimulate issuance of Money Market Instruments and Corporate Bonds bystrengthening mandate and funding of Investment Banks, which should be

moved under SBP supervision

The Mutual Fund industry, Provident/Pension Funds and Insurance

companies mobilized to stimulate demand side for corporate debt

Fiscal reforms and debt / capital market development


12/20

Access to finance for SME sector

Simplify financial access for SMEs shifting away from

collateral based lending towards cash flow based lending

Government to provide core investment in new SME Venture

Capital ProgramSECP to create Alternate Investment Market for SME listing

for issues over Rs 25mn

Enhance SME access to bond and capital markets, facilitate/

incentivize specialized private equity companies for SME

Loans to SMEs procuring local machinery be offered and loan

repayment guarantee insurance scheme

Alternate dispute resolution mechanism to find solution to

Democratization of Capital


13/20

Human Resource developmentAlignment of Skills and Education with Industrialization

Train 2 million new workers per annum

Current Workers to be trained and supported for

Upgrading their skills and knowledge

Providing good Health Care for labor force (to protecthealth and reduce losses in workdays)

Promotion of Innovation and Technological Up-

gradationBringing Universities into mainstream of industrial and

economic development(University-Industry Linkages.)

Encouragements be put in place for enterprises which

use Universit s ca abilities demand driven research


14/20

Set up Industrial zones across Pakistan

Infrastructure &Utilities

Special Economic

Zones for SMEs andJawan Marakaz

Labor colony withhousing, schools,

health unit

Specialized Financialinstitutions for access

to Capital

Universities, R&D,

Quality & Standards,

Labs & testing facilityINDUSTRIAL

ESTATE


15/20

Thar coal Industrial Cluster

Power

Generation

Fertilizer

Diesel

PetroChemical

Strategy focused on developing

local resource base for jobs

and wealth creating

activities


16/20

SMEs promotion - focused incentivesSector development companies led by private sector for developing

an integrated development strategySkills, Technology, Marketing

Revamp TDAP with independent board and professional

management for better co-ordination with government ministries,

tax authorities and tariff commission for creating market linkages indomestic and export markets for SMEs. Remove from government

control, no bureaucrats to be appointed.

Revamp SMEDA into an effective private sector led institution with

independent board and professional management. SMEDA tofacilitate export policy, technical skills development and access to

finance for SMEs. Remove from government control, no bureaucrats

Tax procedures simplified to support the SME sector

Support of Management training to be provided, apprenticeship andtechnical & vocational training according to skills development policy


17/20

SMEs developmentOne village One product project to promote traditional

handicrafts, skills and culture (revitalize AHAN program)Jawan Marakaz to facilitate and mentor local entrepreneurs

Land Documentation reforms - Urgent drive for land

documentation, enforcing legal rights of land owners.

Achieving ISO & other international standards for SME through

accredited trained engineers; specialists

Technology Funds to upgrade equipment and training of

workers.Technology up gradation centers for sector development (E.g.

Tools dies, mould centre in Karachi and Gujranwala)

Cluster development initiatives for existing SME clusters


18/20

Regional Trade corridors

Geo-strategic proximity to fastest growing economies in the

world

combined GDP of USD 11 trillion (2012)Only country that shares border with China and India, two of

the fastest growing markets GDP, population, trade

Intra-regional trade only 1% of GDP in South Asia vs. 27% in

East Asia and 16% in Europe huge potential to expand trade

Establish trade corridors between South Asia, Central Asia, ECO

Public Private partnership in transforming trade and transport

logistics chain and services to international standardsRemove infrastructure bottlenecks to intraregional trade

Use SAFTA framework to address non tariff barriers on both

sides

Create environment which fosters cross border investments


19/20

Institutional reforms for growthMake FBR fully Autonomous to insulate from Political Influence

Separate Tax Policy from Tax Administration

Revamp Customs department; deploy technology to check under

invoicing of goods

Strengthen & empower SECP, CCP, OGRA & NEPRA to act against

Cartels, Speculators, and Gas & power thieves

SMEDA / TDAP to be restructured with independent Board with

majority holding by private sector

Strategic investment agency to manage all other SOEs (Steel

Mill/Discos etc) similar to Malaysias Khazanah

Fully Autonomous Board

Mandate to revitalize within two years

CEOs of all SOEs to be appointed by Boards not PM (including

TDAP and SMEDA)


20/20

Infrastructure Public Private initiatives

National Trade Corridor Loss of 4% of GDP (Rs

800bn in FY12) annually due to inadequate andantiquated railways, transport infrastructure. Focus

on cost effective supply chains.

Railways revamp PSE, business plan to focus onraising freight traffic above 6 million tonnes for

return to profitability

Public Private Partnership getting privateinvestment in transport, energy, water supply &

sanitation, low cost housing, education / health

sectors. IPDF Framework exists for private sector to

invest in ublic oods / ro ects

PTI Industrial Policy

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